The Welfare Impact of Protectionism in Latin America: Evaluation of Alternative Scenarios

NICOLÁS DEPETRIS CHAUVIN; MARIA PRISCILA RAMOS

Encuentro; XLVII Reunion Anual de la Asociacion Argentina de Economia Politica; 2012

ASOCIACION ARGENTINA DE ECONOMIA POLITICA

his pap er studies the welfare impact of alternative scenarios of trade protectionism and liberalization in four large Latin American countries, namely Argentina, Brazil, Colombia, and Peru. The impact of the different trade policies is assessed in two different ways. We first use the multi-sectoral and multi-regional computable general equilibrium MIRAGE model to assess the effects of trade policy on GDP, exports, imports, terms of trade, real wages, and welfare. The second approach is to follow the trade and poverty literature and use the price and factor remuneration changes from each simulation to feed them into household survey data and assess the welfare effect on households. The simulations show that in the four countries unilateral protectionism has only short term benefits while the other protectionist scenarios reduce welfare significantly. Liberalization, on the other hand, would improve welfare in most cases. In the case of Argentina, the analysis using household survey data shows that protectionism has negative effect across the entire income distribution and the effect is particularly severe for the p o orest households. Liberalization scenarios  improve households´ welfare in most cases. However, a FTA with China would negatively affect households in Argentina.