Colombian President Juan Manuel Santos may not have been hallucinating when he said last week that the Pacific Alliance — the bloc made up of Mexico, Colombia, Peru and Chile — “is the new economic and development engine of Latin America and the Caribbean.”
Indeed, the Pacific Alliance, which was officially launched only one year ago, is growing rapidly and becoming a serious economic bloc, while Mercosur — the common market made up of Brazil, Argentina, Venezuela, Uruguay and temporarily-suspended Paraguay — is turning into a political club increasingly weakened by internal infighting.
The four Pacific Alliance member countries had a combined economic growth of 5 percent last year, while members of Mercosur grew by a combined 2.9 percent, according to the United Nations Economic Commission for Latin America (ECLAC).
Furthermore, amid a general slowdown in global commerce, trade among Pacific Alliance countries grew by 1.3 percent last year, while trade among Mercosur members declined by 9.4 percent, ECLAC figures show.
The economic divide between Latin America’s Pacific and Atlantic blocs became increasingly visible at last week’s summit of Pacific Alliance countries in Cali, Colombia.
At the meeting Pacific Alliance countries claimed that their group was not trying to distance itself from Mercosur, Venezuelan-led ALBA and other regional blocs. But, in effect, that’s exactly what they did.
Pacific Alliance leaders presented themselves as a group of stable countries that respect democracy and the rule of law, and are thus much better investment opportunities than Argentina, Bolivia, Venezuela and other populist nations that expropriate foreign companies at whim.
President Enrique Peña Nieto of Mexico said that members of the Alliance share “a vision in support of the rule of law and democracy, and the belief that with free trade we can find better competitiveness for our people.” Translation: we are not Venezuela or Argentina.
Costa Rica President Laura Chinchilla, whose country is officially joining the Pacific Alliance, said that in Latin America, “we’ve had enough of ideology, slogans, and trying to find scapegoats... We have to assume our responsibility and complete the work that remains to be done in terms of development.”
Mercosur’s internal divisions have grown since its incorporation of Venezuela, and Argentina’s latest trade barriers, which have affected fellow members.
Brazil’s respected daily Valor Economico reported last week that Brazilian President Dilma Rousseff recently had a “very hard” private exchange with Argentine President Cristina Fernández de Kirchner over bilateral trade and investment issues.
And Uruguayan President José Mujica, who has complained of Argentina’s protectionist measures, was caught on tape last month saying, without realizing that a microphone was on, that the Argentine president is “worse” than her husband, the late President Néstor Kirchner.
While trade among Mercosur countries declines, Pacific Alliance presidents agreed in Cali to eliminate tariffs on 90 percent of their products, and to reach a deal by June 30 for adding duty-free treatment for the remaining 10 percent.
The Pacific Alliance agreement goes beyond traditional free trade deals by including trade in services, investments and government purchases. It also includes plans to increase student exchanges, validate university degrees among member countries, and open joint embassies and trade offices abroad.
Sergio Diaz Granados, the Colombian trade minister, told me that the group opened a joint trade office in Istanbul, Turkey, this month, and that it will start sharing embassies in Ghana, Morocco, Vietnam, Singapore and other countries later this year.
Overall, one of the main goals of the Pacific Alliance, all of whom already have free trade agreements with each other and with the United States, will be to create a joint platform with efficient supply chains from which to export to Asia.
My opinion: We are heading toward a global economy of super-blocs — the Trans Pacific Partnership, the Trans-Atlantic Partnership, the European Union and China’s own economic bloc with its neighbors — and Latin America’s Pacific Alliance is taking the right steps to insert itself into the coming global reality.
Meantime, Brazil, Argentina, Venezuela and their neighbors keep pursuing inward-looking policies that may have produced economic growth during the commodity boom years of the past decade, but that are likely to lead to continued stagnation and greater poverty in coming years, as commodity prices level out.
It’s too early to tell whether the Pacific Alliance will succeed where so many other Latin American integration projects have failed. But it’s the most exciting thing taking place in the region, even if it’s by default.