Determinants of Latin American and the Caribbean agricultural trade: A gravity model approach

Abstract

Latin America and the Caribbean (LAC) region is one of the most important players in global agricultural trade. They have vast potential to strengthen their position as a result of the region's opportunities to increase agricultural production when combined with growing global demand, which could help the region's economy thrive. To discover the LAC potential agricultural trade pattern, this paper aims to analyse the determinants of LAC agricultural bilateral export for the period 1995–2019. The gravity model of trade was employed by estimating various Poisson pseudo-maximum likelihood (PPML) models including zero trade flows for panel data. The findings show that importers' GDP of LAC countries has a greater impact on agricultural trade compared to LAC exporters. Cultural similarities (common language) and countries' participation in Southern Common Market [Mercado Común del Sur (MERCOSUR)] stimulated agri-food export. Conversely, distance (transportation), past colonial links, and North American Free Trade Agreement (NAFTA) raised trade costs, having a negative impact on the export of agricultural products. The impacts of environmental regulations are ambiguous. This paper contributes to the literature by investigating the factors of agri-food export in LAC countries, which can be an important instrument for decision-makers adjusting agricultural trade policy.