The total costs of Brazilian bilateral trade: determinants and recent evolution

Abstract

The objective of this study was to evaluate the total costs of Brazilian trade and the determinants of bilateral trade growth with the ten main trading partners from 1995 to 2012. The method proposed by Novy (2009) was based on obtaining the costs from the gravity equation. The results showed a generalized reduction in total trade costs between countries. Manufactured goods performed similarly to total trade, while those in the agricultural sector showed higher values throughout the period, but with sharper reductions. The contribution of the fall in bilateral costs to the growth of Brazilian trade was significant, although lower than the contribution of income growth. Although there was a continued decline in trade costs, it was noted that lower bilateral costs were associated with trade with developed countries, where the largest investments related to trade facilitation occurred. There are also many opportunities for reducing trade frictions in Brazil, since the country has significantly lower cost performance indicators than the other sample developing countries, which will certainly contribute to increased export competitiveness and to reduce the cost of imports.