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FDI, Trade and Integration in Mercosur

Marta Castilho () and Soledad Zignago ()

MPRA Paper from University Library of Munich, Germany

Abstract: In the 90’s, the Mercosur countries experienced a strong growth of trade and foreign direct investment (FDI). To examine the relationship between FDI, trade and regional integration in the Mercosur, we tested different disaggregated gravity equations on trade and FDI flows between two Mercosur members – Argentina and Brazil – and their partners during the 90’s. Our results attest a strong relationship between FDI and imports, but a weak and negative linkage between FDI and exports. This reinforces the perception that the investment flows into the Mercosur countries has generated strong flows of imports without generating exports. Another important result is the relevance of Mercosur in multinational firms strategies that seems to be different depending on the country where the firm is located. Firms installed in Brazil give an importance to the regional market while the firms installed in Argentina, assume that regional market is not a relevant issue.

Keywords: FDI; International Trade; Regional Integration; Mercosur (search for similar items in EconPapers)
JEL-codes: F15 F10 F14 (search for similar items in EconPapers)
Date: 2002
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Related works:
Journal Article: Commerce et IDE dans un cadre de régionalisation. Le cas du Mercosur (2000) Downloads
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