Brazil’s Stagnant Economy Is the Poster Child for High Tariffs

While high tariffs protect some jobs in the country, they have also driven up costs for consumers and helped make domestic industry inefficient

By Samantha Pearson of The WSJ. Excerpts:

"Brazil’s World War II-era policy of protectionism has kept some jobs home but has also driven up costs for consumers and, according to economists, stifled competition and innovation. That iPhone 16 made in Brazil costs almost twice as much as a Chinese-made model sold in the U.S. for $799.

The strategy has done little to boost Brazil’s industrial production. On the contrary, it has lowered productivity and led to some notorious price-fixing scandals, economists said. Manufacturing made up 36% of gross domestic product in 1985. Now it has fallen to about 14%, the worst example of “premature deindustrialization” in the world, according to the São Paulo-based Institute for the Study of Industrial Development."

"Brazil has relied on domestic consumption during external economic crises, from the oil shocks of the 1970s to the 2008-09 financial crisis. But it has also bred complacency and protectionism during more prosperous times, ultimately making goods more expensive for consumers.

“They never felt the competitive pressure to innovate and to reduce costs and to find a way to survive in a competitive market,” said Alberto Ramos, head of Latin America economics research at Goldman Sachs. 

Brazilians who can afford imported goods typically pay several times the price they would in the U.S. The price differences are so vast that rich Brazilians spend much of their vacations abroad shopping, stuffing their suitcases so full that returning flights are often delayed as airline staff scramble to find room in the cabin."