Updated May 19, 2014—One of the newest economic blocs to emerge from Latin America, the Pacific Alliance seeks to create a Latin American gateway to Asian markets. Composed of Chile, Colombia, Mexico, and Peru, the bloc is pursuing commercial, economic, and political integration among member countries. The group accounts for more than one-third of Latin America’s GDP and exports about 60 percent more than the Southern Common Market (Mercosur) bloc.
While only two years old, the Pacific Alliance has taken strides to liberalize trade, focusing on openness to foreign investment and the integration of a common market.
AS/COA Online details the Alliance’s Framework Agreement, its origins, its members, and its goals.
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- Origins and Goals
- Members of the Alliance
- Organizational Institutions
- Goals and Progress of the Alliance
- Recent and Upcoming Meetings
At the Eighth Summit of the Pacific Alliance on February 10, Costa Rica signed the Alliance Framework Agreement and began the path to full membership. On May 5, President Laura Chinchilla signed a free trade agreement (FTA) with Colombia, completing the requirement that members have bilateral FTAs with each Alliance country.
Panama penned an FTA with Mexico on April 2, allowing the country to receive its Alliance “entry ticket” since it already has pacts with Chile, Colombia, and Peru. However, Colombia’s Congress must still approve the FTA before Panama can begin the process of integrating into the bloc.
In late April, Colombia’s Constitutional Court struck down a law formalizing the country’s membership in the Pacific Alliance. The court said that the bill was incomplete when submitted to Congress. The government plans to submit a new bill to the legislature soon.
The Ninth Summit of the Alliance will be held in July in Punta Mita, Mexico, where the host country will assume the bloc’s pro tempore presidency.
The Alliance was informally created on April 28, 2011, when the presidents of Chile, Colombia, Mexico, and Peru signed the Lima Declaration. This initiative was developed by then Peruvian President Alan García to supplement the existing bilateral trade agreements between the four countries and create an economic bloc to negotiate and trade with other economies as a unified group. The Alliance wanted to increase competitiveness by integrating economies and allow for the free flow of capital, goods, people, and services among its members, in addition to seeking expanded trade with Asia-Pacific countries.
The Framework Agreement dictates that member countries must be democracies, practice the separation of the powers of state, and protect, promote, and guarantee human rights and fundamental liberties. They must also have existing bilateral trade agreements with member countries already in place. Article 3 of the Framework Agreement outlines requirements for countries seeking membership. The bloc aims to sign FTAs with Asia-Pacific countries based on existing bilateral trade accords.
Costa Rica was accepted as a fifth member of the Alliance at the Seventh Pacific Alliance Presidential Summit in May 2013. The Central American country already had FTAs with three members, and signed a trade accord with Colombia during the summit. Now, Costa Rica’s Congress must ratify the FTA and the Pacific Alliance Framework agreement before it becomes a full member.
Ecuador, El Salvador, the Dominican Republic, Guatemala, Honduras, Paraguay, Panama, and Uruguay are official observers to the Pacific Alliance and are candidates for future membership. A number of countries outside of Latin America are also observers; Australia, Canada, France, Japan, New Zealand, Portugal, and Spain have received this status. China, South Korea, Turkey, and the United States were accepted as observers in June 2013.
The Alliance also invited the Association of Southeast Asian Nations (ASEAN) to join as an official observer in November 2012. Observers to the Alliance could benefit from gaining increased access to Alliance-Asia Pacific trade links, as Canadian officials suggested after Ottawa gained observer status. Article 10 of the Framework Agreement gives the Council of Ministers responsibility to determine the conditions of each observer’s status. Approval by the Council of Ministers is required to gain full membership into the Pacific Alliance.
- High-Level Group: To accomplish the Alliance’s goals, the Declaration of Lima established a High-Level Group (HLG) that would meet as a council, made up of member countries’ ministers and vice ministers of commerce, trade, and foreign affairs. Officials form working groups on trade and integration, migration facilitation, and services and investments, and hold meetings to evaluate and discuss progress or changes within these areas. The Inter-American Development Bank provides technical assistance to working groups upon request.
- The Pacific Alliance Business Council was established at the First Meeting of the Council of Ministers of the Pacific Alliance in August 2012. The Business Council is comprised of 14 businesspeople from member countries who meet to further private-sector integration. The Alliance is currently establishing a joint representative office in Turkey.
- Pacific Alliance Parliament: On May 6, heads of legislatures from Alliance member countries signed an agreement to form a Pacific Alliance Inter-Parliamentary Committee. This body would develop legislation to approve Alliance trade agreements. The group will be formally presented to the Alliance at another legislative meeting in Chile this June.
- Trade: At the HLG working meeting in January 2013, the Alliance agreed to liberalize trade by 90 percent by March 31, 2013, meaning that inter-member tariffs would be reduced to 10 percent. The bloc will move to accomplish its free-trade goal at its upcoming summit on May 23 in Cali, Colombia. Chilean Foreign Minister Alfredo Moreno said at the Alliance’s seventh summit that presidents of member countries plan to eliminate tariffs on 90 percent of internally traded goods, while the remaining 10 percent of goods experience periods of tax exemption.
- Migration: Advancements have also been made toward the free circulation of people. Member countries have a combined population of approximately 215 million. This would not only promote the tourism industries of Alliance members, but is also intended to increase the international competitiveness gained through academic and business exchange. In November 2012, Mexico exempted Colombian and Peruvian residents from visas for stays of up to 180 days (Chile has been exempt from this requirement in Mexico since 1991). The Alliance has also implemented a joint system to provide 100 annual university scholarships to promote student exchange.
- Integrated Financial Markets: The Latin American Integrated Market (MILA) is the joint stock exchange between Chile, Colombia and Peru. In pursuit of financial integration, the three member countries combined their financial markets into one combined bourse, or stock market. Since May 2011, they have used MILA to conduct cross-border trading of companies. Mexico agreed to join the conglomerate at the Second Summit of the Pacific Alliance, a move that would double MILA’s size and make it larger than Brazil’s Bovespa, Latin America’s biggest bourse. The move has not yet happened, though Mexico bought a stake in Lima’s bourse in February 2013. While the creation of MILA was independent from Pacific Alliance negotiations, the Alliance agreement influenced Mexico’s move to join MILA and to expand the joint exchange.
- Multilateral Ties: The Alliance is expanding connections with other regions. At the Community of Latin American and Caribbean States (CELAC)-EU summit in January 2013, the Alliance sought to deepen ties to European markets when member countries held bilateral meetings and signed agreements with European leaders. At the time, Chile penned pacts signed with Brazil, Germany, and Spain. With the exception of Colombia, Alliance members are also party to the Trans-Pacific Partnership (TPP), a free-trade agreement under negotiation with 11 Pacific-Rim countries. The most recent TPP negotiations were held in Malaysia in July, and included Japan in the talks.
Alliance leaders used the World Economic Forum as a meeting ground from April 23 through April 25, taking advantage of being in the same location to discuss business and finance. At the April 25 meeting, finance ministers discussed options for uniting policies related to capital flows, fluctuating currencies, and trade procedures.
Rachel Glickhouse contributed to this article.