The presidents of Latin America's most pro-business countries, Peru, Chile, Colombia and Mexico agreed on Thursday to deepen their existing commercial ties and further open doors to lucrative Asian markets.
The so-called Pacific Alliance, which Panama could also join, creates a framework for deep integration that will eventually allow for the freer movement of goods, people and services, according to the “Lima Declaration” read at the end of the regional summit.
The Pacific Alliance should help the bloc negotiate as a group with fast-growing Asian countries and offer an alternative platform for global firms that tend to look first to Brazil's vast but relatively more closed economy when they come to Latin America.
This is a historic step for our continent, Peruvian President Alan Garcia, who leaves office in July, said of what has become his signature foreign policy project.
The initiative, which would supplant a bevy of bilateral pacts the four countries already share, represents a greater emphasis on so-called south-south integration among booming emerging markets in Latin America and Asia.
Though the four countries have trade deals with the United States, it has lost its allure as a trade partner because of a sluggish economy. And Colombia has grown frustrated by a US Congress reluctant to approve a bilateral agreement.
Mexico spent years sending roughly 80% of its exports to the United States, only to find itself thrown into recession during the global crisis when shipments north slumped.
In Asia, both Chile and Peru have trade pacts with China, among other markets. Peru, Chile and Mexico also belong to the Asia Pacific Economic Cooperation trade pact, a club of 21 economies that Colombia has long aspired to join.
Trade experts say the Pacific Alliance could progress more quickly than existing regional trade blocs such as Mercosur, which is led by Brazil and includes Argentina, Chile and Uruguay. It has been around for years but has made fewer advances breaking down trade barriers.
Of the many integration projects in Latin America, this agreement has a better chance of success, said Carlos Aquino, director of the center for economic studies at Lima's San Marcos University. The four countries are stable democracies with open economies.
The four presidents, Colombia’s Juan Manuel Gómez; Mexico’s Felipe Calderón; Chile’s Sebastián Piñera and host Alan García also agreed to hold a next meeting in Mexico to assess advances.
Technical groups from the four countries will make the follow-up while Deputy Foreign Affairs and Trade ministers draft the framework agreement based on the homologation of existing free trade agreements between the four countries.
The draft should be ready for the summit in Mexico.
In another integration effort, next month the stock exchanges of Colombia, Chile and Peru will formally launch an bourse known as MILA that cross-lists shares of the companies in all three countries.
MILA will trail only Brazil's bourse in size, and President Garcia on Thursday encouraged the Mexican stock market to join the group, though Mexican President Felipe Calderon did not openly support the idea.
At the end of December the Chilean, Peruvian and Colombian exchanges had a combined market cap of 718.8 billion US dollars.