Latin America and Asia PacificObservatory
Ignacio Bartesaghi (Ph.D.) – Coordinator“Latin American regional integration at acrossroads? : the Pacific Alliance and the Mercosur”
Latin American and the Caribbean Studies (ILAC)& Japan Association of Latin America and the Caribbean (JALAC),
March 12Tokyo, Japan

Creation of theLatin America – Asia Pacific Observatory

In July 2012, three renowned international entities
decided to include the significance of relations between
Latin America and Asia Pacific as part of their agendas.

Purpose of the Observatory
To create a debate forum for analyzing strategic
aspects of the economic relations between the tworegions.

To prepare and disseminate studies with bases tocontribute in the design and application of policies
aimed at strengthening the relations that exist between
the regions.
To build instruments for systematizing information
regarding trade of goods, investments, agreements
and negotiations, among other aspects, in a clear andsimple manner.

The Observatory's agenda (1)Release of the book entitled “Building Networks. Strategies of Asiantransnational companies in Latin America”.
Seminar: “Relations between the ASEAN and Japan, and Latin America”.
Introduction of the Web Portal of the Latin America – Asia Pacific Observatory.
Distribution of Publications: Half-yearly Statistical Bulletin, special studies bythe ECLAC, and monthly bulletin.
Institutional representation at specialized events.
Academic Seminar “Trade relations between Latin America and Asia Pacific:
challenges and opportunities”.

The Observatory's agenda (2)Creation of the Observatory’s Academic Forum.

Publication of book: “Trade relations between Latin America and AsiaPacific: challenges and opportunities“.
Seminar: “India: a partner for Latin America”.
Visit to some member countries of ASEAN.
Seminar: “The TPP and Latin American integration”.
New reports: news bulletins.

The Observatory's agenda - 2015
Publication and release of the book entitled “Global Crisis, National
Responses, the Great Recession in Latin America and Asia Pacific”.
Publication and presentation of Essay Contest.
Second Academic Seminar, on July 8th and 9th, 2015; and publication ofarticles submitted.
Inclusion of the issue regarding physical connectivity and infrastructure
between the two regions.
Creation of an Entrepreneurial Forum.

Academic Forum
Creation of an Expert Network (with over 100 experts from both regions).

Seminars, contests, calls for presentations, workshops and closeddebates.
Definition of lines for research.
Opening of new academic departments on Latin America and Asia Pacificat universities in the two regions.
Dissemination of publications.
Promotion of student and expert exchanges.

“Latin American regional integration at acrossroads? : the Pacific Alliance and the Mercosur”

Note: opinions by the Coordinator of the Latin America – Asia Pacific
Observatory do not necessarily reflect, nor compromise, thepositions of LAIA, CAF and ECLAC.Plan for the presentation
Possible viewpoints to approach the issue.

New international context.
Current state of the MERCOSUR.

Pacific Alliance: a new way of integration?
MERCOSUR and the Pacific Alliance: at a crossroads?
Some conclusions.

Possible viewpoints to approach the issue
Latin American unity: relations between Brazil and Mexico and relations
between the region and Asia Pacific.
The MERCOSUR and the Pacific Alliance at the light of changes occurred ininternational trade during the past decade.
The success of integration processes in Latin America: the South American
external agenda.

Differences and similarities existing between the two blocks.

New international context
Significance of China and Asia Pacific.
Investment relocation.
Trade liberalization.

What is theposition ofdifferent Latin
Americancountries
regarding thisphenomenon?

Growth in foreign trade.
Services in added value.
New trade topics.
Technological leaps in communications and transportation.
Changes in international production.

Is Latin America
implementing
the reforms
required by thenew
international
context?

International Agreements (1)Boom oftrade
agreements
since the1990s.

Source: WTO.

International Agreements (2)Type of the agreement

Enabling clause

GATS Art. V

GATT Art. XXIVGrand total

Customs Union

81018

Customs Union - Accession

178

Economic Integration Agreement

125125

Economic Integration Agreement - Accession

44

Free Trade Agreement

13218

231

Free Trade Agreement - Accession

01

1

Partial Scope Agreement

1414

Partial Scope Agreement - Accession

11

Grand total

37

129

236

Source: WTO.

What are the type of agreements subscribed, and why?

402

International Agreements (3)Regional trade agreements notified to the GATT/WTO and in forceBy date ofentry into force
RTA Name
Japan - Australia
Canada - Rep. of Korea
EFTA - Bosnia and Herzegovina
Eurasian Economic Union (EAEU)
Korea, Republic of - Australia
Hong Kong, China - Chile
EU - Georgia
EU - Rep. of Moldova
EFTA - Central America (Costa Rica and Panama)
EU - Cameroon
Iceland - China
Switzerland - China
Singapore - Chinese Taipei
New Zealand - Chinese Taipei
EU - Central America
Costa Rica - Singapore
EU (28) Enlargement
Costa Rica - Peru
Turkey - Mauritius
Korea, Republic of - Turkey
Canada - Panama
EU - Colombia and Peru
Malaysia - Australia
Ukraine - Montenegro

Source: WTO.

Date of entry intoforce
15-Jan-2015
01-Jan-2015
01-Jan-2015
01-Jan-2015
12-Dec-2014
09-oct-14
01-sep-14
01-sep-14
19-Aug-2014
04-Aug-2014
01-jul-14
01-jul-14
19-Apr-2014
01-Dec-2013
01-Aug-2013
01-jul-13
01-jul-13
01-jun-13
01-jun-13
01-may-13
01-Apr-2013
01-mar-13
01-Jan-2013
01-Jan-2013

Whosubscribe
trade
agreements, members of theMERCOSUR or members ofthe Pacific Alliance?

Current state of the MERCOSUR

Some history (1)Integration of Latin America and the Caribbean. Some history:
LAFTA (currently LAIA).
Central American Common Market, currently CAIS.
Andean Pact, currently the Andean Community.
Caribbean Common Market.
MERCOSUR.

Agreements following
the European
integration model,including theMERCOSUR,incorporated during
the change of theintegration paradigm(1990s).

Some history (2)• ALBA (Bolivarian Alternativefor the Americas).

• The Pacific Alliance.

A new integration mode?
Geopolitical significance ofagreements.

The UNASUR, the SELA and the CELAC are, among others, contexts with apolitical profile, as opposed to the economic and trade contexts referred above.

A few advances (1)A free trade zone and a partial Customs union were created in addition to acommon external tariff.

There was a significant growth of intra-regional trade.
The most important intra-regional in South America is the one between
Argentina and Brazil, with an outstanding intra-industrial aspect ofsignificant multiplying effects.
The institutional conditions continue in place, and have become stronger insome cases.

A few advances (2)The block has advances in its political representation at the international
level, as with forums (an aspect particularly significant for Brazil).

The FOCEM was created to consider asymmetries.
There were different instances aimed at strengthening unified Customs,
such as the 2010 San Juan Summit.
Negotiations between MERCOSUR and the EU were resumed.

The block has included new members.

Certain concerns (1)Protectionist measures applied by members.

The united Customs have not been perfected, and the common externaltariff includes very significant exceptions.
No advances have been reached in creating a common market.
Advances in productive integration have been scarce.

The block’s internal agenda has not made any progress (services,governmental acquisitions, investments, policy of competitors, intellectual
property, environmental regulations, labor regulations, and so on).

Certain concerns (2)Non-observance of awards resulting from the MERCORSUR’s Dispute
Settlement System.
Failure to negotiate trade agreements with developed countries and scarcesignificance of the current external agenda in relation to economic terms.
Institutional aspects not efficient for the purposes of the integration
process.
Inappropriate administration of the process relative to the inclusion of
Venezuela in the MERCOSUR.
Excessive politicization of the block.

Prioritization of the bilateral agenda in relation to the regional agenda.

Possible challenges (1)Observing treaties (such as lifting trade barriers).

Advancing towards united Customs and common market.
Promoting production chains.
Complying with arbitration awards.
Complying with legal provisions for the inclusion of new members(Venezuela, Bolivia, and possibly Ecuador).
Institutional Reform (supra-nationality).

Possible challenges (2)Strengthening the FOCEM (fund for considering asymmetries).

Extending the internal agenda (environment, intellectual property,
governmental acquisitions, investments).
Approving policies in common (infrastructure, energy, innovation, scientificcooperation, product promotions abroad, coordination and exchange ofmacro-economic information, and exports systems, among others).

Advancing in the MERCOSUR´s external agenda.
Defining regional leaderships.

MERCOSUR´s external agenda (1)Signatories

Suscription dateCategory of agreement

Mercosr - Chile

1996

Economic integration agreement

Mercosur Bolivia

1996

Economic integration agreement

Mercosur - Andean Community

2004

Economic integration agreement

Mercosur - India

2004

Fixed preference agreement

Mercosur - Peru

2005

Economic integration agreement

Mercosur - Israel

2007

Free Trade Agreement

Mercosur - SACU

2008

Fixed preference agreement

Mercosur Egypt

2010

Free Trade Agreement

Mercosur - Palestine

2011

Free Trade Agreement

Source: drawn based on data from the MERCOSUR’s Secretary’s Office.

What agreements has the MERCOSUR subscribed and withwhom?

MERCOSUR’s external agenda (2)There are no trade agreements in place with developed countries, except
for the case of Israel.

For instance, the block did not negotiate a FTA with the United States ofAmerica (failures of the 4+1 and opposition to the ALCA), and impossibilityof closing negotiations with the European Union since 1999.
No agreements subscribed with Asian giants such as Japan, China or theRepublic of Korea, or with other Asian economies like the ASEAN’smembers.
The MERCORSUR’s average tariff (non-weighed) is not more than 10%, andprotectionist measures continue to restrict foreign trade.

MERCOSUR’s external agenda (3)The subscription of regional agreements is limited to free trade zones
relative to goods with few examples for strengthening. Such agreements arelimited to those signed within the LAIA’s framework.
There isn’t an in-depth agreement with Mexico (except for the case ofUruguay).
The external agenda has been promoted by Brazil, based on interests rather
political than economic.

There are no negotiations subject to any Mega Trade Agreement.

Tensions regarding the external agenda?
Uruguay’s demand to negotiate bilaterally in advance, or independently
from the rest of the MERCOSUR’s members (suggested by Uruguay and theU.S.A. on two occasions).
Inclusion of Uruguay and Paraguay in the Pacific Alliance, as Observercountries (reaction by Brazil).
Possible breach in negotiations with the European Union (Argentina notnegotiating).
Pressures from the Brazilian private sector for subscribing tradeagreements.
Interest by Uruguay and Paraguay in trade negotiations with Asian
countries, including China.

Pacific Alliance: a new way ofintegration?

A few keys of the Pacific AllianceContext: dismemberment of the Andean Community: separation of Venezuela
and entry in the MERCOSUR, creation of the ALBA, the Arco del Pacifico (LatinAmerican Pacific Basin initiative), and others.
Agreement with new features. “Profound integration”.
Initial idea of Peru supported by Chile and Colombia. Mexico showed belated
interest, but after joining, the agreement changed in geopolitical terms,
generating contrasts between the two integration processes.
Impact of the Pacific Alliance on the media, and surprising international
interest in the initiative (observer countries).
Aims at the liberalization of goods, services, capital and individuals, which
could relate to a common market.

Observer countries

Source: Pacific Alliance official website.

A few advances of the Alliance
Regular meetings at the highest levels.
Elimination of visas.
Integration of stock exchanges (MILA-Latin American Integration Market).
Definition of joint centers for external promotion (at embassies).
Negotiations of tariffs, exceptions and cumulation of original regime.

Possible contradictions and challenges (1)The objectives set forth have already been defined in other integration
processes, or the agreements defined involve members of the Alliance.
The idea of reaching an “in-depth agreement” is not supported by theinstitutional aspects required.

Maintaining the obvious affinities in economic, trade and international
inclusion policies, beyond short terms, due to political affinity (changes ingovernments).
Complying with the initial expectations generated by the process (currentlyin progress) and avoiding possible breaches with the rest of Latin America
and the Caribbean.

Possible contradictions and challenges (2)How to increase regional trade flows and investments (some Alliancecountries have more trade with MERCOSUR than with the integration
process itself).
It is possible to promote structural changes in the block, for which it will benecessary to cease the re-primarization cause by the exports ofcommodities to the extrazone.
Will the block favor improvements in the physical (logistic) infrastructure?

Will the generation of clusters be promoted?
Will there be regional policies favoring enhanced quality and qualified
manpower in the subregion?

MERCOSUR and the Pacific Alliance: ata crossroads?

MERCOSUR and the Alliance: at a crossroads?
 The first thing to acknowledge is that these are two integration processes
that are naturally different, though they also show similarities.
 Asymmetries between members.
 Differences in business constitution.
 Tariff levels and trade defense measures.

 Number of trade agreements.
 Facilitated trade.

Asymmetries
70%
60%

80%

58%

71%

70%
60%

50%

50%
40%

40%
30%

30%

18%

20%

13%

10%

10%

10%

0%

0%
MexicoColombia

Chile

Peru

15%

20%

BrazilArgentina

12%

Venezuela

2%

1%

Uruguay

Paraguay

The significance of Mexico in the Pacific Alliance, and of Brazil in theMERCOSUR, indicates the relation between the two integration
processes.
Source: drawn based on ECLAC's data.

Differences in the composition of trade
MERCOSUR’s intra-regional trade,though scarce in international terms,
is three times greater than trade inthe Pacific Alliance.

PacificAlliance

23%

51%

Mercosur18%

Pacif ic Alliance

Mercosur

16%

15%

14%

14%

12%

13%

10%

Upon Mexico’s initiative, the Alliancehas a trade structure with more
technological components than theMERCOSUR.

8%
6%
4%

3%

2%

2%

0%
2001

Source: drawn based on ECLAC's data.

4%

20062012

Tariff levels
16,0

Tariff levels (non-weighed average)
applied are higher in the MERCOSUR
than in the Pacific Alliance.

14,0

10,3

12,0

10,08,0
6,04,010

2,09

80,0Paraguay

Uruguay

MercosurVenezuela

ArgentinaBrazil6,7

76
5Tariff levels show differences inprocesses, which in the case ofMERCOSUR relate to exceptions tothe common external tariff.

43210Peru

Source: drawn based on WTO data.

Chile

Pacific Alliance

MexicoColombia

Trade defense measures

When considering the antidumping measures imposed by theMERCOSUR countries and the Alliance countries on China in the pastten years, we can see the degree of protection by Brazil and Argentina
in relation to the member countries of the Pacific Alliance.
Source: drawn based on WTO data.

Agreements subscribed by the Alliance
VietnamTaiwan Prov. ofChina

ThailandSingapore

New Zealand

Myanmar

Malaysia

LaosJapan

Indonesia

India

Hong Kong (SAR)

Philippines

Rep. of Korea

China

Camboya

Brunei

Pacific
Alliance
countries

Australia(with Asia Pacific)

Chile
Colombia
MexicoThere is only one
agreement
inplacebetween
MERCOSUR andIndia.

Chile
Colombia
MexicoPeru

Source: drawn based on data from the Latin America – Asia Pacific Observatory.

VietnamTaiwan Prov. of China

ThailandSingapore

New Zealand

Myanmar

Malaysia

LaosJapan

Indonesia

India

Hong Kong (SAR)

PhilippinesRep. of Korea

China

Camboya

Brunei

Pacific
Alliance
countries

AustraliaPeru

MERCOSUR
is notcurrently
negotiatingwith any
country inAsia Pacific.

Competitiveness Indicators (1)Doing BusinessIndex - 2013

World Economic
Forum Index - 2013

Average

Integration process

Chile

37

34

36

Pacific Alliance

MexicoPeru
Colombia
Uruguay

48
43
45
89

55
61
69
85

52525787

Pacific Alliance
Pacific Alliance
Pacific Alliance
MercosurBrazil

130

56

93

Mercosur

Paraguay
Argentina
Venezuela

103
124
180

119104
134

111
114
157

Mercosur
Mercosur
MercosurCountry

Source: drawn based on data from the World Bank and the World Economic Forum.

The Alliance countries are implementing reforms to favor the business context.

Competitiveness Indicators (2)140Mercosur

Pacific Alliance

120100806040200
Doing Business Index 2013

World Economic Forum
Index - 2013

Average of the two Index

Source: drawn based on data from the World Bank and the World Economic Forum.

In relation to an
average of positions
occupied by countries
of MERCOSUR and ofthe Alliance, as per
Doing Business andWorld EconomicForum indexes, there
exists a clear
difference betweenthem.

The Alliance’s vision
The Alliance was introduced as a new formofintegration(flexible,lacking
institutionalization aspects, and apart fromthe classical models present in the region).

Liberalized economies, promotion ofinvestments, enhanced business context,
and facilitated trade.
It promoted international interest withobserver countries, with a clear focus onachieving greater integration within Asia
Pacific.
Mexico’s participation and South American
leaderships turned it into a geo-politicalagreement.

The Alliance’s originalagreements, as well as
the presidents’ discourse,
were intended to show
their differences with theother models in theregion.

The MERCOSUR’s vision
Brazil conferred the Alliance geopolitical significance (in relation to Mexico,as well as to Peru and Colombia).
The consequences of a new integration paradigm for the very politicizedand MERCOSUR standing at a standstill.
Implications of the Alliance on the MERCOSUR’s external agenda (pressureby the Brazilian private sector and by the smaller countries).
MERCOSUR’s approach towards this new scenario, which enables options tosome members, and to the Brazilian entrepreneurs who call for changes.
Additionally, there is the international interest caused by the brand new
integration process.

Some conclusions (1)There is a new international context, with mega agreements, changes in theforms of production due to technological leaps, global value chains, andgeopolitical significance of trade initiatives, among other factors.
The MERCOSUR has not attained some of its main objectives.
The Pacific Alliance was presented as a cutting-edge integration process,and aspect still to be ratified, in compliance with the conditions agreed.

The differences between economic and political models in the region areevident and have become greater in the past few years.

Some conclusions (2)• Different trade policies, such as their productive structures, applied by each
integration process.
Geopolitical significance of the 21st century’s trade agreements, confirmedby the effect of the Alliance on MERCOSUR (reaction by Brazil and Mexico).
Lack of consistency in MERCOSUR due to the current status of the process,leading to the Alliance becoming part of the former block’s internal agenda.

Uruguay’s and Paraguay’s interest in the Alliance, based on a stronger
connection with the group’s economic model, and mainly due to its strategy
relative to international inclusion.

Latin America and Asia PacificObservatory
Ignacio Bartesaghi (Ph.D.) – Coordinator“Latin American regional integration at acrossroads? : the Pacific Alliance and the Mercosur”
Latin American and the Caribbean Studies (ILAC)& Japan Association of Latin America and the Caribbean (JALAC),
March 12Tokyo, Japan