Opportunity knocks for LatAm

Monday, March 20, 2017

While in the United States and certain European countries the immediate future is one of isolationism and closed borders, another chunk of the world is showing a desire to move to further openness. In Latin America, cross-border commerce might never have appeared so bright.

Last week, leaders from Latin America and Pacific Rim nations gathered in the Chilean beachside city of Viña del Mar to try to pick up the pieces left by the failed TPP trade deal. They were eager to send a singular message: free trade is the pillar of a healthy economy.

Latin America's Pacific Alliance trade bloc is suddenly looking very relevant. Its four pro-free market members – Chile, Peru, Colombia and Mexico – said they would now allow associate membership, a way to build out a free trade zone without all the fuss. New Zealand was quick to say that it would be one of the first to begin negotiations.

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For lots of the world, the TPP was a good notion, but it was flawed. The withdrawal of the US now allows nations pause, and time to refine some of the most controversial clauses, such as those on labor and the environment. The absence of the US allows Latin American nations greater protagonism.  

A joint statement from the TPP partners attending the Chile event, which included Australia, Canada, Japan, New Zealand, Singapore and Vietnam, reiterated a "firm commitment to collaborate in keeping markets open and to the free flow of goods, services and investment, advancing regional economic integration and strengthening the rules-based international trading system noting our concern with protectionism in many parts of the world."

Next, Pacific Alliance members will attend Mercosur talks in Buenos Aires on April 7. Deeper economic integration will make the region more competitive in international markets and boost long-term growth, according to a new World Bank report.

"In today's world, regional economic integration offers a way forward to reactivate the economic growth needed for reducing poverty and boosting shared prosperity," says Jorge Familiar, World Bank VP for Latin America and the Caribbean. "A more robust intraregional integration will make us more competitive in the global arena. Effective integration will require investment in infrastructure, connectivity and logistics, which will offer an additional boost in economic growth."

The World Bank calls for a reduction in external tariffs, new preferential trade agreements, harmonization of rules and procedures, improvements in infrastructure to lower costs, and a full integration of labor and capital markets. The Pacific Alliance achieves these goals.

Instead of seeing Brexit and Trump as a deep regression, then, many Latin American countries might consider it a little blip in an upward trending graph.