30
May

The region is falling in behind two alternative blocks: the market-led Pacific Alliance and the more statist Mercosur

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On May 23rd in the Colombian city of Cali the presidents of four Latin American countries—Chile, Colombia, Mexico and Peru—will sign an agreement removing tariffs on 90% of their merchandise trade. They will also agree on a timetable of no more than seven years for eliminating tariffs on the remaining 10%. They have already removed visa requirements for each other’s citizens and will proclaim their aspiration to move swiftly towards setting up a common market.

The Pacific Alliance, as the group calls itself, is “the most exciting thing going on in Latin America today”, according to Felipe Larraín, Chile’s finance minister. Some outsiders think so, too. Costa Rica and Panama want to join; Canada’s prime minister, Stephen Harper, and his Spanish counterpart, Mariano Rajoy, have said they will attend the Cali meeting as observers.

Behind the excitement is the sense that the Pacific Alliance is a hard-nosed business deal, rather than the usual gassy rhetoric of Latin American summitry. Under the leftist governments that rule in much of South America, there has been plenty of talk of regional integration, but precious little practice of it. Intra-regional trade makes up just 27% of total trade in South and Central America, compared with 63% in the European Union and 52% in Asia.

The Pacific Alliance aspires to change that. “It is based on affinity, rather than proximity,” says José Antonio García Belaunde, a former Peruvian foreign minister who was instrumental in launching the group in 2011. “It’s integration with those who are capable of doing it.” Read more…

As published in www.economist.com on May 18, 2013 (The Economist – Print Edition).

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