Free Trade and Transportation Infrastructure in Brazil: Towards an Integrated Approach

Abstract

In the development of models analyzing the impacts of free trade agreements between countries or regions within countries, relatively little attention has been paid to potential limitations imposed by transportation infrastructure. In free trade blocks such as those represented by the European Union or the USA and Canada part of NAFTA, the implicit assumption of little or no impact imposed by transportation infrastructure may be justified. However, in the case of MERCOSUL in South America, this assumption may need to be challenged. In this paper, an illustration of a potential approach to this problem will be illustrated with reference to Brazil. Attention will be devoted to the way in which the potential gains from free trade within MERCOSUL were mapped onto a highway transportation network to identify the creation of additional bottlenecks and point out the need of highway improvements once the impacts of economic development result in higher transportation costs due to such bottlenecks.

Keywords: free trade, Brazil, transport

JEL Classification: R4, F13