With the Trump Administration pushing the world ever closer to a global trade war, the most important economies of Latin America gathered in the steamy resort town of Puerto Vallarta, Mexico on July 23-24 of this week to chart the future of regional integration. The motive for this gathering was the 13th presidential summit of the Pacific Alliance, an increasingly important regional trade grouping, which encompasses Mexico, Chile, Colombia, and Peru. The host, Mexican President Enrique Peña Nieto, appeared to revel in the opportunity the Summit afforded him to shift gears away from the contentious NAFTA talks with the United States and Canada, and engage with a more likeminded set of partners. Still, the fact that the two largest economies in the Pacific Alliance—Mexico and Colombia—were represented by lame-duck presidents underscored the degree to which the future of this trade bloc remains as uncertain as it is aspirational.
The Pacific Alliance has demonstrated a remarkable vitality since it was first launched in 2011, which has enabled it to plow through a degree of internal incoherence that has plagued the group from the beginning. Despite sweeping claims to representing Latin America’s Pacific region, the founding countries found it politically expedient to omit Ecuador and the six Central American countries with Pacific coastlines from the bloc. (Costa Rica and Panama initially embarked on an accession process that has since stagnated, while the now more politically moderate government of President Lenin Moreno in Ecuador has decided to pursue an associate membership.) Even the four actual members did not map neatly onto existing Asia Pacific architecture, with Colombia missing from both the Asia Pacific Economic Cooperation forum (APEC) and the Trans Pacific Partnership (TPP), yet serving as charter member of the Pacific Alliance.
Moreover, given that Mexico shares no borders with the other members, Colombia and Chile do not border each other, and their respective slender and isolated borders with Peru are not exactly paradigms of regional integration, the Pacific Alliance was as much a conceptual re-imagination of Latin America as an actual integration effort. Based on the premise of deeper economic ties with Asia, the Pacific Alliance still has not superseded the desire of Asian countries to logistically and diplomatically engage each of the four members on a bilateral basis. Indeed, Chile and Peru already boast free trade agreements with China, and Colombia has entered initial discussions, while Mexico has yet to get its footing in dealing with China’s rise. Missing from the equation entirely was Brazil, which is far and away Asia’s largest trading partner and a necessary element in any vision of Latin American integration with the Asia Pacific region.
Hence the puzzle of the Pacific Alliance: it is a worthy concept that does not fully represent either the geographic or economic realities of the region. And that is before one considers the increasingly unwieldy set of associate members, beginning with Australia, Canada, New Zealand, and Singapore in 2017, soon to be joined by Ecuador and South Korea. Meanwhile, at the most recent gathering in Puerto Vallarta, more than 50 observers from countries as far flung as Belarus, Serbia, and the United Arab Emirates participated in the proceedings, as did several hundred business executives from Pacific Alliance member and observer countries.
Still, the Pacific Alliance has clearly succeeded where others have failed in terms of making Latin American economic integration alluring to a global community that has long preferred maintaining a state of blissful ignorance when it comes to the alphabet soup of hemispheric integration efforts. The bloc currently accounts for 38% of Latin America’s gross domestic product and represents the eighth largest economy in the world with a population of 225 million people accounting for 50% of the region’s trade. Another major goal of the Pacific Alliance is to have 100% free trade between member states by 2030. Rather than subscribe to grandiose schemes of continental integration, or deeper political union, these pragmatic, trade-friendly countries instead focused on nuts-and-bolts issues like harmonizing existing free trade agreements, lowering tariffs, and eliminating visa requirements—while maintaining a pace of frequent presidential summitry.
New leaders, new future?
This week’s summit was also transitional in one key sense, in that between the 12th Summit hosted by President Santos in Cali, Colombia in June 2017, and the 14th Summit to be hosted by President Vizcarra in Peru in 2019, a complete changeover in the leaders of the Pacific Alliance members will have occurred. Former Chilean President Michelle Bachelet left office earlier this year, while former President Pedro Pablo Kuczynski in Peru was felled in March by a corruption scandal, and Santos and Peña Nieto are also headed for the exits. The new constellation of leaders will lend greater primacy to Chilean President Sebastian Piñera, one of the original architects of the Pacific Alliance during his first presidential term from 2010 to 2014. Vizcarra is also poised to lead, while the new Colombian President Ivan Duque and his Mexican counterpart Andres Manuel Lopez Obrador are likely to judge the utility of the Pacific Alliance against their own domestic goals, and possibly as an ungainly inheritance from their not particularly beloved predecessors. (Both Duque and Lopez Obrador were invited to attend the meeting in Puerto Vallarta, but declined.)
The challenge, therefore, is how to continue to advance pace of integration amid the region’s shifting political winds. The progress that the Pacific Alliance has made thus far in terms of trade integration has been impressive. In May 2016, member countries cut tariffs on 92% of imports and exports, with the remaining 8% to be phased out in the next five years. Migration has been another area of focus. Member countries have made advancements in talks for a single passport and have lifted short-term visa requirements up to six months, as means of increasing tourism and academic and business exchanges. The Latin America Integrated Market (MILA) is the joint stock exchange launched among Chile, Colombia, Peru, and Mexico. Companies participating in the MILA have increased availability to capital by means of new investors in Latin America’s largest stock exchange. Intriguingly, Pacific Alliance member states have also taken steps to streamline their diplomatic forces overseas, by combining embassies abroad in Ghana, Vietnam, Morocco, Algeria, and Azerbaijan.
The presence of Brazilian President Michel Temer in Puerto Vallarta put the question front and center of the possible merger of the Pacific Alliance with the Brazil-led South American Common Market (MERCOSUR). Temer, who is also entering his final months in office as Brazil faces elections this October, broke with past Brazilian precedent of treating the Pacific Alliance with a mixture of standoffishness and barely-disguised exasperation. It was the right move for Temer to attend; it moved Brazil much closer to the center of the conversation, accompanied by fellow MERCOSUR member President Tabaré Vázquez of Uruguay and ministers from Argentina and Paraguay. MERCOSUR and the Pacific Alliance signed a joint declaration to undertake a series of steps forward, including making goods trade easier, helping small and medium-sized firms do business internationally and boosting the knowledge-based economy. Temer’s shift toward engagement will pave the way for future dialogue with the next Brazilian government and force a more comprehensive discussion of how Latin American integration with the Pacific can benefit from the economic heft and political savvy of the critical MERCOSUR bloc of countries.
In the final analysis, the 13th Pacific Alliance Summit in Mexico highlighted how far this new trade bloc has come since its formation, as well as how far it still has to go. As President Piñera of Chile remarked, “The Pacific Alliance celebrates seven years of great achievements in integration and collaboration between Mexico, Colombia, Peru, and Chile. But the world changed a lot in these seven years and the alliance must renew its pioneering and enterprising spirit.”
The task ahead is clear: the leaders of Mexico, Chile, Colombia and Peru must redouble their efforts at integration; think through how to best engage with Brazil and MERCOSUR; and weigh the addition of new full and associate members against the strategic imperatives of maintaining a coherent internal structure that can help position the region to take advantage of new economic possibilities in the Asia Pacific. For all the hype, the Pacific Alliance still adds up to less than the sum of its parts, but with renewed vision and energy it can help reshape this vital region of the world.
Daniel P. Erikson is managing director at Blue Star Strategies, LLC and a senior fellow at the Penn Biden Center for Diplomacy and Global Engagement. He served as a White House and State Department advisor on Latin America during the Obama Administration.