The Pacific Alliance Casts Its Cloud over Latin America

In a joint declaration on 8 October 2013, the presidents of the Pacific Alliance (PA) – an organisation legally constituted in 2012 that is comprised of Chile, Colombia, Peru and Mexico – announced the conclusion of trade negotiations to remove all tariff barriers between its member states, thus making it the eighth largest economy in the world. This new free trade agreement (FTA) has attracted the interest of states and business sectors around the world, including the German Business Association for Latin America, which will dedicate its Latin American Day conference in November 2013 to this new group.

Analysis

The PA will remove 92 percent of all trade tariffs by the end of 2013 and progressively lift the remaining 8 percent. Whereas financial markets and some of its protagonists depict the PA as the new star in Latin America, the Bolivarian Alliance for the Peoples of Our Americas (ALBA) and most of the countries of the Southern Common Market (Mercado Común del Sur – Mercosur) see the PA as a new attempt by the United States to undermine alternative patterns of regional integration in the Americas.

• The PA is an economic alliance that revives the open regionalist model of the early 1990s in Latin America in that it seeks to increase intratrade and extraregional trade relationships with Asia, the United States and Europe; the PA states already haveFTAs with the United States and the European Union.

• The positive view of the PA in Latin America and abroad is based on its economic potential. In fact, Australia, Canada, China, the Dominican Republic, Ecuador, El Salvador, France, Guatemala, Honduras, Japan, New Zealand, Portugal, Paraguay,South Korea, Spain, Turkey, the United States and Uruguay have already applied for and been granted observer status. Moreover, Costa Rica and Panama are on their way to becoming full members.

• At the political level, however, the PA has created friction in the region as it brings Mexico into South America – an area seen by Brazil as its sphere of influence. Moreover, the PA countries have good relations with the United States and are in linewith its FTA agenda.

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