Analysis of the Impacts of Economic Complementation Agreements between Brazil and Mexico

Abstract

The objective of this study is to analyze the potential impacts of the economic complementation agreement (ACE nº 53 and ACE nº 55) in the trade flows of Brazilian economy. In this sense, we seek to make a synthesis of the trade relations between Brazil and Mexico, and simulate scenarios of the economic complementation agreement Brazil and Mexico with a decrease of 50% and 100% of the tariffs. The sectors were classified based on the degree of technological intensity according to the criteria established by the Organization for Economic Cooperation and Development (OECD), isolating the vehicle sector. The computable general equilibrium model (CGE) was used for the simulation, using the Global Trade Analysis Project (GTAP) database, version 9. The results revealed, in both scenarios analyzed, two major benefits for Brazil. The first is due to the increase in exports and imports of products in the vehicle sector and medium-high and high technological intensity, reducing the export of commodities, which would stimulate Brazilian industrial production. The second gain would be increase of well-being, mainly because of the increase in allocative efficiency.