Effects of entry of Venezuela in MERCOSUR: The creation and trade diversion in Brazil

Resumen

This study aimed to measure the likely static impacts of the integration process through the trade creation and diversion between Brazil and Venezuela, with the effective entry, ex -ante, of that country in Mercosur. Therefore, the article makes use of elasticity partial equilibrium model of Laird & Yeats (1986), using the export sectors to 2 digits (00 to 99) of the SITC Rev. 3. The results of the simulations for the period 1995- 2011 seem to show that Venezuela’s entry into Mercosur, with the elimination of trade barriers, would bring significant impact on Brazilian exports. For all studied sectors, trade creation effect is higher than trade diversion effect, demonstrating the competitiveness of Brazilian exports in the Venezuelan market