Where Did the Trade Liberalization Drive Latin American Economy: A Cross Section Analysis

The institutional reforms towards trade liberalizations in Latin America during the 1980s and the 1990s have introduced a good measure of import competition, but trade policies alone are not sufficient to create a competitive environment in an economy. Most of the region's economies have changed from restrictive to open policies, but unlike trade liberalization in Europe, most trade barriers in Latin America have been reduced unilaterally. These countries favored free trade to improve their economies in terms of savings, export share, foreign reserves and growth of GNP during the reforms period. After decades of weak growth in Latin American countries, the manufacturing sector exports have shown optimistic results in recent years following the international trade agreements. The proposed study examines the trends of export dynamism in the Latin American countries and attempts to analyze whether the current pace of growth is sustainable. This paper attempts to analyze the extent of trade competitiveness and its impact on the economic welfare measures in the Latin American countries. The analysis concentrates on measuring the economic growth of the Latin American countries during 1950-2003. Nash equilibrium has been calculated to measure the economic welfare gains among the trading blocs in the Latin American region.