Has trade liberalization created pollution havens in Latin America?

Abstract

This paper asks whether the recent trade liberalization in Argentina, Brazil and Mexico has led to increased transfer of polluting activities to Latin America. Using a factor content of trade approach, it shows that prior to liberalization, all three countries specialized in relatively pollution-intensive manufactures. Following liberalization, Argentina and Brazil have increased their specialization in such industries, while Mexico has moved in the opposite direction. It is suggested that these differences are a result of the structure of protection in the pre-liberalization period and the increased stringency of environmental enforcement in Mexico in the 1990s.