Who Gains from Free Trade: Export-Led Growth, Inequality and Poverty in Latin America

Since the late 1980s, almost all Latin American countries have gone through a process of far-reaching economic reforms, featuring in particular trade, financial and capital account liberalization. At first the reforms seemed to be working as promised and trade expanded. However, at the turn of the century, the economies have shown unstable and rather dismal growth. Some argue trade liberalization is partly to be blamed for this. Who Gains from Free Trade examines the extent to which trade reforms have been an important source of the slowdown of economic growth, rising inequality and rising poverty as observed in many parts of the region. This volume presents an comprehensive analysis of this important topic, utilizing research based on 16 country narratives of policy reform and economic performance; rigorous general equilibrium (CGE) modelling of the economy-wide effects of trade reform for all country cases; alongside application of an innovative method of microsimulations to assess theemployment and factor income distribution impact of policy reforms on poverty and inequality at the household level. The study finds that trade liberalization and the switch to export-led growth are not the cause of the growth slowdown in Latin America. Nor are they the cause of rising poverty and inequality. If anything, the impact on growth and poverty in general has been positive, but very small. Thus, further trade opening is neither the solution to the region's economic woes, nor should we expect any disastrous implications for aggregate poverty.