Peru's Ollanta Humala, Chile's Sebastián Piñera, Colombia's Juan Manuel Santos, Mexico's Enrique Peña Nieto and Costa Rica's Laura Chinchilla in Cartagena, Colombia
It’s all about free trade. The Pacific Alliance, a growing bloc in Latin America that stands among the world’s 10 largest economies, sealed a deal on Monday to eliminate tariffs on 92 per cent of goods and services in a move that distances it further from some of its more protectionist neighbours.
“I don’t think there has been an integration process that has taken decisions so fast as the Pacific Alliance has done,” Colombia’s President, Juan Manuel Santos, told beyondbrics.
Formed in June 2012 and cemented in May last year, the tie-up links the free-trading economies of Chile, Colombia, Mexico and Peru, and is moving quickly to fulfil the goal of unrestricted movement of capital, goods and services, as well as people.
Santos, Ollanta Humala of Peru, Enrique Peña Nieto of Mexico, and outgoing Sebastián Piñera of Chile shook hands at a presidential summit in Colombia’s colonial city of Cartagena, also agreeing that the remaining tariffs for agricultural goods will be eliminated gradually over the coming years.
The total output for the four members accounts for more than a third of Latin America’s total gross domestic product. According to the latest available data, in 2o12 the bloc attracted some 41 per cent of all foreign direct investment inflows. Exports were $550bn and imports $561bn in the same year.
Even if trade between the nations has been flowing thanks to bilateral agreements that were in place before the Pacific rim union was established, the alliance also opens the door for member countries to export to markets where some of them had limited or no access, strengthening their value chains to be more competitive in the global supply chain, with a particular focus on Asia.
Santos added:
“We have a common vision on how to manage our economies, common attitudes regarding foreign investment, the role of the market in the economy, respect for private property.”
“Because we have common denominators, we would be able to play with more specific weight on the global economy.”
Other regional economies such as Brazil, Argentina and Venezuela – which are part of another regional bloc called Mercosur – are more inward-looking when it comes to trade and capital flows, and have been struggling with slippery economic growth.
Notwithstanding, late last week, Brazil’s foreign minister, Luiz Alberto Figuereido ,said Mercosur was interested in trade integration with members of the Pacific bloc.
The Pacific Alliance is set to expand in coming months with the entrance of Costa Rica as a full member. Panama and then Guatemala are likely to follow suit. Several other countries inside and outside the region act as observers – including the US, the UK and China.
In addition to removing trade barriers, member countries have opened joint trade offices and diplomatic missions around the world in places such as Ghana, Azerbaijan and Vietnam.
Sceptics say that, for the moment, the Pacific club is not much more than a very successful marketing strategy that highlights how the member countries are open for business. Eduardo Ferreyros, Peru’s former foreign trade minister, shrugs off the argument, saying “what’s been agreed today demonstrates there are concrete results, there is dynamism.”