OECD and Trade Evnironment in Latin America

This research paper discusses recent changes in the level, composition and orientation of the trade of the nations of Latin America (Central and South America, excluding the Caribbean area) and the special role being played recently by the Organisation for Economic Co-operation and Development (OECD) in facilitating that trade expansion. With a number of exceptions, the international, including intra-regional, trade of the principal Latin American nations has expanded during the past decade, reflecting changes in the global economy and the revitalization through structural reform of domestic economies. International financial assistance and private capital flows, primarily direct foreign private investment (FDI), from the developed world have played an important role in improving the trading and balance of payments positions of the major Latin American countries. At the same time, the 'shock therapy' imposed on Latin American nations under structural adjustment policies, formally support adjustment programs (SAPs) of the International Monetary Fund (IMF) may create imbalances in domestic economies, including adverse environmental effects.

OECD has become more involved with Latin America because of rising levels of Western European trade, lending and investment there and the common interest of all the members of OECD in leveling the playing field for FDI in Latin America. OECD is playing an important role in amelioratin

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provisions of the NAFTA Treaty. Other regional free trade organizations have been established, the Central American Common Market (ACM) (1960), which includes Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, the Andean Pact (1960), which includes Bolivia, Chile, Colombia, Ecuador and Peru, the Southern Common Market (1991) (MERCOSUR, the Spanish abbreviation for Southern Common Market), which includes Argentina, Brazil, Paraguay and Uruguay, and the free trade arrangement of 1994 between Colombia, Mexico and Venezuela known as the Group of Three. These latter arrangements are encouraging developments but their positive effects have had only moderately positive effects on intra-Latin American trade for two reasons: (1) the tendency of the members to set ambitious targets and not meet them, most pronounced in the case of the Andean Pact; and (2) the relative insignificance of regional trade which accounted for only 19.4 percent of total Latin American trade in 1993, as compared with 70 per cent in Western Europe. Latin interregional trade, mostly in the MERCOSUR area, has tripled between 1983 and 1994, from $7 billion to about $26 billion. In South America, MERCOSUR is the most important free trade pact. Substantial
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Approximate Word count = 5632
Approximate Pages = 23 (250 words per page)