Prospects and Implications of the Pacific Alliance


Taekyoon Lim and Siun Yi

The Pacific Alliance, which was officially launched by four Latin American countries on the Pacific coast (Chile, Colombia, Mexico, Peru) in June 2012, has been making fast progress and is expected to open up new horizons in economic integration in Latin America. Under the circumstances that existing regional communities such as MERCOSUR and ALBA are faltering, the Pacific Alliance is drawing attention from the world as it advocates Open Regionalism.

According to our quantitative analysis on prospect of the Pacific Alliance based on the macroeconomic indicators of the member countries, the Pacific Alliance shows a positive but somewhat limited prospect. When it comes to various qualitative aspects, however, the future of the Pacific Alliance is quite positive. In terms of institutional aspect, the Pacific Alliance avoids institutionalization and bureaucratization. Given that existing regional communities in Latin America focused on institutionalization and failed to produce practical outcomes, the minimal institutionalism of the Pacific Alliance is expected to achieve pragmatic development as a new model of regional integration. From the approach of natural market, the Pacific Alliance has a high level of socio-cultural homogeneity. Though the member countries are located somewhat spread out, this potential geographical disadvantage has not been an issue. In terms of economic aspects, the member countries of the Pacific Alliance have relatively good business environment and high economic freedom in Latin America, and this well supports the characteristics of its Open Regionalism pursuing Asia-Pacific markets. Still, the very high percentage of agricultural products in exports may be a potential issue when the Pacific Alliance tries to abolish tariffs completely. In political terms, the member countries of the Pacific Alliance has rightist or center-leftist, liberal dispositions and a high level of democracy. It has little concern about security within or outside the Pacific Alliance, and the external hegemon, the United States, is quite in favor of the Pacific Alliance. Also, the political will of each member government is very strong, which makes the prospect of the Pacific Alliance very positive.

It might be too early to discuss concrete cooperation with the Pacific Alliance at the moment since it is currently focusing on the deepening of its internal consolidation. However, it is necessary to make the foundations for future cooperation as the Pacific Alliance begins serious discussion about cooperation with the Asia-Pacific in the near future. Thus, we will have to have a medium- and long-term rather than a short-term view. In the first place, we will have to reduce the gap in interests between the Pacific Alliance and us, and we will have to pursue investment in the member countries of the Pacific Alliance in the areas that they want FDI such as mining, transportation infrastructure, and renewable energy. Through gradual and steady efforts to improve the relationship with the Pacific Alliance, we will have to take a better position in future cooperation than our competitors including China and Japan.