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27 May 2013

Pacific Alliance (trade block) rapidly expanding

Regional economic and trade integration can be a long and arduous path, but four countries of Central and South America have been progressing rapidly, as evidenced by the 7th Summit of the Alianza del Pacifico in Cali (Colombia), which bringue together Mexico, Colombia, Peru and Chile (210 million inhabitants). A total of nine heads of state and government attended, as Canada, Costa Rica, Spain, Guatemala and Panama joined the members, with observer status, while Australia, New Zealand and Japan attended at a ministerial level.

The official website of the Spanish government (La Moncloa) makes an interesting study of the "opportunity to develop a new vector in Spanish foreign policy for the 21st Century - the Pacific Area - while coinciding with the 500th anniversary of the arrival by Vasco Núñez de Balboa to the Pacific Ocean", putting into practice "the Spain-Latin America-Asia Pacific triangulation concept, which consists of using Spain's considerable corporate presence and sizeable influence in Latin America to project Spanish interests into the Asia Pacific region, thus benefiting from the increasingly strong relations between the two regions." The article also charts the expansion of the influence of the trade block formalised as recently as 6 June 2012: "the number of new observer states has increased rapidly: Canada and Uruguay (September 2012), Spain, Australia and New Zealand (November 2012), Guatemala and Japan (January 2013). Costa Rica and Panama were the first and have special status as "candidate observer states" and this week Costa Rica has just filled the conditions for membership. Portugal has already asked to become an Observer State, while Germany, France and the EU have also expressed an interest. According to The Economist, existing members would like to see the United States sign up sooner rather than later, as part of a broader goal of creating a free-trade area of all countries in the Americas with a Pacific coast
The ongoing Trans-Pacific Partnership negotiations (11 countries: Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam and soon Japan) aim to build a tricontinental free-trade area and economic block between America, Asia and Oceania. Three Member States and four Observers of the Pacific Alliance belong to the Trans-Pacific Partnership. See history of negotiations and results on NZ MFA site.
The Miami Herald dated 25 May contrasted the vigour of the PA with the weakness of Mercosur— the common market made up of Brazil, Argentina, Venezuela, Uruguay and temporarily-suspended Paraguay — which is turning into a political club increasingly weakened by internal infighting. While the four Pacific Alliance member countries grew by 5% in 2011, Mercosur's growth was limited to 2.9%, according to the United Nations Economic Commission for Latin America (ECLAC). The PA represents 35 % of the Latin America and Caraibe economy.
Furthermore, amid a general slowdown in global commerce, trade among Pacific Alliance countries grew by 1.3 percent last year, while trade among Mercosur members declined by 9.4 percent, ECLAC figures show. "Pacific Alliance leaders presented themselves as a group of stable countries that respect democracy and the rule of law, and are thus much better investment opportunities than Argentina, Bolivia, Venezuela and other populist nations that expropriate foreign companies at whim." The Miami Herald also reports results: "Pacific Alliance presidents agreed in Cali to eliminate tariffs on 90 percent of their products, and to reach a deal by June 30 for adding duty-free treatment for the remaining 10 percent. The Pacific Alliance agreement goes beyond traditional free trade deals by including trade in services, investments and government purchases. It also includes plans to increase student exchanges, validate university degrees among member countries, and open joint embassies and trade offices abroad (...) It's too early to tell whether the Pacific Alliance will succeed where so many other Latin American integration projects have failed. But it's the most exciting thing taking place in the region, even if it's by default."
A business forum with some 400 participants from most relevant economic sectors was also held in the margin of the Cali Summit.
See also FT article for comment and background.
Also the previous Summit in March 2013 on Smart Regulation in Spanish.

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