Pacific Alliance Launched in Chile

13 June 2012

Chile, Colombia, Mexico, and Peru have inked an accord aimed at developing closer economic ties and boosting trade with Asia-Pacific countries, leaders from the four countries announced last week.

Meeting 120 kilometres south of the Chilean city of Antofagasta, in Paranal - an astronomical observatory in the Atacama desert known for its deep-space telescopes - heads of state from the four Latin American economies signed the deal, which had been proposed last year at a summit in Lima, Peru. The accord still needs to be ratified by the respective parliaments of those countries.

"We wish to join forces with this integration, but also project ourselves together toward the world of the Asia-Pacific, which is not only the world of the future, but also the world of the present," said Chilean President Sebastián Piñera, who hosted the event.

At the Paranal meet, Costa Rica formally asked to join the four-country Pacific Alliance; Panama, meanwhile, is an observer. Canadian officials also attended the summit, in an observer capacity.

Accord provisions

Under the agreement, leaders have instructed negotiators to advance in parallel talks regarding the elimination of tariff barriers and rules of origin, with the goal of finalising these by the end of this year.

The four countries have also agreed to continue advancing the implementation of an interoperable "Single Window" system and the mutual recognition of Authorised Economic Operators, or so-called safe traders, and will work toward developing a customs co-operation agreement within the regional grouping.

A technical group has also been asked to negotiate a dispute settlement system for the bloc. In addition, the four countries have established a committee tasked with analysing existing barriers in trade in services and investment.

Other areas to be dealt with during upcoming negotiations include regulations on food safety and plant and animal health, as well as technical barriers to trade.

The deal also aims to eliminate visa restrictions for citizens of the member countries, and sets up a system that will allow students from universities in one of the group's countries to study in those of any other member economy.

The four countries have a combined GDP of more than US$2 trillion and over 200 million consumers, and make up 40 percent Latin America's GDP and 55 percent of the its total exports.

Asia focus

One of the main goals of the new alliance is to build a stronger relationship with Asian trading partners; Chinese exports to Latin America have grown rapidly in recent years, while Latin American exports to the Asia-Pacific region grew three times faster than those of the rest of the world between 2006 and 2010, according to data cited by Bloomberg.

The Pacific Alliance countries have said that they plan to explore new regions for setting up export promotion offices, "particularly in Asia," and are supporting the work plan that their own respective export promotion offices launched in April 2011 toward promoting the presence of members' goods and services in the Asia-Pacific region.

Three of the countries - Chile, Peru, and Mexico - are already members of the 21-country Asia-Pacific Economic Co-operation grouping, which also includes Australia, Brunei, Canada, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, New Zealand, Papua New Guinea, the Philippines, Russia, Singapore, Taiwan, Thailand, the US, and Vietnam.

Mercosur rivalry?

Following the announcement of the new regional grouping, trade analysts were quick to draw comparisons with another Latin American trade bloc, Mercosur, which counts Argentina, Brazil, Paraguay, and Uruguay as full members.

The latter grouping's two largest members - Argentina and Brazil - have lately come under fire for trade and currency policies that some of its trading partners deem to be protectionist, such as last week's announcement that Buenos Aires would be imposing import tariffs on capital goods. These various measures have also been blamed for brewing trade tensions within the Mercosur grouping itself.

Chile, meanwhile, has been flagged as the most open economy in the region and 14th worldwide, according to the World Economic Forum. Peru comes in at 53, Mexico at 65, and Colombia at 89. Of the Mercosur countries, while Uruguay ranks at 40th for level of trade openness, Brazil ranks at 84, Argentina at 96, and Paraguay at 101.

Heads of state from the Pacific Alliance countries themselves have acknowledged that while the size of the new alliance, in some aspects, is smaller than that of the better-known Southern Cone group, their new grouping has its own advantages in other areas.

"Even when we are less in population and in the size of our economies compared to our brothers from Mercosur, we export double in volume and value than Mercosur; we have an extraordinary potential," Mexican President Felipe Calderón commented.

However, officials from these same countries have rapidly sought to dispel any suggestions that the new grouping is trying to supplant or exclude other economies or regional blocs. Chile, Colombia, and Peru are already associate members of Mercosur, and officials have stressed that the new grouping can serve as a complement to this and other groups, rather than as a replacement.

"There are no incompatibilities or exclusion vis-a-vis other integration efforts," Colombian President Juan Manuel Santos said last Wednesday in Paranal. "We are against nobody but rather in favour of even greater integration."

"This is not a response to Mercosur or to Brazil," Chile's ambassador to Spain, Sergio Romero Pizarro, reaffirmed at a meeting in Madrid last week.

"Someone might feel that this accord is aimed at someone, but it only aims to unite the strengths that we each have individually," Mexico's ambassador to Spain, Francisco Javier Ramírez Acuña, added during the same meeting.

Questions have also been raised in trade circles about how successful this initiative will be, given the varied success of other integration efforts in the region; however, observers note that the fact that all four already have bilateral trade deals between themselves could help the alliance's prospects, as could their shared goal of working together to increase their trade with Asia.

"With this Summit, we are configuring one of the major economic blocs, among the most important, competitive, and fastest-growing [countries] at a regional and global level," Calderón underscored at the Paranal meet.

ICTSD reporting; "Chile, Peru, Colombia and Mexico form ‘Pacific Alliance'," AFP, 7 June 2012; "Latin American Pacific Bloc Rejects Brazil-Led Protectionism," BLOOMBERG BUSINESSWEEK, 6 June 2012; "Alianza del Pacífico, el noveno bloque más grande del mundo," EL ECONOMISTA, 7 June 2012; "Alliance of the Pacific emerges as a potent challenge for Mercosur and Brazil," MERCOPRESS, 8 June 2012; "Los países del Pacífico se unen," LA NACIÓN, 12 June 2012; "Alianza del Pacífico crea puentes, no brechas, dicen embajadores en Madrid," RADIO NACIONAL DE COLOMBIA, 8 June 2012; "UPDATE 2-Argentine president slaps tariffs on capital goods," REUTERS, 6 June 2012; "Latin America starts new regional alliance," UPI, 7 June 2012.

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