Furtado on Exchange Control and Economic Development: An Evaluation and Reinterpretation of the Brazilian Case

Abstract

In recent years there has been a vigorous debate regarding the optimum commercial and exchange policies of the underdeveloped countries. One important question in this debate has been that of overvaluation and selective import controls versus devaluation as the proper means to correct an external disequilibrium. Powerful groups are arrayed on both sides of this question: professional economists of the United Nations Economic Commission for Latin America, such as Raul Prebisch and Celso Furtado, are generally in favor of means other than devaluation, while those of the International Monetary Fund, Haberler and others, are generally in favor of devaluation. 1 Although the purpose of the present article is not to examine this many-faceted debate, it does provide an evaluation of Furtado' s arguments for exchange control as opposed to devaluation in Brazil, and for underdeveloped countries in general, in his two recent books. 2 Formerly chief of the development division of ECLA, head of the program for development of the Northeast of Brazil (SUDENE), Minister of Planning for the Goulart government, and presently Visiting Professor of Economics at Yale University, Furtado has undoubtedly wielded a great deal of influence in Brazil and elsewhere in Latin America; a critical evaluation of the basis of his policy recommendations is therefore of some impor-