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The Effects of Trade Agreements and Economic Turmoil in South America
Organized Symposium “The Impact of Trade Agreements and Economic Turmoil in Latin America: The Future of the FTAA” Jaime Malaga, Gary Williams, and Flynn Adcock Texas A&M University 2000 AAEA Annual Meetings Tampa, Florida
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Overview South American Agricultural Dimension
US-SA Agricultural Trade South American Trade Agreements Economic Reforms and Performance -90’s Crisis of 1999 Economic Recovery Trade Agreement Perspectives Implications
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South American Economic Reform of the 1990s
Fiscal/ Monetary Discipline Low inflation Market Oriented Policies Competitiveness and private initiative Privatization and Deregulation Foreign Investment Trade Liberalization Increased trade flows
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Trade Agreements in South America
Mercosur Argentina, Brazil, Paraguay, Uruguay 220 million people Initiated in Free Trade Area- Imperfect Customs Union. Intra-group trade has triple since 1995 Chile and Bolivia “associated” members in 1997 Expectation to incorporate all South America by 2005 Problems with Brazilian devaluation.
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Trade Agreements in South America (continued)
Andean Pact Colombia, Venezuela, Peru, Ecuador, Bolivia 110 million people Initiated in 1969-Revitalized in 1994-Free Trade Area Intra-group trade has double since 1995 Full liberalization expected by Negotiations with Mercosur ongoing Problems with domestic policies and devaluation Bilateral Agreements Chile with all other South American countries
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Causes of the1998-1999 Crisis in South America
El Niño/La Niña Five times more intense than the last one (1983) Collapse of fisheries, devastating floods, destruction of infrastructure Political Turmoil Guerrilla intensified in Colombia Government instability and social unrest International Financial Crisis Asian crisis, collapse of Russian market, Brazilian devaluation
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Causes of the 1998-99 Economic Crisis
of in South America PP F PPP F FFF NN PP F NN F F P F NN FF FF N: El Niño P: Political Unrest F: Financial Crisis FFF
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Recovery and Economic Trends
IMF, World Bank, ECLA, FRB-Atlanta: Overall recovery of South American economies in 2000 ( % GDP average growth) and a stronger performance in 2001. Recovery is strong in Chile (6% GDP growth), Brazil, Peru, and Bolivia; less pronounced in Argentina, Paraguay and Venezuela, and unstable in Colombia and Ecuador. Economic reforms of the 90s helped a faster recovery than in previous crisis. Long term growth % (WB)
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Trade Agreements Expectations
Mercosur Andean Pact Bilateral Agreements South American Common Market? Agreements with Mexico and Canada Negotiations with European Union FTAA?
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Implications The US might not have a clear comparative advantage in agricultural trade with South America Economic and trade reforms make South America a more suitable partner for free trade agreements Consolidation of South American trade areas may imply diversion of trade away from the U.S. S.A. regional and bilateral agreements imply an informal hemispheric trade agreement.
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