Latin American trade bloc exceeds expectations
THE PACIFIC Alliance is probably the most important alliance that South Africans may never have heard of. The new economic bloc of Latin American countries comprising Mexico, Peru, Chile and Colombia has exceeded expectations in its four years of existence, and when taken together is now considered the eighth largest economy in the world and the seventh largest exporter.
The four countries are trying to achieve something that has eluded the Latin American region for centuries – unification and integration – which had been the vision of Simon Bolivar in the 19th century.
Bolivar had led the successful wars of independence from Spain, but had failed in his mission to unite the region.
Former Venezuelan president Hugo Chavez tried his hand at being the modernday Bolivar, and was at the helm of a number of initiatives to unite the region politically and economically.
In 2004, he created the Bolivarian Alliance for Peoples of our America; in 2008, he promoted the Union of South American Nations (UNASUR); and in 2011, he championed the Community of Latin American and Caribbean States.
The problem was that the groupings did not succeed in expanding economic ties.
According to the The Atlantic, leaders of the region’s more political and antiAmerican groupings have not welcomed the alliance. Bolivia’s President Evo Morales bluntly stated the bloc was a conspiracy hatched in Washington to divide UNASUR.
Ecuador’s President Rafael Correa declared that “more neoliberalism, more free trade, this naive desire for trade openness, this forming of markets and not societies, creates consumers not citizens”.
In Brazil, former President Lula da Silva claimed that the alliance was trying to bring the much-derided Washington consensus back to South America.
The presidents of the four Pacific Alliance countries, for their part, insist that the initiative is not an ideological one, but simply an economic arrangement to promote trade and investment.
Judging by its record to date, the alliance has the greatest potential to significantly deepen economic integration.
What distinguishes it from other regional groupings is the key objective of forging closer relations with the AsiaPacific region. The four countries believe they will have greater bargaining power if they approach China together, and they will market the fact that they have better and cheaper products for the US market than Asia.
The rapid success of the Pacific Alliance suggests that the decisive axis of the world has changed. For centuries economic and political hegemony was in the Atlantic, from the 15th century with the Portuguese and Spanish empires, then France in the 17th century, England in the 19th century, and the US in the 20th century. Now the centre of economic power has shifted to the Pacific as Asia has become the new engine of the world economy. It is now for emerging markets to court China, India, Japan and South Korea. Trade between Asia and Latin America has been growing at an annual rate of 20.5 percent over the past 12 years.
Together the alliance countries constitute a bigger economy than that of Brazil, and they are expected to grow three or four times faster than Brazil over the next few years. Brazil’s $1.7 trillion economy contracted by 0.1 percent last year, and is shrinking by 0.5 percent this year. By contrast, the collective GDP of the alliance countries is $2.2 trillion, and is expected to grow by 4 percent this year.
Market analysts say Brazil’s economy is in recession, with last year being the fourth year of subpar growth, and Brazil seeing the largest capital flight in more than a decade. Argentina is also going through an economic crisis, and its differing political and economic agendas often clash with those of Brazil.
Venezuela has turned to China to help navigate out of its economic crisis.
The Pacific Alliance countries have in fact been the most successful economies in Latin America, with high economic growth rates and low inflation.
They have eliminated 90 percent of the tariffs between them, linked their stock markets, and generally boast high domestic consumption, record low employment and wage growth. Not only do their export promotion agencies share offices abroad, but they hold joint presentations at international fairs.
Other regional economic blocs could learn a great deal from the success of the Pacific Alliance in terms of making their collaboration tangible on a number of levels.
If SADC countries were to market the region as an alliance, promoting regional tourism and investment opportunities, substantially reduce tariffs between them and eliminate all visa requirements, it would escalate integration of the region.
The fact that the alliance is solely focused on economic and development issues without taking political or ideological positions means there is less chance of new administrations derailing the agenda. Shannon Ebrahim is the foreign editor
of Independent Media