alianza del pacífico · some areas: infrastructure (iirsa), financing (caf) and energy. •...

Alianza del Pacífico

October, 2011

Germán Ríos May 2012

Table of Contents

• The integration process in Latin America

• The future is Asia

• Latin America and Alianza del Pacífico

The integration process in Latin America

The Context of Latin America

Integration

• Increasing relevance of China and India in global trade

• Renewed interest on openness and free trade in a complex context

• Lack of consensus over trade policies and internal agendas

• Traditional regional integration agreements fatigue (CAN, MERCOSUR, etc.)

• New actors: UNASUR, ALBA, CELAC, Alianza del Pacífico, etc.

Where is the integration process

today?

• Traditional integration processes have slowed down because of lack of agreements among members

• The international crisis has increased protectionism pressures

• Difficult to reach agreements with other trade blocks or countries outside the region

• More emphasis on political than economic integration

• Use of non-traditional mechanisms of integration

The integration process

• Integration has taken place in other forms and in some areas: infrastructure (IIRSA), financing (CAF) and energy.

• Countries' strategies of market access (bilateral, regional and multilateral) respond to own interests

• A pragmatic approach: Alianza del Pacífico

The future is Asia

The new global economic order

will be Asian…

• Emerging Asian economies will contribute around 58% to global growth in the next 10 years

• Traditional Latin American partners (US and EU) to contribute less than 20%

…the Asian order will be Chinese,

followed distantly by India

• China incremental GDP will triple that of India

• India will have a larger contribution to growth than the US

The future of Asia-Latin America

relationship

• Latin American market: Given its size, economic growth, and strengthening of the middle income class, the region will become a key market for Asian exporters

• Alianza del Pacífico: 34% of Latin America GDP, and population of more than 200 million

• Asian market: It has become one of the main drivers of economic growth in Latin America in recent years. Relevance of commodities, infrastructure requirements, and strategic geographic location will foster a closer relation through higher FDI flows

Latin American middle income class (millions of people)

0

20

40

60

80

100

120

140

160

2010 2020

0

20

40

60

80

100

120

140

160

China to become a key FDI provider

for Latin America

• China will diversify its large positive international investment position away from reserve assets to FDI, and away from the developed world to the emerging world. This is a great opportunity for Latin American.

• FDI and increasing labor and transportation costs will foster manufacture production outside China.

Opportunities for Latin America:

beyond commodity exports

• Increase in middle income class in China and higher domestic consumption will bring about large demand for consumer products.

• China will use FDI to cover some of the demand of the rest of the world in a decentralized way as Japan and Korea did in the past. This brings opportunities for countries with (or access to) large markets: Mexico (much less engaged with China). This could be a great opportunity

• China also has the financing muscle to help Latin America finance its infrastructure gap.

Latin America and la Alianza del Pacífico

Source: Trade Maps

Regional Inter-trade in LatAm and Asia

2010

37%

63%

Asia exports to Asia

Asia exports to the rest of the World

17%

83%

LATAM exports to LATAM

LATAM exports to the rest of the World

LATAM shows very low levels of regional inter-trade when compared to Asia; suggesting that regional value chains remain fragmented and weak.

Source: The Atlas of Economic Complexity (Hausmann, Hidalgo, et al 2011)

Economic Complexity

Mexico shows a higher level of economic complexity than its regional counterparts; followed by Brasil, Argentina, Uruguay and Colombia

Source: CEPAL

Latin American exports by destination

40%

60%

47%

53%

76%

24%

84%

16%

Rest of the world

87%

13%

Natural resources and manufactures based in natural resources

Other manufactures

Average 2008-2010

The destination for Latin America manufactured goods remain mostly in the United States and the region itself; and primary exports are more

concentrated in Asia and Europe

Trade between China & Latin

America

• From 2000 to 2010 bilateral trade between China and Latin America increased 1,433%

• The main exporters to China are: Brazil, Chile, Argentina, Peru and México

• China exports high added-value goods to the region such as motor vehicles and electronic and communication devices

• Latin America exports to China are mainly commodities such as: iron, soy, copper, oil, paper and animal feed

Trade between China & Latin

America

0

20

40

60

80

100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Exports to China Imports from China

US$ billion

Source: IMF and China Bureau of Statistics

Trade between the Pacific Alliance

and Asia

0%

5%

10%

15%

20%

25%

30%

35%

Chile Colombia Mexico Peru Pacific Alliance

Imports by country (2001)

China Japan Korea India Mexico Chile Perú Colombia

0%

10%

20%

30%

40%

50%

60%

70%

80%


Imports by country (2010)


Trade between the Pacific Alliance

and Asia

0%

5%

10%

15%

20%

25%

30%

35%


Exports by country (2001)


0%

10%

20%

30%

40%

50%

60%


Exports by country (2010)


• Bilateral trade agreements’ popularity has skyrocketed on

recent years. These mechanisms seem to have effectively

boosted trade and FDI.

Bilateral trade agreements in

Colombia, Perú, México and Chile

CAN AELC UE US COR TRKY CHIN P-4 JPN AUS MLAS VTNM THAI TPP SING

COL

CHIL

PERU

MEX

Agreements in negotiation

Subscribed agreements

Alianza del Pacífico: a natural

evolution

• In 2010 total trade volumes between Mexico, Colombia, Chile and Peru was twice the share as compared with 2001

• With the exception of Mexico, a larger economy with a natural trading partner (US), these economies have increased their trade with Asia and among themselves.

• Chile, Peru, Colombia and México have demonstrated their commitment with trade liberalization policies and improvements in competitiveness and productivity.

The main challenges ahead

• Productive transformation

– Competitiveness agenda

– Productivity gains

• Infrastructure

• Education

• New ¨discoveries¨ and innovation

• Development of regional clusters

• Quality FDI

• Strengthening of institutions and regulatory framework

The role of CAF

• Shareholders expansion and increasing relationship with Chile and Mexico

• Strengthening ties with Asia (especially China and India) • Partner in development: an integral approach • Promotion of regional integration • Support to trade negotiations • Infrastructure for physical integration: IIRSA, PPPs,

Mesoamerican Integration and Development Project, borders integration program, etc.

• Competitiveness programs: financial support to the private sector, PAC program, research agenda, environment and biodiversity.

Final remarks

• Alianza del Pacífico is a step in the right direction to promote regional integration

• This agreement could take advantage of increasing trade and investment opportunities with Asia

• The countries in the Alianza del Pacifico have important complementarities and scope for collaboration in several areas (infrastructure, energy, competitiveness, etc.)

• One of the main challenges is the productive transformation of the region

• CAF will support its member countries in their development agendas and integration efforts

Thank you

alianza del pacífico · some areas: infrastructure (iirsa), financing (caf) and energy. •...

Documents