Latin American Agri-Food Exports, 1994–2019: A Gravity Model Approach

María-Isabel Ayuda,Ignacio Belloc,Vicente Pinilla

doi:10.3390/math10030333

María-Isabel Ayuda, Ignacio Belloc + Show 1 more

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https://doi.org/10.3390/math10030333

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Abstract

This study analyses the causes of the strong growth in the agri-food exports of Latin America between 1994 and 2019. To do this, a series of gravity models are estimated, using as a dependent variable the agri-food exports of 15 Latin American countries to their 185 principal trading partners. The empirical specification is based on the gravity theory of trade, according to which, trade between two countries is determined by the size of both of their markets and their transport costs. Other variables have also been included, considering the theoretical foundations proposed for the gravity model. We initially used the PPML estimator since it is the method that provides estimates with the best properties. We later compared these results with those obtained through OLS and the Heckman selection model. Our findings show that the growth in agri-food exports is explained by factors of both supply and demand, but that the latter plays a more important role since we have obtained evidence of a reverse home-market effect. Furthermore, we can conclude that the creation of regional trade agreements, such as NAFTA, MERCOSUR, CACM, APEC, and TPP, has significantly favoured agri-food exports in the region.

Highlights

In the second half of the twentieth century, profound changes took place in global trade
The impact of the regional agreements that have arisen in Latin America contrasts with the coefficient of the World Trade Organization (WTO), which captures the effect of multilateral trade liberalization carried out under this supranational institution, as the results suggest that it has not played any role in the growth of agri-food exports in the region
We have used the gravity equation methodology and panel data analysis in order to identify the determinants of this trade in 15 countries, which represent an enormous proportion of the exports of

Summary

Introduction

In the second half of the twentieth century, profound changes took place in global trade. The Latin American countries lost an important part of their relative weight in the global exports of agricultural and food products between 1950 and 1990, they did not become prominent players in the global trade of manufactured goods either. This loss of share was due to the change in the region’s development model towards import substitution and its bias against agricultural exports, and to the specialisation in products with a weak demand and low level of industrial transformation. From the mid-1990s, Latin American exports of agri-food products grew substantially, giving rise to what has been dubbed as an agricultural export boom and a “re-primarization” of its economies

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