The Pacific Alliance: One of the World’s Leading Economic Blocs
A predominantly economic and commercial bloc, the Pacific Alliance is comprised of Chile, Colombia, Mexico and Peru, Latin America’s most trade and investor friendly economies. These four countries share the same macro economic principles. As a bloc and with a population of 225 million people, it is the world’s 8th largest economy with a cumulative GDP of US $1.950 billion (which accounts for 40% of the GDP in Latin America and the Caribbean). Additionally, in 2016, it received 41% of foreign direct investment destined for the region, totaling over US $ 42 billion. The Pacific Alliance is recognized around the world as one of the most successful integration mechanisms in the region and for its clear objectives to promote greater growth, development and competitiveness through the free circulation of goods, services, capital and people. Currently 92% of tariffs have been eliminated regarding the free circulation of goods among the members of the Alliance, with full liberalization planned for 2030.
In a current global scenario marked by trade tensions and protectionist tendencies, the four members of the Pacific Alliance continue to stand by their core values as free market economies in order to continue developing individually and collectively. The Alliance now has 55 Observer States from five different continents which includes USA, Canada, Spain, Australia, New Zealand, Japan, Portugal, France, South Korea, China, Singapore, Finland, Italy, India, Switzerland, Israel, UAE, among others. There are also several candidates to become associate members such as Australia, Canada, New Zealand and Singapore. The goal is to increase the Alliance’s presence on the Asia-Pacific region and to identify new and better trade and investment opportunities. The main trading partners for the Pacific Alliance in 2016 were the European Union with US $10,703 million followed by United States with US $3,706 million and China with US $3,868 million.
As individual countries, all four members of the Pacific Alliance generally lead regional economic rankings such as:
Investment Grade Rating (Moody’s, 2018)1. Chile (A1)
2. Peru (A3)
3. Mexico (A3)
4. Colombia (Baa2)
Ease of Doing Business (World Bank, 2018)
1. Mexico (49)
2. Chile (55)
3. Peru (58)
4. Colombia (59)
Chile: One of the most competitive, stable and open economies in Latin America, Chile has earned its place as Latin America’s most developed nation and enjoys one of the lowest levels of corruption and stands out for the solidity of its institutions and its macroeconomic achievements. It is also one of the countries with the greatest freedom for business and investment. Its leading economic activities include mining, fishing, trade and tourism, agriculture and forestry. Chile is the world’s largest producer of copper accounting for approximately 30% of the market share. Main trade and investment opportunities include: Mining, Cleantech, Environment, Agriculture, Technology.
Colombia: An emerging economy on the international stage, Colombia has experienced considerable growth over the last decade attracting many foreign investors along the way. Its economy is based mainly on the production of export commodities and the production of consumer goods for the internal market. Coal mining, agriculture and the industrial sector (chemical, automotive, petrochemical) also play a large part in Colombia’s economy. Main trade and investment opportunities include: Petroleum Industry, Transportation, Manufacturing and Financial Services.
Mexico: North America’s third largest economy, Mexico’s main economic activities include a strong domestic demand, remittances from Mexicans working abroad, tourism and robust mining, industrial and agricultural activity. The country also enjoys a strong automotive sector, which is recognized internationally as a leader. Over the last decade Mexico has become the eight largest producer of new vehicles and the fourth largest exports of vehicles globally. Another important sector is tourism for which Mexico ranks 13th in the world as the most visited country. Main trade and investment opportunities: Manufacturing, Transportation, Construction, Financial Services, Tourism.
Peru: One of the world’s most culturally diverse and historically rich countries, Peru has been one of Latin America’s fastest growing and most stable economies over the last 20 years, reaching record GDP growth levels of 9% in 2008 – 2009. Solid macroeconomic policies, prudent fiscal management, an emerging middle class, strong internal demand and one of the largest portfolios of free trade agreements in the world have paved the way for Peru’s economic success. Its main economic activities include mining, hydrocarbon exploration, agriculture, fishing and manufacturing of goods. Main trade and investment opportunities: Mining, Agriculture, Energy (wind energy projects), Forestry, Manufacturing, Tourism.
Furthermore, all members of the Alliance have individual free trade agreements with the United States of America, who continues to be among their top trading partners. While individually each country presents different trade and investment opportunities, the bottom line is that these four countries are all open for business and provide solid macro economic fundamentals and clear rules of the game. Companies from Houston that are already doing business in Mexico (as this country’s trade and investment relevance to Texas, and particularly Houston, is unquestionable) or even Brazil (Houston’s third largest trading partner) should capitalize on this Latin American experience to explore further opportunities in Chile, Colombia and Peru. In addition to business and cultural ties, Houston is connected through direct air service to all major cities in the Pacific Alliance countries. Similarly, United Airlines’ gateway to Latin America is Houston’s George Bush Intercontinental.
Veronica Medina, Founder and CEO of BusinessHub Consultants, one of South America’s leading international business development firms (www.businesshubconsultants.com)