External vulnerabilities and economic integration. Is the Union of South American Nations a promising project ?

This article addresses the reactions of the Union of South American Nations (UNASUR) economies to external shocks. Unlike the existing economic integration projects, the UNASUR was conceived as a political alliance. Because the recent euro debt crisis con rmed the importance of political agreement for economic integration, the South American plan is likely to be promising. However, economic and political aspects must go hand in hand for an integration project to succeed. Thus, assessing the UNASUR from an economic perspective is essential. Using a structural vector autoregression (SVAR) approach, this paper measures the impact of three external shocks (monetary, commercial and nancial) in the real, monetary and fi scal economic sector of seven UNASUR economies, Argentina, Bolivia, Brazil, Chile, Colombia, Peru and Venezuela, and detects for co-movement paths. The results reveal a non-negligible current synchronization level across the studied economies, con rm their high external vulnerability and identify mutual weaknesses to overcome.