by Michael Lerner
The two-day Pacific Alliance business forum and presidential summit concluded on Friday with a resounding push for further integration. The Alliance’s four member states – Chile, Peru, Colombia, and Mexico – were joined by 49 observer states, including Costa Rica, which may become the fifth member. Argentina also attended for the first time, having recently been extended observer status.
In contrast to the South American trading bloc Mercosur, which has been protectionist and fraught with internal dissent, the Pacific Alliance has made tremendous strides since its formation in 2011. It has reached agreements on open commerce and migration, and as of this year it has eliminated tariffs on 92% of goods traded between member states. Services should be freed up next.
Additionally, financial integration could also bring major benefits, particularly to investments in infrastructure. One smart approach would be allowing pension funds from the bloc’s members – which collectively have about $404 billion in investments — to make a broader range of investments in each other’s economies. This could help realize the Interamerican Development Bank’s prescription that Latin America should increase infrastructure spending by 2 to 4% of annual GDP in the coming decades.
Most refreshing of all the summit’s takeaway messages was that there is strength in unity. Brexit was repeatedly mentioned as a warning sign for how not to go, and because the Pacific Alliance is still in the early stages, it can avoid some of the structural flaws of the unwieldy E.U. Rather than a bloc parliament and bureaucracy dictating terms to members, the Pacific Alliance has no permanent institutions. Members take turns holding the presidency for one year and technical groups composed of country officials work on issues to be discussed at summits that take place at least twice a year. By maintaining national sovereignty and working through consensus, the bloc’s future looks very bright.