Even as Chinese President Xi Jinpeng was making his way around the region to promote more trade and cooperation between China and Latin America and the Caribbean, visiting Trinidad and Tobago (where he also held bilateral talks with those Caricom countries with which Beijing enjoys diplomatic relations), Costa Rica and Mexico, there was a buzz coming from the western rim of Latin America with the consolidation of the one-year-old Pacific Alliance.
This new regional trade grouping, comprising Chile, Colombia, Mexico and Peru – representing a bloc of some 209 million people (equivalent to the population of Brazil), with a combined GDP of US$2 trillion (about 35 per cent of Latin America’s GDP) and accounting for 55 per cent of total exports from Latin America and the Caribbean – has as its main objectives the deepening of trade and economic integration among its members and to serve as the institutional bridge between Latin America and the Asia-Pacific region, given that its members already have or are pursuing free trade agreements with several Asia-Pacific countries, particularly China, Japan and South Korea.
On May 23, the Pacific Alliance held a presidential summit in Calí, Colombia, with the leaders of Canada, Costa Rica, Guatemala, Panama and Spain also in attendance as observers, and with the participation of over 400 business people. Measures were announced to take further steps to allow for the free circulation of goods (90 per cent of intra-regional goods are to be tariff-free with immediate effect), services, capital and people, and Costa Rica has been accepted as the next full member.
Just one year since its establishment, the Pacific Alliance has become, for all intents and purposes, a free trade area, bringing together the four most open and market-oriented economies in Latin America, which account for more than half the region’s trade, mostly commodities in high demand in China and other parts of Asia. Mexico alone is China’s second-largest trading partner in Latin America and China is also Mexico’s second most important export destination.
The Pacific Alliance has also overtaken the Southern Common Market (Mercosur), comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela, as the most dynamic integration bloc in Latin America, with Mercosur stagnating as a result of political problems and protectionism. Some say that it is no mere coincidence that the Pacific Alliance countries, with their focus on liberalisation and private sector-driven outward engagement, are also registering the highest growth rates in Latin America. Indeed, this alliance may well prove to be a formidable counterweight to the region’s other more well-known alliance, Alba – the Bolivarian Alliance for the Peoples of Our America.
Apart from all this, with the Brazilian economy stuttering, the Pacific Alliance may be pointing the way to a new model for Latin American integration, growth and development. In addition, it is poised to become a strategic platform for the incorporation of its members into other far-reaching multilateral agreements, such as the Trans-Pacific Partnership currently under negotiation. Caricom countries, with their faltering approach to deeper integration, should watch this space closely.
No doubt the Pacific Alliance countries will face challenges, not least those associated with the dependence of Chile, Colombia and Peru in particular, on commodities and their own institutional capacity in general. Their bureaucracies, for instance, will be hard pressed to keep up with the rhetoric of their political leaders and such problems could be exacerbated as the alliance expands and structural imbalances among its members, if not carefully managed, become a threat to their ambitions. They could perhaps learn a bit from Caricom in this respect. But for now, there is unity of vision and purpose, and that most essential ingredient, political will, is strongly in evidence.
Thus, even as the leader of the world’s emerging superpower follows up on his tour in the supposed backyard of the United States of America, the established global superpower, with a hugely important summit with President Barack Obama today and tomorrow, in California, it is clear that the four members of the Pacific Alliance, now in the vanguard of the regional economy, are positioning themselves to take advantage of the rise of not only China but also of the power of the Asian market as a whole, with a view to increasing trade and identifying new investment opportunities for their own economic development. If the alliance can build on this promising start, expand and evolve, going from strength to strength, the implications for the rest of Latin America could be profound.
