Title: “Testing for the effects of Trade Liberalisation in Brazil: Evidence from Cross-section panel of Manufacturing Industries”

Introduction International trade and industrialisation have been central concerns in the debate on development theory and policy for many years. International Finance Institutions, such as World Bank and IMF introduced, during the 80s, strong revisions of their lending mechanisms by adding the known conditinalities, which included the trade liberalisation policies particularly concerning LDCs. Many studies on trade impacts into LDCs economies carried out in the seventies, like the ones by (Balassa, 1971) and (Krueger, 1984). The evaluation of LDCs policies was also aiming to face oil crises in the70s and debt crisis in the 80s, which have had strong influenced in the Brazilian economy. At the beginning Brazil believed to be amongst the luckiest, when the economy boosted in the so-called " Brazilian miracle " , with two digit growth rates in some years. But when persistent external indebtedness revealed itself inconsistent with the country' surplus generation in the late 70s and 80s, it collapsed due to lack of resources to repay the debt. The government at the beginning of the 80s reinforced the ISI policies that were in place from the introduction of the Second National Development Plan (II PND) in 1974. the main import restrictions were non-tariff barriers and foreign exchange controls, which were introduced to reduce the foreign deficit with some success, since the current account that was on deficit of 8% of the GDP in 1982 achieved small surplus in 1984 (Franco & Fritch, 1994). Inflation rose sharply and became persistent when combined with international debt, high interest rates and less international trade, which made particularly difficult to reach the minimum levels of foreign exchange needed to face indebtedness. Only when debt crisis was in the way to a solution, the country was able to introduce new trade policy together with other reforms, required by the agreement to solve the debt problem. International trade theory has stated for many years now that lowering tariffs and other trade barriers may increase competition in the domestic market, which increases pressure for modernisation, cost and prices reducing and improving product quality. Another consequence of such reforms, however, is that the access to imported goods and technology, although being cost-cutting stimuli could results in increasing profits, due to the international prices being less than the domestic ones and new technology and modernisation also encourage better resource allocation, by the possibility of importing final and intermediate goods. 1 The aim of …