Mercosur, Pacific Alliance Members Push for Deeper Economic Ties

13 April 2017

On Friday 7 April, ministers from Mercosur and the Pacific Alliance convened in Buenos Aires for talks on developing closer ties between the two regional mechanisms, representing the second ministerial meeting since their joint integration effort was initiated in 2014.

During the meeting, held at the seat of the Argentine Foreign Ministry, Palacio San Martín, officials agreed on a “roadmap” aimed at increasing cooperation and exchanging information between the two groupings.

The Pacific Alliance, established in 2011, unites Chile, Colombia, Mexico, and Peru with the aim of advancing towards the free movement of labour, goods, and services between their economies. Doing so, they say, would help drive economic growth and development in their members and boost trade in the region. (See Bridges Weekly, 13 June 2012)

Mercosur, founded two decades prior under the 1991 Treaty of Asunción, brings together Brazil, Argentina, Uruguay, and Paraguay in a customs union comprising 70 percent of South America’s population with 275 million inhabitants. Venezuela, while also a member, has been temporarily suspended over human rights concerns.

Mercosur members have a combined GDP of US$3.32 trillion, which would make the bloc the fifth largest economy globally when considered together. Between the two of them, the blocs account for over 90 percent of the GDP and foreign direct investment of Latin America and the Caribbean.

Roadmap

At Friday’s ministerial, representatives from both Mercosur and the Pacific Alliance pointed out the low volume of trade between the eight economies relative to trends in other regions, highlighting the imperative of harnessing this potential for growth.

Intra-regional exports in Latin America account for 20 percent of total exports, as compared to the 60 percent of intra-regional exports in the EU and 50 percent in the East Asia-Pacific, according to World Bank data.

As a first step, a roadmap was outlined as a framework for potential convergence between the regional groupings. In the joint communiqué issued following the meeting, discussions were mandated between experts and officials to develop closer contact and share experiences in the areas of trade facilitation, cumulative rules of origin and the identification of possible regional value chains, trade promotion, and support for small and medium-sized enterprises.

A second meeting was also envisioned for technical exchanges on customs cooperation, following an earlier meeting between experts held in Buenos Aires last month. The results of the workshop process would ultimately be shared with the World Customs Organization.

In addition, in order to advance progress in these areas and maximise cooperation between the blocs, the Pacific Alliance’s High Level Group (HLG) and Mercosur’s Common Market Group (CMG) were assigned to hold periodic meetings. A seminar entitled, “Mercosur-Pacific Alliance: A positive agenda for integration” was scheduled to take place in Buenos Aires in the coming months.  

A new dynamic?

“The convergence between Mercosur and the Pacific Alliance could mean the birth of a new dynamic pole of the world economy,” said Brazil’s recently appointed Foreign Relations Minister, Aloysio Nunes, according to comments quoted in Rio Times.

“We want to take advantage of the network of agreements that already unite us to make a leap of quality,” he added. Mercosur has a free trade agreement in place with each of the Pacific Alliance countries individually. The agreement with Chile entered into force in 1996, followed by the Andean Community in 2001, Mexico in 2002, and Peru in 2005. 

The plans for closer ties between the blocs are also giving hope to some officials as a means to revitalise a struggling Mercosur.

"Mercosur has been languishing. In recent years it has been one of the most closed and isolated blocks in the world. We have decided to change so that Mercosur is a powerful trading platform with a huge export potential for all international markets," Argentine Minister of Economic Development Francisco Cabrera stated in a press conference.

“It is another step that we will take in the rescue of the original purposes of Mercosur with a view to making the bloc a platform for the competitive insertion of our countries into the international economy,” Aloysio Nunes said of the planned convergence.

Argentina was granted observer status to the Pacific Alliance in June, joining fellow Mercosur members Uruguay and Paraguay, already observers to the group. (See Bridges Weekly, 16 June 2016)

Meanwhile, Chile, Colombia, and Peru are all associate members of Mercosur. Chile currently holds the rotating presidency of the Pacific Alliance, and recently held a summit on regional integration which brought together Trans-Pacific Partnership (TPP) signatories and Pacific Alliance members, as well as China and South Korea. (See Bridges Weekly, 16 March 2017)

Positioning Latin America in face of new global realities

Over the course of the meeting, ministers also reflected on the region’s positioning in response to emerging international challenges and shifting global power relations, including the rise of nationalist parties in some parts of Europe and US President Trump’s recent executive orders enforcing stringent duty collection at the border, commissioning a study into the US’ trade deficits, and withdrawing his country from the TPP. (See Bridges Weekly, 6 April 2017)

“When tectonic plates move you have two possibilities: you are either squeezed between them, or your opportunities open up,” said Argentine Foreign Minister Susana Malcorra during the World Economic Forum on Latin America, which was also held last week.

“We need to be fast on our feet to ensure we are not squeezed, and seize the opportunities,” she added. Argentina will continue to be the standing Mercosur Pro Tempore chair for the first half of 2017.

In a separate statement, the Argentine official said that Trump’s approach to trade with Mexico, which has been targeted in discussions for a potential review of the North American Free Trade Agreement, has meant that Mexico is now “choosing to strengthen its ties with the south,” representing an opportunity for Argentina and the broader region for further integration. (See Bridges Weekly, 16 February 2017)

ICTSD reporting; “Mercosur and Pacific Alliance summit will address potential convergence and Trump’s protectionism,” MERCOPRESS, 7 April 2017; “Alianza del Pacífico y Mercosur establecen hoja de trabajo conjunto,” DIARIO FINANCIERO,” 12 April 2017; “Brexit and Trump Could Create New Opportunities for Latin America,” MODERN DIPLOMACY, 7 April 2017; “Accord Between Mercosur and Pacific Alliance is Closer,” RIO TIMES, 10 April 2017.

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