Due to President Donald Trump’s protectionist politics, Latin American countries are rallying together. In fact, the USA’s hostility could lead to an historic reconciliation between the region's key organisations, the Pacific Alliance and Mercosur.
As the new American president introduces aggressive policies on immigration and trade targetting Mexico, Latin American countries have expressed solidarity with Mexican President Enrique Peña Nieto.
Nieto publicly thanked Latin American governments on 14 February for their support in the increasingly bitter war of words with Trump.
As early as January 25, Ecuadorian President Rafael Correa publicly stated his support for Nieto when he said, “the solution to stopping immigration isn’t walls or borders.”
The Argentinian and Brazilian presidents, Mauricio Macri and Michel Temer, voiced their support on February 6th, by stating that the South American free trade bloc Mercosur would further strengthen its ties to Mexico.
According to the Colombian daily El Espectador, Uruguay, Bolivia and Chile have also sent similar signals.
Reconciliation and free trade
The Trump issue and the apparent US mistreatment of their Mexican neighbour could lead to a landmark reconciliation between two competing Latin American organisations.
Currently the countries of Latin America are split between the Mercosur (or Mercosul) and Pacific Alliance organisations. Mercosur, formed in 1991, includes Argentina, Brazil, Paraguay, Uruguay and Venezuela (current suspended), as well as five associate members. The Pacific Alliance consists of four countries: Chile, Colombia, Mexico and Peru.
Historically, the two organisations are rivals.
As Olivia Ronsain, a specialist in international relations and economics, remarked in a note on Diploweb, the two organisations are built on different models: "We believe that the Pacific Alliance is destined to become, in the short-term, a free trade zone, since it has eliminated 92% of customs barriers,” she explained. “The Alliance aims to evolve into a common market… Unlike Mercosur, the Pacific Alliance is not meant to be a customs union since it will not set up a common external tariff.”
Meanwhile, Mercosur was founded in the 1990s at the instigation of the progressive governments of Brazil, Argentina and Venezuela. Mercosur has a political purpose beyond economic and customs integration, making it more similar to the European Union, if on a smaller scale.
The situation has changed in recent years: 2015 saw the end of Cristina Kirchner’s time in office in Argentina and the beginning of the presidency of Mauricio Macri. In Brazil, Dilma Rousseff was removed from power in 2016 and Michel Temer took over the presidency. The two new leaders are much more open to liberalism and free trade than their predecessors, and therefore much more open to a practical mutually beneficial relationship with the Pacific Alliance.
Macri took a step in this direction last year when he attended the Pacific Alliance’s annual meeting as an observer. His presence sent a clear and unambiguous signal.
Opposing Trump with economic unity
The leaders of Argentina and Chile, Mauricio Macri and Michelle Bachelet are, respectively, currently the temporary presidents of Mercosur and the Pacific Alliance, and they are determined to use their positions to bring the two organisations closer together. That closeness could eventually lead to a merger.
The election of Trump may well accelerate the process.
Indeed, on February 12, the foreign ministers of Argentina and Chile announced a large-scale meeting of the ministers of both organisations in April "to deal with the protectionist pressures" from the United States.
"We want to signal our willingness to move towards more openness, integration and investment," said Heraldo Muñoz, the Chilean foreign minister.
However, any potential merger is still far off.
The next few months will be decisive, and the merger may well not happen, as the approaches of the two organisations differ. Chile, for example, has already signed nearly 180 bilateral free trade agreements: how could these existing treaties be made compatible with more closed economies, such as those of Mercosur members Brazil and Argentina?
Saving the Transpacific Partnership Agreement
Trump's protectionism also seriously undermines the Transpacific Partnership Agreement, even though the USA was originally the driving force.
The free-trade treaty aimed to remove tariffs between the Pacific countries, bringing together Australia, Brunei, Canada, Chile, the United States, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. But on February 26, 2017 President Trump announced the unilateral withdrawal of the US from the agreement, in adherence to one of his campaign promises.
The US withdrawal could mean the death of the treaty, but Chile, as president of the Pacific Alliance, wants to ensure its future. Chile has called for an extraordinary meeting of the 12 members, to be held on March 14-15 March. China and South Korea have also been invited to the meeting, as their economies stand to be affected if the treaty comes into force.
The objective is to provide new markets for Latin American products.
According to the Peruvian newspaper La Prensa, the logic is simple: in the face of the closure of the US market to Latin American exports, the countries of the Pacific Alliance and Mercosur now want to look in other directions, such as Europe and the emerging economies of Asia.
Date created : 2017-02-16