Trade liberalization, the Mercosur integration process and the agriculture-industry transfers: a general equilibrium analysis

Abstract

This paper deals with the effects of trade liberalization and Mercosur integration process upon the Brazilian economy, with emphasis on the agricultural and agroindustrial production sectors, under the hypothesis that those phenomena could be another step in the rural-urban transfer process in Brazil. The analysis is conducted through an applied general equilibrium model. Results suggest that trade liberalization would hardly generate a widespread process of rural-urban transfers, although Brazilian agriculture shows up as a loser in the process. Notwithstanding that fact, there are transfers inside the agricultural sectors, where, besides the losses in the value added of the grain production sectors, there would be gains for the livestock and for the ''other crops sectors. The agroindustry, in contrast, seems to gain both in Brazil and Argentina. Model results suggest yet that the Brazilian society would be benefitted as a whole by the integration, despite the losses in the agricultural sector.