Understanding the Determinants of Economic Integration in Latin America

Abstract

When signing or enhancing trade agreements with Latin America, political and institutional factors play a more important role at present compared with their role in the past. In addition, a better institutional framework increases covered and legally enforceable provisions in Latin America trade agreements. This paper analyzes the determinants of economic integration in Latin America and the institutional quality of signed trade agreements with this region. By focusing on both a discrete choice and a linear framework, the study results prove that economic, geographic, institutional, and political factors influence economic integration. This is because these aspects are key elements in the formation and enhancement of trade agreements both within and outside Latin America. This study considers the role of additional exogenous political facts, such as the September 11 attacks in New York City, and the Revolución Bolivariana, a leftist movement in Venezuela, which affected economic integration in Latin America.