The Pacific Alliance: A Counterpoint to Crisis in Venezuela?

  • photo courtesy of Wikipedia
    Feb 21, 2014

    Over the past two weeks, it seems that all attention on the Western Hemisphere has focused on the unfolding political crisis in Venezuela—and for good reason. Venezuelans have taken to the streets to protest a range of topics ranging from human rights to the current economic chaos.

    Last year, Venezuela’s inflation topped 56 percent, and its budget deficit escalated to almost 50 percent. Last month, Venezuelans faced widespread and increasing scarcity of basic goods—at any given moment, one in five basic goods was out of stock.

    These issues appear to be spiraling out of control. But the same can’t be said of Venezuela’s neighbors, many of which are faring better than their politically embattled counterpart. In light of all that has happened in Venezuela, then, perhaps now is an appropriate time to look at one of the
    most promising and dynamic initiatives in the Americas: the Pacific Alliance.

    Q1: Where does the Pacific Alliance stand to date?

    A1: On February 10, the presidents of Colombia, Chile, Mexico, Peru, and new member Costa Rica met in Cartagena, Colombia, for the eighth Pacific Alliance summit in less than three years. At the summit, the leaders agreed to eliminate 92 percent of the tariffs on intra-alliance trade and formally began Costa Rica’s membership process.

    In many ways, this summit is a major milestone for Latin American economic integration efforts—but perhaps this should not come as a surprise, given the fast-moving success of the Pacific Alliance so far.

    In just three years, the four founding members have yielded significant positive results. Together, the alliance’s combined economies represent more than one-third of Latin America’s GDP and a full half of the region’s trade. And the Pacific Alliance collectively boasts a projected growth rate of 5 percent, surpassing even Brazil.

    And this success has attracted attention. There are rumors that Panama will seek full membership, and the list of observers is impressive and growing. Some have even speculated that Canada, which already meets many of the criteria for consideration, could enter the framework moving forward.

    Q2: What does the Pacific Alliance and its recent growth mean for the region?

    A2: Much of what differentiates the Pacific Alliance from its past and current counterparts throughout the region is its pragmatic focus on achieving and sustaining economic stability and liberalization.

    At a domestic level, members of the alliance have benefitted from adhering to the standards of this regional framework for facilitating growth and stability. At the summit earlier this month, Presidents Ollanta Humala and Juan Manuel Santos (of Peru and Colombia, respectively) agreed to cooperate in addressing common problems of illicit exploitation of resources and drug trafficking, demonstrating how the precepts of the alliance allow for more dynamic partnerships on many levels beyond the purely economic.

    The benefits at the regional level are significant, as well. Open to increased membership from countries committed to the existing framework, the Pacific Alliance represents an opportunity for expanding business investment, job creation, and resources for poverty reduction.

    At the global level, the Pacific Alliance has steadily worked to bridge a coherently integrated Latin American market with opportunities in the Asia-Pacific region. The alliance’s mechanisms enable the leveraging of existing commercial agreements between Pacific Alliance members and Asian economies.

    By paving the way to Asian markets, the group strengthens its members’ ties with key markets. And with China, Australia, New Zealand, South Korea, Japan, India, and Singapore already on the list of observers, it is clear that the group is turning heads across the Pacific. With deeper involvement, policymakers and investors in Asian countries could utilize the institutional framework of the Pacific Alliance as an entryway to deepen trade of resources and increase business opportunities in the region, thereby growing global—not just regional—economic integration.

    Q3: What does the Pacific Alliance mean for the United States?

    A3: Recent years have seen the growing interconnectedness of Latin American states. And part and parcel to those linkages is an implicit distancing from the United States.

    As a uniquely Latin American initiative, the Pacific Alliance certainly represents some degree of growing autonomy from U.S. economic influence. Still, unlike Mercosur—a more ideological agreement among Argentina, Bolivia, Brazil, Paraguay, Uruguay, and Venezuela—the Pacific Alliance has as its center a pragmatic platform that seeks to maximize growth and competitiveness, both of which are in the political and economic interests of the United States.

    In many ways, the alliance represents an expansion and institutionalization of values traditionally promoted by the United States in the hemisphere. Economic liberalization, consolidation of good governance, rules-based trade, sound macroeconomic management—all of these are key to the U.S. government’s own economic priorities, and they are integral to the Pacific Alliance’s framework.

    And given the close bilateral relationships the United States enjoys with all of the current members of the group, the Pacific Alliance represents a new and vibrant source of economic opportunities for the United States.

    As of this most recent summit, the Pacific Alliance has 29 observers—including the United States. The members’ already successful efforts to deepen the linkages among their economies and develop a sustainable institutional framework are already proving fruitful—and as more countries rally for a piece of this promising agreement, the United States stands to gain.

    To be sure, the Pacific Alliance will continue moving forward—deliberately, if slowly. Each founding member state’s commitment to the agreement has already been tested, with each surviving a turnover in head-of-state since the alliance’s inception. Though not yet fully formed, in short, the Pacific Alliance is at the very least both robust and resilient.

    The contrast between the Pacific Alliance and other regional initiatives past and present is sharp—particularly in light of Venezuela’s recent economic troubles and the ensuing political crisis. And with each successful step, the Pacific Alliance validates its own model as a potential mechanism for regional cooperation—a model based on economic pragmatism and liberalized trade. The results shown by the alliance’s vigorous effort for economic integration demonstrate an opportunity to assured development. So who will be the next to jump on board?

    Carl Meacham is director of the Americas Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Rodrigo Otárola, intern scholar, and Jillian Rafferty, staff assistant, both with the CSIS Americas Program, provided research assistance.

    Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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