reduced the net export tax, should have led to an increase in exports and, as foreign importers
moved down their demand curve, a slight decrease in Brazil’s nominal export price.18 Without
specific analysis, it is impossible to determine whether the coffee export tax was set at the
economically optimal level, though casual analysis suggests that Brazil’s coffee export tax was
generally set too high as there has been a large erosion of its market share over time. Assuming
that the export tax was too high, the use of the export tax rebate may have been welfare
improving. However, it would have been more efficient to simply reduce the export tax.
If these broad characterizations are correct, Brazil’s payment of an export tax rebate is
likely to have had a significantly negative welfare impact only during the 1980-88 period.
During 1965-71, the export tax rebates probably led to an expansion of exports to the member
market and this expansion may have achieved benefits that exceeded the cost of the avisos
issued. Regardless, the export tax rebates issued totaled only $220 million and any transfer of
rents would have been small. Assuming benefits from expanded exports of about $40 million per
year, Brazil’s welfare was probably not significantly affected during this period of time. During
1972-79, Brazil issued $1.8 billion in avisos. These export tax rebates reduced Brazil’s tax
revenues (assuming that the export tax was not adjusted), but according to theory the tax rebates
should not have significantly affected Brazil’s nominal coffee export price and could even have
improved its economic welfare. During 1980-88, however, I believe the harmful effect of the
export tax rebates was large. Brazil issued more than $6 billion in avisos during this short period
and, since the export tax did not constrain exports during this period, the avisos had no effect on
member market export volume. Brazil thus lost heavily unless importers bid up the nominal
export price by the full amount of the unit export tax rebate.
Econometric Model. Brazil’s domestic coffee export price data are considered
18 The primary effect of the rebates in this situation is to increase the price paid to farmers and thus expand exports.
15