What is it about?

We ask whether the trading pattern of Mercosur countries is aligned with approaches based on regional value chain, and if not, how it differs and why. In our evidence and analysis, we primarily use traditional gross trade data and Trade in Value Added (TiVA) indicators, and we look more at countries' profiles. We show that there has been a decrease in Brazilian trade with Mercosur, with manufactured exports being the main reason for the decline. We indicate that, in addition to the effect of China in the 2000s, there has been a structural movement of Mercosur economies, mainly regarding Brazil, which supports a hypothesis of primarization or deindustrialization.

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Why is it important?

Our results show that Brazil and Argentina are both relatively closed to foreign trade, as well as global and regional value chains, which makes them even more poorly integrated with one another. This reinforces what we call Mercosur's 'introspective' model of integration, making it less outward-oriented, which is divergent with what is observed when regional value chains are encouraged.

Perspectives

The fact that South American countries have shown low rates of GDP growth since 2013 could be related to the relatively low participation of more value-added products in their export baskets, as manufacturing and services. As we showed, regional integration can be an important source of industrialization, mainly for developing countries, which could enjoy a comparative advantage in searching for productive complementarities in order to become more competitive on the global market. Without returns of scale, the manufacturing sector might not even survive.

Professor Eduardo Viola
University of Brasilia

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This page is a summary of: Divergences Between New Patterns of Global Trade and Brazil/Mercosur, Brazilian Political Science Review, December 2017, FapUNIFESP (SciELO), DOI: 10.1590/1981-3821201700030001.
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