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Latin America's experience with export subsidies

  • Nogues, Julio

Twenty years ago, it ws believed that export subsidies would produce more diversification and better export performance. This has not happened. In most cases, export subsidies were not supported by more open import policies - so subsidies reduced only marginally the anti-export bias of Latin American countries. Unstable real exchange rates have also hurt exports. Export subsidies appear to have improved exports in Brazil, which also liberalized imports, stabilized exchange rates, and promoted other policies conducive to export growth. Yet Mexico, after reducing import barriers, also enjoyed improved exports - with minimum export subsidies, and with apparently lower social costs than Brazil experienced. Export subsidies have failed in other Latin American countries - and particularly hurt development in Argentina, where fraud, corruption, and rent-seeking have been rampant. The author contends that the failure of export subsidies should remind us of the importance of distinguishing what is possible from what is likely. Finally, export subsidies compete with other government programs, and, considering their failure rate, the money might be better spent on infrastructure, health, and education projects.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 182.

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Date of creation: 30 Apr 1989
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Handle: RePEc:wbk:wbrwps:182
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  1. Finger, J M & Hall, H Keith & Nelson, Douglas R, 1982. "The Political Economy of Administered Protection," American Economic Review, American Economic Association, vol. 72(3), pages 452-66, June.
  2. Moran, Cristian, 1988. "A Structural Model for Developing Countries' Manufactured Exports," World Bank Economic Review, World Bank Group, vol. 2(3), pages 321-40, September.
  3. Baumann, Renato & Braga, Helson C., 1988. "Export financing in LDCs: The role of subsidies for export performance in Brazil," World Development, Elsevier, vol. 16(7), pages 821-833, July.
  4. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," World Bank Economic Review, World Bank Group, vol. 2(1), pages 1-47, January.
  5. Nogues, Julio J., 1983. "Alternative trade strategies and employment in the Argentine manufacturing sector," World Development, Elsevier, vol. 11(12), pages 1029-1042, December.
  6. Faini, Riccardo, 1994. "Export supply, capacity and relative prices," Journal of Development Economics, Elsevier, vol. 45(1), pages 81-100, October.
  7. Laird, Sam & Nogues, Julio, 1988. "Trade policies and the debt crisis," Policy Research Working Paper Series 99, The World Bank.
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