Non-traditional services and knowledge-based services have taught positive lessons to PA governments and businesses alike during the 2020 pandemic. Notwithstanding the tremendous hit that traditional services — tourism, hospitality, passenger transport, and travel — have experienced due to the government measures to stop the spread of COVID-19.

Similarly to the 2008 GFC, knowledge-based services have proved their resilience and ability to adjust to the new environment during the pandemic.

Services sectors in the PA countries have been vital in supporting government measures on mobility restrictions, social distancing and the closure of non-essential shops. While telemedicine, IT services, and the use of big data have helped PA countries in the management of health and sanitary risks, telecommunication services have been the backbone to support work-from-home (WFM) not only for businesses but also for government institutions.

The dynamism and productivity of the knowledge-based services sectors not only continues but in some industries such as call centres and other BPO services increased during the COVID-19 lock-down. New business models have either emerged or sped up their evolution, thanks to the mandatory use of digital platforms to operate. An example of these changes is the increase in the microsourcing of education, professional, and personal training services through digitalisation, despite persistent challenges for Internet access and capabilities. Demand for audiovisual contents, animation services, entertainment and online gaming services, and digital services in support of e-commerce —shopping carts, online catalogues, electronic payment platforms etc — increased in the last five months.

In this regional context, the lack of a regional policy to promote knowledge-based services trade and investment has become more apparent.

The services sector is crying for a regional policy and strategies within the PA that could contribute to delivering results on the goals set in the Pacific Alliance 2030 Vision.  Doubling and consolidating intra-regional services exports demand more robust and long-term regional strategies that are non-existent today.

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Protocredits: Alianza del Pacífico

Early this month the presidents of the Pacific Alliance (PA) met in Lima, Peru for their regular yearly summit. The absence of the Mexican president overshadowed the XIV meeting and marked the first time in eight years that a president of the member states did not heed the call. A series of meetings by the ministerial councils and technical groups of the mechanism between 1 and 6 of July preceded the presidential gathering.

The outcomes of the presidential summit include a political Declaration in Support of the Multilateral Trading System that refers to the commitment of the members towards a rules-based system, their support to the World Trade Organization, and their rejection towards protectionist measures that have hindered global economic growth. Members also signed a Declaration for the Sustainable Management of Plastics stating their commitment to undertake specific initiatives to better management practices. Framework agreements for cooperation were concluded with Japan, the Eurasian Economic Commission and the Organization for the Economic Cooperation and Development (OECD).

As customary with the early harvest approach the Pacific Alliance has followed since its inception, the presidents and ministries highlighted the progress of the integration. The works underscored include multiple events hosted under the PA umbrella, such as macro business round-tables, joint commercial and investment promotion activities, the delivery of technical studies and several meetings for the exchange of experiences and good practices. The outcomes also report efforts to reach harmonisation at the normative, operative and technological level.

National agencies in the state members have also signed memoranda of understanding for future inter-institutional cooperation. One of them is an interesting Memorandum of Understanding Regarding Good Governmental Practices and the Development of Cooperation Mechanisms for the Prevention and Fight against Corruption in Public Procurement Systems within the Pacific Alliance. This memorandum represents a typical example of the problem-based approach PA members have followed from the start in the definition of their practical agenda. An approach that seems reasonable, albeit it brings to question the extent to which the PA regional agenda would be able to deliver meaningful results on these broad agenda growing not only in size but also complexity.

Following, the launch of the 2030 Vision in 2018, the presidents celebrated the conclusion of a work plan to pursue the aims envisioned for a more integrated; more global, more connected; more citizen-oriented PA. So far, the scope of the work plan is still unknown since the document is not public, and it is not clear what input from the civil society and other stakeholders was received for its construction.

Moving forward, the presidents instructed the working groups with a long list of mandates to undertake activities in areas such as trade facilitation, SMEs; public procurement; financial integration; trade, investment and tourism promotion; regulatory cooperation; global value chains and productive linkages; innovation; services and capital; tourism, labour, education; gender; and culture just to mention a few.

However, a close examination of these mandates make it evident a need for more stringent monitoring mechanisms of the activities undertaken to accomplish them. Although it is clear that some of these mandates are far-reaching and could not be achieved in the short-term, a few questions arise from the practice of presidential mandates.

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Last week the Colombian President, Ivan Duque, stated his interest in establishing a new regional institution (perhaps an organisation) which he suggested to name Pro-South. This regional initiative if successful, would aim at coordinating public policies among South American countries, defend democratic values, including the separation of public powers, promote free market economies and the social agenda. He even suggested that it would replace UNASUR, a regional organisation founded in 2008 under the leadership of Brazilian and Venezuelan left-wing governments. UNASUR entered a significant crisis last year after Colombia’s announcement to withdraw from it and the voluntary membership suspension of five of its twelve members.

The move aims to politically punish UNASUR for its inability to take action against the current undemocratic regime run by Venezuela’s president, Nicolas Maduro.

Colombia’s president said to have discussed the initiative with the Chilean president, Sebastian Piñera and found a positive response. In this short note, we would like to examine the need for a new regional institution of this type and the implications that its establishment could have for the Pacific Alliance’s long-term consolidation.

The announcement of this new regional forum seems to be another perfect example of the “escape forward” rooted in Latin America’s regionalism. This term coins a practice of establishing new regional organisations or fora to pursue similar objectives to already existing ones when those established institutions face a crisis due to lack of political consensus or ideological differences within them. Rather than persevering at solving those political differences, states create new organisations to address similar topics while leaving the organisations that fail to deliver a particular result in a coma.

Building momentum for a new regional forum places Colombia’s president in the regional radar and reclaims the interest for a dialogue targeted at South America. It will be not only a test to its potential regional leadership but also a test to other regional institutions such as the Pacific Alliance, Mercosur and the Andean Community to stay relevant.

The objectives that this organisation are set to pursue are not different to the aims that the above institutions have been seeking for quite a while, questioning the real added value of Pro-South.  Even CELAC, with a more extensive membership and regional coverage over Latin American affairs, seems to follow similar goals. Is Pro-South just a new political statement of the geopolitical swings within South America that has unfolded over the past few years?.

A consensus-based fora such as this one will always face the risk of stagnation that comes with political disagreements of the government members. Moreover, intergovernmental institutions such as the future Pro-South will claim a refocus of priorities by the government officials managing it. It is more than likely that governments running on national budget deficits will not have dedicated human resources for this new instance. On the contrary, the reassessment of priorities and national agendas could contribute to slow down the pace of progress in the existing institutions.

Photocredits: Photo by Gaelle Marcel on Unsplash
Sources: cancilleria.gov.co ; cnnespanol.cnn.com; blueradio.com

The Pacific Alliance reached its 7th anniversary this year with an active agenda but uncertain times lie ahead. With further presidential changes in Colombia in August and Mexico in December 2018, some concerns arise regarding how these presidential moves will affect the progress in the internal agenda of the PA. Securing presidential support is particularly relevant for the PA considering its intergovernmental model where presidents have had the major leading role since inception.

In the case of Colombia the election of Ivan Duque, the centre-right candidate, may represent less of a concern to the continuity of the PA. This is because the PA’s principles and ideas align with his views on investment promotion and economic development. The mechanism enjoys strong support from the business community in Colombia which has played a central role in its electoral campaign and its economic strategy. Duque’s potential support to the PA contrasts with his recent declarations that confirm his interest to withdraw from UNASUR.

In the case of Mexico, presidential changes represent a broader concern for the more unpredictable foreign policy line that Andres Manuel López Obrador (AMLO) might follow for the coming six years. AMLO was able to secure a sweeping victory on the 1st of July with a slogan that states: ‘the best foreign policy is domestic policy’. It is not entirely clear what he means with this narrative other than he will prioritise dealing with domestic affairs such as corruption and drug trafficking-related crimes.  AMLO’s rhetoric until late stages of the presidential campaign has relegated foreign affairs to the side although setting a clearer foreign policy pathway will be unavoidable. In any case, the PA might be off to a good start as the elected president will join the outgoing president Enrique Peña Nieto during the Presidential Summit on the 24th of July.

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The Pacific Alliance hosted meetings from the Ministers of Finance and the High-Level Group this week. What progress did they make?

During the XVI Meeting of Ministers of Finance, which took place in New York, they agreed to explore the option to issue a new catastrophic bond to cover risks of floods and droughts. This initiative is well received after the successful issuance of  CAT Bonds to cover earthquake risks last February.  The Pacific Alliance is also working on an agenda towards financial inclusion. Members agreed on the development of common criteria/standards for Fintech Regulation to promote these kinds of activities. They also reported some progress on the implementation of the Pacific Alliance Infrastructure Fund.

On the 24th of April 2018, the Deputy Ministers of Trade and Foreign Affairs held a virtual meeting to discuss the awaited 2030 Strategy for the Pacific Alliance, the entrance of the four associate members, and the next presidential meeting to take place in July. However, not much else is reported on the content and scope of this strategy and proposals are not publicly available for consultation on their website or through other means.

In the meantime, other regional players continue to explore membership to the Pacific Alliance. This is the case for Ecuador which has expressed interest in joining the mechanism on two occasions.  Whether these intentions are to materialise seem unlikely in the short and even medium term. However, Ecuador’s statement is a strategic geopolitical move by president Lenin Moreno to distance from this predecessor’s foreign policy. With this announcement, Moreno makes the call that he wants to build new alliances during his presidency, ideologically different to the ones made by Correa. He wants to signal a more open and liberal approach to regionalism with the aim to embrace economic and political relations with the Asia Pacific beyond China.

How stable this resolution is as a state policy will be a challenge for Ecuador’s membership acceptance and would certainly test one of the openness features that the Pacific Alliance preaches. Adding a new full member with an unstable foreign policy orientation could prove disastrous for the future progress of a consensus-based intergovernmental mechanism such as the Pacific Alliance.

Sources: Nueva Sociedad; 20minutos.com.mx; alianzapacifico.net
photocredits:@MauricioCard

The blog Shaping the Pacific Alliance is introducing a new feature that aims to contribute to the ongoing academic and non-academic research about the Pacific Alliance. The new feature is a library that encompasses more than 200 publications examining the Pacific Alliance. From books to journal articles, general articles and briefing papers, the library provides visitors with a substantive number of documents produced mainly in  Spanish and English.

Visitors will be able to research the publications through the general search engine. Users can also employ key terms to find the materials they are looking for. Publications can also be found by their type (eg journal article, working paper) and language. A research cloud depicting the most common terms used in the publications is also available on the right-hand side, at the bottom of the library page. In case you want to have a bit of fun with your research you can give it a go!. Continue reading

The presidents of the Pacific Alliance countries had a virtual meeting on May 6 to discuss the Pacific Alliance’s strategy towards 2030 and reiterate the instruction to the ministers to develop such a strategy, according to the Cali Declaration from last year. The presidents emphasised the requirement to propose a concrete plan to increase competitiveness and productivity, to strengthen the integration process and to disseminate the benefits of the PA to its citizens in a more effective way.

An interesting point of the brief declaration is that the presidents clearly spell out the commitment to develop deeper integration and its relation to the free movement of persons, goods, services and capital. The scope of the 2030 strategy is put on the spot by this connection and questions how instrumental it could be in reducing not only barriers to trade but also going beyond in proposing concrete actions towards coordination, regulatory harmonisation, recognition and convergence and the development of regional public goods.

Presidents will meet again on the 24th and 25th of July 2018 when the pro-tempore presidency will be passed on to Peru for a year.

In the meantime, the third round of negotiations for free trade agreements with potential associate states –Australia, Canada, New Zealand and Singapore– was held in Santiago, Chile from March 3rd through to the 9th. Parties reached agreements in the SMEs disciplines, transparency and regulatory improvement, general cooperation, and sanitary and phytosanitary rules.

Negotiators have anticipated that not everything could be negotiated as a bloc and some issues, particularly market access for goods, will require bilateral negotiations. On this occasion, the parties discussed the access offers for goods, services, investment and disciplines for the temporary entry of business people.
The next round of negotiations with associate candidates will be held in mid May in Ottawa, Canada.

Sources: alianzapacifico.net
larepublica.co
Photo by Deniz Altindas on Unsplash

Two developments have taken place in recent days concerning the progress of the Pacific Alliance: first the issuance of cat bonds for earthquake-induced damages. Second, the new round of negotiations with candidates to associate members on the last week of January. We will refer to each of them briefly.
A positive outcome is the release of  Catastrophic bonds to cover the four members against earthquakes with a total coverage of US $ 1.3 billion. The World Bank-IBRD issued the first multi-nation operation on Wednesday 7 February. According to the Bank, this is the second largest issuance of cat bonds in history.

Coverage for Chile, Colombia and Peru will be for three years while Mexicos’ coverage will be two years. The cat bonds issuance is worth celebrating as a clear example of how regional cooperation could contribute to support national capabilities. It is also an expression of the problem-based approach taken by the Pacific Alliance in the aftermath of the intense earthquakes suffered by Mexico in 2017 and Chile in  2015.

The second round of negotiations towards ‘commercial agreements of high standards’ between the PA members as a whole and the four candidates (Australia, New Zealand, Canada and Singapore) took place in Gold Coast, Australia, from the 29 January to the 2 February 2018.

It gathered government officials of the eight countries to discuss disciplines in areas such as: market access on agricultural and industrial products, trade facilitation, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, services, investment, trade remedies, public procurement, cooperation, environment, labour, and institutional matters of the agreements. Continue reading