Market-friendly integration.

Author:Dube, Ryan
Position:TRADE: THE PACIFIC ALLIANCE - Pacific Alliance Corp.


While the Pacific Alliance involving Mexico, Chile, Colombia and Peru has gotten off to a good start, many observers say that grounds for skepticism remain. Will the member countries' pragmatic, market-friendly approach make the difference?

The launch of the Pacific Alliance last year revived hopes that a Latin American project may finally be successful in promoting economic integration and free trade, while deepening ties with China and other fast-growing Asian countries. But though the four-country alliance has gotten off to a good start, many observers say there are still grounds for skepticism.

Other Latin American integration efforts have met obstacles despite starting off with similar optimism. Mercosur was formed more than 20 years ago as an ambitious project to create a common market of Argentina, Brazil, Paraguay and Uruguay. Today, analysts believe that Mercosur, which now also includes Venezuela, is at risk of breaking up partially due to increased protectionism.

Authorities from Chile, Colombia, Mexico and Peru--the members of the Pacific Alliance--are confident that their initiative will be different. Their optimism is largely based on the Pacific Alliance's strong foundation.

Unlike some of their Latin American neighbors, the four countries have been firm proponents of market-friendly policies, with each one signing several free trade agreements prior to the Pacific Alliance. Chile, Colombia, Mexico and Peru have also had good compliance records for international commitments in recent years.

"It is an important signal to Latin America, in the sense that regional integration and open markets are the best way to ensure greater volumes of investment, trade, and growth," the Colombian trade minister, Sergio Diaz-Granados, said last year after the alliance was officially created.

In addition, the Pacific Alliance's immediate objectives are more modest than other regional integration efforts. In January, the countries eliminated 90 percent of the tariffs on goods traded among their countries. They have a plan to lift visa requirements in order to facilitate travel, and create an exchange program for university students. Chile, Colombia and Peru have integrated their stock markets, while the Mexican Stock Exchange is expected to join them soon.

"The Pacific Alliance strikes me as more encouraging," said Michael Shifter, the president of the Inter-American Dialogue, a think tank. "They are trying to build a...

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