Great expectations: the Pacific Alliance has captured the hearts of many Latin Americans who expect the integration agreement to drive economic growth.

Author:Long, Gideon


In the year since the Pacific Alliance was formally launched at the Paranal Observatory in northern Chile, presidents across Latin America have lavished it with praise. At the Alliance's most recent summit, in the Colombian city of Cali in late May, Chilean President Sebastian Pinera hailed the trade bloc as "probably the most successful experience of integration that Latin America has had in its history."

That is quite a claim for an entity that is barely a year old and includes only four countries as members. So what is the Pacific Alliance, and is it really as magnificent as Latin America's presidents would have us believe?

The bloc was set up in June 2012 by Chile, Colombia, Mexico and Peru. Although they insist the Alliance is not a rival to Mercosur, the trade bloc dominated by Brazil and Argentina, it is difficult not to see it as such. Mercosur has become increasingly hamstrung by protectionism in recent years, and the founding members of the Alliance have clearly decided their future lies in freer trade and cooperation.

The Alliance countries also have an advantage over their Mercosur neighbors in that they all boast Pacific coastlines and increasingly look west, to the thriving economies of Asia. Although it is only a year old, the Alliance seems to be emerging as the most dynamic trade bloc in the region.

Together, the member countries have a combined gross domestic product (GDP) of around $2 trillion--a third of the Latin American total--and accounts for half the region's exports. They are, between them, a rival to Brazil. Last year, their combined exports were worth $556 billion and their imports $551 billion. Combined, it would boast the world's ninth largest economy, accounting for 2.7 percent of global GDP.

In its short life, the trade bloc has achieved a lot. The member states have agreed to scrap tourist and business visas and will strive to make work visas more readily available. They made cross-border grants available to their students so they can study more easily in the other member states.

They have agreed to scrap tariffs on 90 percent of their shared merchandise trade and to eliminate the remaining 10 percent by the end of the decade.

The Pacific Alliance is also tackling issues like tax harmonization and...

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