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International Situation Threatens the Pacific Alliance’s Formula for Success

LIMA – The trade dispute between the United States and China has sparked concern among organizations such as the Pacific Alliance, who see the spat between the two superpowers as a threat to the success formula developed in recent years based on trade exchange and preferential attention to entrepreneurs.

The Alliance is equivalent to the world’s eighth largest economy – accounting for 40 percent of regional exports and 40 percent of the Latin American region’s GDP – and has not been able to dodge the trade war’s impact, especially given that both the US and China are major partners of Peru and Chile, who – along with Colombia and Mexico – make up the four-nation Pacific Alliance.

Despite boasting better economic figures than other Latin American countries, the bloc has suffered a hit in its exports, even though Mexico has benefited from a new trade agreement with the US and Canada as well as from a tariff agreement with its northern neighbor.

The head of the Inter-American Development Bank’s Institute for the Integration of Latin America and the Caribbean, Pablo Garcia, revealed in June that the alliance’s exports had gone from more than 9 percent in 2018 to a mere 0.3 percent in the first quarter of this year.

This scenario affects a group that has made considerable progress since its creation in 2011 and has already completed all “first-wave” reforms, which included trade agreements and similar economic policies, as well as the reduction of physical barriers to allow the free transit of people.

“What the first-stage reforms have done is facilitate investment. We have very important cross-investments. The four of us have adopted the same pension fund systems, things that have helped us grow together and integrate,” Peru’s Alfonso Bustamante, who led the business council, told EFE.

For entrepreneurs, the Alliance offers the possibility of “real” integration and allows access to larger markets, with similar regulatory harmonization and the possibility of their citizens being employed by any economy in the group.

Despite the emphasis on free trade and industry, the group believes that being an organization goes “beyond the inclusion of colors and positions of the right and left,” as it considered that it was more important to generate added value through private or public investment to generate “real employment” and fight poverty.

In this regard, there is a consensus that the progress made so far shows that the Alliance’s enormous potential, as its objective is to overcome the barriers among the four countries and provide goods and services to the world.

In this context, the presidents of the member states on Saturday, at the end of the group’s 14th Summit, issued a joint declaration in support of free trade, rejecting all protectionist measures and recognizing the importance of World Trade Organization.

Free trade was described as a key tool and multilateralism as an essential element for development in the joint presidential declaration at the conclusion of the Pacific Alliance Summit.

Colombia’s minister of trade, industry and tourism, Jose Manuel Restrepo, said the alliance not only sought to vindicate the importance of multilateral systems, but also to offer “a response to the protectionist trend that has begun to appear in the world.”

Looking into the immediate future, according to Peruvian Foreign Minister Nestor Popolizio’s comments to EFE during the summit, the Alliance will work to increase its cooperation with other blocs and make improvements in public policy standards.

During the Lima summit, the alliance held meetings and signed agreements with Ecuador, South Korea, Australia, Canada, New Zealand, Singapore and Japan, as well as with the Eurasian Economic Commission and the Organization for Economic Cooperation and Development.


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