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This paper aimed at analyzing competitiveness of three whole milk powder production chains in Rio Grande do Sul (Brazil) with three different technological levels (low, medium and high) of raw material production using Policy Analysis Matrix (PAM) methodology, developed by Monke and Pearson (1989). The results showed that all of the production chains studied generated earnings in the form of both private profits (i.e. the remuneration of the agents is higher than the opportunity costs and investment depreciation) and social profits (i.e. there are economic effectiveness and comparative advantages). The production chain with the medium technological production level, in which the use of production inputs was intensive, suffered more penalizing effects of taxation policies than the chains showing lower indices of modern input adoption, according to the values of Private Cost Ratios (PCRs), which were the following: 0.72, 0.46, and 0.26, for medium, low and high technological raw material production levels, respectively. [ABSTRACT FROM AUTHOR]