5. FOREIGN TRADE EXPANDING

The total value of Brazilian foreign trade reached the unprecedented level of US$96.2 billion in 1995. This figure represents an expansion of about 60% over the average annual trade flow during 1990-1994 (US$60.4 billion).

BRAZILIAN FOREIGN TRADE, 1990-1995
(US$ billions)

YEAR	EXPORTS	IMPORTS	TOTAL TRADE
1990	31.41	20.66	52.07
1991	31.62	21.04	52.66
1992	35.86	20.55	56.42
1993	38.60	25.48	64.28
1994	43.54	33.10	76.65
1995	46.50	49.70	96.20

Source: SECEX/MICT

Brazilian imports totaled US$49.70 billion in 1995, an increase of approximately 105% over the 1990-1994 annual average (US$24.2 billion). The composition of these imports, i.e., the importance of raw-materials and capital goods, reflects Brazil's increasing penetration of the international economy.

COMPOSITION OF IMPORTS IN 1995

CATEGORY	% SHARE
Raw Materials and Intermediate Goods	45.3
Fuels and Lubricants	10.4
Capital Goods	24.2
Consumer Goods	20.0

The significant value of imports, which in 1995 totaled US$50 billion, reflects to a great extent the combination of two factors: 1) economic stabilization increased domestic demand by restoring the currency's purchasing power; and 2) the consolidation of the economic opening, with the January 1, 1995, implementation of the Mercosul Common External Tariff, established a new standard of tariff protection.

AVERAGE IMPORT TARIFF (%)
1990-95

1990	32.2
1991	25.3
1992	16.5
1993	14.0
1994	14.0
1995	12.6

Exports in 1995 totaled US$46.5 billion, another historic record. The composition of these exports, i.e., the large importance of manufactured products (74.64%), reflects the diversification of the Brazilian economic structure.

COMPOSITION OF BRAZILIAN EXPORTS IN 1995

CATEGORY	% SHARE
Basic Products	23.59
Industrial Products (Semimanufactures) (Manufactures)	74.64 (19.66) (54.98)
Others	1.77

The wide range of exports and the balanced distribution of the products among the most affluent world markets provide stability and predictability to Brazilian foreign trade and show Brazil to be a true global trader.

PRINCIPAL BRAZILIAN EXPORT MARKETS IN 1995

FOREIGN MARKET	% SHARE
European Union	26.99
ALADI (MERCOSUL)	21.45 (13.23)
United States	18.67
Asia	17.61
Others	15.28

The Brazilian government recognizes the important role exports play in promoting economic growth and job creation. Thus, priority is being given to developing the new export centers; to perfecting the Export Financing Program (Programa de Financiamento às Exportações); to implementing a market based system of Export Credit Insurance (Seguro de Crédito às Exportações); to eliminating the impact of indirect taxes on exports; and to reducing the so-called "Brazil Cost," which is associated with the peculiar disadvantages caused by policy distortions or by government or market failures.

In 1995, Brazil, Argentina, Uruguay and Paraguay completed an important phase of the Mercosul regional integration process when they inaugurated the Customs Union. This phase established a set of characteristics, namely: free trade within the area; the Common External Tariff; elimination of non-tariff barriers; the formation of the block's institutional structure; and the creation of an international juridical identity.

The dynamism of intra-Mercosul trade is shown in the following data: total Brazilian trade with the other Mercosul countries grew from US$3.64 billion in 1990 (the year prior to the signing of the Treaty of Asunción) to US$12.97 billion in 1995 (the first year of the Customs Union's operations) — an increase of 256%. Another aspect of this dynamism is the growing importance of intra-industry trade, which demonstrates the greater use of economies of scale permitted by an expanded regional market.

BRAZILIAN TRADE WITH THE MERCOSUL COUNTRIES, 1990-1995
(US$ billions)

YEAR	EXPORTS	IMPORTS	TOTAL TRADE
1990	1.32	2.32	3.64
1991	2.31	2.27	4.58
1992	4.10	2.25	6.35
1993	5.40	3.36	8.76
1994	5.92	4.02	9.94
1995	6.15	6.82	12.97

Mercosul's external relations are founded on the concept of "open regionalism" ("Regionalismo Aberto"). Since the establishment of the Customs Union on January 1, 1995, Mercosul has been negotiating free trade agreements with other South American countries. It is also working to establish the American Free Trade Area (ALCA —Área de Livre Comércio das Ámericas). Moreover, in December 1995, Mercosul and the European Union signed an interregional cooperation agreement that has important significance for economic and political relations between the two blocks.