International Journal of Food and Agricultural Economics ISSN 2147-8988 Vol. 3 No. 1, (2015), pp. 45-61 THE POTENTIAL IMPACTS OF THE PORT OF SALVADOR IMPROVEMENTS ON THE BRAZILIAN COTTON INDUSTRY Rafael Costa Texas A&M University, Department of Agricultural Economics, College Station, Texas, USA, Email:
[email protected] Parr Rosson Texas A&M University, Department of Agricultural Economics, College Station, Texas, USA. Ecio de Farias Costa Universidade Federal de Pernambuco, Departamento de Economia, Recife, Pernambuco, Brasil. Abstract A spatial price equilibrium model of the international cotton sector was used to analyze the impacts of the Port of Salvador improvements on the Brazilian cotton industry and world cotton trade. The port of Salvador is undergoing relevant improvements in its facilities and physical structure. As a result of these improvements, the port of Salvador is expected to become more competitive and attract ocean shipping companies which are willing to export products directly to Asian importing markets. Scenarios with different reduction in export cost for the port of Salvador were examined. For all scenarios, the new direct ocean shipping lines were found to be important for the cotton exporters in Brazil, especially for the producers in the state of Bahia. In addition, results suggested that the state of Bahia would have the potential of becoming the largest cotton exporting state in Brazil. Keywords: Cotton, international trade, Brazil, spatial equilibrium model, transportation 1. Introduction and Background In the 18th century, cotton was introduced in Brazil in the Northeastern region of the country. As the Southeastern region of the country started to industrialize in late 1800’s, the textile industry followed and eventually cotton cultivation was solidified in the states of São Paulo and Paraná.