Is There Something to Fear?
Analyzing the potential output and distribution effects in Venezuela after joining the FTTA

The American continent have adopted a challenging trade negotiating agenda that, in a context of increasing global interdependence. The region is engaged in the negotiations for the Free Trade Area of the Americas (FTAA), as mechanism to foster countries gains in terms of trade and economic growth. In Venezuela the debate on the convenience of joining the FTAA has been limited to political considerations, and no systematic effort to asses the potential impacts of the agreement has been made whatsoever. In this paper we assess the potential output and distribution impacts of the FTAA in Venezuela, using a Ricardo-Viner type computable general equilibrium model with four sectors and five different factors of production. Given the proposed structure, this paper predicts virtually no impacts in overall output, but sharp output and distributional effects among different productive sectors. Regarding the workers, the model estimated distributional loses of around 2.3% of their nominal wages, while the capitalists in manufacturing and non-oil mining sectors would be clearly better off. Compensatory policies are suggested as the way to ease the transitory frictional effects of output redistribution among sectors.