The Pacific Alliance is gearing up for a fight

The Latin American countries want to form a regional economic powerhouse to rival the world’s largest trade blocks.

BBG image of LatAm leaders at Dec. 2018 Mercosur Summit
The Pacific Alliance is a regional trade bloc launched in 2011 that includes Chile, Colombia, Mexico, and Peru [Santiago Mazzarovich/Bloomberg]

A little-known group of countries in Latin America has emerged as a key bastion of globalisation and is now working to turn a sputtering regional bloc into a global powerhouse.

The Pacific Alliance is a regional trade bloc launched in 2011 that includes Chile, Colombia, Mexico, and Peru as well as 55 observer states, including neighbouring Argentina.

The presidents of the four countries are meeting in Lima, Peru, to move forward the bloc’s Strategic Vision 2030, consolidate a functional trade alliance and, most significantly, consider integrating new members.

At a time when globalisation is coming under attack from its erstwhile champion, the United States, the Alliance is looking for associate members around the world. Australia, New Zealand, South Korea and Singapore are all candidates, as is Canada and, closer to home, Ecuador.

The Pacific Alliance has a combined population of 225 million, per capita GDP of $18,921, and accounts for 38 percent of the region’s foreign direct investment.

A key goal for Pacific Alliance leaders is to encourage closer links with Mercosur – another regional trade bloc that includes Argentina, Brazil, Paraguay and Uruguay. Closer links between the two could create a regional economic powerhouse to rival the largest trade blocs in the world.

“I believe that the main opportunity in front of us is to establish a link between the Pacific Alliance and Mercosur,” said Colombia’s president Ivan Duque. “If we manage to make this process work, we can certainly see more intraregional trade and I also see the great opportunity to expand the market and increase value chains.”

Mauricio Macri, president of Argentina and current chair of Mercosur, agreed with the importance of building bridges between the two regional trade blocs that, combined, account for 81 percent of Latin America’s population and 86 percent of its GDP.

“We believe in the importance of continuing to advance in the convergence of Mercosur with the Pacific Alliance, which is an important bridge that we have to strengthen between the two strong blocs of the region,” Macri said.

Mercosur and the Pacific Alliance agreed last July on a plan to strengthen their relationship.

Formidable challenges

“Reaching a free trade agreement between the blocs or, even more, their total integration, presents great diplomatic, legal and economic challenges,” Juan Ignacio Stampalija, adjunct professor of law and director of the Centre for Asian Legal and Political Studies at Universidad Austral in Buenos Aires, Argentina, told Al Jazeera.

Stampalija added that the two blocs have “clearly different objectives and structures.”

The Pacific Alliance has a small institutional footprint and its members have not made much headway eliminating intra-bloc trade barriers while Mercosur countries are more integrated with a more developed institutional structure.

The Alliance’s main objective is to take advantage of trade opportunities, particularly with other Asia Pacific countries. Countries in the region have traditionally criticised initiatives like the Pacific Alliance.

Marco Aurelio Garcia, adviser for international affairs for the governments of Luiz Inacio Lula da Silva and Dilma Rousseff in Brazil, told Opera Mundi in 2013 that the Pacific Alliance “contributes very little, except to those who already feel convinced by it even before its creation”. 

In 2013, then-president of Ecuador, Rafael Correa, said wryly that he would not enter the Pacific Alliance until Alaska and Siberia had their own agreement.

In 2016, Bolivia’s President Evo Morales tweeted that the Pacific Alliance was a political, military and financial arm of “the Empire” intent on ending “the regional integration of Mercosur”.

There have been failed attempts at regional integration. In 2008, for example, Brazil unsuccessfully tried to create a 12-country block called Unasur. And, even as the Pacific Alliance pushes forward, the right-wing governments of Colombia and Chile are pushing forward with another initiative called Prosur.

“Integration in Latin America is always stronger in declarations of will than in practice,” said Juan Pablo Glasinovic, a Chilean lawyer and professor of international relations. “Although, in Latin America, we have traditionally been voluntarist in matters of integration, we have successively been failing, because we have insisted on top-down and predominantly inter-state structured models, but little by little, a greater critical mass favourable to integration has been created.”

“Hopefully our political leaders, as so many other times, will not fail us. At least this time we have more empowered societies to demand results,” said Glasinovic.

The Trump Factor

The gathering in Lima is happening at a time when the world is focused on the trade wars that US President Donald Trump is fighting or creating.

“Currently there is no clear influence of Trump’s foreign policy on this issue. However, it is not something that can be ruled out. For example, there are many voices mentioning the need for Mercosur to move forward with a trade agreement – in the FTA style – with China,” Stampalija said. “At this point, the idea of working jointly with the Pacific Alliance would also be very useful, since Peru and Chile already have FTAs with China.”

Still, the ongoing trade war between the US and China could slow down any progress in further integration.

“It is very difficult to think that serious progress can be made in trade agreements with countries such as China until there is something more than a truce in the current trade war between the two powers,” said Stampalija.

Meanwhile, in Chile, Glasinovic thinks Trump’s style could weigh on Latin American’s push for greater integration.

“Without a doubt, the trade war between the US and China and its extension to other blocs and countries should affect the scope of our integration,” he told Al Jazeera. “Latin America must defend itself against more drastic scenarios and reduce its excessive dependence on a few products and markets, mainly China and the US. One way to do this is by strengthening regional exchanges.”

For the countries being considered for membership, the opportunities that the Pacific Alliance represents are too attractive to ignore.

“New Zealand is committed to the conclusion of a high quality, mutually beneficial free trade agreement with the Pacific Alliance,” said Minister of Foreign Affairs Winston Peters in a press release before leaving for Peru. “Our participation in the Summit will be an opportunity to reinforce the strategic importance of the Pacific Alliance and promote trade that benefits all our citizens.”

And in Ecuador, President Moreno is pushing to “strengthen the existing ties with the partners of the Pacific Alliance”, according to the Ministry of Foreign Affairs.

Ultimately, the summit in Lima this week may cause the paradigm shift that finally takes Latin American integration forward, said Alberto Bernal, a Colombian analyst and chief global strategist at XP Investments, a Miami-based international financial services firm.

“This group is very relevant because it is considered internationally as a group of serious countries that implements serious policies,” Bernal told Al Jazeera. “In addition, these countries have understood that the limitation of the size of their respective economies is a relevant fact. Therefore, it is very important that they join forces, in order to have greater international influence.”

Source: Al Jazeera