General Issues and Regional Groups
Edited by Miroslav N. Jovanović
Chapter 18: Integration Efforts and Economic Dynamics in South America
Cláudio R. Frischtak* 1 INTRODUCTION In the past decades, there have been significant efforts at economic integration in Latin America. Yet the evidence from the trade and investment flows, and growth dynamics, point to a continent moving in a different direction: while the US economy has polarised Mexico (and Central America and the Caribbean), this chapter contends that there is no equivalent endogenous engine of economic integration in South America. If there were such a country, it would be Brazil – due to its economic size, dynamism of its firms, and geography. But the evidence indicates otherwise. The Brazilian economy responds to global economic undercurrents; its trade and investment relations reflect the growing importance of Asia and new, emerging markets. Thus South America’s integration is left in a conundrum: while there is a strong political logic to building a unified subcontinent and reducing the inter-country asymmetries, centripetal economic forces weaken unification efforts in the region. It would take a major political decision by the government of the key economy to reverse course and contain such forces. This chapter is structured as follows. Section 2 briefly reviews the main economic integration agreements in Latin America and their impact on intra-regional trade in the last three decades. It suggests that the two key agreements that could become the backbone on an integrated continent – MERCOSUR and CAN – have lost political dynamism and economic impulse in recent years after peaking in the 1990s. The remainder of the chapter focuses more specifically on the limited...
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