The Effects of the Costs of Trade Transaction and Free Trade in the International Soy Market

This study analyzes and discusses the impacts of the costs of trade transaction and tariff barriers and subsidies in the international soy trade. To achieve such a purpose, a partial equilibrium model is used, formulated as a Mixed Complementarity Problem - MCP - which allows including of the costs and the tariffs and subsidies in addition to building scenarios. Three simulations are built for testing the impacts: in the first one the costs are eliminated, in the second one, the trade policies are removed and in the third one, an increase of 20% in the consumption of soy is tested. The results show that eliminating the trade transaction costs favors Brazil, Argentina and China in the increase of exports and raises imports in the United States and Europe. The countries in the rest of the world are the ones who benefit the most from the free market condition. The scenario of increase in the world consumption shows that with the rhythm of soy consumption in the same levels of the years from 2009 to 2011 in the world and with the same pattern of the transaction costs and the trade policies, Brazil is the only one among the large producers who cannot manage to increase its participation in the world soy exports.