MERCOSUR: Another failed move towards regional integration?

In this paper the present challenges of consolidation and deeper integration of Mercosur will be discussed, in order to shed some light on the nature of the problems, that might be responsible for the present slow down of the speed of integration. In the second chapter I shall outline the concept of Mercosur. In the third chapter the formation of Mercosur will be discussed and in the fourth chapter I shall evaluate the future prospects of Mercosur. --

The EU-Mercosur agreement: towards integrated climate policy? Egmont European Policy Brief No. 57 November 2019

The recently signed EU-Mercosur agreement has met with criticism from civil society, farmers and politicians around the EU. These criticisms have been amplified by recent forest fires in the Amazon. Although the Von der Leyen Commission’s strategic documents highlight the importance of mainstreaming climate change and environment throughout all policies, including trade, the EU-Mercosur agreement lacks enforceable measures to this end. In light of recent events, ratification of the EU-Mercosur agreement by all member states seems unlikely. However, the EU itself could also use this opportunity to send a clear message as to where its priorities lie by taking unified action to shift the terms of the trade agreement

Impact assessment of trade liberalisation between EU and Mercosur countries

Ongoing bilateral trade negotiations between the Mercosur group and the EU since 2000 on agricultural products served as incitement to analyse the impacts of possible outcomes. The objective of this paper is to quantitatively assess impacts of bilateral liberalisation scenarios on EU25 and Mercosur markets as well as their bilateral trade flows. For this purpose, the CAPRI model, which has already been applied to several multi- and bilateral trade liberalisation scenarios in the past, has been adopted in several ways. (1) Trading blocks in CAPRI have been expanded so that the Mercosur countries are now represented with country specific behavioural functions and explicit trade flows. (2) The parameters of these behavioural functions have been calibrated using recently estimated supply and demand elasticities (CAP, E. ET AL., 2006) as prior information in a constrained Bayesian framework (HECKELEI, T. ET AL., 2005). (3) Two different baselines scenarios varying in the assumed production potential of the Mercosur countries were defined with experts from these countries. This approach reflects that developments in Mercosur countries are very dynamic with lots of uncertainties. It also provides analysis of results dependent on baselines which is an innovation in CAPRI (technically and qualitatively). In this paper three selected scenarios are analysed. The first scenario reflects an unilateral partial liberalisation between the EU25 and the Mercosur countries by allocating additional Tariff Rate Quotas (TRQs) to the Mercosur countries for certain products based on an official EU proposal (USDA, 2005). The second scenario combines the partial unilateral liberalisation with the multilateral WTO G20 proposal. Sensitive products are defined according to JEAN, S. et al. (2006). The third comprises a bilateral full liberalisation between the EU25 and the Mercosur countries by allowing quota and duty free access in both directions for all agricultural products. The results focus on welfare effects and the market balances of seven key commodities (wheat, maize, rice, soybeans, bovine meat, chicken and pork). Furthermore, a sensitivity analysis on the elasticities of substitution between foreign and domestic produced goods that drive demand of trade flows is provided and shows that the choice of those elasticities is very crucial with respect to model results.Trade liberalisation, Mercosur, CAPRI, Armington., Demand and Price Analysis, International Relations/Trade,

Is Mercosur an optimum currency area? An assessment using generalized purchasing power parity

We consider the cointegration approach of generalized purchasing power parity to show that a necessary condition for Mercosur to be an optimum currency area is met. Yet there are still large cross-country differences as to cast doubt on the success of either monetary union or official dollarization. The PPP puzzle is also found to occur in Mercosur.

Disentangling business cycles and macroeconomic policy in Mercosur: a VAR and unobserved components model approaches

Monetary integration in Mercosur processed in a context of strong macroeconomic volatility. This paper analyzes the feasibility of a monetary union within this zone. Instead of taking in account all the criteria of the optimal currencies areas, this study focuses on the macroeconomic cycles in Argentina, Brazil, and Uruguay. First, we analyse cross-correlation to identify the degree of cycle synchronization. Second, a structural VAR model is built for each country. It allows us to determine the sources of shocks which hit these countries. Third, we decompose structural innovations -especially economic policies shocks- of domestic SVAR into unobservable common and idiosyncratic components using a state-space model. We assess in what extent economic policies are coordinated between the Mercosur countries.Business Cycles ; OCA, Comovement ; VAR ; Unobserved components model ; Mercosur

Integration of the Americas: Welfare Effects and Options for the MERCOSUR

The purpose of this paper is to assess the costs and benefits of the creation of the Free Trade Area of the Americas (FTAA) and other integration options for the MERCOSUR with the other countries in the hemisphere. The GTAP, a multiregional, multisector CGE model is used to simulate the effects of several scenarios that are currently on debate. The existing preferences, granted by previous agreements under the framework of the Latin American Integration Association (LAIA), and the preferential treatment granted by the USA through the Generalized System of Preferences (GSP), the Caribbean Basin Initiative (CBI) and the Andean Trade Preference Act (ATPA) are taken into account. The analysis decomposes the effects of the FTAA in order to assess the importance of market opening and market access and identifies the net effect of trade creation and trade diversion. Additionally, the FTAA initiative is decomposed in possible subregional agreements among the countries involved (MERCOSUR – Andean Community, MERCOSUR – USA, etc.). The assessment includes the estimation of the welfare effects in case the agreement does not include the agricultural sector. All the results are presented for the MERCOSUR as a bloc and for each of its members.