Economic Policy Pacific Alliance countries accelerate pace in the midst ofglobal challenges

economic policy

Chile, Colombia, Mexico and Peru make up one of the most successful trade blocs in the world

PACIFIC ALLIANCE COUNTRIES ACCELERATE PACE IN THE MIDST OF GLOBAL CHALLENGES ▶ PACIFIC ALLIANCE CONSOLIDATED AS TRADE BLOC WITH STRATEGIC PROJECTIONS TO THE WORLD.

Within the framework of the XIV Pacific Alliance Summit held from July 1st to July 6th, 2019, the regional bloc, considered one of the most successful in the world, flexed its muscles in the face of global challenges by signing statements with the Union European, the Eurasian Economic Commission, the Organization for Economic Cooperation and Development (OECD) and Japan, in addition to signing a statement on environmental issues.

At the summit, the Presidents of Chile, Sebastián Piñera Echenique; Colombia, Iván Duque Márquez; Mexico, Andrés Manuel López Obrador; and Peru, Martín Vizcarra Cornejo, expressed their satisfaction for the approval of the 2030 Strategic Vision Work Plan, which establishes a road map of the Pacific Alliance with an aim at being more integrated, more global, more connected, and more citizen-involved; with the aim of closing trade negotiations in 2019 with candidates for Associated States to the Pacific Allianc, Australia, Canada, New Zealand and Singapore.

They also welcomed Ecuador as a new candidate to become an Associated State of the Pacific Alliance, with a view to their future membership as a full member, which constitutes an important step towards strengthening the Alliance. The leaders of Chile, Colombia, Mexico and Peru also declared their satisfaction with the incorporation of Armenia, Azerbaijan, the Philippines and Kazakhstan as new Observer States of the Pacific Alliance, currently with 59 countries on five continents listed as observers. This consolidates the role of the Pacific Alliance as an economic and trade platform with strategic projection to the world.

The Pacific Alliance Presidential Declaration was signed at the Summit on the Sustainable Management of Plastics, an instrument that exemplifies the sustained commitment of the Pacific Alliance and Observer States to the achievement of 2030 Agenda and the Sustainable Development Goals of the United Nations Organization. In the Declaration of Lima, the four Presidents of the Alliance expressed their appreciation to the Working Group on Harmonization of the Plastic Industry and Circular Economy, created by the Business Council of the Pacific Alliance (CEAP) to meet the challenges of these issues and accompany the efforts committed by governments in the Pacific Alliance Presidential Declaration on the Sustainable Management of Plastics.

A YEAR OF ACHIEVEMENTS Over the past year, the regional bloc composed of Chile, Colombia, Mexico, and Peru has put into effect an agreement that establishes the Pacific Alliance Cooperation Fund, which promotes new projects and initiatives for the benefit of the public. Likewise, it launched the Cooperation Council, a mechanism that boosts and makes the relationship with Observer States more efficient; and promotes the implementation of cooperation programs and projects.

Another of the Alliance’s achievements in recent months has been the allocation of resources, through the Entrepreneurial Capital Fund, for the first eight MSMEs that will be able to finance and develop their projects. Also there was the implementation of an electronic scheme for the interoperability of certificates of origin and phytosanitary certificates, which eliminates the use of paper in foreign trade operations that require them.

More than 400 businessmen attended the VII PACIFIC ALLIANCE Summit.

The Pacific Alliance has also published the Public Policy Index for the Development of SMEs in the past year in coordination with the Organization for Economic Cooperation and Development (OECD), with the support of the Bank of Development of Latin America (CAF) and the Latin American and Caribbean Economic System (SELA). The heads of state of the Alliance also highlighted the launch of the “Export Access” Platform, which allows access to information on non-tariff requirements of more than 900 products; facilitating the identification of business opportunities throughout the American region.

VII Pacific Alliance Business Summit in the city of Arequipa (Peru), July 10th, 2019. | Photo: Pacific Alliance (Flickr)

Chile, Colombia, Mexico and Peru decided to work as partners rather than as competitors.

cific Alliance of Tourism Statistics, whose main objective was the exchange of statistical data to strengthen decision-making regarding tourism policy of member countries of the Pacific Alliance. Likewise, they highlighted the signing of the Pacific Alliance Memorandum of Understanding on Cooperation in Media, through which National Television in Chile, National Radio-Television of Colombia, the Public Broadcasting System of Mexico and the National Radio and Television Institute of Peru express their desire to collaborate for reciprocal benefits.

VII BUSINESS SUMMIT IN AREQUIPA After the XIV Lima Summit, the 7th Pacific Alliance Business Summit was held on July 10th and 11th in the Peruvian city of Arequipa. The event was a trade platform attended by more than 400 entrepreneurs, including buyers and exporters from the agro-industrial, clothing and manufacturing sectors of Chile, Colombia, Mexico, Peru, as well as entrepreneurs from China, Japan, South Korea, India, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Australia and New Zealand. The purpose of the event was to promote regional trade and the export offerings of the Pacific Alliance to other economies, mainly Asia-Pacific.

The business summit was organized by the Export Promotion Directorate of Chile (ProChile), ProColombia, a Colombian government agency, the Ministry of Economy of Mexico and the Commission for the Promotion of Peru for Export and Tourism (Promperú), and generated more than 2,500 business contacts. Luis Torres Paz, executive president of PromPerú said that the success of the summit reflects, “the importance of the joint work that has been done in the bloc and the great interest in doing business with the guest countries of Asia-Pacific one of the fundamental regions to the global economy and that must be well exploited ”

MORE PARTNERS THAN COMPETITORS Work as partners rather than competitors, using regional integration as a tool to achieve growth and development which is sustainable over time. That was a bold decision that Chile, Colombia, Mexico and Peru made in 2011 and that led them to found, after hard deliberations, the Pacific Alliance as an economic and trade platform with projections towards the Asia-Pacific region and, in addition, as a mechanism that allows the free movement of goods, services, capital and people progressively.

This regional initiative formed by countries highly committed to democracy and free market principles, prerequisites for building an economic and trade bloc, has celebrated its eighth anniversary on April 28th, advancing vigorously in the fulfillment of its foundational objectives. Today, it is the eighth largest economy in the world, totaling 225.3 million people, a combined GDP of nearly two trillion dollars and an average GDP per capita of $18,921.

Although trade blocs such as the Pacific Alliance normally slow down after the initial years, the Alliance still presents itself as a concrete, ambitious, and effective trade bloc that provides great benefits, although there is a lot of work ahead of it: Chile, Colombia, Mexico, and Peru are classified as

PACIFIC ALLIANCE becomes established as a commercial

middle-high income economies, but wealth is not well distributed in them. In fact, 11% of Chilean inhabitants are poor and 21% of the Peruvian population survive in this critical condition. In Colombia and Mexico, the poverty rate reaches 30% and 42%, respectively.

Another pending task is the low participation of women in the workforce of Pacific Alliance nations, which exerts a decrease in economic and social progress. Integrating women into formal economic sectors would increase growth and increase productivity. It is also especially imperative for Pacific Alliance nations to focus on reforming education systems, currently with poor performance in most educational classifications.

CHILE - LEADER IN FOREIGN DIRECT INVESTMENT Foreign direct investment (FDI), a fundamental indicator in a country’s economy and a strategic variable in the behavior of markets and social dynamics, continues to grow in the Pacific Alliance. Not surprisingly, the member countries of the bloc occupy at the Latin American level the four best positions of the Ease of Doing Business Index, recently published in Doing Business 2019 of the World Bank.

The member country of this solid regional bloc that presents, greatly surpassing the others, the largest foreign direct investment in terms of percentage of its gross domestic product is Chile, one of the most functional Latin American economies, with 102 percent. Second place in foreign direct investment as a percentage of GDP in the Pacific Alliance is Colombia, a country with an acceptable economic growth, with a ratio of 58 percent.

Marcelo Ebrard and Graciela Márquez, Secretaries of Foreign Affairs and Economy of Mexico, respectively, at the 21st Meeting of the Council of Ministers of the Pacific Alliance, in Mexico City. | Photo: Pacific Alliance (Flickr).

48th Meeting of the High Level Group (GAN) of the Pacific Alliance, held at the headquarters of the Ministry of Foreign Affairs of Peru, in the city of Lima. | Photo: Peruvian Foreign Ministry (Flickr)

platform with strategic projection to the world.

Mexico and Peru have fairly similar levels of foreign direct investment over gross domestic product, with values of 48 and 46 percent, respectively. However, while Peru has more diversified business partners, Mexico relies heavily on its exports

to the United States- 87% of its shipments are directed there.

Likewise, in the coming decades, sustained population growth is expected, bringing the Pacific Alliance population to 265 million, which is equivalent to a greater percentage of people of working age with respect to the total population. This will produce a “demographic dividend” which, if used, could be an element in favor of more dynamic economic growth. However, Alliance countries need to act decisively to increase productivity and deepen the transformation of a commodity-based economy into an open, diversified economy that promotes the well-being of its population.

SME CONSOLIDATION On the other hand, in the framework of the 21st Meeting of the Council of Ministers of the Pacific Alliance held last May in Mexico, new steps were taken to consolidate small and medium enterprises (SMEs) of countries belonging to the bloc, through the implementation of the Cooperation Fund, which allows for the development and financing of SME joint projects.

According to the Strategic Vision through 2030, SMEs are considered the engine of regional trade, so they are granted business facilities. It should be noted that the first agreement of the Council of Ministers of the Pacific Alliance was to create a fund of one million dollars for joint projects ai

med at strengthening the capacities of these productive units; seed capital that is expected to begin to take root so that SMEs can see robust growth.

PACIFIC ALLIANCE AND MERCOSUR MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay) and the Pacific Alliance, the two main economic blocs in Latin America, have been consolidating for years and, despite their differences, try to deepen their economic relations pointing towards the formation of a market that concentrates 85% of the region’s GDP. MERCOSUR was born 28 years ago under the leadership of Argentina and Brazil that, at that time, produced as much as China: today, they only generate a fifth of the Asian giant, paralysis that marked the dynamics of MERCOSUR for many years and forced its members to look abroad. the countries of the Pacific Alliance, with a 3.8% growth, above that expected for Chile (3.5%), Colombia (3.5%), and Mexico (1.7%). By 2020, Peru will continue to lead growth among the countries of the regional bloc with 3.9% growth, ahead of Colombia (3.7%), Chile (3.1%) and Mexico (2.0% ).

While MERCOSUR, according to the opinion of some analysts, has been losing dynamism and transcendence for at least a decade and a large part of the Treaty of Asuncion that created it (March 1991) is a dead due to breaches by its own partners, with the Pacific Alliance, the sky is more than clear and it is estimated that Peru will be the country with the highest growth in the 2019-2020 period.