NS4540 Winter Term 2019 Pacific Alliance Oxford Analytica Latin America: New Bloc aims for op;en regionalism, May 23, 2013; Oxford Analytica, Latin America/iAsia, Pacific Alliance’s Roe Eexpands, July 31, 2017

Overview I The Pacific Alliance includes Chile, Colombia, Mexico and Peru Established in June 2012 All had free trade agreements with each other Main goal: Promotion of the free circulation among member countries of Goods Services Capital and People Issues No clear road map in achieving this goal Course towards economic integration began with small, pragmatic measures rather than grand designs and heavy institutional engineering.

Overview II Clear the bloc had a number of important barriers to overcome: Mexico is already deeply integrated with the U.S. and Canada through NAFTA and Geographical distance between countries, combined with transport costs make it difficult to promote productive supply chains and other forms of deeper economic integration Little natural complementarity between economies which remain commodity exporter countries whose main markets are outside the region

Background I At the time of formation the economies of the Pacific Alliance collectively rivaled that of Brazil They have a joint population of around 215 million compared to Brazil’s 201 million (2013) Taken as a single economy, the Pacific Alliance is the second largest after Brazil In 2012 exports from Chile, Colombia, Peru and Mexico amounted to $556 billion, significantly larger than that of Mercosur ($435 billion) Countries have also Moved to create a joint stock market Eased requirements of business and tourism visas and Established several inter-governmental cooperation projects in other policy areas

Contrast with Mercosur I Pacific Alliance countries are fundamentally different from the Mercosur countries Mercosur has become increasingly inward-oriented and protectionist Pacific Alliance countries are among most open economies in the region In contrast with Mercosur, the countries of the Pacific Alliance are parties to a large number of free trade agreements While the countries of Mercosur increasingly impose non-tariff barriers to internal trade in violation of the sub-region’s market’s rule, the Pacific Alliance countries committed to abolishing tariffs on 90% of their trade

Contrast with Mercosur I Possible to perceive Pacific Alliance countries as an alternative to The rise of leftist governments in the region and Brazil’s aspirations to regional leadership

Assessment Pacific Alliance Alternative to Mercosur Closer to what Mercosur was intended to be when it was set up in the 1990s and has ceased to be – open regionalism The bloc however faces significant obstacles on the road to deeper integration Pacific Alliance has emphasized deepening ties with Asia since its founding However movement toward Asia presents opportunities but also risks

Opportunities I With the U.S. abandonment of the Trans-Pacific Partnership (TPP), Asian and Latin American governments have discussed variety of initiatives to deepen integration between the two regions. China and Japan both vying for leadership role in the Asian – Latin America relationship With Asia, the Pacific Alliance well positioned to take on greater relevance Chile, Peru, and Mexico have free trade deals with Japan (a Colombia-Japan deal is in the works). Are part of the TPP which the remaining eleven partners are looking to revive

Opportunities II The Pacific Alliance also signed a wide-ranging agreement with ASEAN in 2016 signaling its intention to engage more actively as a bloc with Asian counterparts With regard to China A Pacific Alliance- wide deal remains unlikely However China can be expected to ramp up its engagement with PA countries both individually and as a bloc. China has a clear interest in financing infrastructure projects in the region. This goal is consistent with PA’s objective of promoting cross-border infrastructure projects

Recent Initiatives Since 2014 the PA has held high-level talks with Mercosur, taking advantage of more market-friendly administrations in Argentina and Brazil To extent these talks result in actions that facilitate doing business throughout the region Streamlined customs procedures and regulatory standards The economic and political importance of the PA for Asian counterparts will continue to growth

Assessment Likely developments The PA ill move ahead on its broad integration agenda including Trade Investment Financial Markets and Labor mobility However its ability to take on a larger political and economic role will depend on Reaching trade deals with external partners and The evolutions of its relationship with Mercosur