When the world gets closer.

We help you see farther.

Sign up to our expressly international daily newsletter.

Economy

In Search Of Unity On Latin America Trade

With the region still divided into different trading blocs, Chile is leading efforts to bring Latin American nations together for a joint policy to expand global trade.

The world within reach in Punta Arenas in southern Chile
The world within reach in Punta Arenas in southern Chile
Laura Villahermosa

SANTIAGO Since becoming Chile's president a second time and since her first meeting with the heads of state for the Pacific Alliance — Chile, Colombia, Mexico and Peru — Michelle Bachelet has insisted on the importance of moving closer to a separate, but parallel, Latin American trade alliance known as the Mercosur bloc.

But in Lima, there is skepticism about growing closer to this subregional bloc that includes Argentina, Brazil, Paraguay, Uruguay and Venezuela. César Peñaranda, executive head of the Peruvian business development institute known as IED, believes that "annexing" Brazil and Argentina into the Pacific Alliance would dilute it and hinder its progress.

"If they start incorporating countries that are not talking the same language on certain issues, that would take something away instead of advancing," he says.

Peñaranda says no other countries should join the Pacific Alliance in the short term, or at least until it consolidates itself, which would be during the first half of 2015, when the four parliaments will ratify the Alliance and its norms.

This is what will permit the sustained implementation of all agreements reached so far, says Humberto Astete, a tax partner at consultants Ernst & Young, who agrees the Pacific Alliance must consolidate before expanding.

The Alliance faces several challenges besides parliamentary ratification, including standardizing trade procedures and norms, harmonizing tariffs between members, and forging business alliances, says Juan Carlos Mathews of Peru's Pacific University.

Mixed messages

At a government level, Peru and Chile are taking contrary postures to these. During a May meeting of Pacific Alliance trade ministers, Peruvian Minister Magali Silva said the Alliance is open to the membership of new countries, particularly Brazil and Argentina. Chile's Deputy Foreign Minister Edgardo Riveros was more specific, saying in Sao Paulo in late August, "We want to be a bridge between the Pacific Alliance and Mercosur," and rejecting the idea of the "two coasts living with their backs to each other."

Juan Ruiz, chief Latin America economist for BBVA Research, sees these as promising words. He believes that to integrate Brazil and Argentina into the Alliance, Mercosur states should change their economic policies to align with the Alliance's requirements. "One requisite ... is having a free trade agreement signed with all the countries in the Alliance, then taking concrete specific steps," he says. Mexican President Enrique Peña Nieto also said recently that the Alliance is open to other countries, provided they promote free trade.

Humala, Bachelet, Peña Nieto and Santos at the 2014 Pacific Alliance meeting — Photo: Alianza del Pacifico Facebook page

The Pacific Rim economies are much more open, more stable in macro-economic terms, and have a greater willingness to reform, says Juan Carlos Martínez Lázaro, head of in-company programs at the IE Business School. But, he say, "In Mercosur, some economies like Brazil, Argentina and Venezuela are following a contrary line."

The differences between the blocs are evident. "Mercosur is a trading union between countries that have signed free-trade agreements with eight or nine countries," says BBVA's Ruiz, while "Alliance countries have each signed more than 40."

Argentina could update its economic policies with a change of government next year, says Martínez Lázaro. "But I think it will be a long time before Venezuela is on the same political and economic wavelength. But what could be done is Mercosur and the Alliance signing specific agreements on a tariff item or on economic cooperation."

It would be better to boost ties and increase integration with Mercosur members, says Hernán Vallejo, a lecturer at Colombia's Andes University, instead "of trying to form a single bloc, since member countries are focusing on quite different things." Current initiatives are intended to identify areas of shared interests, but are "very preliminary," he says.

Those who prefer that a giant, multifaceted economy like Brazil's were kept out observe that the Alliance's main point of attraction is the harmonized visions of its members.

The Alliance's collective economic figures are no trifle. As a bloc, the four would constitute the world's eighth largest economy, a population of 209 million, and expected growth rates of 5% a year, Astete says.

Ruiz says the Alliance is becoming an attractive shop window. "We are a club of countries with orthodox and prudent economic policies aiming for global integration," he says.

That's not an asset to squander.

You've reached your limit of free articles.

To read the full story, start your free trial today.

Get unlimited access. Cancel anytime.

Exclusive coverage from the world's top sources, in English for the first time.

Insights from the widest range of perspectives, languages and countries.

Geopolitics

U.S., France, Israel: How Three Model Democracies Are Coming Unglued

France, Israel, United States: these three democracies all face their own distinct problems. But these problems are revealing disturbing cracks in society that pose a real danger to hard-earned progress that won't be easily regained.

Image of a crowd of protestors holding Israeli flags and a woman speaking into a megaphone

Israeli anti-government protesters take to the streets in Tel-Aviv, after Prime minister Benjamin Netanyahu fired Defence Minister Yoav Galant.

Dominique Moïsi

"I'd rather be a Russian than a Democrat," reads the t-shirt of a Republican Party supporter in the U.S.

"We need to bring the French economy to its knees," announces the leader of the French union Confédération Générale du Travail.

"Let's end the power of the Supreme Court filled with leftist and pro-Palestinian Ashkenazis," say Israeli government cabinet ministers pushing extreme judicial reforms

The United States, France, Israel: three countries, three continents, three situations that have nothing to do with each other. But each country appears to be on the edge of a nervous breakdown of what seemed like solid democracies.

How can we explain these political excesses, irrational proclamations, even suicidal tendencies?

The answer seems simple: in the United States, in France, in Israel — far from an exhaustive list — democracy is facing the challenge of society's ever-greater polarization. We can manage the competition of ideas and opposing interests. But how to respond to rage, even hatred, borne of a sense of injustice and humiliation?

Keep reading...Show less

You've reached your limit of free articles.

To read the full story, start your free trial today.

Get unlimited access. Cancel anytime.

Exclusive coverage from the world's top sources, in English for the first time.

Insights from the widest range of perspectives, languages and countries.

The latest