Trade Patterns of Latin America and the Caribbean: Evidence from the agri-food sector

Abstract

Latin America and the Caribbean (LAC) region is one of the most important players in global agricultural trade, being among the global leaders in the production and exports of agricultural and fisheries commodities and accounting for 15% of the world’s average agri-food export from 1995 to 2019. The region have vast potential to strengthen their position as a result of the region's opportunities to increase agricultural production when combined with growing global demand, which could help the region's economy thrive. The purpose of the dissertation is to provide a consistent analysis of the agri-food trade patterns for Latin America and the Caribbean. determinants of LAC agricultural bilateral export for the period 1995-2019 and export competitiveness of the sector in the same period. This research explored the LAC agricultural trade patterns and export competitiveness through the analysis of the Revealed Comparative Advantage (RCA) index formulated by Balassa (1965) and its modifications – SRCA (Symmetric Revealed Comparative Advantage), RTA (Relative Trade Advantage, and RC (Revealed Competitiveness) – in the agricultural sector for the period of 1995-2019, indicating which countries in the region are currently competitive and in what agricultural products. Panel data econometrics was used to identify the conditioning factors lying behind trade flow and the gravity model of trade was employed, by estimating various Poisson pseudo-maximum likelihood (PPML) models including zero trade flows, to determine how bilateral cultural characteristics affect LAC agri-food export. Throughout the research period, the results indicated that Brazil, Argentina, and Mexico were the TOP agri-food exporters in LAC. The highest RCA, SRCA, and RTA were found in Guatemala, whereas the greatest RC was found in Argentina. At the product level analysis, oil seeds and oleaginous fruits, miscellaneous grains, seeds and fruit, industrial or medicinal plants, and straw and fodder (HS12) were the most exported items at the 2-digit level. Coffee, tea, mate and spices (HS-09) was the most competitive group product in the worldwide agri-market. In terms of agri-trade flow determinants, findings show that importers' GDP of LAC countries had a greater impact on agricultural trade compared to LAC exporters. Cultural similarities (common language) and countries' participation in Southern Common Market [Mercado Común del Sur (MERCOSUR)] stimulated agri-food export. Conversely, distance (transportation), past colonial links, and North American Free Trade Agreement (NAFTA) raised trade costs, having a negative impact on the export of agricultural products. The impacts of environmental regulations are ambiguous.