Colombian President Juan Manuel Santos called the economic ties formed at the seventh summit of the Pacific Alliance ‘historic’ reported local media on Thursday.
The declaration came from the trade block’s newly appointed leader, Juan Manuel Santos, who the leaders of Mexico, Peru and Chile think will lead the Pacific Alliance to face Latin America’s hardest challenges: grinding poverty and gaping inequality.
“The big challenge for Latin America is to close the inequality gap,” Peruvian President Ollanta Humala told reporters. “We are not the poorest region, but [we are] the most unequal in the world.”
Making the Pacific Alliance truly historic and meeting those challenges comes with a new economic posture in the region that contrasts sharply with the region’s other trade alliance: Mercosur.
In 1991 a trade block formed to unite the markets of Brazil and Argentina. It later incorporated Paraguay and Uruguay, and in 2012 Venezuela joined. At one point, the gaucho was proposed as a regional currency to promote trade around the region. But today Mercosur hardly practices the “open regionalism” it preached upon its formation. Its two largest economies, Brazil and Argentina, have a history of trade quarrels, and the region has an underwhelming record of trade agreements beyond Mercosur.
“Today [Mercosur] is almost wholly a political front” with “protectionist internal tendencies which frequently collide with Mercosur’s original principles,” Luiz Felipe Lampreia, a former foreign minister of Brazil, told The Economist.
Intra-regional trade constitutes 27% of total trade around Central and South America. That is far less than intra-regional trade within Europe and Asia.
The Pacific Alliance’s free trade posture, and clear orientation toward Asia’s emerging economies could be a more promising way to integrate Latin America’s emerging economies. In Cali, the group of four inducted Costa Rica as a fifth member, simultaneously approving a free trade pact between Costa Rica and Colombia.
Yet Santos’ and the other members’ vision goes beyond trade, which could mean a truly historic alliance if it succeeds in what it has promised. After stripping 90% of tariffs, the block has set out plans to create a fund that focuses on small and medium enterprises. That intends to boost domestic wealth generation. And it has plans to introduce a visa that lets entrepreneurs move easily within the block.
A long line of nations including Guatemala, Spain and Japan are interested in joining and getting in on what many believe the 21st century to be a Pacific one. Santos expects the US is likely to turn a more curious eye to the group as well.
“I imagine they are interested,” Santos told the Financial Times. “They are starting to ask about it. Vice President Biden will be here next week and one of the points we are going to touch on is this.”
- Cumbre del Alianza del Pacifico ha sido ‘historico’: Santos (W Radio)
- Alianza Pacifico libera el 90% del comercio (Semana)
- Latin American geoeconomics: A continental divide (The Economist)
- Pacific Alliance: the most exciting thing going on in LatAm these days (Financial Times beyondbrics)