TRADE LIBERALIZATION AND STRUCTURAL CHANGES IN LATIN AMERICA*

Abstract

ABSTRACTWide disparities in growth potential and performance and hence, presumably an unequal sharing of benefits of trade liberalization, are among the most pressing issues facing the future course of economic integration in South America. The customary indices of changes in intra‐zonal trade among members of a preferential trade area do not adequately capture these tensions. This paper develops a framework based on differential rates of growth for analyzing the relative changes in production structure and per capita income in each member country vis‐à‐vis the corresponding set of free‐trading partners. The empirical investigation is carried out for member countries of the Latin American Free Trade Association (LAFTA) and of the Central American Common Market (CACM) for the period of their existence.Preliminary results suggest that although ‘reciprocity’ of benefits has been an elusive goal, there is no evidence that structural imbalance in the continent is worsening. In fact, in terms of per capita incomes there appears to be a modest trend toward convergence.