This was an important policy change. Export export tax rebates were no longer justified as being
an instrument to achieve price discrimination, but instead to offset the distortion caused by the
Minimum Registration Price.14 That is, the IBC justified the use of the Minimum Registration
Price to ensure a reliable basis for taxing coffee exports and ensuring delivery of adequate
foreign exchange. Then, since the administratively determined Minimum Registration Price
(PMR) was said to be intermittently higher than the international price of coffee from competitors,
the IBC argued that export tax rebates were needed to ensure that private exporters could remain
competitive with exporters from other countries during such periods. This argument was widely
accepted and was still thought valid throughout much of private industry in Brazil in 1994 when
I interviewed many coffee exporters.
In fact, the argument seems to have had no validity. Private private exporters did not sell
coffee at PMR, but instead at whatever was the going international price for Brazilian coffee (PA’).
The government had no control over the price at which coffee was sold internationally and did
not even collect data on actual transactions. Exporters indicate that if they sold coffee at a price
below PMR, they paid an export tax based on the higher PMR and purchased foreign exchange on
the black market at a less favorable rate in order to deliver the requisite foreign exchange to the
Central Bank. The Minimum Registration Price thus influenced the residual rent received by
exporters, but so long as that rent was positive, the Minimum Registration Price did not impede
exports. Export tax rebates were thus not essential to Brazilian competitiveness even within the
prevailing distorted policy context. Instead, it seems likely that export tax rebates were
maintained after the 1972 IBC “reforms” because the rebates were privately profitable and called
forth rent seeking activity to preserve them.
14 Indeed, throughout the 1980s, the export tax was regularly lower than the difference between PA and PD and thus
never restricted exports. As a result, the export tax rebates could no longer be justified as an instrument of price
11