While Latin American presidents meet in regular summits that usually end with grandiose declarations vowing to dramatically increase economic integration, several little-noticed reports paint a very different picture: they show that trade within the region is falling fast.
A report published in January by the Latin American Integration Association (ALADI), a group made up of most South American countries and Mexico, says that trade within the region has fallen by more than 17 percent over the past three years, and that the latest figures from December 2014 confirm a continuing “downward trend.”
An earlier report by the United Kingdom’s Ministry of Defense is even more dramatic. It says that “Latin America and the Caribbean are likely to remain politically and economically fragmented” over the next three decades “with individual countries pursuing bilateral relationships rather than forming a strong unified bloc.”
The report, titled “Global Strategic Trends — out to 2045” and available on the Internet, states that “it is likely that the region will remain a loose community of countries rather than becoming an institutionalized federal entity.”
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It adds, “while sub-regional organizations such as CELAC, CARICOM and Mercosur are likely to continue, they are unlikely to develop into powerful, unified institutions. This makes it probable that relationships with external actors will be conducted on a bilateral basis.”
Translated into plain English, the British military analysts are predicting that individual Latin American countries, especially members of South America’s Mercosur trade bloc — which prohibits its members from individually signing free trade agreements with the United States, the European Union or other external parties — will soon break loose, and pursue their best national interests by signing bilateral trade accords with non-member countries.
This would mean that, sooner rather than later, many Latin American countries would begin to reconsider their 2005 decision at the IVth Summit of the Americas in Mar del Plata, Argentina, to formally reject the idea of a Free Trade Area of the Americas that would have created a hemisphere-wide free trade zone.
At the time, Brazil, Argentina and Venezuela were emboldened by soaring world prices for their oil, soybeans and other commodity exports, which made them rich overnight. They believed that raw materials would reign forever.
But now, world commodity prices have collapsed — oil has fallen by more than 50 percent over the past six months — and Mercosur members are feeling the pinch. There are growing business pressures within Mercosur’s biggest player, Brazil, to change Mercosur’s rules, in order to be able to step up bilateral trade agreements with the European Union, and perhaps even with the United States.
Brazil’s exports to Argentina, for instance, have fallen by 35 percent over the past year and a half, according to ALADI’s figures. Other members, such as Uruguay and Paraguay, are in an even bigger rush to sign free trade agreements with extra-regional partners.
But, instead of opening their economies to each other and to the rest of the world, most Latin American leaders — especially those of Venezuela, Ecuador and Bolivia — are fooling their populations with false claims that the region is becoming more united than ever. In fact, according to United Nations figures, Latin America’s inter-regional trade today stands at a paltry 20 percent of its world-wide trade, compared with Asia’s near 40 percent, and Europe’s more than 60 percent.
My opinion: Latin America has an alphabet soup of regional institutions that are either totally or partially devoted to promoting integration (CELAC, UNASUR, Mercosur, ALADI, SICA, SIECA, ALBA, AP, CARIFTA, CARICOM, CAN, OEAS, are only some of them). Some, like Unasur, are mutual protection societies for repressive regimes, as it proved after the protests that left 43 dead in Venezuela last year.
It’s time to merge most of them, especially Mercosur with the much more efficient Pacific Alliance, made up of Chile, Peru, Colombia and Mexico. And it’s time for the region to start revamping trade talks with extra-regional partners. Now that the commodity price boom is over, they will need to look at the world’s biggest markets for more trade and investments.
Political winds are changing. Whoever is elected in the 2016 U.S. elections may refloat the idea of a free trade area of the Americas (with another name, of course) for those that are willing to join it. And it wouldn’t be surprising if he or she does it at the request of many Latin American countries.