Trade Agreements Without Structural Transformation: Evidence on Export Upgrading in Latin America

This paper examines whether trade agreements promote export upgrading in Latin America and whether their effects depend on domestic structural conditions. Using a panel dataset covering 17 Latin American countries over the period 2007–2022, the study applies fixed-effects estimations to analyze how trade depth interacts with export diversification, institutional quality, informality, and trade openness in shaping export upgrading outcomes. The results show that trade depth does not exert a significant positive effect on export upgrading across model specifications. Moreover, export diversification and institutional quality alone do not significantly strengthen the developmental impact of trade agreements, while informality appears as a structural constraint with a negative and marginally significant effect. Most importantly, the interaction between trade depth, diversification, and institutional quality becomes negative and statistically significant in the second model, with this effect becoming more robust when controlling for trade openness in the third. These findings suggest that trade agreements do not necessarily lead to structural transformation or technological upgrading in Latin America.