There is a paradox when it comes to the relations between countries in Latin America and the Asia-Pacific. Although both regions have a long history of cultural, diplomatic, and economic engagement, Asia-Latin American ties have tended to be subdued – at least when compared to the pivotal relationship the United States has with other states across the Pacific.
Of course, no one should expect “superpower pivot” from countries in Latin America and the Caribbean (LAC), a region that is still developing politically and economically. However, given the prominence of international trade in a globalized economy and the rise of Asia as a source of global demand, LAC countries have been keen to take advantage of these trends for the benefit of their own economic development. A recent manifestation of these desires is the Pacific Alliance, a new trade bloc in Latin America that has been watched closely in the region and abroad.
The Pacific Alliance (PA) was formally established last June by its current members– Chile, Colombia, Mexico, and Peru. The PA’s mission is to deepen commercial and economic integration among its members, who are required to be democracies that respect human rights. Furthermore, Pacific Alliance members (or those countries that aspire to join) are required to have trade agreements with all other members. The four LAC countries that currently make up the PA, all of which have expansive Pacific Ocean coastlines, together account for over a third of Latin America’s GDP and 55 percent of total LAC exports, meaning the PA rivals the economic size of the Association of Southeast Asian Nations (ASEAN), which was US$2 trillion in 2012.
The PA has two unique and significant characteristics that have added to the fanfare surrounding the new bloc. First, given the fact that the organization seeks to build upon its members’ current trade agreements, one of its core objectives is to serve as an institutional bridge between Latin America and the Asia-Pacific. The effort to deepen economic ties with Asia meshes well with the fact that a number of the PA’s members already have free trade agreements with several Asia-Pacific countries, including China, Japan, and South Korea. Prospective members will further this trend if they join the PA. For example, Costa Rica has trade agreements with both China and Singapore and is expected to become a member in the wake of the Pacific Alliance summit that took place on Thursday in Cali, Colombia.
The other key factor of the Pacific Alliance is that all of its members are considered to be the most economically dynamic and market-oriented countries in Latin America. Historically, the region has been home to a fierce economic debate between neoliberalism and statism. Seeking a “third way” between these two models, LAC countries have opted to forge their own development strategy, best characterized by the “Brazil Model.”
PA’s emergence on the scene is also well-timed as Latin America’s traditional dominant economic bloc—known as Mercosur and consisting of Argentina, Brazil, Paraguay, Uruguay, and most recently Venezuela—has stumbled in recent years over political squabbles and protectionist policies. As Mercosur loses its shine and its members increasingly look inward, the Pacific Alliance is seeking to go in the opposite direction with big strides in liberalization and outward engagement. PA members have already slashed tariffs by 90 percent, boosted investment, and removed a significant amount of visa requirements for their citizens. Their private sector has also played a big role by joining three of their stock exchanges into a single bourse – with Mexico’s soon to join. This week’s PA summit was meant to enhance these actions with more steps towards “integration to allow free circulation of goods, services, capital and people.”
This move has attracted attention from small and large states like; nearby and across the Atlantic. Costa Rica’s Trade Minister, Anabel González, said that the PA could be “a stepping-stone for small countries… to integrate faster into other multilateral agreements, such as the Trans-Pacific Partnership (TPP).” With Spain serving as an observer member of the Pacific Alliance, Chilean President Sebastian Piñera said that “The Pacific Alliance may become a great platform for Europe to project itself towards the Asia-Pacific region.” Indeed, other observer nations already include Australia, Canada, Japan, and New Zealand.
Despite the PA’s pragmatism and outreach to the Asia-Pacific, there will still be a number of obstacles for the nascent group to overcome. Although the member countries have enjoyed steady economic growth in recent years, they continue to struggle with inadequate infrastructure and a deficit in educational opportunities. Furthermore, they all have a degree of dependence on commodity exports which are vulnerable to disruption and exacerbate tension regarding the environmental impact of Latin America’s mining boom.
Even if member states of the Pacific Alliance overcome their domestic challenges, they still must contend with politics beyond their borders. Latin America already has an “alphabet soup” of regional organizations, most of which have failed to meet any initial promise they held, and merely devolved into talking shops. Although the PA has had an ambitious start, it is possible that it might run into the same problems faced by Mercosur or even the Trans-Pacific Partnership (TPP) as it expands and evolves. On the other hand, the Pacific Alliance may instead succeed in its own right and even give momentum to the TPP and other integration initiatives.
Latin American governments and organizations have long sought enhanced economic ties with countries in the Asia-Pacific for the opportunities that the other side of the Pacific has to offer. As LAC countries have dithered and struggled on their own, especially when it comes to China, the PA’s unique and multilateral approach may be the answer that Latin America has been looking for. Should the Pacific Alliance succeed, it may prove to be a pivotal bridge linking Asia and the Americas for decades to come.
Sebastian Sarmiento-Saher is an editorial assistant at The Diplomat.