Trade excepted from discussion as Timerman expresses doubts over export primarization
The two competing economic blocs of Latin America held talks yesterday to promote an agenda of partial integration, after a meeting in Santiago de Chile with top representatives from the Pacific Alliance and the Mercosur trade blocs.
The protectionist Mercosur, led by Brazil, and the free-market oriented Pacific Alliance, led by México, don’t plan to move forward on common trade policies — but infrastructure, energy and immigration are matters where the sides see agreement as possible.
The host, Chile, was the main driving-force behind the initiative, a move which President Michele Bachelet had long been anticipating.
Bachelet was very enthusiastic when speaking about the possibilities of bringing both blocs together.
“In this historic meeting, we expect to take the first steps on a common road for development in our Latin America,” she claimed during the opening of the gathering.
According to Bachelet, the idea that both blocs are opposed and don’t talk between them should be set aside as a mere prejudice, and concrete steps forward in cooperation should be made.
Although she acknowledged that integration in topics such as tariffs was not realistic today, Bachelet considered that other areas do show potential for common policies.
Chile’s Foreign Minister Heraldo Muñoz was similarly enthusiastic, adding that “even if Mercosur and the Pacific alliance respond to differenc economic models and different ways of insertion in the world economy, they are two essential components, whose gradual and pragmatic convergence would give important benefits to the countries of both blocs.”
The “bi-oceanic” nature of this convergence was highlighted as one of the strategic benefits that drawing new links between both blocs would bring.
Mercosur more lukewarm
Brazilian Foreign Minister Luiz Alberto Figueiredo stated that both economic blocs are looking for very similar objectives, which amounts to “integration,” so both projects “complement each other.”
His words were very moderate, in line with the Workers’ Party (PT) electoral platform which supported Brazil’s allignment with the Mercosur instead of opening up to the Pacific Alliance, which was the goal of Dilma Rousseff’s two main rivals, Marina Silva and Aécio Neves.
Figueiredo’s Argentine counterpart Héctor Timerman did not disagree about possible integration, but he did add a twist reminding the participants of the different perspectives that both countries have.
“If we don’t create a common market for our industrial products, it will be very difficult to sell them outside the region,” Timerman stated, adding that “we can’t keep being a simple provider of raw materials.”
While the Pacific Alliance has focused mainly on selling more of its raw materials to new markets, the Mercosur’s more protectionist policies are defended by their participants as necessary to protect local industries.
The Economic Commission for Latin America and the Caribbean (ECLAC) was invited to the meeting, and highlighted the fact that both blocs encompass more than 80 percent of the region’s foreign trade, and called for the “necessary and even urgent” integration of all blocs in the region, although trade should only be one of the aspects in sight, with regional “added value” work-chains also importat, as well as infrastructure, communications, transport and logistics, and convergente should be “gradual.”
According to ECLAC, the region is lagging in terms of insertion in the “knowledge economy,” which is why it can’t offer the world products different from raw materials or “industrial products produced for low wages.” To overcome these limits, “education, science, technology and innovation” should be promoted in both blocs.
Today, Mercosur is bigger than the Pacific Alliance in terms of population and GDP, although the latter has more foreign trade, a fact that highlights the different approach of both economic blocs. The Pacific Alliance is seen as more in line with US policies, and looking for trade expansion into Asia, while the Mercosur has been looking for treaties with Europe.
According to Moody’s, in terms of per capita GDP, adjusted for purchasing power parity, the Pacific Alliance was doing better than the Mercosur in 2013. Mercosur’s growth has been slower than the Pacific Alliance’s in the last two years, but if figures are viewed since 2002, Mercosur fared better.
