Integration Options for MERCOSUR: A Quantitative Analysis by the AMIDA Model

Jan 2008
The recent developments at the multilateral and regional fronts call for a re-evaluation of trade and integration options for MERCOSUR. Applying a brand new CGE model, we evaluated six scenarios. The simulation results indicate that trade agreements will generate relatively small but positive gains. Integration with the Unites States and the European Union, two key partners, will have somewhat divergent and opposite outcomes. Agriculture will be a clear winner, while MERCOSUR has competitiveness issue in capital-intensive manufacturing sectors. It is revealed that the bloc's present trade policy is on a right track. Nevertheless it is undoubtedly important for the bloc to clinch regional initiatives with long-term perspective, and essential to streamline and modernize their productive sectors for sustained trade balance and growth.