Agricultural Pricing Policies in Brazil

10185
WORLD BANK VOL. 2
COMPARATIVE STUDIES
The Political Economy of Agricultural Pricing Policy
Trade, Exchange Rate, '
and Agricultural Pricing Policies
in Brazil
VolumeII Appendixes: Data and Methodology
Antonio Salazar P. Brandao
Jose L. Carvalho
~ _
p.~~~~~~~~~~~~~~~~o
FL'O

/t1 II{
The Political Economy of Agricultural Pricing Policy
Trade, Exchange Rate,
and AgriculturalPricing Policies
in Brazil
VolumeH Appendixes: Data and Methodology
Antonio SalazarP. Brandao
Jose L. Carvalho,
WORLDBANK
COMPARATIVESTUDIES
The WorldBank
Washington,D.C.

Copyright © 1991
The International Bank for Reconstruction
and Development/THE WORLDBANK
1818H Street, N.W.
Washington, D.C. 20433, U.SA
All rights reserved
Manufactured in the United States of America
First printing November 1991
World Bank Comparative Studies are undertaken to increase the Bank's capacity to offer sound and relevant policy
recommendations to its member countries. Each series of studies, of which The Political Economy of Agricultural
Pricing Policyis one, comprises several empirical, multicountry reviewsof key economic policies and their effects on
the development of the countries in which they were implemented. A synthesisreport on each serieswillcompare the
findings of the studies of individual countries to identify common patterns in the relation between policy and
outcome-thus to increase understanding of development and economic policy.
The series The Political Economy of Agricultural Pricing Policy,under the direction of Anne 0. Krueger, Maurice
Schiff, and Alberto Valdes, wasundertaken to examine the reasons underlying pricing policy, to quantify the
systematic and extensive intervention of developing countries in the pricing bf agricultural commodities during
1960-85, and to understand the effectsof such intervention over time. Each of the eighteen country studies uses a
common methodology to measure the effect of sectoral and economywide price intervention on agricultural incentives
and food prices, as well as their effects on output, consumption, trade, intersectoral transfers, government budgets,
and income distribution. The political and economic forces behind price intervention are analyzed, as are the efforts
at reform of pricing policy and their consequences.
The findings, interpretations, and conclusions expressed in this publication are those of the authors and do not
necessarily represent the viewsand policies of the World Bank or its Board of Executive Directors or the countries they
represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no
responsibility whatsoever for any consequences of their use.
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1818 H Street, N.W.,Washington, D.C. 20433,U.S.A.,or from Publications, The World Bank, 66,avenue d'I6na, 75116
Paris, France.
Antonio Salazar P. Brandao is an economist in the Agricultural Policies Division of the World Bank's Agriculture and
Rural Development Department. Jose L. CarvaIho isa professor of economics, Universidade Santa Ursula, Rio de
Janiero.
Libraryof CongressCataloging-in-Publication Data
Brandao, Antonio Salazar P. (Antonio Salazar Pess6a)
Trade, exchange rate, and agricultural pricing policies in Brazil
/ Antonio Salazar P. Brandao, Jose L. Carvalho.
p. cm. - (The Political economy of agricultural pricing
policy) (World Bank comparative studies)
Includes bibliographical references.
Contents: v. 1.The country study - v.2. Appendixes: data and
methodology.
ISBN0-8213-1947-7(v. 1). - ISBN0-8213-1948-5(v.2)
1.Agricultural prices-Government policy--Brazil. 2.Agriculture
and state-Brazil. I. Carcalho,Jos6 L II. Title. III. Series:
World Bank comparative studies. Political economy of agricultural
pricing policy.
HD1872.75.B73 1991
338.1'881-dc2O 91-30519
CIP

iii
Abstract
This study covers the latter part of the 1960s, the entire 1970s,
and the first years of the 1980s.During this period, agriculturalpolicy
has undergone major changes, going from a period in which subsidized
credit to agriculturewas the most importantpolicy instrumentto one in
which guaranteed prices assumed a predominant role. In addition, as
Brazil's economic situation became more and more unstable, so did
agriculturalpolicy.
A large number of government interventions occured in the
agriculturalsector of Brazil, and both direct and indirect intervention
helped to distort prices. To evaluate the net effect of this array of
policies, various measures of protection were calculated.The results
indicate that, in general, the agriculturalsectqr was taxed in Brazil
when compared to the nonagriculturalsector. Two export crops, soybeans
and cotton, were taxed more heavily than import-competingfood crops.
Indirect causes, mainly exchange rate overvaluation, were the most
importantdeterminantsof the level of taxation.
Substantiallossesof productionwere estimatedas a consequenceof
the discriminatorypolicies of the government.The overall impact on the
trade balance was also significant.
Although the agricultural sector was taxed through price policy,
this becomes less clear when all transfersto and from agricultureare
accountedfor. The most importantof these transfersduring a large part
of the 1970s and the early 1980s was that associatedwith a subsidized
interestrate for agriculturalcredit. The data make it clear that what
the governmentdid over that periodwas to use creditsubsidiesto counter
balance its discrimination against agriculture. This compensation,
however,was highly regressivewith respectto incomedistribution.Price
discriminationaffectedall agriculturalproducers,but the creditsubsidy
was not available to all of them. It was the larger and wealthier
producers that received the transfersassociatedwith that policy. This
contributedto the concentrationof incomeobserved in the agricultural
sector during the 1970s. Our assessmentconfirms that smaller producers
paid the largestpenalty for price discriminationagainst the sector.
Inflationwas clearlyone importantconcernof the governmentin its
price interventions,especially with respect to food crops. Pressure
groups were particularly active for soybeans and cotton, which are
importantindustrialinputs. However,a high degree of randomnessin the
behavior of the governmentis also seen in the econometricresults.This
was particularly relevant for those commodities associated with many
pressure groups with possibly conflictinginterests.

- v -
Table of Contents
APPENDIX A TABLES................................................. 1-16
APPENDIX B ........................................................ 17
APPENDIX B TABLES................................................. 25-30
APPENDIX C ........................................................ 31
APPENDIX C TABLES .. ......... 40-47
FIGURE C.1........................................................ 48
APPENDIX D........................................................ 49
APPENDIX D TABLES .................. 51-60
APPENDIX E........................................................ 61
APPENDIX E TABLES .................. 63-77
APPENDIX F........................................................ 78
APPENDIX P TABLES ................ 83-103
TABLES 4.10A TO 7.4A .................. 104-125
TABLES A.7.1A TO 8.6A .................. 126-137
TABLES H.1 TO H.27 ................... 138-164

Table A.l - EFFECTIVE PROTECTION RATES IN BRAZIL, 1967 - 1980 (percent)
SECTOR 1958 1963 1967 1973 1975 1980/81
Primary vegetable products - 47 - 15 - 14 na na na
Primary animal products 24 12 na na na na
Mining - 5 34 9 - 8 - 8 - 4.2
Mtanufacturing (average) 106 184 48 27 30 46.4
Nonmetallic Minerals 73 103 48 21 26 - 19.6
Metallurgy 61 124 33 18 17 34.2
Machinery 22 68 31 9 13 93.3
Electric Equipment 83 169 57 19 22 129.3
Transport Equipment 82 147 81 30 37 . 6.5
Lumber and Wood 138 176 44 19 24 17.7
Furniture 221 367 92 44 42 52.7
Paper and paperboard 86 169 42 24 32 - 18.5
Rubber products 139 221 182 56 54 - 21.4
Leather products 248 405 84 26 36 13.9
Chemicals 56 146 20 28 22 86.4
Pharmaceutical products 17 60 10 28 17 116.3
Perfumery 279. 453 70 33 40 91.6
Plastics 281 489 117 99 111 28.3
Textiles 239 298 88 36 58 36.7
Apparel and shoes 264 481 154 26 37 46.7
Food 502 678 71 33 37 26.1
Beverages 171 243 76 143 139 - 1.1
Tobacco 273 469 79 - 6 - 6 5.7
Printing and Publishing 139 305 8 10 13 31.9
Miscellaneous 88 175 45 17 21 171.7
Average 30 75 14 25 29 na
Source: 1958-75 Carvalho-Haddad (1980); 1980/81 Tyler (1981)
t;.rv:(a) Effective rates from 1958-1967 were computed by Fishlow; those for 1973 and 1975 were computed by Neuhaus-Lobato (1978)
and those for 1980/81 by Tyler (1981).

TABLEA.2 .: Brazil - l¶anufacture Export Subsidies as a Percentage of FOB Value
TAX EXEMPTION PRICE SUBSIDIES MANUFACTURE MANUFACTURE
CREDIT
DRAWBACK INCOME EXPORT EXPORT
ICm IPI DRAWBACK PEVOS T IPI ICM SUBSIDIES PROMOTION SUBSIDIES b/
EXEMPTION SUBSIDY SUBSIDY RATE a/ (sx)
1964 _ 0.4 _ _ - _ _ - 0.4 _
1965 _ 5.0 _- - 5.0 _
1966 - 5.0 ;- - 5.0 _
1967 16.1 5.2 _- - 21.3 _
1968 19.6 6.0 _ _ _ _ - 0.6 26.2 0.6
1969 20.5 6.8 0.7 - _ 4.3 - 1.7 34.0 6.0
1970 20.5 7.0 1.9 - - 6.0 5.1 3.3 43.8 14.4
1971 19.8 7.5 2.4 - 1.3 6.4 5.9 4.2 47.5 16.5
1972 19.1 8.1 2.6 - 1.3 6.9 6.6 3.9 48.5 17.4
1973 18.3 9.8 3.5 - 1.3 7.0 7.0 3.6 50.5 17.6
1974 17.7 10.0 2.8 - 1.8 8.5 8.5 3.2 52.5 20.2
1975 17.0 10.0 4.6 3.2 1.7 10.1 10.1 5.6 62.3 25.8
1976 16.3 10.9 4.4 5.0 1.3 13.2 13.2 9.7 74.0 36.1
1977 16.3 12.0 2.9 4.1 1.5 11.2 11.2 12.3 71.5 34.7
1978 16.3 12.3 4.0 4.4 1.5 12.0 12.0 10.5 73.0 34.5
1.979
1980
1981
1982
1983
Source: Musalem (1981) p.19
Notes: a) Tax exemptions plus subsidies.
b) Price plus credit subsidies.

TABLE A.3: DOMESTIC RESOURCE COSTS (c), EXPORTING SHARE AND EXPORTING
SUBSIDYFOR BRAZILIANEXPORTINGGROUPS OF MANUFACTURES
Groups of Manufactures Exporting Share Nominal Subsidy (%)
With Exporting net Benefits 1970 1975 per ExportedCruzeiro
Positive (c < 1.25) 79.62 71.23 3.01
Positive Extluding Mining 59.76 51.67 9.01
Indetermined (1.25<c< 1.35) 8.51 9.85 27.96
Negative (c > 1.35) 11.87 18.93 33.76
Source: Savasini-Kume (1979) p. 81

TABLE A.4 : Brazilian Exports by Selected Agricultural Products
GRANULATED SUGAR BROWN SUGAR REFINED SUGAR
VEAR VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY
US$ 1 000 t US$ 1 000 t US$ 1 000 t
1960 5 204 69 056 52 527 699 985
1961 34 570 65 571 782 722
1962 384 5 619 39 111 439 606
1963 9 592 62 006 62 725 461 380
1964 32 950 252 073
1965 2 697 50 130 54 029 709 849
1966 80 535 1 004 549
1967 80 426 1 001 311
1968 101 577 1 026 244
1969 115 045 1 099 008 4
1970 120 1 000 126 512 1 125 223
1971 6 397 70 660 146 554 1 190 563
1972 89 401 480 456 314 147 2 054 454
1973 97 848 444 353 454 863 2 353 573 5 976 22 027
1974 283 330 487 096 978 300 1 767 352 60 302 102 243
1975 204 342 279 469 769 902 1 235 119 125 529 216 186
1976 52 420 205 834 152 473 600 794 101 645 360 706
1977 55 937 293 481 276 530 1 536 151 130 238 624 954
1978 32 764 183 400 195 929 1 154 016 121 371 614 100
1979 22 972 110 783 247 004 1 282 872 93 832 435 573
1980 317 398 568 922 624 500 1 391 530 346 356 611 884
1981 86 879 221 689 578 928 1 563 519 395 926 915 635
1982 76 910 397 665 259 441 1 222 177 243 654 1 089 840
1983 25 990 145 820 332 969 1 575 013 167 843 782 642
1984 47 692 702 787 325 955 1 544 881 212 546 1 211 590
Source: 1960 - 1963 Anu;rio Estatfstico do Brasil Cont.
1964 - 1984 CACEX

TABLE A.4.: Brazilian Exports by Selected Agricultural Products
Cont.
SOYMEAL SOYBEAN OIL REFINED SOYBEAN OIL SOYBEAN
YEAR
VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY
US$ 1 000 t US$ 1 000 t US$. 1 000 t US$ 1 000 t
1960
1961
1962 837 96 771
1963 3 107 33 449
1964 3 024 43 821 V
1965 7 676 105 058 7 343 75 286
1966 14 591 184 949 13 028 121 241
1967 10 219 135 359 29 243 304 543
1968 18 931 234 530 6 291 65 859
1969 23 415 295 366 29 249 310 147
1970 43 637 525 365 767 2 654 27 084 289 623
1971 81 532 911 407 2 245 6 661 2 218 6 589 24 309 213 426
1972 145 920 1 343 446 160 600 14 536 59 443 127 927 1 037 273
1973 418 636 1 561 863 23 808 61 408 8 753 29 452 494 153 1 786 139
1974 301 539 2 020 500 1 890 2 277 9 12 586 271 2 730 426
1975 463 742 3 119 354 152 441 263 183 1 147 1 294 684 901 3 333 334
1976 791 746 4 356 269 174 642 452 889 21 782 44 766 788 538 3 639 497
1977 1 145 709 5 328 957 274 216 487 225 8 698 14 938 709 606 2 586 866
1978 1 047 725 5 406 740 283 156 487 824 11 755 15 778 169 886 658 527
1979 1 136 933 5 170 806 326 798 524 528 7 107 9 206 179 506 638 466
1980 1 449 013 6 581 925 411 111 731 852 22 975 36 598 393 930 1 548 883
1981 2 136 176 8 884 373 544 871 1 107 622 106 125 173 645 403 672 1 449 731
1982 1 619 165 7 720 763 222 359 509 321 156 657 340 055 123 457 500 804
1983 1 793 219 8 492 849 155 057 354 370 305 899 716 517 308 571 1 295 095
1984 1 460 179 7 587 925 557 178 803 028 94 171 125 181 454 116 1 561 110
Cont.

TABLE A.4: Brazilian Exports by Selected Agricultural Produts
Cont.
RICE CORN ORANGE JUICE
YEAR VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY
US$ 1 000 t US$ 1 000 t US$ 1 000 t
1960 28 434
1961 13 169 150 762
1962 4 748 43 678 6 84 235
1963 29 504 699 206 2 167 5 314
1964 851 12 425 2 928 62 315 1 437 3 825
1965 23 765 236 789 27 915 559 675 1 884 5 760
1966 33 320 289 252 31 478 620 800 4 737 13 929
1967 4 817 31 882 22 053 430 444 6 693 18 647
1968 21 214 158 175 57 009 1 237 966 11 631 30 096
1969 13 643 112 487 32 938 649 640 10 910 23 245
1970 6 800 95 051 80 594 1 470 619 14 736 33 468
1971 11 469 148 830 75 431 1 279 696 35 858 77 334
1972 152 1 898 9 629 172 074 41 499 87 156
1973 4 233 33 432 3 146 41 010 63 622 120 990
1974 18 122 56 783 138 991 1 108 713 59 170 108 460
1975 .1 237 2 601 150 867 1 147 941 82 204 180 897
1976 11 956 76 350 164 678 1 371 733 100 882 209 841
1977 82 832 409 108 135 668 1 420 037 177 026 213 524
1978 38 387 184 622 2 240 14 732 332 621 335 629
1979 145 337 1 721 9 917 281 414 292 200
1980 463 1 526 1 133 5 970 338 653 401 026
1981 19 838 49 886 1 344 7 180 659 156 639 047
1982 3 835 12 359 53 881 543 439 573 388 521 217
1983 1 288 8 020 71 779 765 929 607 931 553 110
1984 434 1 364 23 563 178 245 1 414 500 904 805
Cont.

TABLE A.4: Brazilian Exports by Selected Agricultural Products
Cont.
COTTON COCOA BEANS COFFEE BEANS
YEAR VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY
US$ 1 000 t US$ 1 000 t US$ 1 000 t
1960 45 586 95 399 69 181 125 457 712 714
1961 109 682 205 676 45 923 104 170 710 386
1962 112 166 215 915 24 227 55 340 642 671
1963 114 241 221 804 35 030 68 685 748 284
1964 108 259 217 028 34 816 74 710 759 703 896 775
1965 95 551 195 690 27 687 91 966 706 587 808 917
1966 111 004 235 867 50 731 112 498 763 983 1 009 909
1967 90 844 189 442 59 161 114 351 704 725 1 004 250
1968 130 817 247 551 46 098 75 814 774 474 1 107 465
1969 196 008 439 380 105 490 119 574 812 955 1 121 375
1970 154 435 342 833 77 679 119 768 939 266 962 629
1971 137 140 226 809 61 681 119 072 772 479 1 034 266
1972 188 682 284 201 59 156 102 254 989 218 1 050 151
1973 218 068 282 867 88 522 87 774 1 244 272 1 071 377
1974 90 934 83 160 210 002 .129 865 864 313 683 784
1975 97 794 107 202 220 369 176 628 854 513 718 990
1976 6 957 5 579 218 757 128 838 2 '172 687 805 367
1977 40 894 34 732 435 454 107 624 2 298 942 512 391
1978 52 759 44 515 453 813 134 079 1 946 509 621 301
1979 499 308 486 873 156 932 1 917 618 562 196
1980 11 226 8 651 291 688 123 580 2 486 055 784 465
1981 41 497 30 266 241 582 125 297 1 516 646 825 463
1982 61 769 56 487 215 978 143 462 1 857 526 888 020
1983. 188 510 180 179 283 773 152 773 2 095 526 939 603
1984 41 556 32 273 248 276 107 186 2 564 136 1 031 851
;

-8-
TABLE A. 5 : BRAZILIAN IMPORTS BY SELECTED AGRICULTURAL PRODUCTS
RICE BEANS CORN WHEAT
(EAR _
VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY
JS$ 1 000 t US$ 1 000 t US$ 1 000 t US$ 1 000 t
1960
19611
1962 378 5 193
1963 1 21
1964
1965 160 792 100 1 129 135 899 1 876 292
1966 2 196 15 454 433 4 518 167 771 2 380 659
1967 2 188 11 760 710 7 688 180 767 2 446 017
1968 1 3 996 6 685 476 4 590 181 678 2 614 403
1969 26 152 306 1 748 109 1 062 160 637 2.346 243
1970 9 42 448 2 139 255 2 109 127 236 1 957 827
1971 141 1 513 666 1 228 95 1 180 124 450 1 710 521
1972 1 133 9 389 405 13 894 250 2 141 141 184 1 796 875
1973 1 557 10 984 6 542 1 431 818 4.251 376.658 2 944 628
1974 84 536 779 3 705 0 0 522 344 2 399 175
1975 23 852 9 577 2.059 52 736 1 270 2.069 350 767 2 082 376
1976 5 219 16 893 21 825 81 819 479 923 546 564 3 425 999
1977 212 579 33 659 7 580 290 317 2 608 068
1978 7 770 28 623 3 203 7 664 160 974 1 262 132 601 080 4 334 433
1979 245 340 711 132 3 816 39 887 232 182 1 525 930 629 055 3 650 741
1980 99 120 238 844 30 727 5 631 268 933 L593 985 1 051 315 4 755 116
1981 66 605 142 823 4 908 3 570 169 445 901 936 962 201 4 360 034
1982 47 002 147 708 2 336 3 739 851 985 4 223 844
1983 113 483 323 299 1 985 60 527 37 224 213 149 804 883 4 182 029
1984 111 227 34 358 46 472 253 609 840 884 4 867 632
Source: 1960 - 1963 Anuario Estat'stico do Brasil
1964 - 1984 CACEX

-9-
TABLE A.6 - BRAZIL: PEA AGE DISTRIBUTION(Z) SELECTEDYEARS
AGE GROUPS 1940 1950 1960 1970 1980
10 - 14 0.0733 0.0559 0.0471 0.0476
15 - 19 0 .26 95 a 0.1641 0.1487 0.1466 0.1500
20 - 24 b 0.1594 0.1546 0.1619 0.1710
0. 2713b
25 - 29 J 0.1313 0.1304 0.1296 0.1432
30 - 39 0.1899 0.2000 0.2132 0.2118 0.2110
40 - 49 0.1364 0.1399 0.1507 0.1568 0.1474
50 - 59 0.0792 0.0801 0.0891 0.0922 0.0866
60 - 69 0.0375 0.0385 0.0427 0.0416 0.0343
> 70 0.0150 0.0120 0.0148 0.0124 0.0073
Source: IBGE Demographic census
aRefers to age groups 14-19.
bRefers to age groups 20-29.

- 10 -
TABLEA.7 - BRAZIL:SectoralPEADistribution(%) SelectedYears
SECTORS 1940 1950 1960 1970 1980
Primary 0.7689 0.5989 0.5340 0.4466 0.2929
Secondary 0.1029 0.1298 0.1316 0.1770 0.2491
Terciary 0.2382 0.2713 0.3344 0.3764 0.4580
Source:IBGE- Demographiccensus
TABLEA.8 - BRAZIL:PEA Sex Distribution(%)SelectedYears
SEX 1940 1950 1960 1970 1980
Male 0.8547 0.8562 0.8226 0.7940 0.7262
Female 0.1462 0.1470 0.1774 0.2060 0.2738
Source: IBGE - Demographiccensus

- 11 -
TableA.9 - BRAZIL:PEA Schooling Distribution(M)SelectedYears
Schooling 1940 1950 1960 1970 1980
ILLITERATES 0.5330 0.4832 0.4140 0.3599 0.2445
ELEMENTARY 0.4261 0.4391 0.5052 0.4261 0.3948
0-3Y.inSchool 0.3693 0.2766 0.3083 0.2760 0.1701
4 y.in School 0.0568 0.1625 0.1969 0.1501 0.2237
HIGHSCHOOLI 0.0479 0.0452 0.1406 0.1738
5-8Y. inSchool 0.0266 0.0185 0.1092 0.1587
9 Y.inSchool 0.0213 0.0267 0.0314 0.0151
HIGH SCHOOLII
10-1111Y.inSchool 0.0168a 0.0049 0.0032 0.0120 0.0858
12Y.inSchool 0 . 01 58 b 0.0344 0.0199 0.0366 0.0066
UNIVERSITY 0.0016 0.0118 0.0125 0.0234 0.0514
13-16Y.inSchool 0.0013 0.0033 0.0015 0.0160 0.0467
17Y.inSchool 0.0003 0.0085 0.0110 0.0074 0.0047
Source:ISGE- Demographiccensus
aincompletedhigh-school(5 to 11 yearsof schooling)
bg or 12 yearsof schooling.
Clncludesthosewith lessthana yearof formalschool
d1-3years in school
e17or moreyears in school

- 12 -
TABLE A-I0 - BRAZIL: Monthly Minimum Wage in Rio de Janeiro - 1955-85
MINIMUM WAGE
MW APPROVALDATE CurrentCr$ May 1977Cr$
JUL 1954 2.40 1,628.53
AUG 1956 3.80 1,700.13
JAN 1959 6.00 1,813.99
OCT 1960 9.60 1,701.81
OCT 1961 13.44 1,722.51
JAN 1963 21.00 1,573.59
FEB 1964 42.00 1,504.37
MAR 1965 66.oo 1,242.10
MAR 1966 84.oo 1,138.70
MAR 1967 105.00 1,051.21
MAR 1968 129.60 1,076.83
MAY 1969 156.00 1,018.91
MAY 1970 187.20 998.44
MAY 1971 225.60 987.63
MAY 1972 268.80 1,004.01
MAY 1973 312.00 1,027.17
MAY 1974 376.80 975.05
MAY 1975 532.80 1,099.19
MAY 1976 768.00 1,109.03
MAY 1977 1,106.40 1,106.40
MAY 1978 1,560.00 1,147.04
MAY 1979 2,268.00 1,143-56
NOV 1979 2,932.80 1,105.91
MAY 1980 4,149.60 1,150.94
NOV 1980 5,788.80 1,167.03
MAY 1981 8,464.80 1,145.06
NOV 1981 11,928.00 1,161.87
MAY 1982 16,608.00 1,125.28
NOV 1982 23,568.00 1,168.99
MAY 1983 34,776.00 1,089-74
NOV 1983 57,120.00 1,029.50
Source:IBGE- AnuarioEstatisticodo Brasil.
aObtainedas [MW(t)/CPI-RJ(t)]CPI-RJ (May1977)whereMW (t) is
theminimumwageat periodt; CPI-RJ(t)is the ConsumerPrice
Indexin Rio de Janeiroat periodt.

TABLE A.ll: Brazil-Average Price Received by Producers for Selected Products
RICE BLACK BEAN COFFEE SOYBEAN WHEAT MANIOC MAIZE SUGAR COCOA
YEAR Cr$/Kg Cr$/Kg Cr$/Kg Cr$/Ke/ Cr$/Kg_/ Cr$/Kg- Cr$/Kg
1966 0,21 0,40 0,20 0,22 0,025 0,11 0,009 0,67
1967 0,24 0,34 0,21 0,27 0,038 0,14 0,010 0,78
1968 0,29 0,37 0,32 0,32 0,042 0,13 0,014 1,38
1969 0,32 0,73 0,46 0,39 0,051 0,19 0,018 2,16
1970 0,38 1,08 0,79 0,36 0,47 0,077 0,28 0,021 1,70
1971 0,57 1,09 1,04 0,48 0,50 0,111 0,35 0,026 1,52 t
1972 0,69 1,03 1,41 0,53 0,55 0,127 0,36 0,029 2,17
1973 0,75 2,50 2,49 1,12 0,68 0,154 0,50 0,036 3,92
1974 1,14 2,66 4,03 1,14 1,07 0,226 0,69 0,048 6,35
1975 1,83 2,98 5,77 1,27 1,51 0,373 0,91 0,075 6,13
1976 1,84 6,80 11,63 1,46 1,91 0,737 1,36 0,109 12,19
1977 2,06 7,67 18,92 2,61 2,57 1,052 1,53 0,146 30,53
1978 3,49 7,58 18,75 2,95 3,57 1,203 2,33 0,211 38,74
1979 6,23 13,27 26,25 5,66 4,83 1,684 3,21 0,313 47,23
1980 11,51 44,25 39,10 7,78 8,83 3,089 8,25 0,707 66,85
1981 19,48 95,81 58,29 23,52 21,55 5,518 17,74 1,382 105,43
1982 40,55 89,61 106,30 21,23 42,06 8,245 26,53 2,440 152,41
1983 110,00 303,20 269,50 120,50 100,05 17,451 83,20 6,130 651,58
1984
1985
Source: FGV/CEA
Note: a/ Beans b/ Sugar Cane

TABLE A.12: Brazil - Average Price Paid by Consumers
for Selected Products
YEAR RICE BLACKBEAN COFFEE SOYBEAN WHEAT MANIOC MAIZE SUGAR COCOA'/
Cr$/Kg Cr$/Kg Cr$/Kg Cr$/900ml/ Cr$/Kg_b/ Cr$/Kg_/ Cr$/KgY! Cr$/Kg
1974 3,86 4,47 14,98 6,37 1,72 1,71 1,74 1,41 2,75
1975 4,30 4,44 19,22 7,05 1,69 2,72 2,41 1,73 3,43
1976 4,79 5,67 36,26 7,91 1,70 4,96 2,90 2,83 4,94
1977 6,13 8,27 51,88 12,33 3,09 5,75 3,07 4,32 10,76
1978 8,91 9,84 62,04 15,99 3,52 6,03 4,41 5,71 17,93
1979 13,39 16,03 91,61 24,38 4,18 8,78 7,23 8,34 25,98
1980 24,90 27,25 133,97 38,23 6,21 27,88 16,07 16,30 42,37
1981 45,52 116,63 251,24 76,94 25,10 60,35 36,55 35,68 65,44
1982 104,28 121,68 595,13 150,04 59,13 69,04 52,42 74,72 119,12
1983 276,98 301,68 1 346,00 431,27 143,35 176,66 183,16 173,18 295,56
1984 758,64 1 134,78 4 103,40 1 602,03 438,14 775,29 498,71 547,78 956,03
1985 1 942,93 2 532,43 13 553,73 3 663,72 1 335,87 1 781,87 1 041,04 1 257,06 2 601,77
Source: CEE/IBRE/FGV
Note: a/ Oil
b/ Flour
c/ Chocolate

TABLE A.13:Brazil - Average Adjusted Prices Received by Producers for Selected Products per unit of product at consumer level
YEAR. RICE BLACK COFFEE b/ SOY BEANS c/ WHEAT / MANIOCe/ MAIZE f/ SUGAR 9/ COCOA h/
Cr$/Kg Cr$/Kg Cr$/Kg Cr$/900 ml Cr$/Kg Cr$/Kg Cr$/Kg Cr$/Kg Cr$/Kg
1966 0.31 0.40 0.48 0.60 0.29 0.09 0.12 0.10 0.91
1967 0.35 0.34 0.50 0.87 0.36 0.14 0.15 0.11 1.05
1968 0.43 0.37 0.76 1.19 0.43 0.15 0.14 0.16 1.86
1969 0.47 0.73 '.10 1.36 0.52 0.19 0.20 0.20 2.92
1970 0.56 1.08 1.88 1.95 0.63 0.28 0.29 0.23 2.30
1971 0.84 1.09 2.48 2.60 0.67 0.41 0.37 0.29 2.05
1972 1.01 1.03 3.36 2.87 0.73 0.47 0.38 0.32 2.93
1973 1.10 2.50 5.93 6.07 0.91 0.57 0.53 0.40 5.30
1974 1.68 2.66 9.60 6.18 1.43 0.84 0.73 0.53 8.58
1975 2.69 2.98 13.74 6.89 2.01 1.38 0.96 0.83 8.28
1976 2.71 6.80 27.69 7.92 2.55 2.73 1.44 1.21 16.47
1977 3.03 7.67 45.05 14.15 3.43 3.90 1.61 1.62 41.26
1978 5.13 7.58 44.64 16.00 4.76 4.45 2.45 2.34 52.35 1
1979 9.15 13.27 62.50 30.-69 6.44 6.24 3.38 3.48 63.82 H
1980 16.93 44.25 93.10 42.19 11.77 11.44 8.68 7.86 90.34 A
1981 28.65 95.81 138.79 127.55 28.73 20.44 18.67 15.36 142.47
1982 59.63 89.61 253.10 115.13 56.08 30.54 27.93 27.11 205.96
1983 161.76 303.20 641.67 653.47 133.40 64.63 87.58 68.11 880.51
Notes: (a) Polished rice
I ton of rice in the husk corresponds to 680 Kg of polished rice
(b) Ground Coffee
1 ton of coffee beans corresponds to 420 Kg of ground coffee
(c) -Soybeans
1 ton of soybeans corresponds to 180 Kg of refined oil, Soybeans oil density: 0,922 approximately
(d) Wheat Flour
1 ton of grains of wheat corresponds to 750 Kg of wheat flour
(e)Manioc Flour
I ton of manioc. corresponds to 270 Kg of manioc flour
(f) Maize Flour
1 ton of grains of corn corresponds to 950 Kg of maize flour
(g) Sugar
I ton of sugarcane corresponds to 90 Kg of sugar
(h) Cocoa Butter
1 ton of cocoa bean corresponds to 740 Kg of cocoa butter

- 16 -
TABLE A.14: Brazil - Price Paid by Farmers
(Current Cr$/Kg)
YEAR NITRECALCARIUS SUPERPHOSPHATE POTASSIUM CLORIDE
1966 0.187 0.248
1967 0.226 0.264
1968 0.269 0.269
1969 0.310 0.292
1970 0.337 0.341
1971 0.382 0.418
1972 0.509 0.488
1973 0.698 0-.910 0.594
1974 1.647 2.543 1.308
1975 2.074 3.302 1.597
1976 1.961 3.147 1.608
1977 2.567 3.959 2.069
1978 3.555 4.979 2.922
1979 5.233 7.441 5.558
1980 11.587 19.061 14.257
1981 23.828 36.108 27.785
1982 42.858 70.127 44.753
1983 94.000 152.222 110.600
1984 312.375 554.900 440.100
Source: Getulio Vargas Foundation - IBRE-CEA

- 17 -
APPENDIX B
PRICE INDEX CONSTRUCTION
B.1 - DOMESTIC PRICE INDEX OF IMPORTABLES (PM)
The Price Iftdexof Importables was obtained as an
weighted average of agricultural importables (PMA) and non-
-agricultural importables (PMNA). The weights for PMA, the a i's
were the participation of wheat imports on total imports. The
PMNA weights were defined as (1 - a.i. Although other agricultural
products are imported occasionally, we think wheat is a representativ
product of agricultural imports.
PMNA from 1970 onward is given by the wholesalepriceson
cereals and grains (column 19) as computed by Getulio Vargas
Foundation (FGV).Prior to 1970we used the wheat price paid by the
millers.
PMNA from 1960-69 corresponds to the aggregation of two
wholesale price indices computed by Vargas Foundation: chemical
and metalurgy aggregated by theircorresponding participations on the
sum of their values of production. For the rest of the sample period
that is, from 1970 on PMNA is obtained by aggregating the following
wholesale price indices (also computed by FGV): Lime and Silicates,
Nonferrous Metals, Machinery, Electrical Machinery Equipment,
Vehicles. and Vehicle Equipments, Chemical, Paper and Paperboard,
Artificial Yarn Fabrics. These indices were selected to define
non-agricultural importables based on Carvalho-Haddad (1981). Using

- 18 -
a four digit disaggregationof the industrialsector in Brazil,
these authors classified them on exportables,importablesand home
goods based on an statistic that depends on production, consumption,
exports and imports. For details on this classification,readers
are to refer to Chapter III and table A.8 of the referred study. The
aggregation of these indices on PMNA from 1970 on, was made weiaht-.nc
each index by the relative share of the value of production of the
corresponding sector on the sumof the considered sector values of
production.
B-2 - DOMESTIC PRICE INDEX OF EXPORTABLES (PX)
Once more, an agriculturalprice index and a non-agricul-
tural one were computed andaggrea-atedtodefinethePX. The agricul-
tural price index of exportables (PXA)from 1970 on is the index, at
thewholesalelevel,of AgriculturalProducts mainly for Export. Prior
1970 we used the wholesale price index of agriculturalproducts.
The price index of non-agriculturalexportableswas
obtained by aggregatingwholesale price indices computed by FGV as
follows: 1960-1969 - Raw-Materials;Hides, Skins and Leather; Textiles
Apparel and Footwear;
1970 onward - Lumber and Wood Products; Furniture; Iron and Steel;
Hides, Skins and Leather; Natural Yarm Fabrics;
Hosiery; Apparel (hosieryexcluded); Footwear.
These indices were aggregatedon PXNAby weighting each
one by their relative importanceon the group as measured by the
value of production activity participationon group total value.

- 19 -
To aggregate PXA and PXNA to obtain PX, we used as
weights the relative participation on exports of agricultural
products for the first and its complement to one for the second.
B.3 - DOMESTIC PRICE INDEX OF NON-AGRICULTURAL PRODUCTS (PNA)
To construct a domestic price index of non-agricultural
products, we aggregated the following price indices: non-agricultural
importables (PMNA) as defined in A above; non-agricultural exports
(PXNA) as described in B and non-agricultural domestic goods. The
price index of non-agricultural domestic goods (DNA) was cbtained
by aggregating the following indices-computed at consumer level in
Rio de Janeiro by FGV: Housing, Personal Services and Public Services
These indices were aggregated in DNA by their relative importance
on the RJ-CPI, normalized to add up to one.
To aggregate PMNA, PXNA and DNA to obtain PNA we did
the following:
PNA = a (M) PMNA + a (X) PXNA + a (D) DNA
where:
MNA IPa (M) = ( A ) .( _ )
MNA+ XNA PIBNA
)(X) = (XNA IP
MNA + XNA * PIBNA
a (D) = -PIBNA

- 20 -
MNA = non-agricultural imports in current cruzeiros;
XNA = non-agricultural exports in current cruzeiros;
IP = industrial product in current cruzeiros;
PIBNA = non-agricultural product in current cruzeiros;
SP = services product in current cruzeiros.
B.4 - DECOMPOSITION OF CONSUMER PRICE INDEX ON TRADABLES AND
NON-TRADABLES
The decomposition of the CPI on tradables and non-tra-
dables was done considering as non-tradables the following components
housing, personal services and public services. These components are
computed monthly for Rio de Janeiro city by Getulio Vargas Foundation
To aggregate these components in the non-tradable price index we
--roceeded as describedpreviously for DNA (B.3 above). Thus, non-tra-
dables price index do not include agriculturalproductsand therefore
is the same index as domestic non-agricultural products. This might
not represent a serious bias in this index since very few agricultu-
ral products, such as cassava, can be considered domestic products.
The tradable component (PT) of the consumer price index
was obtained by residual considering the sum of the weights of the
individual components that comprises the non-tradable price index as
the weight of this price index (PNT) in the definition of CPI. Thus,
PT was obtained as:
PT 1 CPI a( ) PNT,
at a

- 21 -
where a had the following values:
Period _
1960-65 0.637
1966-71 0.706
1972-73 0.671
1974-84 0.621
according to the family expenditure surveys conducted by FGV to
calculate CPI for Rio de Janeiro.
The reason for using Rio de Janeiro CPI and not a
national one is that this index became available from 1979 on.
Nonetheless, the relative movements of both series for the
overlaping period is quite similar and therefore the Rio de Janeiro
CPI can be used as a good proxy for the national index.

- 22 -
B.5 - Undistorted Price Index for Non Agricultural Goods
To calculate the free-trade price of non-agricultu-
ral goods, UPNA, the following procedure has been adopted:
E* PXNA + (M) E* PMNA
UPNA = a (X) . E . + a (M) + a(D) DNA
X m
Where, sx and tm are export subsidies and import
tariffs on non-agricultural goods; PNXA, PMNA and DNA are the
components of PNA as defined in B.3 above as well as a (X), a (M)
and, a (D); E is the official exchange rate and E* is the
equilibrium rate as estimated in the Appendix C. This procedure
is incomplete in correcting PNA since distortions on tradables do
affect non-tradables (DNA). One way to correct DNA would be to
consider the equivalent homogeneous tariff as the price distortion,
weightedby the cross-price elasticity of domestic goods with
respect to tradables that in this case shouldbeapproximated by w
defined in Appendix C. For simplicity and given the difficulties
associated to obtaining this cross-price elasticity we did not
consider here this correction.
The estimates of the export subsidies come from
various sources: Musalem (1981) for the period 1964-78; De la Cal
(1981)for 1979;Tyler (1983)for 1981. For the remaining years, that
is 1980, 1982 and 1983 we estimated these export subsidies based
on observed price,indices as follows:
P
(1 +s)s x where
x P*
x

- 23 -
P* - Export price index as calculatedby GetClio Vargas Foundation;x
Px = Domestic price index of exported goods as calculated on
table B.2 above. To maintain the consistenceof the series,
we computed the rates of change of sx estimated as above and
apply them to the previously mentioned estimates.
For the import tariffs, the adopted estimates also
come from various sources: Fishlow (1975)for 1962; Fendt (undated)
for 1977; Guedes et al. (1981) for 1973, 1979 and 1980; and Tyler
(1983)for 1981. To obtain the missing year we adopted a procedure
similar to the one adopted for sx defining import tariff as follow:
p
(1 + t) m
m
m~~~~~~~~
-m Import price index as calculated by GetuilioVargas Foundation;
PM - Domestic price index for imported goods as calculated on
table B.1 above.
One could argue that using our definition of x
and tm one would have a good estimate of sx and tx. We did
calculate these subsidies and taxes. The results we obtained
were quite inconsistentwith the existing evidences. This is
the case for two reasons. First the definitionswe presented
above are valid for individual prices and might not be a good
estimate for aggregates. Second the price indices we constructed
do not cover the same aggregates used by Getulio Vargas Foundation
in constructingP*x and P*m indices.

- 24 -
B.6 - Undistorted Consumer Price Index
The undistorted consumer price index can easily
be obtained by the decomposition we made on this index on B.4
above:
CPI = aPT + (1 - a) PNT,
where
PT is the price index for tradables and PNT is the price index
for non tradables.
Thus, tradables price index could be corrected by
taking into consideration the average tariff described in the
Appendix C below and the exchange rate correction. Also, PNT
could be corrected in the sane fashion as DNA above. For simplicity
and because the most relevant distortion here is reflected on
the exchange rate, we adopted the following correction for CPI.
UCPI = E aPT + (1 - a) PNT
E
The values for UCPI are reported on Table B.6 for
two alternative equilibrium exchange rate.

- 25 -
TABLE B.1 - BRAZIL: DOMESTICPRICE INDEXOF IMPORTABLESDECOMPOSEDIN
AGRICULTURALAND NON-AGRICULTURALGOODSPRICE INDICES
YEAR PMA PMNA PM
1960 0.44 0.557 0 .545
1961 0.85 0.746 0.756
1962 1.28 1.136 1.152
1963 2.07 2.289 2.265
1964 4.56 4.592 4.587
1965 7.78 7.746 7.750
1966 8.86 9.042 9.024
1967 10.54 11.613 11.509
1968 13.30 13.310 13.309
1969 17.12 17.367 17.351
1970 21.46 21.067 21.082
1971 27.15 24.079 24.190
1972 32.67 27.692 27.851
1973 33.65 31.221 31.357
1974 42.42 41.150 41.198
1975 52.99 52.383 52.401
1976 76.56 71.720. 71.923
1977 100.00 100.000 100.000
1978 138.40 134.747 134.937
1979 207.90 205.158 205.314
1980 433.10 434.194 434.129
1981 862.60 970.216 964.620
1982 1 323.70 1 969.197 1 940.150
1983 4 913.80 4 821.810 4 827.789
1984 16 516.50 15 277.084 15 351.449
Source and explanations: see B.1 above.

25 -
TABLE B.2 - BRAZILTDOMESTICPRICE INDEX OF EXPORTABLESDECOMPOSEDIN
IN AGRICULTURALAbNDNON'AGRICULTURALGOODSPRICE INDICES
YEAR PYA PXNA PX
1960 0.20 0777 0.267
1961 0.26 1.157 0.386
1962 0.42 1.670 0.61 2
1963 0.70 2,965 0.997
1964 1.40 5,247 2.058
1965 1.99 7.988 3.310
1966 2.82 10.891 4.426
1967 3.51 13.680 5.788
1968 4.12 17.818 6.969
1969 5.01 13.531 8.350
19 70 6 e45 23 o130 11e120
1971 6.18 Z?O489 13 255
1972 8.14 3lG296 15.342
1973 211e30 37o556 19.781
1974 15.49 46e760 27,623
1975 19.22 55.751 35.221
1976 49.74 744107 59.414
1977-00.00 100l000 100.000
1978 90.53 32.3e185 110.108
1979 118.40 199.128 161.589
1980 200.60 364s413- 287.749
1981 299o30 689e048 526.133
1982 485.50 1 303.964 975.760
1983 2269.90 2 821.171 2 227.034
1984 5 277.60 -, 302A360 7 445.410
Source and explanation$s. see B.2 abo e.

-27-
TABLEB.3: BRAZIL- DOMESTICPRICE INDEXOF NON-AGRICULTURALPRODUCTSDECOMPOSED
IN INPORTABLES,EXPORTABLESANDDOMESTICGOODSPRICE INDICES
YEAR IMPORTABLES NA EXPORTABLES NA DOMESTIC NA PNA
1960 0.557 0.777 0.410 0.466
1961 0.746 1.157 0.526 0.615
1962 1.136 1.670 0.726 0.881
1963 2.289 2.965 1.216 1.604
1964 4.592 5.247 2.130 2.979
1965 7.746 7.988 4.170 5.577
1966 9.042 10.891 6.695 7.760
1967 11.613 13.680 9.447 10.424
1968 13.310 17.818 12.143 12.924
1969 17.367 19.531 15.189 16.251
1970 21.067 23.130 18.688 19.833
1971 24.079 27.489 22.469 23.418
1972 27.692 31.296 26.489 27.297
1973 31.221 37.556 29.659 30.934
1974 41.150 46.760 35.668 38.460
1975 52.383 55.751 48.848 50.637
1976 71.720 74.107 70.877 71.449
1977 100.000 100.000 100.000 100.000
1978 134.747 132.185 139.075 137.127
1979 205.158 199.128 207.850 206.121
1980 434.194 364.413 382.220 393.758
1981 970.216 689.048 779.181 810.458
1982 1 969.197 1 303.964 1 560.576 1 617.156
1983 4 821.810 2 821.171 3 437.474 3 666.507
1984 15 277.084 9 022.360 9 515.230 10 760.841
Source and explanations: see B.3 above.

- 28 -
TABLE B.4: BRAZIL - DECOMPOSITIONOF CONSUMERPRICE INDEX ON TRADABLES
ANDNON-TRADABLES
YEAR CPI PT PNT
1960 0.51 0.567 0.410
1961 0.68 0.768 0.526
1962 1.03 1.203 0.726
1963 1.76 2.070 1.216
1964 3.37 4.077 2.130
1965 5.59 6.399 4.170
1966 7.90 8.420 . 6.695
1967 10.31 10.669 9.447
1968 12.61 12.804 12.143
1969 15.39 15.,474 15.189
1970 18.88 18.960 18.688
1971 22.69 22.782 22.469
1972 26.45 26.431 26.489
1973 29.80 29.869 29.659
1974 38.03 39.471 35.668
1975 49.04 49.157. 48.848
1976 69.57 68.772 70.877
1977 100.00 100.000 100.000
1978 138.70 138.471 139.075
1979 211.80 214.211 207.850
1980 387.20 390.239 382.220
1981 795.90 806.104 779.181
1982 1 575.70 1 584.930 1 560.576
1983 3 812.90 4 042.025 3 437.474
1984 11 314.50 12 412.605 9 515.230
Source and Explanations:see B.4 above.

- 29 _
TABLE B-5: BRAZIL - Undistorted Price Index for non-Agricultural
Goods
UPNA8 o UPNA
YEAR 8 0
(E* = E*8 0 ) E* = E*wb
1960 0.472 ,0.491
1961 0.628 0.646
1962 0.893 0.933
1963 1.720 2.059
1964 2.861 3.098
1965 5.358 6.282
1966 6.842 8.159
1967 9.494 11.391
1968 11.700 13.430
1969 14.985 17.516
1970 17.831 20.744
1971 21.203 24.146
1972 24.807 28.513
1973 28.174 32.625
1974 37.368 40.509
1975 49.787 54.223
1976 70.047 77.683
1977 93.770 106.684
1978 118.202 129.365
1979 179.228 189.296
1980 349.325 348.593
1981 787.981 805.760
1982 1 577.150 1 562.522
1983 3 791.783 3 421.832

- 30 -
TABLE B.6 - BRAZIL: Consumer Price Index Correctedfor Exchange Rate
Distortionon Tradable Goods
C P I - CORRECTED
YEAR C P I - RJ
E*wb 80
1960 0.51 0.571 0.529
1961 0.68 0.732 0.695
1962 1.03 1.162 1.073
1963 1.76 2.243 1.744
1964 3.37 3.812 3.327
1965 5.59 6.686 5.372
1966 7.90 10.932 7.972
1967 10.31 15.040 10.723
1968 12.61 17.427 13.393
1969 15.39 21.038 15.978
1970 18.88 26.376 19.894
1971 22.69 32.086 24.923
1972 26.45 36.932 28.581
1973 29.80 41.024 31.691
1974 38.03 50.139 44.170
1975 49.04 63.967 55.824
1976 69.57 90.881 76.676
1977 100.00 132.913 106.283
1978 138.70 186.339 151.110
1979 211.80 268.070 235.987
1980 387.20 427.670 427.283
1981 795.90 906.030 867.582
1982 1 595.70 1 771.564 1 794.304
1983 3 812.90 3 519.219 4.146.411
Notes: CPI - As published by Getulio Vargas Foundation for Rio de
Janeiro citv
CPI - Corrected - See B.6 above.
E*wb - Equilibrium Exchange Rate obtained by PPP criterion
base year 1980 as computed by the World Bank as in
table C.S.
80 - Equilibrium Exchange Rate based on the year by year
elasticity approach as described in appendix C table
C.4. Base year 1980.

- 31 -
APPENDIXC
EQUILIBRIUMEXCHANGE RATE
Following the note prepaired by Schiff (January23 1986) the
equilibrium exchange rate is defined as:
E*= (ltmQdnQs)t
[Q + Q + n Q x °
+~~~~~+IE
Od = Demand for foreign exchange;
as = Supply of foreign exchange;
Eo = Official exchange rate
600= Qd - as at the official exchange rate Eo
E* = Equilibrium exchange rate at the moment E0 is observed;
n = Price elasticityof foreign exchangedemand (positivelydefined)
E = Price elasticityof foreign exchange supply;
tm = Tariff on imports;
tx = Export taxes
This formula.was applied to Brazilian data with
tm and t, estimated as described below. However, the results were
not satisfactory,specially in the years of the beginning of the
period: for example, in 1965, the exchange rate estimated according
to this formulawas 1.584 and the official rate was 1.891, which
indicates that the cruzeiro was undervaluedby approximately19%.

- 32 -
In view of these difficulties, the above
formula was not utilized. Instead, we have estimated the
equilibrium rate following the procedure of Roe and Green (1986),
which consists of the derivation of an exact formula for E*
assuming demardand supplyof foreign exchange subject to constant elas
ticities. The estimates are shown in Table C.4 of this Appendix.
They are, in general very similar to the ones obtained before
with the formula given in the beginning, but for the specific
years in which those results were not very satisfactory it
improves them. The year 1965 shows an undervaluation of only
5.89%.
The procedure of Roe and Green is
described below. Let the excess demand for goods and services
in period t, Mt, be
Mt = Bt(p = Bt Et P* (1 +
where Bt is an intercept term that reflects the movements in other
variables affecting Mt; Pmt is the domestic price of imported
goods and services and is equal to world (or border) price p*,
times the exchange rate, Et, times one plus the tariff (l+TMt).
The value of imports is then:
pt Mt BdtBt (P* )l+7 Et (1+Tmt)]
Similarly, the supply of foreign exchange
can be obtained. Let Xt be the excess supply of goods and
services, P*xt be the world (or border) price of export goods
and services and Txt be the export tax. Then, it is assumed that

- 33 -
Xt = At pxPtEt (1-txt)]O
from which one obtains the value of exports;
P* Xt = = At (P )1+a EEt (l-txt)]a
where At is, again, an intercept term that reflects changes
in exogenous variables that affect Xt.
Data on the value of imports and exports
of goods and services, on Tmt and Txt,Et and the elasticities
a and n allow us, following Roe and Green, to estimate At and
B . The equilibrium exchange rate is defined, for each t, as
the value of Et thatonewouldobtainunderthe followingconditions:
l Mt :xt'
T
xt = Tmt = 0 and At and Bt as estimated above.
To compute the equilibrium exchange rate
we will need the true tariff and the true subsidy accruing on
imports and exports. We will also need the demand and supply
elasticities associated to foreign exchange and a set of published
data on trade. Let us consider the required information by turns.

-34-
Calculating tm and sx
Accordinglywith Sjaastad-Clements(1981) true
import tariff (t ) and true export subsidy (s ) can be defined as
function of two parameters, w and t, as follows:
=m 1-w)t
lwE
X +wt
sx I + wf
where
w - distributionalparameter: elasticity of (homegood prices/export
prices) with respect to (import prices/export prices);
-- the uniform equivalent tariff.
Note that if sx < 0, that is t > 0, there will be a true tax on
exports. This is so because w has to ve positive as shown by
Sjaastad-Clements (1981).
Hence, if we have estimatesof t and w, we will
be able to estimate tm nd s
An estimate of t
For exportablesand importableswe should have:
Px E . (1 + s9) Px (c.1)
Px E * ( + tm) P

35 -
where
Px = domestic price of exportable goods
P* = international price of exportable goods (in US$);
x
E = official exchange rate (Cr$/US$);
Pm = domestic price of importable goods;
Pm = international price of importable goods (in US$).
m
(c.l) should hold true for every tradable. Since these individual
price comparisons cannot be made for a long period of time due to
data limitations, the comparisons we will make will consider price
indices for each tradable category. Thus,
v 1 + t P*
= +tm m- (c.2)
P 1 + s x
x x x
will hold for the corresponding price indices.
If we call 1 + tm (1 + t), E is in fact the equivalent
1 + s,
uniform tariff.
Since we are working with relative price indices
and not with the individual prices we cannot estimate (1 + Et)by
taking (P /P )/(P*/P*). Nonetheless, we can obtain the rate of
m x m x
change in (1 + t) by applying d lg to the expression (c.2).
P p*
d lg m d lg (1 + t) + d ig m
x P or
x ~~~~~~~~~x
d lg (1 + t) = d lg pm _ d lg (c.3)
x x

- 36 -
Estimating a value of t for one year, will
allow us to obtain the series of t once d lg (1 + t) is
estimated by (c.3). Pm and Px can be taken as the price indices
constructed on appendix B while Pm and Px are published by Getuilio
Vargas Foundation. Therefore, d lg (1 + t) can easily be obtained
from (c.3) and the next step is to compute t for a specific year.
Tyler (1983), using 676 different products,
distributed along 72 sectors of the 1970 IBGE input-output table,
calculated the average implicit nominal tariff protection and the
effective rate of export promotion. These values will be taken as
proxies for tm and sx respectively. Tyler's estimates are based
on data collected along the period June 1980 - April 1981. Thus,
we will take his results for the year of 1980.
Table C.1 - BRAZIL: 1980 Estimates for tm and sx
Sectors t sm x
Agriculture - 7.2 - 5.4
Transformation Industry 24.5 34.9
Capital Goods 45.5 34.9
Intermediaty Goods 25.2 34.7
Consumer Goods 13.1 35.0
Weighted Average* 21.62 18.06
Source:Tyler (1983).
*Weightsdefinedas importparticipationfor tm and exportparticipationfor sx
With the average values for tm and sx for 1980, we
can compute (1 + E) as follows:

- 37 -
+ tm 1,2162
(1 + t) 1 + 8 = 1,1806 = 1,0302.
Thus, the value of t for 1980 is 0,0302. With
the values of d lg (1 + t) computed by (C.3)we can obtain a series
of t as reported on table C.2.
w Estimates
Fendt (1981),estimatedw, following
Sjaastad-Clements (1981) through the simple regression.
19(d) a + b 19 + c 19(Z ) + u,
tAx ) X(Px)
being w defined as
d lg (Pd /Px
where
d lg (P /P
pd = Price index for domestic goods
dx= Domestic Price Index for export goods
P = Domestic Price Index for import goods
As Fendt estimated, w depends on lg (Pm/Px).
Using the average values of this relative prices for the
correspondingperiod, he estimated the followingvalues for w:
1955 - 59 w = 0.69
1974 - 78 w = 0.43
Since we could not reproduceFendt's Pd, px
and Pm' we use our price index series from Appendix B to estimate
w for different periods using the following regression.

- 38 -
lg ( d) = a + w lg X +
The results we obtained were:
1964 - 73 w = 0.57 R = 0.64
2
1974 - 83 w = 0.43 R = 0.69
Given the results presented by Fendt and our
own estimates of w, we decided to adopt the following values
for this parameter:
Period w
1960 - 63 0.69
1964 - 73 0.57
1974 - 83 0.43
Thus, with these values for w plus the estimates
of t discussed above, we computed tm and sx. Since the export
subsidies were negative for all periods, they were in fact export
taxes. In table C.2, we report the estimates of w, t, tm and tx
from 1960 to 1983. Alternatively,we present on Table C.2a the
estimated values for tm and tx consideringthe 1976 value of t
estimated by Fendt (1981). In this way, the two sets of tm and tx
will be used in generating the equilibriumexchange rate.
The hypothesis on the elasticities
The methodologyused here to compute the
equilibriumexchange rate requires . knowledge, of the price
elasticitiesof demand (n) and supply (e) of foreign currency
(Us$ in the Brazilian case). Since we have no reliable estimates

- 39 -
for these elasticities we decided to adopt the following values:
n = 2.0 and c = 1.0
Several studies on the equilibrium or shadow
exchange rate have been done for Brazil. Those that have used
the elasticity approach had to impose some hypothetical values for
n and E-L/. In general, their sensitivity analysis induced those
authors to choose values for these elasticities close to the ones
we are adopting here.
Using the trade data reported on table C.3 plus
the estimated values of tm and tx and the hypothesis about n and e,
we computed the equilibrium exchange rate. This rate is also
computed by the values of t obtained from Fendt estimate for 1976
and is reported on table C.4.
Another way of computing a series of the
equilibrium exchange rate would be as follows: take an estimate for
the equilibrium exchange rate calculated for one year and apply
the principle of constant purchasing power parity to obtain the
series from this calculated value.
We have for Brazil at least four points in time
for which we have estimates of the shadow exchange rate. Bergsman-
-Malan (1970) estimated this rate to be Cr$ 0,22 per US$ dollar in
1960.
11 See for example Bergsman-Malan (1970),Oliveira (1981) and a World Bank
Office Memorandum of December 28 1977 prepaired by F.J. Easwaker and
P.T.Knight.

- 40 -
Table C.2 - BRAZIL: Estimates of True Import Tariffs and True
Export Taxes - 1960 - 1983*
Year w t tm tx
1960 0.69 0.6815 0.1437 0.3198
1961 0.69 0.6664 0.1415 0.3150
1962 0.69 0.3863 0.0946 0.2105
1963 0.69 0.6285 0.1359 0.3025
1964 0.57 0.9732 0.2692 0.3568
1965 0.57 1.0682 0.2855 0.3784
1966 0.57 0.6882 0.2125 0.2817
1967 0.57 0.6075 0.1940 0.2572
1968 0.57 0.4795 0.1619 0.2147
1969 0.57 0.6882 0.2125 0.2817
1970 0.57 0.7086 0.2170 0.2877
1971 0.57 0.5260 0.1740 0.2307
1972 0.57 0.6075 0.1940 0.2572
1973 0.57 0.5429 0.1783 0.2363
1974 0.43 0.1885 0.0994 0.0750
1975 0.43 0.1476 0.0791 0.0597
1976 0.43 0.0488 0.0272 0.0206
1977 0.43 0.0457 0.0255 0.0193
1978 0.43 0.1015 0.0554 0.0418
1979 0.43 0.0478 .0.0267 0.0201
1980 0.43 0.0302 0.0170 0.0128
1981 0.43 0.0605 0.0336 0.0254
1982 0.43 0.1171 0.0635 0.0479
1983 0.43 0.2162 0.1128 0.0851
* For details see text.

- 41
TABLE C.2a - BRAZIL: Extimates of True Import Tariffs and True
Export Taxes - 1960 - 1983*
Years w t tm ~~~x
1960 0.69 1.71 0.2432 0.5413
1961 0.69 1.69 0.2419 0.5383
1962 0.69 1.23 0.2063 0.4591
1963 0.69 1.62 0.2371 0.5278
1964 0.57 2.18 0.4180 0.5541
1965 0.57 2.33 0.4304 0.5705
1966 0.57 1.72 0.3735 0.4951
1967 0.57 1.59 0.3587 0.4754
1968 0.57 1.38 0.3321 0.4403
1969 0.57 1.72 0.3735 0.4951
1970 0.57 1.75 0.3767 0.4994
1971 0.57 1.46 0.3426 0.4542
1972 0.57 1.59 0.3587 0.4754
1973 0.57 1.49 0.3465 0.4593
1974 0.43 0.92 0.3758 0.2835
1975 0.43 0.85 0.3548 0.2677
1976 0.43 0.69 0.3033 0.2288
1977 0.43 0.68 0.2999 0.2262
1978 0.43 0.77 0.3297 0.2487
1979 0.43 0.68 0.2999 0.2262
1980 0.43 0.65 0.2896 0.2184
1981 0.43 0.70 0.3067 0.2314
1982 0.43 0.81 0.3424 0.2583
1983 0.43 0.98 0.3930 0.2965
* The t series was computedby taking the 1976 extimate of this
parameter accordinglyto Fendt (1981).

- 42
Table C.3 BRAZIL: Trade Data Needed to Compute the Proposed
Equilibriun Exchange Rate - Value in US$ Millions
Current Merchandise and Services
Year Account Exports (Q ) Imports (Qd)
1960 478.0 1 268,8* 1,746.8
1961 222.0 1 390.9* 1 612,9
1962 389.0 1 469.0 1 858.0
1963 114.0 1 695.0 1 809.0
1964 - 140.0 1 764.0 1.624.0
1965 - 368.0 2 044.0 1 676.0
1966 - 54.0 2 161.0 2 107.0
1967 237.0 2 179.0 2 416.0
1968 508.0 2 416.0 2 924.0
1969 281.0 2 601.0 2 882.0
1970 562.0 3 117.0 3 679.0
1971 1 307.0 3 325.0 4 632.0
1972 1 489.0 4 548.0 6 037.0
1973 1 688.0 7 143.2 8 831.2
1974 7 122,4 9 508.9 16 631.3
1975 6 751.3 10 117.1 16 868.4
1976 6 133.2 11 449.9 17 583.1
1977 4 037.2 13 706.1 17 743.3
1978 5 927.4 14 675.8 20 603.2
1979 10 741.6 17 963.5 28 705.1
1980 12 807.0 23 276.8 36 083.8
1981 11 717.1 26 940.2 38 657.3
1982 16 310.5 23 468.6 39 779.1
1983 6 867,6 24 240.9 31 108.5
Source: IFS
Note: (*)Includesonlyexportof merchandise.

- 43 -
TABLE C.4: BRAZIL: Official and Equilibrium Exchange Rates
Cr$/US$
OFFICIAL EQUILIBRIUM RATE DISCREPANCY (%)
YEAR
E E* (E-E*)/E*
1960 0.190 0.20 . - 6.54
1961 0.272 0.28 - 1.14
1962 0.388 0.41 - 5.80
1963 0.577 0.57 1.35
1964 1.271 1.25 1.59
1965 1.891 1.79 5.89
1966 2.216 2.24 - 0.97
1967 2.662 2.81 - 5.21
1968 3.394 3.69 - 7.97
1969 4.071 4.29 - 5.10
1970 4.594 4.94 - 7.05
1971 5.288 6.02 -12.19
1972 5.934 6.65 -10.73
1973 6.126 6.70 - 8.63
1974 6.790 8.49 -20.03
1975 8.127 9.93 -18.18
1976 10.673 12.45 -14.27
1977 14.144 15.57 - 9.19
1978 18.078 20.69 -12.61
1979 26.818 31.69 -15.38
1980 52.811 61.55 -14.19
1981 93.349 106.72 -12.53
1982 180.366 220.43 -18.17
1983 576.943 653.60 -11.73
Source:OfficialExchangeRate:1960-1969- ConjunturaEcono^mica,1970-1983,
CECEX.
Note:E* - EquilibriumExchangeRate calculatedas describedin the text
using F obtainedfromTylerestimatesof t and sx for 1980.

- 44 -
Easwaker and Knight on their World Bank
Memorandum of December 1977 reported an earlier study where they
estimated that in 1975 the shadow exchange rate was 25% above
the official rate. For 1977 they reported that this difference
was increased to 30%. Another World Bank mission, updated this
estimate to 1980 and found that the shadow exchange rate was 16,7%
above the official rate.
In this way, using the constant PPP argument,
we can arpute four series of equilibrium exchange rate. Nonetheless,
we will compute only two. One based on Bergsman-Malan and the
latest estimate done by the World Bank that is for 1980.
The problem with the PPP aproach is that any
change in relative prices are not considered. Therefore, the
equilibrium rate thus computed will lose its meaning as the
relative prices do vary. This is exactly the case for the considered
period. In this way, we intended to use the difference between-
the equilibrium rate based on the 1960 estimate (E*0) and the
equilibrium rate based on 1980 estimate (E*0) to infer about the
relative price changes. In this way, (E*0 - E*0) along the period,
could be explained by the real change in the relative price of
tradables. With this information, the equilibrium rate based on
PPP could be corrected account for relative price changes.
Table C.5 reports the official rate and those
equilibrium rates computed by the PPR approach taking as base year
1960 (Bergsman - Malan) and alternatively 1980 (World Bank). As
one can easely note by inspecting this table, the differences
between these two rates are negligible and therefore no attempt

- 45 -
to correct for relative price changes can be made.
This is a quite striking result since along
the considered period the relative prices did change at least
after 1973 with the first world petroleumprice shock. Once again,
we should expect another drastic movement in these relative prices
in 1979 with the second petroleum price shock. Also, from 1972
through about 1977 the commodity prices did present a real upward
trend. In any case, it is difficult for us to accept that the
terms of trade for Brazil remained stable during this period.

- 46 -
TABLE C.5: BRAZIL: Official and Equilibrium Exchange Rates (ppp)
CR$/US$
EXCHANGE RP.TE EQUMIRIUM EXC1XwGsRAIE DEGREE OF DIVERGENCE
YEAR a
Nominal Real- World ban/ B - ME/ Vbrld Bank B *
1960 0.1896 6.129 0.2217 0.2200 - 0.1448 - 0.1382
1961 0.2723 6.484 0.3010 0.2987 - 0.0953 - 0.08841
1962 0. 877 6.121 0.4547 0.4513 - 0.1473 - 0.1409
1963 0.5770 5.245 0.7884 0.7824 - 0.2681 - 0.2625
1964 1.2731 6.125 1.4873 1.4759, - 0.1454 - 0.138&
1965 1.8914 5.648 2.3999 2.3816 - 0.2119 - 0.2G5a
1966 2.2163 4.753 3.3422 3.3167 - 0.3369 _ 0.3318
1967 2.6622 4.402 4.3339 4.3003 - 0.3857 - 0.3810
1968 3.3938 4.676 5.2019 5.1622 - 0.3476 - 0.342.5
1969 4.0713 4.724 6.1759 6.1288 - 0.3408 - 0.3357
1970 4.594 4.594 7.167 7.112 0.3590 - 0.3540
1971 5.288 4.525 8.375 8.311 - 0.3758 - 0.3637
1972 5.934 4.504 9.442 9.370 - 0.3715 - 0.3667
1973 6.126 4.593 9.558 9.485 - 0.3591 - 0.3541
1974 6.790 4.796 10.146 10.OG9 - 0.3308 - 0.3257
1975 8.127 4.813 12.102 12.010 - 0.3285 - 0.3233
1976 10.673 4.781 15.999 15.877 - 0.3329 - 0.327 8
1977 14.144 4.684 21.643 21.478 - 0.3465 0.3415
1978 18.078 4.612 28.092 27.878 - 0.3565 - 0.3515
1979 26.818 4.998 38.456 38.163 - 0.3026 - 0.2973
1980 52.811 6.141 61.630 61.161 - 0.1431 - 0.1365
1981 93.349 5.874; 113.905 113.036 - 0.1805 - 0.1742
1982 180.366 5.966 216.359 215.012 - 0.1664 - 0.161.
1983 580.199 8.148 509.637 506.463 + 0.1385 + 0.1456
1984 1.842.610 9.100 1.449.035 1;440.010 + 0.2716 + 0.2796
Source:Nominalofficialrates: 1960-69ConjunturaEconiomica,1970-84CECEX.
Notes: a- Computedas NominalOfficialRate US-Wholesale price index
Brazil-Consumerprice indtex
b- Base year 1980 as computedby the World Bank
c- Base year 1960 as computedby 'Bergsman-Malan(1960)
NominalOfticialRate - EquilibriumRate
d- D3grceof Divergence- EquilibriumRate

- 47 -
TABLEC.6: BRAZIL: Real ExchangeRate
OFFICIALRATE CORRECTEDEQUILIBRIUMRATE
e1/ e* 2/ e 3e - -~~w 80
1960 18 205 18 973 18 474
1961 19 485 20 031 19 624
1962 18 387 19 100 18 649
1963 15 952 17 103 15 903
1964 18 393 19 027 18 322
1965 16 825 17 853 16 573
1966 14 414 15 709 14 439
1967 13 296 14 839 13 494
1968 14 206 15 755 14 543
1969 14 504 16 096 14 722
1970 13 827 15 440 14 110
1971 13 685 15 329 14 184
1972 13 755 15 674 14 265
1973 14 260 16 161 14 665
1974 14 716 16 678 15 842
1975 14 920 17 033 16 015
1976 14 456 16 588 15 300
1977 14 144 16 284 14 650
1978 14 048 16 249 14 757
1979 15 358 17 400 16 288
1980 18 880 19 948 19 940
1981 17 718 18 992 18 583
1982 17 420 18 821 18 933
1983 23 612 22 598 24 599
Sources: E OfficialRate (YearAverage):see TableC.4.
CPI*wb and CPI*80, as computedon tableB.5.
E*wb and E*80, as computedon tablesC.5 and C.4.
Notes: I e - E. WPI - USA
C-I - RS
2 e*vb E*vb.WPI - USA
CPI*wb
*80 E*80 .WPIUSA
CPI* 8 0

20
10
0
-20
-30 I II /
1460 19'63 I 56 1-9169 -- - 19-t2-- 1075-'- -- 1978 9181' years
Fig. C.] - BRAZIL:PercentualDivergenceBetweenOfficialand AlternativeEstimatesof
EquilibriumExchangeRate

- 49 -
APPENDIX D
COMPUTATION OF FREE TRADE PRICE EQUIVALENT AT PARMGATE FOR
SELECTED PRODUCTS
(with the assistanceof Hugo Barros de Castro Faria)
The general procedure to obtain the farmgate free
trade price equivalent was the following:
1- obtain, for the products in question, its FOB
average export or import price (rice and wheat);
ii- subtract the transportation and other transaction
costs from this FOB price to obtain the price the
domestic producer would have received had his product
been sold at that FOB price.
In the work presented by CFP, the international
prices used (either for exports of imports) were obtained from
International Commodity Markets. We, here, use the average export
or import price received or paid along the year by Brazil. These
prices are registred by CACEX and do reflect better the international
market faced by Brazil than the alternative adopted by CFP.
In obtaining the free trade price equivalent, several
hypothesishad to be made. We based our hypothesis on the

- 50 -
previous work done by CFP (.1983).The products we consideredalso
were those considered by CFP as well as the items that comprised
the transaction costs to be subtractedfrom the FOB prices. The
computationsdone by CFP cover the period of 1977-83. In extending
this period back to 1966 we basically maintained the 1977-83
hypothesisby keeping the item as a percentage of FOB price or
by deflating the transaction cost item .The specific hypothesis
for each product is described in the footnotes to each product
table.

TABLE D. 1 - BRAZIL - FREE TRADE PRICE EQUIVALEN-T AT FAMIOGATE FOR EXlOPilTi:D COIIN
1966 1967 1968 1969 19 1972 1 193 1974
1. Brasil - Annual average export price in
USS/t FOB 5E.71 51.23 46.05 50.70 54.80 58.94 5s.9c 76.71 125.36
2. Annual average exchange rate (CrS/USS) 2.2163 2.6622 3,374 4.049 4.564 5.354 ;.899 6.087 6.750
CrS/t FOB 112.39 136.38 155.37 205.28 250.11 309.67 330,11 466.93 846.18
4. Other percentage charges in export price
(CrSJt) 4.15 5.04 4.73 7,58 9.22 11,42 12.17 17.22 31.20
4.1 - Exchange broker's fee (0.1875%) 0.21 0.26 0.29 0.39 0.47 0.58 0,62 0.68 1.59
4.2 - Sale's fee (2%) 2.25 2.73 3.11 4,11 5.00 6,15 6.60 9,34 16.92 U
4.3 - Financial charges
1
/ 1.69 2.05 2,33 3.08 3.75 l,65 4.95 7.00 12.69
5. Port charges 6.18 8.15 9.74 12.03 15.60 19.32 23.99 27.16 32.22
6. Freight Port/Maringa5 12.46 16.46 19.65 24,28 31,47 38.98 48.41 54.80 65.02
7. FOB Value naringa - Cr5/t 89.60 106.73 120.25 161.39 193.82 239.95 245,54 367.75 717.74
8. FOB Value fta,inga - CrS/60 kg 5.38 6.40 7.21 9,68 11,63 14,4o 14.73 22.C6 43.06
9. Other charges (Maring5/producer ) 0.28 0.36 0.43 0.54 0.70 0.86 1.07 1.21 1.44
10. Freight
2
/ O.jl 0.41 0.49 o.60 0.78 0.97 1.21 1,37 1.62
1I. Free Trade equivalent price Lo Producer
10 - 3 - (4+5+69 +10) 4.79 5.63 6.29 8,54 13.15 1'.57 12.45 19.48 40.00
12. Producer price 6.60 8.40 7.80 11.40 16.80 21.00 21,60 30.00 41.40
12-Il
13. Price distortion 13 - ( .2ii-, 10o) 37.79 49.20 24.01 33.49 65.52 67.06 73,49 54.00 3.50
'/Until 1979 - 1.5%. 1980/81 - 2.25%, 1982 - 3.25S and 1983 - 3.0%.
2/Port and others charges are deflated by ICY-RJ. Public Services-columar, 7, base 1977.100. Fundasao Get6lio Vargas.
Sources: CACEX-Banco do Brasil. Banco Central do Brasl. CFP-1linistirio da Agricultura, Fundar,ao Qet6lio Vargas. Cooperatives
and Export Firms.

TABLE D.1 - BRAZIL - IIIEE TItADI I'RICE. EQUIVALENT Al YAUI3UtATiZ ron l:xi'ORlt:Ji coRi
1975 9976977 | 1978 1979 19803981 | 982 3983
1. Brasil - Annual average export pricc in
US5/t FOB 131.42 120.05 95,.5.4 152.05 175.35 189.78 187.19 180.00 174,64
2. Annual average exchange rate (Cr1/U0S) 8.o80 10.613 146.3365 17.378 26.675 52.605 92.686 179.468 577.359
Cr.,t FOB 1 063.87 1 274,09 1 343.77 2 733.55 4 677.46 9 983.38 17 387.33 32 304.24 10S 830,0c
4. O- er percentage charges in export price
(Cr$/t) 39.16 46.98 49.56 100,79 172.48 443.01 773,56 1 756.54 5 230.56
4.1 - Exchange broker's fee (0,1875%) 1.99 2.39 2.52 5.12 8.77 18.71 32.60 60.57 189.06
4.2 - Sale's fee (2%) 21.24 25.48 26.88 5/1.67 93.55 199.67 347.75 646.08 2 016.60 1
4.3 - Financial charges' 15.93 19.11 20.36 41,00 70,16 224.63 391.21 1 049.89 ' 024.90
5. Port charges2/ 44.02 59.22 79.17 113-45 175.36 556.19 772.07 1 755.58 3 138.83
6. Freight Port/3laring
2
'/ 88.83 119.50 159.76 228.94 353.87 718.76 1 557.98 i860.25 9 778.00 1
7. FOB Value Mlaring; - CrS/t 889.86 1 048.39 1 055.28 2 290,37 3 975.75 E 465.72 14 285.72 25 931.87 82 682.61
8. FOB Value lMar;nga - CrS760 kg 53.39 62.90 63.32 137.42 238.54 507,92 857,13 1 555.88 4 960.86
9. Other charges (mtaringS/ producer)" 1.96 2,64 3.53 5.06 7.82 15.88 34.,2 38.86 95.95
10. Freight'/ 2.21 2.98 3.98 5,70 8.82 17.91 38.83 59.94 150.00
11. Free trade equivalent price to producer
12. 10 - 3 - (4+5+6+9+10) 49,22 57,28 55,91 126,66 221.90 474,13 783.90 1 457.08 4 714.90
12. Producer price 54.60 81.60 91.80 139.80 192.60 495.00 1 064.40 I 591.80 4 992.00
12-11
13. Pricedistortion 13- ( . 100) 10.93 46.46 64,49 10,37 -13,20 4.4O 35.78 9.25 5.89
2/Until 1979 - 1.5%, 1980/81 * 2,25%. 1982 - 3.25% and 1983 - 3.0%.
2/Port and others charges are deflated by ICV-RJ, Public Services-column 7, base 1977-100. Fundaeao Getulio Vargas.
Sources: CACEX-Banco do Brasil, Banco Central do Brasil, CFP-m3nisterio da Agricultura, FundaSao Getalio Vargas. Cooperatives
and Export Firms.

TABLE D.2 - BRAZIL - [FREE TRADE PRICE EQUIVALEI;T AT PARMGATE FOR EXPORTED COTTON
1966 19671 1968 1969 1970 1 97 1 1972 1973 1974
1. Brasl I - Annual average export price of
cotton yarn in US$/IS kg FOB 7.06 7.19 7.93 6.69 6.76 9.07 9.96 11.56 16.40
2. Annual average excha.m..era.~.trS/USS) 2,2163 2.6622 3.374 4.049 4.564 5. 25' 5.899 6.087 6.750
3. Brasil - Annual average export price of
cotton yarn in CrS/15 kg FOB 15.65 19.14 26.76 27.09 30.85 47,65 58.75 70.37 110.70
4. Percentage charges in export price of
cotton yarn (CrS/15 kg) 0.04 0.05 0.06 0 06 0. 07 010 0.13 0.15 0,23
4.1 - Exchange broker's fee (0,1875 ) 0.01 0.01 0.01 0.01 0.01 0.01 0,C2 0.02 0.02 Ul
4.2 - Trade fee f).5-)and loss (0.52) 0.03 0.04 0.05 0.05 0.06 0.09 0.11 0.13 0,21 w
5. Port charges/ 0.31 0.38 0,54 0.54 0.62 0.95 1.18 1.41 2.21
6. Storage port charges', 0.17 0.22 0.27 0.33 0, 3 0,53 0.65 0.74 0.88
7. Freight Campinas/Port/ 0.12 0.16 0.19 0.23 0 30 0638 0.47 0.53 0.63
8. Free trade equivalent price to producer
8 . 3 - ((*4.5+6+7) x coeff;icent)
2
/ 4.79 5.85 8.20 8.27 9.39 14.58 '7.97 21.55 34.05
9. Producer price 4.10 4.64 6.39 6.98 8.61 13.22 14.85 19.83 31.08
10. Price distortion 10 8-7 .100) -14.41 ' -20.68 -22.07 -15.60 -8.31 -9.33 -17.36 -7.98 -8.72
I/Port and Storage charges are deflated by ICV-RJ, Public Services-column 7. base 1977-100. Fundac,o Getulio Var,as.
2
/Coefficient - 0.319 (transformation to cottonseed).
Sources:CACEX-Bancodo Brasil, Banco Central do Brasil, CFP-ministerio da Agricultura, Funda5un Getulio Vargas, rooperatives
and Export Firms.

TABLE D.2 - BRAZIL - FRIE TitADE PRICI EUU1VAl.:.:.T AT FARNGCATE roR E:xPORTrlI) CcOIIO.r
1975 1976 1977 1978 1 '979) 1983
1. Orasi - Annual average export pric, of
cotton yarn in USS15 kg FOB 13.68 18.70 17.66 17,78 24.30 I.s,4 2i'.5/ 1',.4Qs 15.69
2. Annua average exchanqe rate ItrSJUSS) 8,eao 10,613 1:.065 17.978 26.675 52.b60 92.E86 179.468 577.359
3. Orasil - Annual average export price of
cotton yarn in USS/15 kg fo 11l.53 198.1. 248.39 319.65 :.I21U I 023.1 1 910.67 2 9$3.28 9 058.76
3. Perceetage huares in mxoprt price of
cottsf yare (0C5/5 kg) 2.1.2 1.34. 5,43 6.99 "..I2 2.:. - .'39: 9
.I - Inchoen Broker I fee (a.1175) 0.21 0.37 0.46 0.60 .22 1,: , S.52 86.5
3.3 - trade fee (1.57) and lols (0.551 2.21 31.7 ".97 6.39 !2.96 vo0-I/ 31E.-1 '1.67 1111.1
S. Fort GeM1r9 1.20 I.f2 216 3.1^ , :.i :..C' '.X52 S64.6
*. Storae port choresP 0.03 0.94 0.05 0.07 S.ll D.:: r,o 0.9i, a.55
7. Freiqhi fpinsJotv 0.56 1.15 1.54 2.21 31.41 1Gi 5.02 28.89 60b3.
Free trad. equivalent price to producer
8 - 3-((1.5.6.7) x coefficient)V 33.82 61.03 78.94 98.02 199.60 3i14,C, 561..50 895.92 2 779.63
9. Producer price 34.73 70.29 841,95 96.95 '53.51 322.2S 616.40 929.27 3 200.00
10.Pritdstotio 10 (-=8-7
10. Price distortion 10 - (- .100) 2.69 15.17 7.61 -1.09 -23.03 2.63 5.46 3.72 15.1z
V Port and Storage charges are deflated by ICV-RJ, Public Services-column 7. base 1977.100, Fundaq5o Gct6lio k.ir':as.
alcoefficient - 0.319 (transforniation to cottonsecd).
Sources: CACEX-Banco do Brasil. Banco Central do Brasil. CFP-ninisterio da Agricultura, Fundaq5o Gctulio Vargas, Cooperative
and Export Frims.

ob
TABLE D.3 - BRAZIL - FREE TRADE PRICE EQUXVALEHT AT FANIGE FOR IPCIATED RICE
1969 1970 1973 3972 1 1973 1 !978. 1975
1. reasil-Annual averageImport price in USS/tfOB 137.63 87.71 1S.31 t07.62 196.8' 314.39 369.37
2. freight' 20.oe 20.00 20.00 30.80 80.00 60.00 60.00
3. insurance (0.90over 1-2) 1.I2 0.97 0.95 1-24 2.11 3,37 3.86
8..Annualaverageimportprice in USS/tCIF 159.05 108.68 106.26 138.86 236.92 377.76 433.23
5. Annualaverageexchange rate (CrS/USS) 8.089 8,568. 5.258 5.399 6.087 6.750 8.080
6. Annual averageimportprice In CrS/tCIF 6W3*99 496#02 556.29 819.14 1 442.13 2 549.88 3 500.50
7.Cherges(CIF/uholeselo) 102.89 108,47 329.85 176.04 239.64 357,05 478.61
7.1 - lIP (31 aver 6) 19.32 14J.8 16.75 24.57 43.26 76.50S05.02
7.2 - AFRi8 12.15 13.69 15.76 26.55 36.52 60.75 7272
7.3 - Dispatcher (0.52)eWeight loss (M2over 6) 9.66 7.44 8.37 12.29 28.63 38.25 52.51
7.4 - Invoice emission (0.92) and Exchange
contract (0.1875% over 6) 7.00 S39 6.07 8 93 15.68 27.73 38.07
7.5 - T1W (8t over 6) 6.8. 1.96 5.58 8.'9 14.4.2 25.50 35.00
7.6 - WharfIage 28..69 32.00 39.63 .9.22 55.71 66.11 90.31
7.7 - Disengage t. stawae. discharge,eCc. 23.23 30.81 37-29 46.33 52,8Z 62.21 8..98
0. freightSatose(Por)/Son Pauleo 20.39 26.43 32.78 8.0.5 *6.02 54.60 74.59
9. uueesale totalcest -rOIt 766.81 630092 720.8. 1 635.63 1 727.9 2 563.53 8 0S3.10
e0.Othercharge (lAelesaelPreducer) 207.91 230,62 290.36 317-57 68.98 633.90 6".6S
80.8 - Sale's too (2 ever 98 .38 12.62 86.8. 0.7n 36.56 59.3 *1.07
10.2 - Flci-eial _hgs (interet)over 9 3I.S6 9.46 86.68 IS.5 2SJ.2 0.42 6*8.6
'0.3 - omfele margie (91 ever 91 31.34 It's$ 36.02 53.71 86.9 1438-.0 2e2.69
138.1- Dasing inceem -82.58. -1265 -20.13 -25.0" -20.30 -33.58 -4SA?
18.5 - FreightPr.uer/woaeele ISS27 281-28 26.25 369-S2 350.37 1S85.75 S47.tC
II. Subtotal * CrS/50 kg 27.9s 19.62 21.51 33.16 62.98 11
6
a30 *'S9-35
3 - (16.1 *I2 t+.336.8..3@.5:)
82. Processingcost (6.52 over11) 1.62 1.28 1.8 z2.16 6.09 7.56 10.36
13. Correction factor (rice peel) (I- 12)+ .828.7 18.32 10.05 11.02 16.9 32.25 59.64 81.65
814.CO"- 0.30 0.3" S."9 0.63 0.69 0.88 1.11
15. Free Trade equivalent price to producer
'5 - 13-88 13.02 9.66 10.53 16.38 33.S6 58.83 80.54
16. Marketprice to producer 16.00 89.00 28.50 34.50 37.50 s7.110 93.50
I7. Price distortion 17 d6.-J5.l00) 14-12 96.68 170.66 110.62 18.82 -3 1' 13.61
I/Valu are deflated by ICV-9J.Public Services-col.mn 7. base 1977-100, rundaqio Cetulio Vargas
'I until 1968-5%; 1969/80- IS and 1981/ 83 - 30%.
Sources: CaEF-Ministerio di Faeenda. CACEX-0nco do Brasil. CFP-Ml;nist:6ro da F.zenda e Funda;aa CLOulio VVarqas.

TABLE D.3 - BRAZIL. - FP0ECTPAL'P r'w'CF JQOU'.7T,ENT AT FAIUWIGATEFOR IMPORTED RICE
1976 1977 1978 1979 1980 IgRI 1982 1983
I~~ ~I.
1. Brasil -Annual average import price In USS/C FOB 319.55 303.80 315.07 329.98 379.60 392.53 344.20 332.54
2. Frelghtv 60.00 60.00 60.00 60.00 60.00 40.00 40,00 40.00
3. Insurance (0.9% over 1 - 2) 3,42 3.27 3.38 3.51 3.96 4,07 3.46 3.35
4. Annual average Import price in USS/t CIF 382.97 367.07 378.45 411.47 443.56 436.60 387.66 375,89
5. Annual average exchange rate (CrS/USS3 10.613 14.065 17.978 26,675 52.605 92.886 170,468 577,359
6. Annual average Import price in Cr5/c CIF 4 064.46 5 162.84 6 803.77 10 975.91 23 333.47 4C 554.03 69 572,56 217 023.47
7. Charges (CIF/Wholesale) 599,00 781.95 1 013.92 1 664.13 3 377.,6 5 976.08 "1 373.73 30 524,72
7.1 - IMP (31 over 6) 121.93 154.89 204,11 329.28 700.00 1 216.62 2 087.18 6 510.70
7.2 - AFRIW 95.52 126.58 161.80 240.08 631.26 1 114.63 2 153.62 6 923.31
7.3 - Dispatcher (0.5') e Weight loss (I;over6) 60.97 77.44 102.06 164.64 350.00 608.31 1 343.59 3 255.35
7.4 - Invoice emission (0.9') and Exchange
contract (0.1875% over 6) 44.29 56.15 73.99 119.36 253.75 44j.03 756.60 2 360.13
7.5 - TUP (0% over 6) 40.64 51.62 68.04 109,76 233,33 405.54 695.73 2 170.23 1
7.6 - Wharfage' 121.50 162.43 208.10 361.17 622.75 1 128.29 2 565.47 4 343.00 l
7.7 - Disengagcment, stowage, discharge, etc./ 114.32 152.84 195.82 339.84 585.97 1 061.66 2 076.54 4 557.00 Ch
8. Freight Santos(Port)/Sio Paulo" 100.35 134,16 171.83 298.30 514.35 931.89 1 822.72 4 000.C0
9. Wholesale total cost - CrS/t 4 763.89 6 078.95 7 989.52 12 938.34 27 224.88 47 462.00 82 774.01 251 643.19
10. Other charges (Wholes.Ilc/Producer) 1 107.31 1 455.71 I 918.51 3 142.77 6 137.86 9 938.70 16 557,88 48 647.23
10.1 - Sale's fee (2% over 9) 95.28 121.58 159.79 258.77 544.50 949.24 1 655.48 5 032.96
10.2 - Financial charges (interest) ovcr 9 71.46 9181S 119.84 194.08 680.62 1 423.86 4 138,70 20 131.86
10.3 - Denefici margin (5.; over 9) 238.20 303-95 399.48 646.92 1 361.24 2 173.10 4 138.70 12 582,41
10.4 - Packinq incor/' -61.71 -82.50 -105.50 -182.00 -315.10 -582.50 -' 025.r0 -2 100.00
13.5 - Freight Produccr/Wholesale | 64.08 1 021.50 1 345.00 2 225.00 3.866.50 5 775.00 7 ss0.o0 13 100,00
II. Subtotal - CrS/50 kg 182.83 231,16 303.55 489.78 1 054-35 1 876.17 3 310.81 10 150.95
119 - 10,1+ 10,2+ 103 + 10.4 + 10,5)
20
12. Processing cost (6.51 over 11) 11.88 16.50 21.36 42.70 68.oo 96.30 151,31 210.00
13. Correction factor (rice peel) (11 -12) +1.8247 93,69 117.54 15q.65 291.82 615.09 1 080,98 1 897,36 5 677,67
14. CDOO 1.50 2.00 3.50 5.80 6.65 15.00 30.00 30.00
IS. Free Trade enuivalent nricc to producer _ ??.I lISr,R 151.C 296 n? (.)(7l I 1t.71fA I S67.3 6 5 4',67
15 * 13 - 14
16. Mirket price to producer 92.00 103,00 174.50 311.50 575.50 974.00 7 077,50 5 500,'0
'7. Price distortion 17 -( 1 5 I10.2l -10.93 15,45 8.0I -7-141 -S. r.3 8,S .
'I Values are deflaced by ICV-RJ.Public Services-col.- 7. base 1977-100. Funda.io Getulio Vargas
/ until 1968.5t; 1969/80 - 154 and 1981/83 - 30/
Sour.es: CltF-ministir io da Fa,enda. CACEX-Lancodo ara,il, tIlP-mini stirio d.a Fazenda and Fu.,Cac - Getul io Vargds.

TADLE D.4 - DBRZIL - FREE TRADE PRICE EQUIVALE.NT AT FARIGATE FOR EXPORTED SOYBEANIS
1966 1967 1 1968 1 1969 1970 - 19)1 1972 19733 1974
US$/15 kg FOb 107.46 96.02 95.52 94.31 93.51 113.90 123.33 276.66 214.72
2. Annual average exchange raie (CrS/USS) 2.2163 2.6622 3,374 4.049 4.564 5-254 5.,92 6.087 6-750
CrSI5 kg FOB 238.16 255.62 322.28 381.86 426.78 5,98.13 727.';2 1 632,02 1 449.36
4. Percentage charges in export price (CrS/t) 3,42 3.68 1.63 5.49 6.13 8.60 10.45 23.46 20.84 1
4.1 - Exchange broker's fee (0.1875%) 0.44 0,48 0.60 0.72 0.E0 1.12 1.36 3.06 2.72 Ln
4.2 - Financial chargesY 2.98 3.20 4.03 4,77 5.33 7,48 9.09 2C.40 18.12
5. Sale's fee
21
2.22 2.66 3.37 4.05 4.56 5.25 5.90 6.09 6.75
6. Port charges" 6.16 8.14 9.72 12.01 15.56 19,28 23,94 27.10 32.15
7. Freight Port/Maringa 7.53 9,94 11.87 14.67 19.01 23.55 29.24 33.10 39.28
8. Other charges Plaringi/producer 2/ 5.85 7.73 9.23 11.40 14.78 18.30 22.73 25.73 30.53
9. Subtotal (25.18) (32.15) (38.82) (47.62) (60.04) (74.98) (92.26) (115,48) (129,55)
10. Free trade equivalent orice to
producer in CrS/60 kg 12.78 £ 13.41 17.01 20.05 22.03 31.41 38.11 92.38 84.73
10 (1 +6,667 +8
11. Producer price na na na na 21.70 28.80 31.80 67.20 68.40
12. ricedis0rtin1 -1-1
12. Price distortion 12. . .10 ) na na na na -1.4 -8.3 -16.6 -27,26 -19.30
'/until 1979-1.25%; 1980/81-2.25%; 1982-3.25% and 1983.2.5%
2
/Port charges and freight are deflated by ICV-RJ, Public Services-column 7. base 1977-100, Fundacao Getalio Vargas.
na: not available
Sources: CACEX-Bancodo Brasil. BancoCentral do erasil, CFP-Ministirio da Agricultura, Fundacao Get:uio Vargas,
Cooperatives and Export Firms.

TABLE D.4 - BRAZIL - FREE TRADE PRICE EQUIVALI-:NT AT rARMGATE FOR EXPORTI:D SOYiEANS
1975 1976 1 1977 1978 1979 1980 9198 92 '2983
I. Brasi I - Annual average export price in
USS/15 I',FOB 205.47 216.66 274.31 257.98 281.15 254.33 27S.'.5 24(.52 238.26
2. Annual average exchanqe rat( (CrS/USS) 8.080 10.613 14.065 17.978 26,675 52,605 5'.31., 1,'95.48 577.359
3. Orasil - Annual averagc export price in
CrS/I5 kg FOB I 660.20 2.299,41 3 858.17 4 637.96 7 499.68 13 379.03 25 85G,.I I ,4. 242.45 137 561.56
4. Percentage charges inexport price (CrS/t) 23.86 33.05 55.46 66.67 107.8i 326.12 630.'4i 1 520.83 601.83
4.1 - Exchange broker's fee (0.1675.:) 3.11 4,.31 7,23 8.70 14.06 25,505 8.50 62.95 257.93 r
4.2 - Financial charges/ 20.75 28.74 48.23 57.97 93.75 301.03 s8I.9,g 1437,88 343.9°0 L
5. Sale's fee/ 8.08 10.61 14.07 17.98 26.68 52.61 2,f. 172.47 577.36
6. Port charges 43.92 59,10 79.00 105.50 210.G0 392.50 eOS.00 1 650.30 2 380,00 1
7. Freight Port./aringi' 53.65 72.18 9f.50 150.00 250.00 645.00 1 020.00 2 200.00 4 500.00
8. Other charges llaringa/producer 2/ 41.70 56.10 75.00 102.50 182.50 270.00 297.00 685.0o 2 100.00
9. Subtotal (171.21) (231,04) (320,03) (307.65) (551.99) (I 686.23) (2 E4,.33) (6 235.30) (10 159.19)
in Cr$160 kg 10 33 (4 15+6.7+8) 89.34 124. 10 212.28 259.81 416.05 701.55 I 381.10 2 280.38 7 643.99
16.667
II. Producer price 76.20 87.60 156.60 177.00 339.60 466.80 1 411.20 1 273.80 7 230.00
12. Price distortion 12 . ( 10°- .100) -14.71 -29.41 -26,23 -31.87 -18.53 -33.46 2.18 -7,76 -5,42
'/until 19791.125%; 1980/81.2.257.; 1982.3.25's and 1983-2.5%
2
/Port charges and freight are deflated by ICV-RJ, Public Services-column 7. base 1977-100, Fundacao Getulio Vargas
na: not available
Sources: CACEX-Banco do Brasil, Banco Central do Brasil. CFP-tiinistirio da Agricultura, Fundasao Get.lio Vargas.
Cooperative and Export Firms.

TADLE D.5 - IRA7AII - FlEu TRADE PlICE EQUIVALEIIAT FAiIGATE FOR IMMrOTiED WIIIAT
1966 1967 1 68 1969 1970 15971 19972 1973 19716
1 Brasil - Annual average ijport price in CrS/t 156.18 196.74 236.01 277.24 294,38 382.28 463.48 778.59 1 469.61
2: Othercharges (CIF/Mlill) 18.46 23.60 28.26 35.99 41.02 52.42 64,06 95.46 t62.54
2.1 - Port duties 5.37 6.76 8.11 11.74 12.69 16.49 19.98 33.58 63.38
2.1.1- TNP (3% over 1) 11,69 5.90 7.08 8.17 8.83 11,47 13.90 23.36 44.09
2.1.2 - AFRIUVI/ 0,68 0.86 1.03 3.57 3.86 5.02 6.o8 10.22 19.29
2.2 - Quality sampling ' 0.06 0.08 0.09 0.12 0.15 0.19 0.23 0,26 0.31
2.3 - Shipment'/ 0.08 0.11 0.13 0.16 0.20 0.25 0.31 0.35 0.42
2.4 - OIscharge2/ 0.06 0,08 0.09 0.12 0.15 0.19 0.23 0.26 0.31
2.5 - Port chargest
1
2.65 3.50 4.18 5.17 6.70 8.30 10.31 11.67 13.85
2.6 - Stowage '/ 0.93 1.23 1.46 1,81 2.34 2.90 3.60 4,08 4.S14
2.7 - Freight (Port/iill) - 1.2794 2.57 3.07 3.79 4.91 6.08 7.55 8.55 10.141
2.8 - E-xchange- Credit concessions/ 1.37 1.72 2.07 2.43 2.58 3.34 4.o6 6.81 z2,86
2.9 - CACEX- administrative duty 3/ 1.23 l5os 1.86 2.18 2.32 3.01 3,65 6.13 11.57
2.10-Chartering charges(O.9% over freight) 0.08 0.10 0.12 0.15 0.15 0.20 0.24 0.,61 0.77
2.12-Sancodo Brasil's fee(3% over 1) 4.69 5.90 7.08 8.32 8.83 11.47 13,90 23.36 44.09
3. Other charges (Kill/producer) 21.39 28.15 33-63 41.4i 53.02 65.85 81.66 94,99 118.17
3.1 - Freight '/ 19.83 26.18 31.27 38.64 50.08 62.03 77.03 87.20 103,167
3.2 - Sanco do Brasil' fee -1%) 1.56 1.97 2.36 2.77 2.94 3.82 4.63 7.79 141670
4. Free Trade equivalent price to producer 153.25 192.19 230.64 271.82 282.38 368.8s 445.88 779.06 1 513.98
. - (1+2) - 3
S.Acquisition price 220.00 270.00 320.00 390.00 470.00 500.00 550.00 680.00 1 070.00
6. Price distortion 6. ( 5;4 . 100) 43.*56 40,49 38.74 43.4S 66.44 35.56 23.35 -12.71 -29.33
I/ until 1968 * 5%. 1969/80 - 15%and1981/83 * 30%
2I Values are deflated by ICV-7J. Public Services-column 7. base 1977-100. Funda;io ietulio Vargas.
3/ 2,81 Is calculated - lI over estimated FOS Import price; 2,9 - 0.9% over the sameprice.
Sources: CIEF-Ninistirlo da Fazenda.CACEX-Bancodo Brasil.CFP-Ninlstdrio da Agricultura and Funda5ao Cetullo Vargas.

Q~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
TAitLi. 0.5 - BRAZI. - FIUE TRADE PRICE EQUIVALENT AT FARMOATE FOR IMPOl41i:l) WIIEAT
1975 1976 197? 1978 1979 1980 1981 1982 1983
1. Brasil -Annual average i..portprice in CrS/t 1 361.08 1 693.09 1 565.68 2 493,19 4 596 .37 11 630.44 20 499.01 36 200.49 110 033.08
2. Other charges (CIF/Jill) 163.68 207.73 214.72 330,24 577.94 1 431.00 2 835.30 5 119,92 14 254.46
2.1 - Port duties 58.69 73.01 67.51 107.52 198,22 552.44 1 153.07 2 036.27 6 189.36
2.2 - 2.1.1 - 7hiP (3 over 1) 40.83 50.79 46.97 74.80 137.89 348,91 614.97 1 086,01 3 300.99
2.1.2 - AFRMI I/ 17.86 22 22 20.54 32.72 60,33 203.53 538.10 950.26 2 888.37
2.2 - Quality sampling'' 0.43 P 58 0.77 1.10 1.71 3,46 7.51 14.44 30,.9
2.3 - Shipment '/ 0.57 0.76 1.02 2.46 2.26 4,59 9.95 19.14 39.99
2.4 - Discharge 2 0.43 o.58 0.77 110 1 .71 ,.46 7.S1 i'.44 30.19 I
2.5 - Port charges ' 18.92 25.45 34.02 4e.75 75.35 153.06 331.76 638.22 1 333.-72 o
2.6 - Stowage 2" 6.6i 8.89 11.89 17.04 26.34 53.49 115.95 223.06 466.14 0
2.7 - Freight (Port/mill) ' 13.86 18.64 24.92 35.71 55,.20 112.12 243.02 467.50 976.96
2.8 - Exchange - Credit concession ' 11.91 14.81 13,70 21.82 40.22 101.77 17537 316,75 962.79
2.9 - CACEX - administrative duty "' 10.72 13.33 12.33 19.63 36,20 91.59 161.43 285,08 866.51
2.10 - Chartering charges (0.9S over freight) 0.71 0.89 0.82 1.31 2.41 E.11 10.76 19,01 57,77
2.11 - Banco do Brasil's fee 40.83 50.79 46,97 74.80 137.89 34E.31 614.97 1 286.11 3 300.99
3. Other charges (Mill/producer) 154.96 207.09 269,88 389.23 605.06 1 260.04 2 684.14 5 131.17 It 066.77
3.1 - Freight 2/ 141.35 190.16 254.22 364.30 563.10 1 143,74 2 479.15 4 76°.17 9 966,44
3.2 - Banco do Brasil's fee (1%) 13.61 16.93 15.66 24.93 45.96 116.30 204.99 36a.00 1 100.33
4 - (1+2) - 3 1 369.80 1 693.73 1 510.52 21434.20 4 564.'2 11 801.40 20 650.17 36 189.24 113 220.77
5. Acquisition price 1 510.00 1 910.00 2 570.00 3 570.00 4 830.00 8 830.00 21 550.00 42 060.00 100 050.00
6. Price distortion 6- . 100) 10.24 12.77 70.19 46.66 5.81 -25.18 4.36 16.22 -11.63
'I until 1968 - 5%; 1969/80 - 15% and 1981/83 - 30%.
I/ Values are deflated by ICV-Ri. Public Serviees-column 7, base 1977-100, Funda6io Cetullo Virgas
3/ 2,8 is calculated - I% over estimted FOB impor price; 2,9- 0.9% over the saae price.
Sources: CIEF-linist.rio da Fazenda, CACEX.Banco do Brasil. CFP-Hinistirio da Agricultura and FundaSio Getullo Vargas.

- 61 -
APPENDIX E
Free-Trade: Agricultural and Non-Agricultural
Value Added.
The value added for each agricultural product
was calculated according to the following procedure:
i) The only input considered was fertilizer,in
view of the difficulty in finding reliable price data for the
comparisons on international and domestic value added. Since
fertilizer is widely utilized in the crops considered, it does
not seem to distort very much the results to exclude other inputs;
ii) The technical coefficients were obtained
from Comissio de Financiamento da Producio (CFP) which has also
indicated the most commom formula for the components N,P and K;
iii) Domestic prices were obtained from Getulio
Vargas Foundation, Prices Paid by Farmers; international prices
were obtained from CACEX and are unit values;
iv) Credit subsidy was included in the
calculations. For the period 1966/1977 it was taken from Duran
(undated); for the rest of the period it was estimated by the
formula (1+ interest rate)/(l+inflation rate) where both the
numerator and denominator are semester rates. Notice that the
interest rates on loans to fertilizer purchases were zero from
1978 through 1981.
The value added for the non-agricultural sector
has been calculated as follows;

- 62 -
i) Estimates of effective protection for the
industrial sector were available for the years 1966, 1967, 1973,
1
1975 and 1981 . From theseestimates and the variation in the
import tariffs estimated in this work (see appendix B) we
calculated effective protection coefficients for the other years;
ii) From the National Accounts we obtained the
value added in the industrial sector which together with the
coefficients above allowed us to estimate the value added in the
industrial sector under free trade. To obtain the value added
in the non-agricultural sector under free trade we added to this
figure the value added in the service sector (the Income of the
Service Sector from the National Accounts).
The value added figures for the agricultural
products and the non-agricultural value added are presented in
the tables below.
All tables with an a .refer to the equilibrium
exchange rate E* while those without the a refer to Eb
1/ Bergsman-Malan (1970); Neuhaus-Lobato (1978) and Tyler (1983).

- 63 -
TABLE E.1 - BRAZIL: RICE - VALUE ADDED AND EFFECTIVEPROTECTION
DOMESTIC VALUE VALUE ADDED EFFECTIVE
YEAR -ADDED FREE TRADE PROTECTION
(VA RICE) (VA3 RICE) RICE
Cr$/Kilo Cr$/Kilo
1966
1967
1968
1969 0.290 0.382 - 24.238
1970 0.343 0.254 34.886
1971 0.526 0.271 93.837
1972 0.638 0.441 44.554
1973 0.649 0.875 - 25.874
1974 0.891 1.504 - 40.753
1975 1.599 2.140 - 25.296
1976 1.617 2.540 - 36.312
1977 1.672 3.235 - 48.331
1978 3.009 4.276 - 29.617
1979 5.509 7.437 - 25.932
1980 9.900 12.852 - 22.917
1981 16.468 22.963 - 28.283
1982 35.353 40.403 - 12.500
1983 98.588 90.679 8.722
Note: These calculationsdo not take into account the domesticprice
of triple superphosphatebefore 1973 since this informationis not
available. Before that year, we used the price of simple
superphosphate.

_ 64 -
TABLE E.la - BRAZIL RICE - VALUE ADDED AND EFFECTIVE
PROTECTION
DOMESTIC VALUE VALUE ADDED
YEAR ADDED FREE TRADE EFFECTIVEPROTECTION
(VA RICE) (VA3 RICE)
Cr$/Kilo Cr$/Kilo RICE
1966
1967
1968
1969 0.290 0.256 13.294
1970 0.343 0.163 110.475
1971 0.526 0.180 191.870
1972 0.638 0.291 119.287
1973 0.649 0.589 10.192
1974 0.891 1.231 - 27.590
1975 1.599 1.729 - 7.502
1976 1.617 1.948 - 16.946
1977 1.672 2.270 - 26.357
1978 3.009 3.073 - 2.075
1979 5.509 6.057 - 9.057
1980 9.900 12.943 - 23.511
1981 16.468 21.519 - 23.473
1982 35.353 41.525 - 14.862
1983 98.588 119.485 - 17.490
Note: These calculationsdo not take into account the domesticprice of
triple superphosphatebefore 1973 since this informationis not
available. Before that year, we used the price of simple
superphosphate.

- 65 -
TABLE E.2 - BRAZIL: SOYBEANS- VALUEADDEDANDEFFECTIVE PROTECTION
DOMESTICVALUE SOYBEANSVALUE EFFECTIVE
YEAR ADDED ADDEDFREE TRADE PROTECTION
(VA SOYBEANS) (VA3 SOYBEANS) SOYBEANS
Cr$/Kilo Cr$/Kilo
1966
1967
1968
1969 0.466
1970 0.326 0.526 - 37.985
1971 0.438 0.767 - 42.902
1972 0.481 0.932 - 48.425
1973 1.022 2.289 - 55.339
1974 0.898 1.861 - 51.752
1975 1.045 1.976 - 47.125
1976 1.243 2.898 - 57.100
1977 2.232 5.121 - 56.410
1978 2.484 6.323 - 60.712
1979 4.958 9.225 - 46.256
1980 6.203 12.056 - 48.550
1981 20.580 25.219 - 18.395
1982 16.151 41.600 - 61.177
1983 109.335 104.349 4.778
Note: As in table E.1

- 66 _
TABLE E.2a. - BRAZIL: Soybeans - Value Added and Effective
Protection
DOMESTIC VALUE SOYBEANSVALUE EFFECTIVEPROTECTION
YEAR ADDED ADDEDFREE TRADE
(VA SOYBEANS) (VA3 SOYBEANS) SOYBEANS
Cr$/Kilo Cr$/Kilo
1966
1967
1968
1969 0.316
1970 0.326 0.353 - 7.555
1971 0.438 0.541 - 18.978
1972 0.481 0.640 - 24.947
1973 1.022 1.590 - 35.709
1974 0.898 1.533 - 41.424
1975 1.045 1.596 - 34.514
1976 1.243 2.234 - 44.342
1977 2.232 3.644 - 38.746
1978 2.484 4.600 - 46.001
1979 4.958 7.549 - 34.324
1980 6.203 12.142 - 48.912
1981 20.580 23.661 - 13.020
1982 16.151 42.741 - 62.213
1983 109.335 136.840 - 20.100
Note: As in table E.la.

- 67 -
TABLE E.3 - BRAZIL; CORN - VALUEADDEDANDEFFECTIVE PROTECTION
DOMESTICVALUE VALUEADDED EFFECTIVE
ADDED FREE TRADE PROTECTION
YEAR (VA CORN) (VA3 CORN) CORN
Cr$/Kilo Cr$/Kilo
1966 0.106
1967 0.137
1968 0.143
1969 0.195
1970 0.262 0.240 9.179
1971 0.329 0.300 9.502
1972 0.335 0.291 15.077
1973 0.452 0.454 - 0.348
1974 0.573 0.875 - 34.557
1975 0.801 1.097 - 26.980
1976 1.255 1.321 - 4.960
1977 1.347 1.263 6.649
1978 2.093 2.552 - 18.004
1979 2.868. 4.924 - 41.748
1980 7.489 8.399 - 10.833
1981 16.315 14.409 13.229
1982 24.078 26.885 - 10.441
1983 77.808 64.480 20.670
Note: As in tabel E.1

- 68 -
TABLE E.3a. BRAZIL: Corn - Value Added and Effective
Protection
DOMESTICVALUE VALUEADDED EFFECTIVE PROTECTION
YEAR ADDED FREE TRADE
(VA CORN) (VA3 CORN) CORN
Cr$/Kilo (CR$/Kilo)
1966 0.067
1967 0.085
1968 0.098
1969 0.131
1970 0.262 0.160 63.640
1971 0.329 0.210 56.855
1972 0.335 0.196 71.060
1973 0.452 0.306 47.592
1974 0.573 0.720 - 20.479
1975 0.801 0.887 - 9.727
1976 1.255 1.014 23.776
1977 1.347 0.879 53.256
1978 2.093 1.845 13.419
1979 2.868 4.032 - 28.859
1980 7.489 8.457 - 11.441
1981 16.315 13.524 20.634
1982 24.078 27.614 - 12.805
1983 77.808 84.521 - 7.942
Note: As in the E.la.

- 69 -
TABLE E.4 - BRAZIL, COTTON- VALUEADDEDANDEFFECTIVE PROTECTION
DOMESTICVALUE VALUEADDED EFFECTIVE
YEAR ADDED FREE TRADE PROTECTION
(VA COTTON) (VA3 COTTON) COTTON
Cr$/Kilo Cr$/Kilo
1966 0.454
1967 0.604
1968 0.801
1969 0.795
1970 0.543 0.930 - 41.605
1971 0.845 1.476 - 42.736
1972 0.946 1.824 - 48.101
1973 1.234 2.132 - 42.101
1974 1.854 3.145 - 41.048
1975 2.112 3.121 - 32.330
1976 4.758 5.875 - 19.020
1977 5.323 7.752 - 31.300
1978 6.045 9.742 - 37.951
1979 9.618 18.334 - 47.538
1980 20.111 22.919 - 12.252
1981 38.523 44.706 - 13.830
1982 57.465 67.484 - 14.846
1983 203.567 155.156 31.202

- 70 -
TABLE E.4a. - BRAZIL: Cotton - Value Added and Effective
Protection
DOMESTIC VALUE VALUEADDED
ADDED FREE TRADE EFFECTIVE PROTECTION
YEAR (VA COTTON) (VA3 COTTON)
Cr$/Kilo CR$/Kilo COTTON
1966 0.298
1967 0.385
1968 0.564
1969 0.545
1970 0.543 0.634 - 14.383
1971 0.845 1.055 - 19.900
1972 0.946 1.274 - 25.707
1973 1.234 1.480 - 16.588
1974 1.854 2.618 - 29.165
1975 2.112 2.545 - 17.007
1976 4.758 4.569 4.142
1977 5.323 5.556 - 4.179
1978 6.045 7.143 - 15.370
1979 9.618 15.124 - 36.402
1980 20.111 23.072 - 12.834
1981 38.523 42.068 - 8.426
1982 57.465 69.275 - 17.049
1983 203.567 202.415 0.569
Note: As in table E.la.

- 71 -
TABLE E.5 - BRAZIL: WHEAT - VALUE ADDED AND EFFECTIVE PROTECTION
DOMESTIC VALUE VALUE ADDED EFFECTIVE
ADDED FREE TRADE PROTECTION
YEAR (VA WHEAT) (VA3 WHEAT) WHEAT
Cr$/Kilo Cr$/Kilo
1966 0.193
1967 0.271
1968 0.305
1969 0.355
1970 0.429 0.378 11.119
1971 0.441 0.503 - 12.212
1972 0.479 0.604 - 20.665
1973 0.542 1.068 - 49.277
1974 0.729 1.918 - 62.009
1975 1.192 1.690 - 29.478
1976 1.605 2.226 - 27.888
1977 2.037 1.910 6.645
1978 2.911 3.217 - 9.511
1979 3.861 5.553 - 30.480
1980 6.691 11.581 - 42.226
1981 17.534 21.021 - 16.589
1982 35.065 37.054 - 5.366
1983 84.836 86.725 - 2.178

- 72 -
TABLE E.5a. - BRAZIL: Wheat - Value Added and Effective
Protection
DOMESTIC VALLE VALUE ADDED EFFECTIVEPROTECTION
ADDED FREE TRADE
(VA WHEAT) (VA3 WHEAT) WHEAT
Cr$/Kilo Cr$/Kilo
1966 0.118
1967 0.163
1968 0.205
1969 0.232
1970 0.420 0.244 71.771
1971 0.441 0.343 28.645
1972 0.479 0.399 20.015
1973 0.542 0.714 - 24.157
1974 0.729 1.566 - 53.470
1975 1.192 1.340 - 11.055
1976 1.605 1.682 - 4.569
1977 2.037 1.280 59.183
1978 2.911 2.249 29.457
1979 3.861 4.452 - 13.284
1980 6.691 11.667 - 42.653
1981 17.534 19.623 - 10.646
1982 35.065 38.140 - 8.062
1983 *84.836 115.599 - 26.612
Note: As in Table E.la.

TABLE E.6: BRAZIL - Index of Non-Agricultural Value Added
INDUSTRY SERVICE NON-AGRICULTURAL INDICES OF
EFFECTIVE INTERNAL FREE TRADE INTERNAL FREE TRADE ACTUAL NON-AGRICULTURAL
YEAR PROTECTION INCOME VALUE ADDED INCOME VALUEADDED VALUEADDED VALUE ADDED (1977-100)
COEFFICIENTS*
FREE ACTUAL
VALUES IN Cr$ 1.000.000 TRADE
1966 2.540 11.727 3*313 24*075 27,388 35.802 1.551 1.801
1967 1.170 15.295 7.048 32.228 39.276 47.523 2.224 2 390
1968 0.911 22.443 11-743 42 914 54.667 65.357 3 095 3 287
1969 1.116 46.482 21.963 69.980 91.943 116.462 5.207 5.857
1970 1.236 61.029 27.293 91.175 118-468 152.204 6-709 7.655 <
1971 1.146 82.714 38.539 123.342 1161.881 206.056 9.167 10.363 L
1972 1.060 110.131 53.461 161.796 215 257 271.927 12-190 13-676 1
1973 0.270 156-565 123-280 223.458 346.738 380.023 i9.636 19.112
1974 - 0.024 241.385 247.244 324.226 571.470 565.611 32-363 28 445
1975 0.300 347.325 267.173 489.765 756.938 837.090 42.866 42.098
1976 0.322 530.772 401.404 785-663 1 187-067 1 316.435 67.225 66*205
1977 0.393 789.178 566.585 1 199.239 1 765.824 1 988.417 100*000 100.000
1978 0.375 1 187.001 863.351 1 930.856 2 794.207 3 117.857 158 238 156-801
1979 0.605 1 966.399 1 224.876 3 279.235 4 504.111 5 245.634 255-071 263 810
1980 0.346 4 294.867 3 190.113 6 646.870 9 836.983 10 941.737 557-076 550 274
1981 0.464 8 067.612 5 510.664 13 532-941 19 043-605 21 600-553 1 078 454 1 086'319
1982 0.578 16 063.568 10 179.556 27 244.453 37 424-009 43 308-021 2 119-351 2 178-015
1983 0.296 37 384.319 28 849.104 62 453-815 91 302-919 99 838 134 5 170-555 5 020'986
Source: See text

- 74 -
TABLE E.7: BRAZIL - Fertilizer Price Distortion for DifferentCrops.
(x)
YEARS WHEAT RICE COTTON SOYBEANS CORN
1966 - 21.680 - 15.587 - 26.493 - 18.417 - 19.868
1967 - 21.028 - 13.324 - 25.525 - 16.090 - 19.183
1968 - 21.172 - 15.443 - 27.569 - 18.991 - 21.390
1969 -- 22.602 - 22.715 - 27.482 - 20.431 - 23.334
1970 - 15.405 - 17.156 - 21.020 - 14.785 - 17.972
1971 - 29.189 - 31.234 - 35.996 - 30.572 - 31.348
1972 - 29.189 - 31.234 - 35.996 - 30.572 - 31.348
1973 - 0.099 - 0.802 - 5.234 2.850 - 2.258
1974 4.265 3.439 - 1.456 3.968 3.377
1975 - 4.786 - 3.756 - 3.528 0.421 - 5.452
1976 3.834 9.547 9.974 21.190 5.384
1977 38.907 40.292 42.010 50.117 36.261
1978 22.756 24.486 24.914 31.371 20.213
1979 2.834 2.589 2.562 6.153 0.852
1980 2.538 3.963 3.617 6.209 1.102
1981 0.803 5.568 3.688 10.781 0.953
1982 14.912 26.212 22.580 37..043 18.765
1983 20.128 34.645 29.954 49.120 19.769
Note: Price distortions is defined as the percentualdifference
between the domestic price actually paid by farmers (all
subsidies included)and the internationalC.I.F. price at
the equilibriumexchange rate.

- 75 -
TABLE E.7a. - BRAZIL - Fertilizer Price Distortion for
Different Crops - (%)
YEAR WHEAT RICE COTTON SOYBEANS CORN
1966 15.554 25.118 5.409 18.784 15.419
1967 20.202 32.740 9.463 25.369 19.097
1968 9.803 18.356 - 2.334 11.214 6.748
1969 9.982 7.275 0.074 11.234 5.891
1970 20.941 15.253 9.595 19.555 13.470
1971 4.635 - 0.968 - 7.138 2.122 - 2.424
1972 - 0.735 - 5.809 - 13.092 - 4.191 - 6.441
1973 40.684 36.923 29.649 42.869 34.316
1974 23.516 21.978 15.692 22.799 21.766
1975 14.948 15.374 15.906 20.653 13.159
1976 32.008 37.222 38.400 52.397 31.631
1977 90.713 88.846 92.321 103.242 82.676
1978 64.744 64.372 65.492 73.773 57.777
1979 23.559 22.121 22.436 26.573 19.813
1980 1.902 3.341 2.993 5.581 0.507
1981 6.704 11.532 9.534 17.001 6.489
1982 12.128 23.291 19.739 33.926 16.099
1983 - 6.623 5.833 2.084 17.584 - 4.214
Note: Price distortionsis defined as the percentualdifferencebetween the
domestic price actually paid by farmers (all subsidies included and the
internationalC.I.F. price at the equilibriumexchange rate (E*0).

- 76 -
TABLE E.8 - BRAZIL: Domestica / InternationalPrices at Equilibrium
Exchange Rate (Ewb)
YEAR NITROCALCIUM TRIPLE POTASSIUMCLORIDE
SUPERPHOSPHATEb
1966 0.898 0.713 1.647
1967 0.809 0.744 1.718
1968 0.874 0.761 1.556
1969 0.823 0.778 1.453
1970 0.867 0.802 1.344
1971 0.799 0.747 1.029
1972 0.889 0.611 1.267
1973 0.831 1.071 1.372
1974 1.298 1.093 1.893
1975 0.970 1.630 1.526
1976 0.686 2.148 1.528
1977 0.857 1.890 1.449
1978 0.841 1.722 1.398
1979 0.905 1.360 1.453
1980 0.885 1.629 1.498
1981 0.760 1.740 1.567
1982 0.680 2.399 2.039
1983 0.662 2.665 2.304
Note: a Domestic prices are averagesof the prices in the states of
Minas Gerais, Espitito Santos,Rio de Janeiro, Sao Paulo
Santa Catarina, Parana, Rio Grande do Sul, Mato Grosso, Mato
Grosso do Sul and Goias.
b Until 1972, simple superphosphate

- 77
TABLE E.8a. - BRAZIL: Domestica / International Prices at
Equilibrium Exchange Rate (Ek)
YEAR NITROCALCIUM TRIPLE POTASSIUMCLORIDE
SUPERPHOSPHATE
1966 1.331 1.056 2.442
1967 1.238 1.139 2.630
1968 1.223 1.065 2.177
1969 1.175 1.112 2.075
1970 1.247 1.154 1.934
1971 1.103 1.030 1.420
1972 1.253 0.861 1.786
1973 1.175 1.515 1.940
1974 1.539 1.296 2.245
1975 1.172 1.971 1.845
1976 0.874 2.739 1.949
1977 1.182 2.606 1.998
1978 1.133 2.320 1.884
1979 1.089 1.637 1.749
1980 0.880 1.619 1.489
1981 0.805 1.843 1.660
1982 0.663 2.340 1.989
1983 0.513 2.065 1.785
Note: a Domestic prices are averages of the prices in the states of Minas
Gerais, Esp!rito Santo, Rio de Janeiro, Sao Paulo, Santa Catarina,
Paran;, Rio Grande do Sul, Mato Grosso, Mato Grosso do Sul and
Goias.
b Until 1972, simple superphosphate.

- 78 -
APPENDIX F
EFFECTS OF AGRICULTURAL PRICE INTERVENTIONS ON
CONSUMPTION
The effects of agricultural price interventions on
consumption would be easy to compute in the absence of
commercialization costs and foreign trade. In this case, the
change in consumption could be calculated with the knowledgement
of the demand price elasticity for the product and the price
effect of the intervention computed at the producer level.
Unfortunatelyt this is not the case for the products
we are considering here. Not only commercialization costs
exist but distortions do exist in this activity. Thus, to
compute the price effect on consumption, due to price interventions
we propose to obtain the consumer price distortion-free as the
wholesale price plus the commercialization margin, both
evaluated in a distortion free situation. Knowing the actual
price paid by consumers and the corresponding distortion-free
consumer price, we can obtain the price distortion at the
consumer level (d) and therefore, compute the effects of price
intervention on consumption as follows:
d6 Qd = np . d (F1)
p
where
dQd = percentage change on domestic consumption due to price
intervention distortion d;

- 79 -
Np= own price elasticityof domestic demand;
PC - p
d = C where Pc is the actual price to consumers
C
and P* is the distortion-freeprice to consumers.C
To estimate P* we will need to estimate theC
commercializationmargin (cc) at wholesale level since the
distortion-freewholesale price (P*) can be estimated as weA
will demonstrate below and these two prices are connected
by that the margin as follows:
P* (1 + cc) = P* (F2)
A C (2
We propose the followingprocedure to obtain the
distortion-freeor the free-tradeequivalentwholesaleprices:
a) take the internationalprice for the good;
b) define this price in cruzeiros using the equilibrium
exchange rate (E*);
c) for imported goods, add to the internationalprice the
costs up to the wholesale level; for the exported goods,
substract from the exporting price the costs to take the
product from the wholesale level to the exportingport.
Proceeding in this fashion and using the data on the
Appendix D (tablesD) we obtained the wholesale price free-trade
equivalent as reproducedon tables F.1 and F.2 accordingwith
the equilibriumexchange rate used.

- 80 -
Having estimate PA, we depend on estimating cc to
obtain P*. Note that the distortions in the wholesale market
C
can be defined as follows.
PA (1 + d) PA (F3)
where PA is the actual wholesale price presented on table F.3.
Also, for the existing information, the observed
commercialization margin, that is, distortions included, can
be defined as;
PC = PA (1 + m) (F.4)
where Pc is the actual price paid by consumers as reported on
table F.4.
Thus, by definition, the observed commercialization
margin is the sum of the undistorted margin and the distortion:
PAm = PA cc + P* dcA A
or
cc = - m - dc (F.5)
A
Therefore, we can compute cc since m and dc are known:
m = -1 from (F.4) and PA and Pc are known since they are
p
observed prices (tables F.3 and F.4); and dc = P _ 1 from
A
(F.3) and PA is observed and PA has been estimated as described
aboveA
above.

- 81 -
As cc is computed by (F.5), the distortion free
consumer price can be obtained by (F.2). Since we have computed
two values for PA according with the equilibrium rate of
exchange was considered, we present on tables F.5 and F.6 the
corresponding values for P*. The corresponding price distortionsc
are presented on tables F.7 and F.8.
To compute the effects on the consumption according
to (F.1) the demand elasticities are required. We adopted the
following values:
Own Price Elasticity
Product of Demand
Corn - 0.90
Cotton - 0.55
Soybeans - 0.55
Rice - 0.18
Wheat - 0.60
These hypothesis were made based on the following
studies: corn: Nogueira - Brandt (1976) this elasticity refers to
the State of Sio Paulo;
Soybeans: Garcia (undated);
Rice: Crocomo (1982);
wheat: average value of -0.7 by Nogueira -Brandt (1976) and
- 0.544 by Garcia (undated).

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