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The Declining Role of Latin America in Global Agricultural Trade, 1963–2000

  • RAÚL SERRANO and VICENTE PINILLA
Abstract

In the second half of the twentieth century, Latin American countries lost a substantial part of their importance in worldwide exports of agricultural and food products. Given this context, the objective of this article is to analyse the determinants of the evolution of agricultural exports from Latin America, paying special attention to the influence of regional processes of economic integration on exports and to their degree of participation in intra-industrial trade. We propose a gravity model with a data panel of total exports and product groups for six Latin American countries towards 39 destinations between 1963 and 2000.

En la segunda mitad del siglo XX, los países latinoamericanos han perdido una parte sustancial de su importancia en las exportaciones mundiales de productos agrarios y alimentos. En este contexto, nuestro trabajo tiene como objetivo analizar los determinantes de la evolución de las exportaciones agrarias de América Latina, prestando especial atención a la influencia en ellas de los procesos regionales de integración económica y a su grado de participación en el comercio intra-industrial. Se plantea un modelo de gravedad con un panel de datos de las exportaciones totales y por grupos de productos, de seis países latinoamericanos hacia 39 destinos, entre 1963 y 2000.

Na segunda metade do século XX, países latino-americanos perderam uma parte substancial de sua importância nas exportações mundiais de produtos agrícolas e alimentícios. Dado este contexto, o objetivo de nossa pesquisa é analisar os fatores determinantes da evolução das exportações de produtos agrícolas oriundos da América Latina, focando especialmente na influência de processos regionais de integração econômica nas exportações e na participação destas no comércio intra-industrial. Propomos um modelo gravitacional com um painel de dados com o total das exportações e grupos de produtos exportados por seis países latino-americanos para 39 destinos diferentes entre 1963 e 2000.

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1 Victor Bulmer-Thomas, The Economic History of Latin America since Independence (New York: Cambridge University Press, 1994).

2 Pinilla, Vicente and Aparicio, Gema, ‘Navigating in Troubled Waters: South American Exports of Food and Agricultural Products in the World Market, 1900–1950’, Revista de Historia Económica/Journal of Iberian and Latin American Economic History, 33: 2 (2015), pp. 223–55.

3 Anderson, James E. and Van Wincoop, Eric, ‘Gravity with Gravitas: A Solution to the Border Puzzle’, American Economic Review, 93: 1 (2003), pp. 170–92.

4 Serrano, Raúl and Pinilla, Vicente, ‘Causes of World Trade Growth in Agricultural and Food Products 1951–2000: A Demand Function Approach’, Applied Economics, 42: 27 (2010), pp. 3503–18.

5 Comisión Económica para América Latina (CEPAL), 25 años en la agricultura de América Latina: rasgos principales (Santiago de Chile: CEPAL, 1978), p. 58.

6 See Appendix Table 4.

7 Serrano, Raúl and Pinilla, Vicente, ‘The Evolution and Changing Geographical Structure of World Agri-food Trade, 1951–2000’, Revista de Historia Industrial, 46 (2011), pp. 103–6 and The Long-Run Decline in the Share of Agricultural and Food Products in International Trade: A Gravity Equation Approach of its Causes’, Applied Economics, 44: 32 (2012), pp. 4199–210.

8 One of the first movers was Chile: Otto T. Solbrig, ‘Structure, Perfomance, and Policy in Agriculture’, in Victor Bulmer-Thomas et al. (eds.), Cambridge Economic History of Latin America. Vol. II: The Long Twentieth Century, pp. 518–20. Costa Rica provides another case: Botella, Elisa, ‘El modelo agrario costarricense en el contexto de la globalización (1990–2008): oportunidades y desafíos para reducir la pobreza rural’, Ager: Revista de Estudios sobre Despoblación y Desarrollo Rural, 12 (2012), pp. 749.

9 Serrano, Raúl and Pinilla, Vicente, ‘Agricultural and Food Trade in European Union Countries, 1963–2000: A Gravity Equation Approach’, Economies et Sociétés. Série ‘Histoire Economique Quantitative AF’, 43: 1 (2011), pp. 191219.

10 Feenstra, Robert et al. , ‘Using the Gravity Equation to Differentiate among Alternative Theories of Trade’, Canadian Journal of Economics, 34: 4 (2001), pp. 430–47; Robert Feenstra et al., ‘Understanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods’, NBER Working Paper #6804 (1998).

11 Krugman, Paul, ‘Scale Economies, Product Differentiation, and the Pattern of Trade’, American Economic Review, 70: 5 (1980), pp. 950–9.

12 Serrano, Raúl and Pinilla, Vicente, ‘Changes in the Structure of World Trade in the Agri-food Industry: The Impact of the Home Market Effect and Regional Liberalization from a Long-term Perspective, 1963–2001’, Agribusiness, 30: 2 (2014), pp. 165–83.

13 The countries concerned are: Algeria, Côte d'Ivoire, Egypt, Morocco, Nigeria, Sudan (Africa); China, India, Indonesia, Israel, Japan, Malaysia, Saudi Arabia (Asia); Austria, Belgium-Luxembourg (aggregate for both countries), Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, and the United Kingdom (Western Europe); Canada and the United States (North America); Argentina, Brazil, Chile, Colombia, Mexico and Uruguay (Latin America); and Australia and New Zealand (Oceania).

14 Baier, Scott Leonard and Bergstrand, Jeffrey H., ‘Do Free Trade Agreements Actually Increase Members' International Trade?’, Journal of International Economics, 71: 1 (2007), pp. 7295.

15 The region's share in world trade fell from 12.4 per cent in 1950 to 5–6 per cent in the 1970s–1980s. See Marcelo de Paiva Abreu, ‘The External Context’, in Victor Bulmer-Thomas et al. (eds.), The Cambridge Economic History of Latin America, Vol. II, p. 103. Argentina is a paradigmatic case: see Hora, Roy, ‘La evolución del sector agroexportador argentino en el largo plazo, 1880–2010’, Historia Agraria, 58 (2013), pp. 145–81.

16 Estimates based on the FAOSTAT-Agriculture-Database (Rome, 2004) for 1963–2000. Current trade values deflated using price indices prepared by the authors for different product groups.

17 Product groups per the Standard International Trade Classification (SITC rev. 1). Basic products (041–045 cereals, 00 live animals, 22 oil seeds, 26 textile fibres); plantation products (06 sugar, 07 coffee, tea, cocoa); high value and processed foods (01 meat and meat preparations, 02 dairy products and birds’ eggs, 04 cereal preparations, 05 vegetables and fruit, 08 feeding stuff for animals, 09 miscellaneous edible products and preparations); other processed products (11 beverages, 12 tobacco and tobacco manufactures, 41 animal oils and fats, 42 vegetable fats and oils, 43 animal or vegetable fats and oils, processed).

18 In 1972–4 agricultural and food products accounted for 41.5 per cent of total Latin American exports: CEPAL, 25 años en la agricultura, p. 44. This percentage would subsequently drop to around 30 per cent, although there are very significant variations between different countries. The extreme case is Mexico. In 2000–4, the country's agricultural exports represented just 6 per cent of the total: Kym Anderson and Alberto Valdés, ‘Introduction and Summary’, in Anderson and Valdés (eds.), Distortions to Agricultural Incentives in Latin America (Washington: World Bank, 2008), p. 8.

19 Anne Krueger et al., The Political Economy of Agricultural Pricing Policy: A Synthesis of the Economics in Developing Countries (Baltimore, MD: Johns Hopkins University Press, 1992).

20 Martín-Retortillo, Miguel and Pinilla, Vicente, ‘Why Did Agricultural Labour Productivity Not Converge in Europe from 1950 to 2005?’, Cliometrica, 9: 3 (2015), pp. 359–96; Giovanni Federico, ‘Was the CAP the Worst Agricultural Policy of the 20th Century?’, in Kiran Patel (ed.), Fertile Ground for Europe? The History of European Integration and the Common Agricultural Policy since 1945 (Baden-Baden: Nomos, 2009), pp. 257–72.

21 Anne Krueger et al., Economía política de las intervenciones agrícolas en América Latina (San Francisco, CA: Banco Mundial, 1990). See Enrique Cárdenas et al., An Economic History of Twentieth-Century Latin America, vol. 3: Industrialisation and the State in Latin America: The Postwar Years (New York: Palgrave Macmillan, 2000); Bulmer-Thomas, Economic History of Latin America; Ricardo Ffrench-Davis et al., ‘Las economías latinoamericanas, 1950–1990’, in Leslie Bethell (ed.), Historia de América Latina, vol. 11: Economía y sociedad desde 1930 (Barcelona: Crítica, 1997); Luis Bértola and José Antonio Ocampo, Desarrollo, vaivenes y desigualdad: una historia económica de América Latina desde la independencia (Madrid: Secretaria General Iberoamericana, 2010), pp. 151–212.

22 Anderson and Valdés, ‘Introduction’, p. 14.

23 Krueger, Anne et al. , ‘Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economy-wide Policy’, World Bank Economic Review, 2: 3 (1988), pp. 255–71.

24 Anderson and Valdés, Distortions, pp. 21–39.

25 Victor Bulmer-Thomas, ‘Globalisation and the New Economic Model in Latin America’, in Bulmer-Thomas et al. (eds.), Cambridge Economic History of Latin America, vol. II and Ffrench-Davis, ‘Las economías latinoamericanas’.

26 Anderson and Valdés, ‘Introduction’, p. 16.

27 Eugenio Diaz-Bonilla, Structural Adjustment Programs and Economic Stabilisation in Central America (Washington: World Bank, 1990); Bértola and Ocampo, Desarrollo, vaivenes y desigualdad, p. 196.

28 Lucio G. Reca and Eugenio Díaz-Bonilla, ‘Changes in Latin American Agricultural Markets’ (International Food Policy Research Institute, TMD Discussion Paper, no. 24, 1997).

29 Imports of farm products by the nations of South America accounted for 4.3 per cent of the world total in 1955–59. At their lowest in 1985–89 they represented just 1.8 per cent recovering (in step with exports) to 3.4 per cent in 1995–99 (authors' calculations based on FAOSTAT).

30 Vicente Pinilla and Raúl Serrano, ‘Agricultural and Food Trade in the European Union since 1963’, in Patel (ed.), Fertile Ground for Europe?, p. 281.

31 Bulmer-Thomas, Economic History of Latin America, pp. 297–304.

32 Coyle, William et al. , ‘Understanding the Determinants of Structural Change in World Food Markets’, American Journal of Agricultural Economics, 80: 5 (1998), pp. 1051–61.

33 Díaz-Bonilla, Eugenio and Reca, Lucio, ‘Trade and Agroindustrialisation in Developing Countries: Trends and Policy Impacts’, Agricultural Economics, 23: 3 (2002), pp. 219–29; Yáñez, César et al. , ‘Nuevas series anuales de la población de América Latina desde el siglo XIX hasta el 2000’, Scripta Nova, 18: 471 (2014).

34 Output destined for domestic consumption grew at an annual rate of 3.7 per cent in Latin America between 1949–51 and 1973–5, compared to growth of just 2.8 per cent in the production of export goods: CEPAL, 25 años en la agricultura, p. 103.

35 Anderson, James E., ‘A Theoretical Foundation for the Gravity Equation’, American Economic Review, 69: 1 (1979), pp. 106–16; Bergstrand, Jeffrey H., ‘The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence’, Review of Economics and Statistics, 67: 3 (1985), 474–81; Bergstrand, Jeffrey H., ‘The Generalised Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade’, Review of Economics and Statistics, 71: 1 (1989), pp. 143–53; Anderson and van Wincoop, ‘Gravity with Gravitas’.

36 Jacobo, Alejandro D., ‘Incrementando la presencia comercial de América Latina: ¿qué tienen los modelos gravitacionales para decir?’, Actualidad Económica, 15: 56 (2005), pp. 1520.

37 Krugman, ‘Scale Economies’.

38 Feenstra et al., ‘Using the Gravity Equation’; Fidrmuc, Jarko, ‘The Core and Periphery of the World Economy’, Journal of International Trade & Economic Development, 13: 1 (2004), pp. 89106.

39 Bergstrand, ‘The Generalised Gravity Equation’.

40 Robert Feenstra, Advanced International Trade. Theory and Evidence (Princeton, NJ: Princeton University Press, 2004); Anderson and Van Wincoop, ‘Gravity with Gravitas’.

41 The members of the RTAs are listed in Appendix Table 3.

42 Jeffrey Frankel and ShangJin Wei, ‘Continental Trading Blocs: Are They Natural or Super-natural?’, NBER Working Paper #4588 (1993); Frankel, Jeffrey et al. , ‘Trading Blocs and the Americas: The Natural, the Unnatural, and the Super-Natural’, Journal of Development Economics, 47: 1 (1995), pp. 6195 and Endoh, Masahiro, ‘Trade Creation and Trade Diversion in the EEC, the NAFTA and the CMEA: 1960–1994’, Applied Economics, 31: 2 (1999), pp. 207–16.

43 Rose, Andrew K., ‘Do We Really Know that the WTO Increases Trade?’, American Economic Review, 94: 1 (2004), pp. 98114; Grant, Jason H. and Boys, Kathryn A., ‘Agricultural Trade and the GATT/WTO: Does Membership Make a Difference?’, American Journal of Agricultural Economics, 94: 1 (2012), pp. 124.

44 The main data sources used for this study and their locations are COMTRADE, a trade database published by the United Nations Statistics Division (see http://comtrade.un.org/); WDI, World Development Indicators published by the World Bank (see http://data.worldbank.org/data-catalog/world-development-indicators); and the CEPI-Database (see http://www.cepii.fr/cepii/en/bdd_modele/bdd.asp).

45 The database contains official international trade statistics provided by the countries included. Given the large number of countries forming this sample, imperfections in the data cannot be ruled out, although the COMTRADE database is widely considered a reliable source appropriate for use in studies of this kind.

46 Cheng Hsiao, Analysis of Panel Data (Cambridge: Cambridge University Press, 1986).

47 Breusch, Trevor S. and Pagan, Adrian R., ‘The Lagrange Multiplier Test and its Application to Model Specification in Econometrics’, Review of Economic Studies, 47: 1 (1980), pp. 239–53.

48 William H. Greene, Econometric Analysis (London: Prentice Hall, 2000).

50 Pinilla and Serrano, ‘Agricultural and Food Trade’, Table 2.

51 Martínez-Zarzoso, Inmaculada and Nowak, Felicitas, ‘Augmented Gravity Model’, Journal of Applied Economics, 6: 2 (2003), pp. 291316; Carrillo, Carlos and Li, Carmen, ‘Trade Blocs and the Gravity Models: Evidence from Latin American Countries’, Journal of Economic Integration, 19: 4 (2004), pp. 667–89.

52 Serrano and Pinilla, ‘The Long-Run Decline’ and ‘Agricultural and Food Trade’.

53 Bergstrand, ‘The Generalised Gravity Equation’.

54 Semi-elasticity is obtained as 100*[exp(ßi)-1].

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57 The period of liberalisation is taken as starting in the mid-1980s. See Cárdenas et al., ‘Introduction’, in Cárdenas et al., An Economic History, p. 11.

58 Martín-Retortillo, Miguel and Pinilla, Vicente, ‘Patterns and Causes of Growth of European Agricultural Production, 1950–2005’, Agricultural History Review, 63: 1 (2015), pp. 132–59.

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* This study has received financial support from the government of Spain, through its Ministry of Economy and Competitiveness, projects ECO 2012-33286 and ECO 2012-36290-C03-01, and from the government of Aragon and the European Social Fund, through the ‘COMPETE’ and ‘Agri-Food Economic History’ research groups. We are grateful for the comments received from the anonymous reviewers and the editors of JLAS, as well as participants in the First Latin American Economic History Congress (CLADHE I, Montevideo) and seminars at the Universidad Pablo Olavide de Sevilla and Universitat Pompeu i Fabra de Barcelona. The usual disclaimers apply.

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Journal of Latin American Studies
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