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

Photocredits: yodiyim/FreeDigitalPhotos.net
Mexico is the biggest economy within the Pacific Alliance. Members praise in being the 7th or 8th largest economy in the world, but this is in great part attributed to Mexico’s membership.

This is why it is worth questioning the relevance that Mexico will give to the PA agenda during times of uncertainty regarding the future foreign policies and diplomacy by its neighbour and largest commercial partner the US.

As  Trump seems to follow through on some of his campaign proposals, Mexico will need to work out its strategy towards the US and define its corresponding offensive and defensive interests. It will soon become the number one priority of Mexico’s foreign policy which could deviate the attention from the PA implementation.

One scenario is if the NAFTA renegotiation takes place. Renegotiation would be a time-consuming endevour that would demand extensive public consultations and the involvement of several interest groups. As some experts have pointed out, this would be the only way to reach a deal that looks after the defensive and offensive interests of Mexico while balancing the negotiation with the US. The original NAFTA negotiations took a long time, and general wisdom suggests that similar agreements take at least two years or more to be concluded and the same time to enter into force. If TPP (Transpacific Partnership) was at the forefront of the main concerns of trade officials in Mexico, its place will be taken by NAFTA renegotiation instead of PA implementation. This scenario is still uncertain because future renegotiation has been bogged down with the recent announcement by President Trump that the construction of the border wall with Mexico will commence soon. In the meantime, Canada has signalled an intention to renegotiate a trade deal with the US with or without Mexico in it.

NAFTA update could bring indirect benefits to the PA by pushing additional regulatory and domestic policy reforms. However, this outcome is contingent on the approach taken by a future negotiation between the three NAFTA members and final approval by the US Congress.

A second scenario is that tensions between Mexico and Trump will escalate with the implementation of further measures by the latter that follow a populist and nationalist approach to its role in the presidency. This situation will likely push Mexico to divert its economic dependency towards more diversified markets in Asia, Europe and down in Latin America. This would be a process that takes time and for which Mexico and the Mexicans are not well prepared.

Up to this point, Mexico has not signaled an interest in becoming the leader driving the progress of the PA, despite its economic power that would suggest it as the natural leader. This is due to some extent with the lower levels of economic interdependence and commercial ties with its South American counterparts. There are no real economic incentives that would retribute on that leadership. However political pressures of the current relations with the US could trigger more proactive actions by Mexico to implement the free markets that PA attempts to pursue.

Time will tell…

Sources: wilsoncenter.org

wilsoncenter.org

latinamericagoesglobal.org

Photocredits: domdeen/FreeDigitalPhotos.net
President Bachelet has recently expressed particular interest in Argentina becoming a PA member, and as Pro Tempore president of the integration mechanism will devote efforts to this end. Let’s remind us that since the second semester of 2016 Argentina officially became an observer of the mechanism.

However, going beyond the political rhetoric of presidents we need to consider the long-term economic and institutional implications for the PA in this scenario.

Despite efforts by the Argentinian president to signal a change in foreign commercial policy, there is a lot of uncertainty as to whether this is a move reflecting a shift in state policy or rather a short term policy of Macri’s government. Uncertainty on the continuity of this policy after the long lasting protectionist approach of the Kirchner era would not contribute to ensuring stability in this front for the PA. The PA is an integration model that has clearly characterised itself by the alignment of its members regarding commercial foreign policy and development approaches. Changes in unconsolidated state policies by a newcomer such as Argentina could not only slow down the pace but lead to stagnation, as seen in previous integration experiences.

On the other side of the table, Argentina should and will probably focus on putting things in order within Mercosur after Venezuela’s suspension from the integration scheme. This situation triggered a most recent institutional crisis for Mercosur and Argentina’s delegation of the pro-tempore presidency. Joining the PA as a full member would only represent another example of ‘the scape forward approach’ that Latin American governments and states often take towards regional integration.

Finally, I am not sure that with the short length of pro-tempore presidencies within the PA Chile should be investing efforts into extending the number of countries in the PA rather than setting and implementing a work agenda that could strengthen the economic ties and other integration areas within the already existing members. People might say these are not excluding issues but they de facto could be when limited human resources are devoted to performing multiple tasks like is the case in the PA. There is a need to prioritise efforts and areas of work.

The issue could be just part of the rhetoric accompanying the recent presidential visit of Bachelet to Macri, but places on the stage a major missing factor: a clear policy line and criteria regarding new members accession/entry to the PA.

Is the PA ready for the newcomers?

I look forward to your comments on this issue.

Sources: panampost.com

reuters.com

A question that has puzzled me for quite a while is what  the Pacific Alliance and its members really mean with deep integration.

Photocredits: Kaisorn/FreeDigitalPhotos.net
This is not a minor issue considering that deep integration is one of the main goals of the Pacific Alliance. In the future deep integration and what it entails could serve as a proxy for the success or failure of the Pacific Alliance, thus more clarity on its meaning is necessary.

I have addressed the question and tried to solve the query through different sources.

First, the text of the Framework Agreement accompanying the concept could give an indication as to the meaning and scope of the deep integration goal. Article three prescribes three goals for the PA. The first one is building an area of deep integration to advance progressively towards the free movement of good, services, capital and persons. The qualification provided is that the area of deep integration will be built in a consensual and participative way. The programmatic reference to ‘advance’ in the free movement of factors has omitted the reference to what in the common typology of Balassa refers to the common market.

Second, traditional approaches to defining the concept refer to deep integration opposing it to the concept of shallow integration. The concept was first used by Robert Laurence. It refers to a kind of commercial agreement that deals with behind the border issues. They include disciplines such as services, factors movement, harmonisation of regulatory regimes, environmental standards, and in general domestic policies that affect international competitiveness. In contrast, shallow agreements refer to agreements that deal with border issues preventing trade between two parties. The concept has been used in the literature to refer to NAFTA (North American Free Trade Agreement). Commercial agreements north-south have been also characterised as deep integration agreements, while  south-south agreements have commonly been considered shallow agreements in some academic literature. In this context, the concept seems to have a commercial connotation. Continue reading

Last week a friend from a government agency asked me in a mesmerising way: Are there already publications on the Pacific Alliance? Well, there are in fact three dedicated edited books on the Pacific Alliance!

I would like to review these recent publications on the Pacific Alliance for the general public to get a sense of what they can get from them.

1. Alianza del Pacífico: en el Proceso de Integración Latinoamericano (the Pacific Alliance in the Latin American Integration Process) by CIEPLAN and the Interamerican Development Bank. This 2014 edited exploratory publication provides general insights on several aspects of the Pacific Alliance such as the relational issues with Mercosur and Brazil. An interesting approach is proposed by Alexandro Foxley in his short contribution on productive integration. As mentioned the book is only exploratory and does not provide details on the particular challenges of the PA to move forward. The book is available for free at: www.kas.de
2. La Alianza del Pacífico Mitos y Realidades (The Pacific Alliance: myths and realities). This is a 2015 edited publication that offers more in-depth analysis on particular topics and issues of the Pacific Alliance. It examines the Pacific Alliance in the regional and the global context with contributions by several authors. The publication briefly addresses some of the general challenges that arrive from the current institutional structure posing the question on how it does not conform with the institutional requirements to establish a common market. Moreover, the book includes a section on the challenges and cooperation avenues on security issues related to drug trafficking, money laundry, and organised crime for the PA members.  The book is available for free at: www.kas.de
3. Perspectivas y Oportunidades de la Alianza del Pacífico. (Opportunities and Prospects of the Pacific Alliance). This is a 2015 edited contribution by Universidad CESA and Universidad del Desarrollo. The book delves into more detail on the achievements that the PA has made up to this point and also touches on particular aspects of the PA, including contributions on particular countries such as Chile and Peru. The chapter by Edgar Vieira is worth exploring since it provides interesting insights from a theoretical and practical point of view. Some general recommendations on steps forward come from the contributions while a strong economic focus on their analysis persists in most of the chapters. Photocredits: Panaawat/FreeDigitalPhotos.net

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