ABSTRACT
At the beginning of the 1980s, the Brazilian economy experienced a drastic change in its pattern of development. The appearance of the external debt crisis, together with the continuing effects of the world oil crisis of the late 1970s, saw the end of the import substitution model, which had been financed by massive external capital inflows. The rise in the production of soybeans and wheat would have had a marked impact on external trade. The chapter evaluates the problem in a general equilibrium framework, using a computable general equilibrium model to perform counterfactual simulations in order to analyse the linkages and feedbacks relating to the fall in agricultural subsidies and the simultaneous agricultural growth. In a programme of agricultural subsidies, which is large enough to generate macroeconomic effects, the sources of funding are important. The mechanism of transfer of funds between institutions is used to simulate the effects of a particular monetary phenomenon.
