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.

Effects of the Completition of MERCOSUR on the Uruguayan Labor Market. A simulation exercies using a CGE model

The Mercosur was born as an imperfect Customs Union. During the transition phase to a complete Customs Union -starting in 1995-, each country established some exceptions to trade liberalization within the region and to the external common tariff. This paper deals with the possible effects on the Uruguayan labor market of the elimination of those exceptions. With that purpose, the changes in tariffs during the transition are simulated with a Computable General Equilibrium model. The model is specified for the Uruguayan economy but three other regions are considered: Argentina, Brazil and the rest of the world. There are nine sectors in the model, six of which are assumed to work under imperfect competition while the rest are perfectly competitive. In the sectors with imperfect competition a Bertrand type behavior is assumed. The labor market is segmented in skilled and unskilled labor and wages are flexible. The results show that the overall effects on the main variables and on the labor market are not important. The most significant changes are found in trade flows. However, at the sectoral level relevant changes are found in consumption, output, trade and factor allocation in those sectors that are most affected by the intra-zone liberalization or by the complete enforcement of the Common External Tariff.

Integración de las Américas: Impactos Globales y Sectoriales para el Mercosur

The purpose of the paper is to assess the costs and benefits of different integration options for the Mercosur with all other countries in the Americas. A multiregional, multisector CGE model is used to simulate the effects of several scenarios that are currently on debate. Alternative strategies are here analyzed: bilateral agreements of each of the Mercosur countries with the US; a South American Free Trade Area (SAFTA); and the Free Trade Area of the Americas (FTAA). Additionally, the paper compares the effects of agreements that lead to total trade liberalization with those that exclude the agricultural sector. The macro results of the simulations are negligible but they nevertheless indicate there is a significant impact on the specialization patterns of the Mercosur.

The effects of increasing openness and integration to the MERCOSUR on the Uruguayan labour market. A CGE modeling analysis

Uruguay is a small economy. Its integration to MERCOSUR has increased the exposure to regional macroeconomic inestability. The aim of this paper is to assess the impact of regional integration on labour market and poverty. We estimated wage differentials between labour categories, finding a 60% wage gap between formal and informal workers. A CGE model with an efficiency wage specification for unskilled labour was built. Results show that regional shocks deeply affect Uruguayan economy. The consideration of efficiency wage model is particularly important when shocks lead to a reallocation of resources towards sectors intensive in unskilled labour. A subsidy on formal, unskilled labour could contribute to decrease informality and therefore increase GDP, but this type of policy need to be carefully implemented, because it may have negative effects on investment. Finally, the effects on poverty and income distribution obtained through microsimulations are consistent with the results of the CGE experiments.Uruguay, labour market, general equilibrium model, regional integration, efficiency wage, microsimulation, poverty

The Effects of Increasing Openness and Integration to the MERCOSUR on the Uruguayan Labour Market: a CGE Modelling Analysis

Uruguay is a small economy. Its integration into MERCOSUR has increased its exposure to regional macroeconomic instability. The aim of this paper is to assess the impact of regional integration on the country's labour market and poverty. We estimated wage differentials between labour categories, finding a 60 percent wage gap between formal and informal workers. A CGE model with an efficiency wage specification for unskilled labour was built, with results showing that regional shocks deeply affect the Uruguayan economy. The consideration of an efficiency wage model is particularly important when shocks lead to a reallocation of resources towards sectors intensive in unskilled labour. A subsidy on formal, unskilled labour could contribute to decrease informality and therefore increase GDP, but this type of policy needs to be carefully implemented because it may have negative effects on investment. Finally, the effects on poverty and income distribution obtained through microsimulations are consistent with the results of the CGE experiments.Uruguay, labour market, general equilibrium model, regional itegration, efficiency wage, microsimulation, poverty

La agenda externa del MERCOSUR: el impacto de negociaciones con el ALCA, la UE y la OMC

The objective of this paper is to contribute to the economic evaluation of the impact on the MERCOSUR countries of the outcomes of three simultaneous negotiations: the Free Trade Area of the Americas (FTAA), the free trade agreement with the European Union (EU) and the multilateral negotiations within the World Trade Organization (WTO). A quantitative evaluation has been done implementing different simulations with a multi country CGE Model, which include the four MERCOSUR partners. The paper concludes that the welfare impact on the MERCOSUR of these negotiations would be rather small and positive, except in the FTAA scenario where negative results are found for Argentina, Brazil and Paraguay. When the negotiations do not include the agricultural sector, the results become negative in most scenarios. The most significant effects of the negotiations would be an increase in trade and a reorientation in favor of the new partners, with detriment for intra- MERCOSUR trade. The difference between the trade effects in a full or a restricted agreement is remarkable for Argentina and Uruguay. In all scenarios MERCOSUR would increase its specialization on agriculture and food, especially in the case of full liberalization between MERCOSUR and the EU. Restricted agreements would neither avoid production decline in some industries nor improve traditional agricultural products and food industries so much as a non-restricted agreement.MERCOSUR, FTAA, WTO, EU, CGE, external negotiations.

Assessing the Impact of the 2007 Tax Reform on Povert and Inequality in Uruguay

In the context of a sharp rise in the incidence of poverty and increasing inequality since the end of the last decade, a major tax reform was put into place in mid-2007 with the explicit goals of promoting both greater efficiency and equity in the Uruguayan tax system. Overall, the reform substantially increased direct taxes on personal income by increasing marginal rates, lowered indirect taxes and direct taxes on firms, harmonized employer contributions to social security across sectors and eliminated some highly distortionary taxes. The joint effects of these changes on the macroeconomic equilibrium, labour markets, and poverty and inequality are assessed using a top-down static CGE, a microsimulation approach. It is shown that full implementation of the tax reform has substantial general equilibrium effects which generally strengthen the reduction of poverty incidences, poverty gaps and the severity of poverty exclusively due to the introduction of the personal income tax (without behavioural responses). Regarding poverty, the general equilibrium effects are significantly greater than the direct effects. Overall, we estimate a one-point reduction of the Gini index due to the reform.tax Reform, CGE models, Microsimulations, Poverty, Inequality

A 1995 Social Accounting Matrix (SAM) For Uruguay

The need to have a social accounting matrix (SAM) built on the basis of relatively recent data was a specific requirement of an UNDP-sponsored research project on “Export-led economic strategies: effects on poverty, inequality and growth”. Previous experiences of building a SAM for Uruguay were based on 1983 data (Elías, 1991; Laens & Rius, 1991). In the second half of the 80’s and all along the 90’s, significant changes occurred in the Uruguayan economy, so none of those SAMs were considered suitable for the analysis. The task of building a new SAM was undertaken as a follow-up of the estimation of an input-output table (IOT95) at CINVE with 1995 data (Lorenzo et al., 1999). This IOT95 was chosen as the core of the SAM for 1995 (SAM95). The methodology used for the IOT95 is presented in detail in Lorenzo et. al (1999), but as long as this document has not been sufficiently disseminated, we will briefly summarize here its main features

Consumo interno de leche y productos lácteos

Area : Los mercado

Efectos fiscales de la reforma de la seguridad social en Uruguay

Incluye BibliografíaResumen Uruguay realizó una reforma estructural en su sistema de previsión social en 1996. Se introdujo un sistema mixto, con un pilar de reparto administrado por el estado y un pilar de capitalización individual con fondos administrados por empresas. La afiliación al sistema fue obligatoria para todos los menores de 40 años cubiertos por el Banco de Previsión Social (BPS);. Sólo aportan al pilar de capitalización los individuos de altos ingresos, mientras que los de bajos ingresos tienen la opción de contribuir a ese pilar. Quienes ejerzan esa opción tienen un premio en la prestación del pilar de reparto. Simultáneamente, se introdujeron cambios importantes en los parámetros del sistema de reparto sobreviviente, básicamente aumentando la edad mínima de retiro femenina y disminuyendo las tasas de reemplazo. Las principales especificidades de la reforma uruguaya son: a); que el pilar de reparto continúa siendo el más importante desde el punto de vista de la cobertura, las contribuciones y las prestaciones, aún después de alcanzada la madurez del nuevo sistema; b); que dentro de las administradoras de fondos existe una de propiedad estatal, que, además, ha captado la mayor parte de las afiliaciones; y c); que no dio lugar a ningún tipo de reconocimiento de deuda a los afiliados. En este trabajo se realizan proyecciones de los ingresos, egresos y resultados financieros del BPS, con y sin pago de intereses, para el período 1996-2050. Estos cálculos se basan en un modelo que simula la trayectoria de 840 individuos representativos. Las proyecciones se realizan para diversos escenarios de crecimiento económico y de tasa de interés. Como ello se hace tanto para situación de reforma como para la hipótesis de ausencia de reforma, se puede medir el efecto de la reforma sobre esas variables. Asimismo, se estima la deuda implícita en el viejo sistema en 1996. Las estimaciones muestran que el resultado fiscal primario se reduce a largo plazo en 2,1% del PBI, independientemente de la trayectoria del PBI per cápita. Esto se logra reduciendo el gasto en prestaciones del pilar de reparto en aproximadamente 5,7% del PBI, que se contrarresta, en parte, con el desvío de contribuciones hacia el pilar de capitalización en alrededor de 3,5% del PBI. A corto y mediano plazo, en cambio, el déficit primario aumenta entre 1,6% y 1,8% del PBI, tanto por la reducción de las contribuciones al pilar de reparto como por un aumento de las prestaciones. El resultado fiscal total, incluyendo los intereses pagados por la financiación del déficit primario, es altamente sensible a las hipótesis sobre crecimiento y tasas de interés. No obstante, el efecto de la reforma es, en la mayoría de los escenarios, el de contraer el déficit a largo plazo entre 0,5 y 2% del PBI