The Pacific Alliance and Mercosur: Two models and a long road towards regional integration

The Pacific Alliance and the Southern Common Market may hold the key to Latin American integration in a world characterized by macro-regions and the return of protectionist trends, if the two blocs manage to work towards greater convergence, overcoming at the same time the internal barriers that still exist

The Pacific Alliance and Mercosur: Two models and a long road towards regional integration
World map - Photo: Charles Platiau/Reuters
English 27/07/2018 18:40 Gabriel Moyssen Mexico City Actualizada 18:47

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Divided by economic and political interests, the Pacific Alliance and the Southern Common Market (Mercosur) may hold the key to Latin American integration in a world characterized by macro-regions and the return of protectionist trends, if the two blocs manage to work towards greater convergence, overcoming at the same time the internal barriers that still exist.

According to analysis from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), the region’s possibilities to diversify its production and exporting structure are closely linked to the perspectives of its own integration process, in order to exploit the opportunities offered in the last years by the rapid growth of the Asian middle classes.

At least since 2014, the ECLAC proposed to both groups to start a joint work programme on trade facilitation and to establish common quality and safety standards.

In the same vein, the agency recommended an accumulation of origin “as a strong incentive to product integration, favoring industrial value chains”, and the mobility of persons, particularly in the tourism and business sectors.

During her intervention in the 13th Summit of the Pacific Alliance in Puerto Vallarta this week, ECLAC Executive Secretary Alicia Bárcena stressed the “need and urgency” of the convergence between Mercosur and the Pacific Alliance, highlighting its limited commercial exchange.

Last year, the former bloc barely represented 2.8% of the Pacific Alliance total goods exports and 4% of its imports. For its part, the Pacific Alliance represented 6.4% of the total good exports from Mercosur and 6.6% of its imports.

Bárcena’s proposals

The Mexican diplomat and biologist also advised the delegations on the mutual recognition of authorized economic operator national programmes, work towards a regional digital market and develop statistics of services trade.

She said the current restrictions amount to just under USD $200 billion (or the equivalent of 1% of global trade on goods) and that this figure could increase considerably if the United States goes ahead in September with an announced 10% increase in tariffs on USD $200 billion worth of imports from China, and if that country responds in kind.

It is even more worrying the erosion of the respect for the World Trade Organization and a move towards power-based trade relations.

“This is a very negative development for all of us who support multilateral cooperation over unilateralism,” Bárcena added.

Nevertheless, there are still internal barriers that should be tackled in the Pacific Alliance and Mercosur.

As my colleague Ivette Saldaña reported in the Economy section for EL UNIVERSAL, Mexican firms often require a year or more time to start exporting to the other three member countries due to normativity issues, despite the elimination of tariffs on 92% of the goods identified in the so-called tariff codes since May 2016.

In addition to this problem, total exports within the bloc have been falling in the last four years.

In 2014, the figure amounted to USD $19,261 billion, one year later the exports dropped to USD $16,223 billion, in 2016 dropped again to USD 14,567 billion and last year the figure amounted to USD $15,902 billion.

Four years ago, the expert in international business Ignacio Bartesaghi noted that virtually all integration process in the subcontinent—from the Latin American Integration Association, the Andean Community and the Pacific Arc to the Community of Latin American and Caribbean States—have not accomplished the majority of their original targets, while at the same time the politicization dragged Mercosur, seen as an alternative to the failed Free Trade Area of the Americas.

After the failure in 2005 of the U.S-led initiative, Mercosur—modelled on the European Union—and the neoliberal-oriented Pacific Alliance emerged as the dominant blocs, with their greatest differences around the leadership of the only two nations capable of influencing international geopolitics, Mexico and Brazil, rather than in the economic strategies, he said.

For the Latin American interests, it is reasonable that the countries determine and adopt the policies they consider suitable to their development, yet debating these policies as a whole at a regional level.

“To achieve this goal, a greater rapprochement between Brazil and Mexico is unavoidable,” Bartesaghi concluded in a study written in Spanish titled "El Mercosur y la Alianza del Pacífico, ¿más diferencias que coincidencias?"published by the Catholic University of Uruguay.

Nowadays, despite the uncertainty arising from the political transition in Mexico and the general elections of October 7 in Brazil, a broad understanding between both nations not only seems unavoidable yet also crucial and urgent.
 

Edited by Sofía Danis
More by Gabriel Moyssen

 

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