Regionalism and industrial policy in developing countries. The case of MERCOSUR

PEDRO E. MONCARZ; MARCELO OLARREAGA; MARCEL VAILLANT

Montevideo

Congreso; XXIVJornadas de Economía del Banco Central del Uruguay; 2009

Banco Central del Uruguay

This paper empirically explores whether trade preferences can be used as a substitute for industrial policy and help countries achieve their industrialization objectives, at the expense of other regional members. It illustrates the heterogeneity that may exist in terms of reaching industrialization objectives with the help of preferential trade between small and large members of these agreements. Results show that MERCOSUR preferences obtained by Brazilian exporters have led to an increase in exports of relatively sophisticated products where Brazil does not enjoys a global comparative advantage. Smaller members of MERCOSUR also exports to the region products in which they have strong comparative advantages and relatively low level of sophistication. Thus, MERCOSUR contributes to large members, in particular Brazil and to a less extent Argentina, to achieve their industrialization objective.