The Adoption of Genetically Modified Organisms in Uruguay's Agriculture: An Ex-Ante Assessment of Potential Benefits

The present study analyzes the economic impact of the introduction of Genetically Modified Organisms (GMOs) in Uruguay's agriculture. Using a partial equilibrium framework the impacts of transgenic varieties are simulated for two crops, rice and potatoes, in small open and closed economies respectively. The model accounts for the presence of market imperfections created by the monopolistic behavior of the genes' patent owner. The change in economic surplus generated after the adoption of the new technology is projected to be positive, although the seed markup charged by the monopolist reduces the surplus compared to a perfectly competitive market. Total deadweight losses and domestic losses are found to increase with the seed premium, as additional monopolist profits are extracted out of the country. Adoption decreases with the seed premium, further reducing the domestic consumer and producer surplus. The results of the study suggest an active role for national technology policies and for the agricultural R&D system in Uruguay to generate conditions that attract the technology's owner to a small market while at the same time reducing the potential losses that monopoly power creates .