Divergences Between New Patterns of Global Trade and Brazil/Mercosur

Abstract

Although integration has been a part of South American discourse for decades, the level at which it is actually promoted remains far from that which is observed in dynamic production and trading centers. Given transformations in global trade, the phenomenon of global value chains is, in fact, very regionalized. 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. 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.

Latin America’s Decentred Economic Regionalism: From the FTAA to the Pacific Alliance

“…In South America, however, these dynamics are still at an early stage. As we noted in a previous work (Viola and Lima 2017), the Mercosur integration model is 'introspective, ' with little effort made towards encouraging productive and technological complementarity among member states in order to improve their global engagement, which would make trade integration more sustainable in the longer term. Mercosur has also few agreements and few productive connections with the rest of the world.…”

The Importance of Primary Commodities in the Foreign Trade of Brazil in the 21st Century

“…Since 2011, the total volume of Brazilian exports to MERCOSUR countries has been decreasing. While the total volume is decreasing, the percentage of total foreign trade remains relatively constant (Viola and Lima, 2017).…”

From the summits to the plains: The crisis of Latin American Regionalism

“…In contrast, intraregional trade in Latin America and the Caribbean as a percentage of total trade did not exceed the 20% threshold (Bown et al, 2017, p. 46; IMF, 2017, p. 44). The predominance of the primary sector in exports to Latin American countries has been a major obstacle to greater economic regionalization based on industrial sectors interested in creating regional value chains (Viola & Lima, 2017). Due to the commodities boom, the share of industrial products in the foreign trade of Latin American countries continued to decline.…”