What is the Pacific Alliance? Post 1 of 4

The Pacific Alliance is a regional economic integration initiative in Latin America, which was created on April 28, 2011 by the presidents of Chile, Colombia, Mexico and Peru.

The Alliance pursuits three main objectives:

1.     Build a deep economic integration among its members, moving gradually Howard a free circulation of goods, but also services, capital and people.

2.     Promote the growth, development and competitiveness of all members’ economies in order to achieve a greater welfare and social equality.

3.     Become a platform for political articulation and trade integration, projecting its strengths to the Asia Pacific region and to the whole World.

Although there are more economic integrations in Latin America that promote trade growth, the Pacific Alliance is characterized by being sui generis in the process it follows in order to achieve its objectives.  Normally, the integration process comprises 6 stages:

Most of the countries have already preferential trade and free trade agreements with others and there are only few examples of the further levels:

MERCOSUR has already a customs union and has already some characteristics of a common market, although it has not achieved it yet. And the only integration in the world with an economic and monetary union is the European Union.

The Pacific Alliance is nowadays in the free trade level, due to the fact that all its four members have signed a free trade agreement. What makes it sui generis, aside from a great stress in an integral cooperation, is the fact that it pursuits to have in the future a common market without having before a customs union.

The reason behind this is members consider that unifying their customs would reduce its liberty to celebrate agreements with third countries and enjoy the benefits from preferential trade with others, what has already been proven in the case of MERCOSUR. When a country is part of a customs union it must apply the same rules and tariffs as their partners, without giving any special treatment to foreign trade. In the case of the Pacific Alliance once the common market is a reality, there will be a free circulation of goods, services, capital and people among the members but they will still be able to individually promote trade with other parts of the world, e.g. Mexico in NAFTA.

This special integration process and other aspects that will be explained later, have attracted the attention of countries that want to be part of it and others that are following carefully all the actions of the Alliance:

•Costa Rica is in already in accession process

•Panama was part of the initiative to create the Pacific Alliance but it remained as an observer country because it didn’t fulfill the requirement of having a free trade agreement with the other four countries.  Panama started working on free trade agreements with Colombia and Mexico, which were signed in September 2013 and April 2014 respectively. As soon as the agreement with Mexico is ratified, Panama will be able to start the accession process.

•There are 29 economies in all continents registered as observer countries:

o   America: Canada, USA, Guatemala, Honduras, Dominican Republic, El Salvador, Panama, Ecuador, Paraguay and Uruguay.

o   Asia: Israel, India, China, Singapore, Korea and Japan.

o   Europe: Portugal, Spain, France, United Kingdom, Netherlands, Italy, Switzerland, Germany, Finland and Turkey.

o   Africa: Morocco

o   Oceania: Australia and New Zealand.

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Foreign Direct Investment 2013 in Mexico

In 2013, the foreign direct investment (FDI) in Mexico amounted to 35.19 billion dollars, representing 178% more than the previous year (12.66 billion dollars) and being the highest since 2000.

As you can appreciate in the table, almost the half of the FDI in 2013 were new investments, which indicates the importance that the country has acquired due to domestic structural reforms, industry competitiveness and growth of the Mexican and neighboring markets.

In the next image, you can see in which part of the country the FDI is made:

Other aspect that should be mentioned is that most of the investment is done in the industry, mainly in manufacturing, while in the area of services prevail trade and temporary accommodation services.

Historically since 2000 the country, which has invested the most, is the USA (47.6% of the total amount) and is followed by some European countries, such as Netherlands and Spain. But in 2013 the Mexican market attracted attention from other countries: Belgium became the main origin of FDI and an Asian economy is among the five most important sources.

All this data is consistent with international surveys done by the OECD and the UNCTAD.

On the one hand, the survey of the OECD shows that in 2013 the participation of Mexico in the inflow of FDI worldwide was 2.9%; that means, Mexico was the 9^th country with more FDI only after China, USA, Russia, Canada, Brazil, UK, Ireland and Australia. On the other hand, the UNCTAD informed that according to the investment prospects, in 2015 Mexico would be the 7^th most attractive country for FDI.

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