Powerful New Latin American “Pacific Alliance” Formed

6 May

by Carlos Arredondo @ MATT.org

What could be a landmark agreement in Latin American economic history was signed last Thursday in the Golden Hall of the Governmental Palace of Lima, Peru’s capital. The Lima Declaration, or Pacific Alliance, was signed by the presidents of four Latin American countries that attended and who presently make up the accord: Mexico, Columbia, Chile and Peru. This comes just less than a month after Peru and Mexico signed a bi-lateral free trade agreement. While it was no secret that Peru’s agenda was to eventually create a larger alliance with multiple countries, the process has been perhaps speedier than expected. The Pacific Alliance agreement will supplant and augment a host of other bilateral pacts that the four countries currently share with each other, including the one Mexico just signed. One of its initial goals is to extend all the benefits of the existing bilateral trade agreements to all its own members, even while a strong emphasis of the agreement is to cultivate trading relationship with Asia.

            The purported purpose of the Pacific Alliance is to create a framework for deep integration in the region increasing economic competitiveness, and advancing a free market for the flow of goods, services, capital and labor, and to strengthen trade links with the Asia-Pacific region. Chilean President Sebastian Pinera said that it would not only liberalize trade in goods but trade in services and ease the movement of investment capital and financial integration. The nations’ leaders agreed that in its first stage the Pacific Alliance would prioritize people and business by focusing on better migration facilities, easing immigration and custom procedures, and ensuring police cooperation. Additionally, the agreement presents the possibility of integrating stock exchanges as well. The four presidents decided that they would hold their next meeting in Mexico in December to evaluate and assess progress of the integration as well as to continue building upon the bilateral free trade deals already in place. It is not final yet either that these are the only four countries that will form the Pacific Alliance as Panama and Ecuador are already potential candidates to join, Columbian President Juan Manuel Santos said that its members will “welcome those countries that wish to join this process.”
            The four leaders said that this trade alliance would make the largest trading zone in Latin America, surpassing Mercosur, the common market of Brazil, Argentinea, Uruguay and Paraguay. Calderon said that the four economies have a total combined value of $872 billion compared to Mercosur’s $543 billion, and that their combined exports of $443 billion also well exceed Mercosur’s $282 billion. But he added that the bloc would not be “just the sum of our exports and imports, it is a synergy of competitiveness.” Even though Peru, Mexico, Chile and Columbia combined represent 55% of Latin American exports and 35% of the continent’s GDP. Peruvian President Alan Garcia said, “Our four nations, and Panama in the near future, represent 200 million people. Our countries account for 55 percent of Latin American exports… This is not a romantic integration, a poetic integration. It is a realistic integration with the world and to the world.” Trade experts say that the Pacific Alliance could progress more rapidly than existing regional trade blocs like Mercosur that have been around for years but made few advances in eliminating barriers to trade. “Of the many integration projects in Latin America, this agreement has a better chance of success,” said Carlos Aquino director of economic studies at San Marcos University in Lima, “The four countries are stable democracies with open economies.” All four nations have leaders that are proponents of free-market systems, which may be in contrast to Mercosur.
            The Pacific Alliance is significant even though each of the four countries already have trade deals with the United States. The US has lost some of its appeal as a trade partner due to the recent recession in its economy. Additionally, forecasts like the International Monetary Fund’s (IMF)  prediction that China’s economy will outgrow the US as the dominant world economy by as early as 2016 don’t help either. Mexico, who sends nearly 80% of its exports northward to the US, found out how quickly the climate of its economy can change when an overwhelming majority of the demands on its exports are tied to one country. President Garcia was probably keen to this when he said “We firmly believe that the best way to face the global crisis and assure development, employment and justice is the integration and complementing of our economies and visions for the future.”
            Garcia also said, “What we are starting here, even though we won’t be here in the government going forward, will mean a decisive step forward for the true integration that we have all dreamed of”…“This is a decisive and historic step toward the modernization of our continent and toward the social development and justice for our people.”

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