Latin America's Pacific Rim Is United and Ready to Mingle Stephen Keppel - Univision News
go to original June 20, 2012

They’re sexy and they know it. From left to right, the presidents of Colombia, Chile, Mexico and Peru. (Gobierno de Chile)

Four of Latin America’s fastest growing economies - Mexico, Chile, Colombia and Peru - officially launched the Alianza del Pacifico, or Pacific Alliance, last week in an effort to unite Latin America’s Pacific Rim.

The main goal of the alliance is to work together to find better ways to connect with fast-growing countries in Asia like China, South Korea, Singapore and Malaysia through trade and investment.

On their own the four Alliance countries may not have the capacity or set of products to attract Asian consumers and investors. But together, they have much more to offer.

Combined, the Alliance has 200 million consumers and would be the world’s 9th largest economy, about the size of Italy and slightly smaller than Brazil.Total exports from Pacific Alliance countries already account for 55% of Latin America’s total.

One way the new group plans to combine efforts is by setting up joint trade promotion offices in Asia. That may not sound like much but it will enable the group to make a more competitive pitch to Asia. Each country can focus on what they do best and find ways to support each other’s top products. A joint promotion office will be able to offer high quality goods like Chilean wine, Mexican manufactures, Colombia coffee and Peruvian minerals.

Here’s how it might work. Chile has the climate and infrastructure to make great wine but let’s say the Mexicans make the best fertilizer, the Colombians develop a more efficient way of making glass and the Peruvians have found a way to design and produce the best labels and corks. If Chilean winemakers buy the Mexican fertilizer and link up with Colombia’s glass makers and Peru’s label makers, together, they can produce a better, less expensive bottle of wine. Alliances like this, which encourage countries or states to develop more efficient value chains, are Latin America’s best and only chance of competing in Asia. Finally some Latin America countries are realizing that they can no longer go it alone and have a lot to gain from working together.

Here are five other reasons why I like the Pacific Alliance and think it can work.

It does not entail a confusing acronym.

Latin America has an ever-expanding set of regional and sub-regional groupings including the OAS, UNASUR, ALADI, SICA, MERCOSUR and the Chávez-inspired ALBA and none has been that impressive. The Pacific Alliance is already off to a good start by choosing a simple name.  The group is small for now (Costa Rica and Panama hope to join at a later date) which should help it meet its short term goals.

The Alliance will promote the free movement of goods and encourage cooperation.

A key pillar of this alliance is trade and the idea that freer trade can benefit all partners. The four countries share a similar belief in free markets and already trade freely with each other. This will allow them to focus on other areas like linking their stock exchanges (Colombia, Chile and Peru have already started on this.)

The Alliance will promote the free movement of people, which will encourage innovation.

I find it amazing that some Latin Americans still need visas to travel to neighboring countries. This makes it more expensive and time-consuming for entrepreneurs, investors and students to travel from one country to another and restricts the spread of ideas and opportunities. The Alliance sets a goal of eliminating visa restrictions for its citizens. This would eventually create a corridor of free movement along the Pacific Ocean and help promote business and cultural links between all the countries involved.

One of my favorite aspects of the Alliance is that it aims to create a joint university system like Europe, where students from one nation can easily study in another country and receive the same credits. Again this sounds simple but it would spur academic competition, strengthen existing universities and produce better students. It is also great for innovation. As part of the Alliance a smart Colombian could choose to study business in Chile and then partner with a Mexican classmate to create a start up in Monterrey. To complete the circle he/she could then re-invest the profits in Colombia.

It has the potential to advance free market democracy in Latin America.

There is a quiet battle going on in Latin America between those that believe in open markets and politics and those that do not. If the Pacific Alliance can show that closer cooperation, openness and freer trade can lead to sustainable wealth and economic growth it will deal a serious blow to the radical, state-controlled model currently advocated by Venezuela, Argentina, Ecuador, Bolivia and Nicaragua.    

And finally…I like geography and geographical positioning is an important, though sometimes overlooked, indicator of potential economic growth.

Two Alliance countries, Mexico and Colombia, and the two observers, Costa Rica and Panama, have access to both the Pacific and Atlantic oceans, placing them in a great position to facilitate trade between Asia, the Americas and Europe. With the coastlines of Peru and Chile facing fast-growing Asia all of the Alliance countries will be well connected to the hot trade and investment routes, giving them a serious advantage over Brazil and other MERCOSUR countries.

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