Updated July 20, 2015—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 four 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
In July 2015 in Paracas, Peru, the Pacific Alliance held its Tenth Presidential Summit. Peruvian President Ollanta Hulama assumed the pro tempore presidency, which he will hold until July 2016. The summit’s main goal was to strengthen ties amongst its members and continue working towards the free movement of goods, services, capital, and people. The Alliance signed the Declaration of Paracas and agreed to have the Framework Agreement (Acuerdo Marco in Spanish) go into effect on July 20, paving the way to reduce tariffs among the members by 92 percent. The remaining 8 percent will be eliminated gradually.
The Alliance also welcomed 10 new observer countries: Austria, Denmark, Georgia, Greece, Haiti, Hungary, Indonesia, Poland, Sweden, and Thailand. Next on the agenda is to finalize the permanent membership of Costa Rica and Panama, expanding the Alliance to six member countries.
However, the Alliance is experiencing the challenge of slowing global economic growth. As COA’s Eric Farnsworth noted: “The troubles of each of the four member nation governments are taking a political toll and thus reducing their abilities individually to prioritize the Pacific Alliance.”
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 Alliance members—Chile, Colombia, Mexico, and Peru—account for approximately 37 percent of Latin America’s total GDP, 50 percent of the region’s exports, and 45 percent of foreign investment.
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 and Panama are in the process of becoming official members of the Alliance. At the Eighth Summit of the Pacific Alliance in February of 2013, Costa Rica signed the Alliance Framework Agreement and began the path to full membership. That May, President Laura Chinchilla signed a free trade agreement (FTA) with Colombia, completing the requirement that members have bilateral FTAs with each Alliance country. Costa Rican officials have been negotiating the terms to become a full-fledged member but a date has not been set.
Panama penned an FTA with Mexico on April 2, 2013, allowing the country to receive its Alliance “entry ticket” since it already has pacts with Chile, Colombia, and Peru. Agreements with Panama are also ongoing, and the country could play an important economic role in the 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.
- Observer Countries: As of the 2015 Summit, there are 42 observer countries. The Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Panama, Paraguay, 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. Since 2014 other observers have joined: Austria, Belgium, Denmark, England, Finland, Georgia, Germany, Greece, Haiti, Holland, Hungary, India, Indonesia, Israel, Italy, Morocco, Poland, Singapore, Sweden, Switzerland, Thailand, and Trinidad and Tobago.
- 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.
- Pacific Alliance Parliament: On May 6, 2013, 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.
- Trade: Alliance members keep a network of trade agreements with each other and additional countries to promote commercial, foreign investment, innovation, and technological exchange. 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. During the 2015 Presidential Summit in Peru, the Alliance signed the Framework Agreement to implement a 92 percent tariff cut on July 20, and is looking to eliminate the remaining 8 percent in the next few years.
- Migration: Advancements have 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). Visa requirements between Costa Rica and Peru are slated to be lifted in the fall of 2015. 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, Peru, and Mexico. In pursuit of financial integration, the four member countries combined their financial markets into one combined bourse, or stock market. Since May 2011, Chile, Colombia, and Peru have used MILA to conduct cross-border trading of companies. Mexico became an official member of MILA in 2014.
- 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 part of the Trans-Pacific Partnership (TPP), a free-trade agreement under negotiation with 11 Pacific-Rim countries.
Celeste Castillejo and Rachel Glickhouse contributed to this article.