Events

Peru and Allies Laud the Pacific Alliance in Utah

This week, the Pacific Alliance, presided over by the Peruvian ambassador Luis Miguel Castilla, was hosted by Utah Valley University. I took the opportunity to attend to hear what the ambassadors from each country; Mexico, Peru, Colombia and Chile had to say. Costa Rica, still in the process of becoming a full member, was not in attendance.

The session was held onstage in the Ragan Theater, which seemed fitting for the social drama that is played out by these international representatives. Introductions of each of ‘His Excellencies’ was made, and each was given a chance to make an opening statement about why their country was a part of the trade alliance. The center stage position is underscored by Samuel George as he calls attention to the ‘reconfigured economic ecosystem’ that is emerging as nations of the world trade more freely. Peru has ‘prime real estate’ positioning it to be a stronger presence in the Pacific as well as Atlantic markets.

Pacific Alliance Ambassadors on the Stage (Teresa Wilson)
Pacific Alliance Ambassadors on the Stage (Teresa Wilson)

The Peruvian ambassador lauded the growth of Peru under the new economic climate, saying the country’s economy has benefited by growing seven times larger under the new alliance.
The founding members of the Pacific Alliance are also known as the Pacific Pumas, the four countries are becoming known for their desired abilities to react like pumas in times of economic changes. The Bertelsmann Foundation describes them as “powerful, fast, agile, lean and stealthy” like the animal, also saying “the puma is a fitting mascot” for Mexico, Colombia, Peru and Chile” as they emerge as global economic leaders. Banding together, the countries are acting on the latest economic model according to Liliana Rojas-Suarez in her report to the Center for Global Development entitled “The International Financial Crisis: Eight Lessons for and from Latin America”. The first model, she claims, was the Export-Led Model, which was marked by exportation of ‘primary’ good or resources such as silver, copper, and cotton. The model proved unstable during times of global crisis, and disregarded social services. Money could be brought into the country with this model, but the costs were too great, and when world markets shifted, Latin America – being at the end of supply line, cracked like a whip.
The first model was abandoned for the second model, known as Import Substitution Industrialization or ISI. This model, supported by Raul Prebisch of Argentina, shifted focus to industrial production and was driven by domestic market needs rather than dependence on foreign markets. The need have a strong home economy was evident during the “great depression” when world markets proved unsound. The second model seemed to produce good results, but to grow industry debt was incurred. The debt grew as banks lent money aggressively during the 1970’s. The loans were backed by the price of commodities and when the world wide price of oil fell, several Latin American countries defaulted on the loans, creating the debt crisis of the 1980’s.
The third model, Rojas-Suarez holds, of economic growth is currently being tried. This model is one of ‘openness’ and ‘free’ trade. By banding together the individual countries become a trade block that has greater clout in the world market place and they hope each country is less vulnerable.
It is easy then to see why, when asked why Mexico was a part of the trade alliance, the acting consul said, “Mexico could either sit down at the table or be a part of the menu.” These were strong words suggesting that international markets can be predatory and unforgiving in the way they take advantage of countries. The ambassador went further and explained that while Mexico was a former major oil producer, they are now producing cars. While the trade-off of exporting cars rather than oil seems to echo the second, and failed model, the difference is the marketing to different segments of the world economy, although Mexico still sells 82% of its products to the United States.

Pacific Pumas
Pacific Pumas

Latin America has benefited, (or has been taken advantage of, depending on your perspective) from its rich natural resources. It is estimated that the continent holds ‘40 percent of the world’s arable land and 35 percent of the planet’s mining investment’. These numbers do not account for the heart of the people whose fat has been sucked out by world markets.

By banding together, the countries are proving to be support to each other to stabilize their economies and possibly provide more stability for the area. By reaching world markets and depending less on a single buyer for their commodities, they are able to achieve stability during economic downturns in the United States or other large investors. The Pacific Alliance is marketing heavily in Asian markets, without becoming entirely dependent upon them.

UVU, Pacific Trade Alliance
UVU, Pacific Trade Alliance

The Pacific Alliance lists its objectives as:

• Building in a participatory and consensual way an area of deep integration to move
progressively towards the free movement of goods, services, resources and people.
• Driving further growth, development and competitiveness of the economies of its members,
focused on achieving greater well-being, overcoming socioeconomic inequality and
promote the social inclusion of its inhabitants.
• Becoming a platform of political articulation, economic and commercial integration and
projection to the world, with emphasis on the Asia-Pacific region.

However, there are still many problems with the latest model, particularly the market driven growth by foreign investors. There are concerns that by allowing corporations to enter into negotiations, that the model of ‘nation states’ will be changed and challenged as the corporations hold more assets than the states without being accountable to world courts.

The happiest news from the meeting was the desire for free travel between the countries themselves, allowing visa free travel. They are also working to include the ‘observer’ nations with which they do much of their business, which includes the United States.

Ambassadors at Utah Valley University (Teresa Wilson)
Ambassadors at Utah Valley University (Teresa Wilson)

References:

https://www.iamericas.org/en/events-sp-1138149363/2160-peruvian-ambassador-castilla-pacific-trade-blocs-and-the-peruvian-economy

http://www.cnbc.com/2015/03/26/pacific-alliance-trade-bloc-of-mexico-chile-colombia-peru-and-costa-rica-is-growing-fast.html

http://poseidon01.ssrn.com/delivery.php?ID=314020083099116114076087076087080123015018037063095085014021112101127028105103108125007063010106031024119008088087002121018068060083036008072068106098017111102111028020024082007074092123095016087001103122085029004029115124095076076123087030091007020&EXT=pdf

http://www.bfna.org/video/the-pacific-pumas-1-economic-developments-in-chile-colombia-mexico-and-peru

 

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