The Effects of Trade Agreements and Economic Turmoil in South America
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Transcript of The Effects of Trade Agreements and Economic Turmoil in South America
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 AdcockTexas A&M University
2000 AAEA Annual MeetingsTampa, Florida
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
South American and U.S. Statistical Indicators, 1999
Source: FAO-STAT and CIA World Factbook
South America United States
Population 340.8 Million 272.6 Million
GDP (PPP) $2.287 Trillion $8.868 Trillion
Agricultural GDP $265.6 Billion $177.4 Billion
Per Capita GDP (PPP) $6,710 per person $31,500 per person
Arable Land 116,000 Hectares 179,000 Hectares
Total Exports $143.9 Billion $663 Billion
Total Imports $147.1 Billion $912 Billion
Agricultural Exports $41.7 Billion $48.3 Billion
Agricultural Imports $15.2 Billion $37.9 Billion
Share of World Agricultural Exports, Selected Commodities, 1998
Source: FAO-STAT
BeefCorn
RiceSoybeans
Wheat
SBM/SBO
Sugars
0
5
10
15
20
Billion Dollars
United States South America Other
U.S.-South America Agricultural Trade1990 - 1999
Source: USDA/ERS
1990 1995 1996 1997 1998 19990
1
2
3
4
5
6
Billion Dollars
U.S. Exports U.S. Imports
U.S. Agricultural Exports to South America1990 and 1999
Source: USDA/ERS
Colombia11.2%
Venezuela 33.3%
Peru 15.1%
Brazil 16.6% Chile
5.9% Argentina
2.6%
Ecuador 8.9%
Other6.3%
Colombia23.6%
Venezuela 22.6%
Peru 16.0%
Brazil 11.6%
Chile 8.3%
Argentina 7.8%
Ecuador 5.7%
Other 4.4%
1990 Total: $1.06 Billion 1999 Total: $1.85 Billion
U.S. Agricultural Imports from South America1990 and 1999
Source: USDA/ERS
Brazil40.1%
Colombia20.3%
Chile12.3%
Argentina10.0%
Ecuador12.4%
Peru2.3%
Other 2.7%
Brazil28.2%Colombia
22.6%
Chile17.4%
Argentina12.9%
Ecuador10.8%
Peru4.2%
Other3.8%
1990 Total: $3.90 Billion 1999 Total: $5.26 Billion
U.S. Competitive Agricultural Imports from South America, 1990 and 1999
Source: USDA/ERS
Chile21.1%Brazil
43.9%
Argentina15.7%
Colombia14.3%
Other5.0%
Chile27.9%Brazil
27.3%
Argentina19.1% Colombia
13.6%
Other12.1%
1990 Total: $2.27 Billion 1999 Total: $3.22 Billion
U.S. Non-Competitive Agricultural Imports from South America, 1990 and 1999
Source: USDA/ERS
Colombia28.5%
Brazil34.8%
Ecuador28.7%
Other8.1%
Colombia36.9%
Brazil29.6%
Ecuador20.9%
Other12.5%
1990 Total: $1.63 Billion 1999 Total: $2.04 Billion
Composition of U.S. Agricultural Exportsto South America, 1990 and 1999
Source: USDA/ERS
Corn16.8%
Wheat24.6%
SBM7.2%
Veg/Prep5.4% Feeds
1.1%Seeds2.3%
Other42.6%
Corn21.3%
Wheat16.3%
SBM7.7%
Veg/Prep7.4%
Feeds4.4%
Seeds4.3%
Other38.5%
1990 Exports: $1.06 Billion 1999 Imports: $1.85 Billion
Composition of U.S. Agricultural Importsfrom South America, 1990 and 1999
Source: USDA/ERS
Non-Comp42.8%
Fruits/Preps7.4%
Flowers5.6%
Juices16.9%
Beef5.1%
Sugars8.7%
Other13.3%
Non-Comp38.8%
Fruits/Preps11.9%
Flowers8.4%
Juices7.8%
Beef5.6%
Sugars5.3%
Other22.2%
1990 Imports: $3.90 Billion 1999 Imports: $5.26 Billion
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
Trade Agreements in South America
• Mercosur– Argentina, Brazil, Paraguay, Uruguay– 220 million people– Initiated in 1995 - 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.
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 2003. Negotiations with Mercosur
ongoing– Problems with domestic policies and devaluation
• Bilateral Agreements– Chile with all other South American countries
Latin America
Argentina
Brazil
Chile
Colombia
Ecuador
Peru
Uruguay
Venezuela
% Growth Per Year
0 5 10 15-5-10
1992 1993 1994 1995 19961997 1998 1999 2000 2001
GDP Growth in South America, 1992 - 2001F
Source: World Economic Outlook, IMF
GDP Growth in South America, 1992 - 2001F
Source: World Economic Outlook, IMF
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
0
5
10
15
-5
-10
% Growth per Year
Latin America Argentina Brazil Chile ColombiaEcuador Peru Uruguay Venezuela
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
NN F
NN PP FFFF
FFF
NN FF
F
PPP FPP F
FF
P F
Causes of the 1998-99 Economic Crisisof in South America
N: El NiñoP: Political UnrestF: Financial Crisis
Recovery and Economic Trends• IMF, World Bank, ECLA, FRB-Atlanta: Overall recovery of
South American economies in 2000 (2.5-3.5% 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 3.5- 4% (WB)
Trade Agreements Expectations
• Mercosur• Andean Pact• Bilateral Agreements• South American Common Market?• Agreements with Mexico and Canada • Negotiations with European Union • FTAA?
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.