ALTERNATIVES FOR BRAZIL TO MERCOSUR: AN EVALUATION THROUGH A COMPUTABLE GENERAL EQUILIBRIUM MODEL

Abstract

The process of integration of Mercosur suffered a series of setbacks in recent years, preventing it from moving beyond the stage of an incomplete free trade zone. This study analyzes the effects on international trade and welfare based on three scenarios that seek a new trade strategy for Brazil, considering a: (i) transformation of Mercosur into a free trade area; (ii) formation of a South American free trade area and; (iii) creation of a free trade area of the Americas. The paper employs a computable general equilibrium model from the Global Trade Analysis Project (GTAP) in its version 9 of the database. The results show that the gains for Brazil, both in international trade and welfare, are obtained in simulations where there is a trade opening between the countries of South America or between the Americas. However, Brazil benefited most from the preferential trade agreement between all the countries of South America, where it obtained the highest welfare gains (USD 533 million).