Mercosul and Regional Development in Brazil : A Gravity Model Approach

This paper assesses the impact of the Mercosul Preferential Trade Agreement on Brazil's regions by means of a gravity model, extended to include dummy variables for Mercosul and for a Brazilian region. The results show that the most significant regional impacts of Mercosul were on Brazil's Southern and Southeastern regions, whereas the North, Northeast and Center-West regions benefited much less from Mercosul in the period from 1990 to 1998. These results suggest that Mercosul may be aggravating regional disparities in Brazil