Working Paper: NBER ID: w2738
Authors: Sebastian Edwards; Miguel Savastano
Abstract: This paper analyzes in detail the evolution of Latin America's international trade patterns, focusing on intraregional trade and on the formal attempts made to create free trade zones or custom unions. In particular, we assess the role of intraregional trade in the structural adjustment required by the Latin American debt crisis. The data analyzed show that the success of the commercial integration process has been quite limited. They also show that there has been no significant change in the DECO countries' share in Latin American imports or in the volume of intraregional trade flows since the early 1970s. Furthermore, the nature of the adjustment to the debt crisis of the 1980s indicate that Latin American markets possess a rather limited capacity to absorb a substantial increase in regional exports in the current context. Thus, we conclude that the success of the required expansion in Latin American exports will depend more on the region's ability to design innovative mechanisms to penetrate the markets of industrialized countries than on the deepening of any regional trade integration process.
Keywords: Intraregional Trade; Latin America; Debt Crisis; Trade Integration
JEL Codes: F15; F36
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Intraregional trade (F14) | Structural adjustment required by the debt crisis (F32) |
| Historical reliance on import substitution strategies (F14) | Limited success of commercial integration processes (F15) |
| Lack of coordination in macroeconomic policies (E61) | Significant barriers to effective integration (F15) |
| High trade restrictions (F14) | Significant barriers to effective integration (F15) |
| Failure of regional trade agreements (F13) | Limited capacity to absorb increased exports (F14) |
| Historical context of high tariffs and trade barriers (N11) | Persistent environment of protectionism (F52) |
| Limited changes in trade shares since the early 1970s (F14) | Failure to achieve a robust commercial integration process (L15) |