The basic aim of this study is to investigate what factors determine the size of the trade flow between selected Latin American nations and Taiwan. To do this, a set of models is presented in the paper. The models include the following explanatory variables: relative price, real income, foreign exchange reserves, and diplomatic relationship. Related statistical data are also supplied that support the empirical results and that help to add more insight into this issue.
Having presented clearly the bilateral trade flow. patterns between Taiwan and selected Latin American countries, the paper prognosticates what the influence of economic recession in Latin America on bilateral trade will likely be. In 1982, most Latin American nations suffered a fall in economic growth, while foreign exchange reserves dropped, imports rose faster than exports, debt servicing grew heavier, and balance-of-payments deficits rose.
The paper also discusses what impact recent government emphasis on trade diversification have had in the Taiwan Latin America trade. So far, diversification in the foreign trade with Latin America has not been significant. In the final section, several suggestions on how to improve trade with Latin America are advanced.
