ABOVE THE RIM

Ecuador is planning to join the Pacific Alliance trade bloc in 2020. Quito hopes the alliance will help grow the economy, but potential pitfalls remain.

ECUADOR IS SET TO DRAMATICALLY reorient its economy in 2020 by joining the Pacific Alliance, a free trade organization that includes Mexico, Colombia, Peru, and Chile. Ecuador joining the Pacific Alliance would signal an enormous shift in policy under President Lenín Moreno and a reversal of a decade of policy under Moreno’s predecessor, Rafael Correa. The alliance comes alongside the negotiation of bilateral trade deals with Mexico and Chile that could benefit Ecuador’s economy. Ecuadorian business leaders told TBY that they are optimistic overall about the chances for the pact to help boost GDP and provide greater opportunity for the country’s citizens. According to official data, Mexico has become the largest investor in Ecuador with accumulated investments worth about USD1 billion, including operations by Mexican flagship companies such as Claro, Bimbo, and Femsa. Likewise, Chile is also leaving its footprint on the Ecuadorian economy. The state-owned Chilean ENAP has been working in Ecuador for years and has recently announced new investments in existing operation fields to increase output. Chile is also set to be involved in another Ecuador’s strategic sector, mining, thorough a joint venture with the Ecuadorian ENAMI to work on Llurimagua, which has the potential to become the world’s largest copper project Ecuador's entry into the Pacific Alliance would create a geographically contiguous trading bloc along the western coast of South America. It would quite literally redraw the map of the continent, with its member Mexico serving as a ballast as the Pacific Alliance’s largest economy. The successes and failures of a similar arrangement, the EU, could help the member states of the Pacific Alliance avoid mistakes that have hobbled Brussels in integrating Europe as an economic and political entity. Ecuador, as its smallest member in terms of economic output and population, needs to be its own best advocate. According to its website, the Pacific Alliance aims to “build in a participatory and consensual way an area of deep integration to move progressively towards the free mobility of goods, services, resources, and people, and drive further growth, development and competitiveness of the economies of its members.” Altogether, the countries in the Pacific Alliance include 225 million people, with a GDP per capita of USD19,000. The states in the alliance get 38% of foreign direct investment in Latin America and export more than USD6 billion in goods. Being part of the alliance would give officials in Quito a seat at the table with a group that could help it negotiate more effectively with China, from which Ecuador buys consumer goods, and the US, to which it sells crude oil. “Ecuador's philosophy is to open up to the world, diversify its markets, and consolidate its commercial relations with all those countries or partners that share democratic values,” Richard Martínez Alvarado, Ecuador’s minister of economy and finance, told TBY, emphasizing that Ecuador’s economic troubles were the work of the previous administration. “Ecuador is in favor of generating an integration process that responds to the economic and social development of countries, the fight against corruption, security, environment, human rights, and cultural aspects, for example. We want to be part of the Pacific Alliance as it will significantly boost our foreign trade; the alliance is the eighth-largest economy in the world, representing 35% of Latin America’s population,” he said. However, while neoliberal policies are already rooted in the bloc, Ecuador is still working to leave behind its decade of excessive public spending. Austerity measures have been part of a plan to reduce Ecuador’s sizable public-sector debt to qualify for a USD4 billion rescue package from the International Monetary Fund, which is demanding a leaner government in return for help.