Thursday, April 27, 2006

Morales' TCP, part II

Evo Morales is about a Free Trade agreement with Venezuela and Cuba. This FTA, called TCP is Morales' alternative to a Free Trade Agreement with the US. As pointed yesterday, why this TCP should be exclusive and prevent Bolivia from signing an agreement with the US is beyond reason (a noteworthy entry on this theme can be found in Guccio's blog).

Today, however, the Institute of Foreign Commerce notes that Bolivia already has trade agreements with both Venezuela and Cuba. Moreover, Bolivian exports to Cuba on 2005 amounted to an impressive $5291. Those are not millions, by the way. Bolivia exported a miserable five thousand dollars to Cuba. As I asked yesterday: how is this an alternative to the American market?

According to Choquehuanca, the TCP goes beyond trade. It will be also "cultural", but he does not elaborate further. He also points out that coca would be exported to Cuba and Venezuela under the TCP (here, at the end of the article). Suddenly, under the light of these events (1, 2), the TCP starts showing a whole new meaning...

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Anonymous Miguel (MABB) said...

Alvaro, one observation. Maybe the PPP p.c. income is not the best measure. Perhaps one should use, from the total income, the disposable income of consumers, and moreove, what proportion of that goes to buy products like the ones produced by Bolivia (namely, soja, bananas, and so on). To my knowledge, that kind of data is not difficult to get, specially from american consumers.

And another thing, it seems to me we are forgetting that the TLCs with the US are not a free entry permit for Bolivian products. The process of negotiation is long and difficult, percisely because there are many restrictions and other difficulties that the US government puts forward before signing one of those agreements.

However, I do agree with the premise that in terms of purchasing power, an agreement with the US could be more beneficial than one with Venezuela and Cuba together. At the same time, I think that the optimal thing would be a free trade agreement with all three countries.

10:26 PM  
Blogger Alvaro Ruiz-Navajas said...

Miguel, you're right on the spot. GDP per capita is, after all, nothing but an average. However, because of the inclusion of Cuba in the agreement, I was not able to find other measures for all 3 countries (I usually use the Penn World Table for economic indicators, and Cuba is not part of the table).

Also, due to time constraints, we are not taking into account a series of factors bound to influence international commerce, such as productive structure (the export share of the primary, secondary, tertiary sectors), transport costs, the (price and income) elasticity of demand for Bolivian products and, of course, the fact that FTAs are not that free -as you point out-, among others.

However, given the information we have (and some strong underlying assumptions), the end message holds.

3:15 PM  
Anonymous bath mateus said...

So well and nice posting , I like it.

4:13 PM  

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