Financial Integration in the Pacific Alliance

The Pacific Alliance (PA) is a pragmatic and dynamic integration process whose members—which currently include Chile, Colombia, Mexico, and Peru—seek the free circulation of goods, services, capital flows, and people among them, as well as cooperation in a wide variety of other areas. The PA subscribes to the modern view of “open regionalism,” because it promotes trade and capital flows with other regions—in particular, with East Asia and Mercosur—and it remains open to new members. Several other Latin American countries have indicated their potential interest in the PA, and Costa Rica is currently advancing in the process of joining.

Financial integration is, thus, one of the PA’s primary goals. Financial institutions within the region, in particular of emerging financial multilatinas, already have important cross-investments.

But the best-known development so far in this area is the Mercado Integrado Latino Americano (MILA) platform, partial integration of the four current PA members’ stock exchanges.

This paper discusses, first, why financial integration, and in particular capital market integration, may provide substantial benefits to the PA’s members, especially in the current external environment.
It then focuses on the potential for the integration of capital markets within the region and on how a significant push toward regulatory harmonisation can contribute to meeting this goal and reenergizing MILA.

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Author: Guillermo Perry
Full document: 2016, Perry, Financial Integration in the Pacific Alliance