Introduction: The Pacific Alliance—Deep integration, marketing, achievements, and failures

At a meeting held in Lima, Peru, in 2011, Juan Manuel Santos, Sebastián Piñera, Felipe Calderón, and Alan García announced the creation of the Pacific Alliance (PA), a regional integration scheme that aimed to promote the deep integration of their countries as well as their international insertion into the world economy. A year later, representatives of the four countries signed the Free Trade Framework Agreement of the PA, the main normative instrument of the trade bloc. Since its creation, the PA has found a warm reception in global economic and financial circles. Born in a context of predominance of the so-called postliberal or posthegemonic regionalism in Latin America, which contested the policies of liberalization and deregulation as the core of economic integration, the Alliance was perceived as a stronghold of the ideas of an open regionalism, favorable to free trade and foreign investment. The Alliance even radicalized this idea by proposing a model of deep integration. For these reasons, in a 2013 article in the Financial Times, the PA was described as “the most exciting thing going on in LatAm these days” (Financial Times, 2013). The pundit Moises Naim (2014) referred to the Alliance as “The Most Important Alliance You've Never Heard Of.” In this context of a clear marketing campaign, the PA began to be described as a successful model for regional integration, adapted to the times of globalization. Newspapers such as the Financial Times (2014), The Economist (2014), and the Wall Street Journal (2014) began to spread a narrative of a Latin America divided between the Pacific and the Atlantic. The Southern Common Market (Mercosur) countries represented the Latin America of the Atlantic, which was characterized by its economic stagnation and low international economic insertion, and the PA symbolized the Latin America of the Pacific, more dynamic, modern, and inserted into the world. In this scenario, the PA became a brand of what would be a successful economic bloc. Detlef Nolte (2016) notes that “The four PA member countries ‘marked’ themselves as gateways to Asia and as ‘good economies’ compared to the ‘bad economies’ of other, more state-oriented economies in Latin America” (p. 1). Thus, as Nolte (2021, p. 151) points out, the Alliance was the “poster child” of Latin American regionalism. Yet, this narrative was soon challenged, especially due to the limited progress in specific issues such as trade integration and the formation of value chains, two central goals of the bloc (Briceño-Ruiz, Legler & Prado Lallande, 2021; Nolte, 2016; Tremolada Álvarez, 2019). The narrative of an Atlantic–Pacific divide was questioned in academic studies (see Briceño-Ruiz, 2017; Sanahuja, 2017). In the political world, it was also rejected, and former presidents Luis Inácio Lula da Silva and Ricardo Lagos published an article in the Spanish newspaper El País in which they highlighted the unity of the region despite their ideological differences (Lula da Silva & Lagos, 2014). Moreover, due to the political impetus given by Michelle Bachelet, negotiations to achieve convergence between the PA and Mercosur began in 2014, with technical assistance from institutions such as the Economic Commission for Latin America (ECLAC) (2014) and experts such as the Argentine Félix Peña (2015). After the turn to the right in countries such as Argentina and Brazil from 2015 onward, the narrative of the division of Latin America between the Atlantic and Pacific lost relevance. Similarly, the erratic return of Mercosur to the logic of trade liberalization through the promotion of free trade agreements with the European Union and other countries or regional blocs implied that the Alliance was no longer the bastion of open regionalism. The image of the Alliance as a brand began to be contested even during the brief cycle of right-wing governments between 2015 and 2019. Experts such as Tremolada Álvarez (2019); and Prado Lallande (2020) highlighted the limited advances in intra-regional trade, which in 2021 represented only 4% of the total trade of the countries in the bloc (Briceño-Ruiz, Prado Lallande & Legler, 2021). Alan Fairlie and Erika Collantes have recently validated this data using the gravitational model, demonstrating that the PA has not significantly affected trade flows among its members (Fairlie & Collantes, 2022). Nolte (2021) notes that “The absence of economic complementarities between member countries is still a major obstacle to increase trade within the PA. Moreover, geographical distance and inadequate transport infrastructures constitute another barrier to such increased trade and to creating intraregional value chains” (p. 160). There is no cooperation in transport or infrastructure in the Alliance that helps in the medium or long term to overcome these difficulties. In an article with a rather optimistic tone, the US expert Kendrick Foster (2020) accepts that “Despite largely being under the radar in the American public debate surrounding trade, the Pacific Alliance has actually achieved a fair modicum of success in its short period of existence. Perhaps this is due to the Pacific Alliance's current small size and pragmatic goals, which have meant that it is taking the route of the tortoise, not the hare, in achieving economic integration” (p. 42). Still, the major problem in evaluating the PA is that it is far from achieving its main goal—deep integration among its member countries. No official document of the Alliance has defined the meaning of deep integration. Nor have the experts of the Alliance clearly defined this concept. Lawrence (1996), one of the first scholars to give content to the category of deep integration, did so by contrasting it with the idea of superficial integration. The latter would be limited to tariff reduction, while deep integration would refer to the regulation of aspects that are closely linked to trade, such as investment, intellectual property, services, government procurement, and trade-related labor and environmental issues. If the Alliance adopts this approach to deep integration, it is a bit complex to assess whether the regional bloc achieves it. On the one hand, before the creation of the Alliance, the member countries had already adopted “deep” regulations on these issues in the bilateral Free Trade Agreements (FTAs) signed with the United States. Both the North American Free Trade Agreement (NAFTA), in force since 1994, of which Mexico was a member (replaced by the United States, Mexico and Canada Free Trade Agreement [USMCA] in 2018), and the FTAs signed by Chile in 2001, Colombia in 2006, and Peru in 2006 regulated these aspects of deep integration. In the Framework Agreement of the Alliance, signed in 2012, none of these aspects are mentioned, but in the Additional Protocol to the Framework Agreement, signed in 2014, chapters on this “deep integration agenda” are included. Thus, if deep integration refers to the approval of regulations on the above-mentioned issues, the Alliance has continued the task initiated by its member countries since the signing of bilateral free trade agreements with the United States. Yet, labor issues, an aspect of the deep integration agenda, have not been regulated in the decade of existence of the PA. A second reading of what is meant by deep integration can be inferred from Article 1, paragraph 1 of the Framework Agreement, which states that an area of deep integration implies “to advance progressively towards the free movement of goods, services, capital and people” (Framework Agreement, 2012, art. 1, paragraph 1). Thus, it can be argued that according to the Framework Agreement, deep integration is a common market without a customs union. This point represents a change in the traditional theory of economic integration formulated in 1961 by Bela Balassa, which conceived integration as a process that was carried out gradually, in stages, beginning with the elimination of tariffs to create a free trade area, followed by the creation of a customs union, which involved the formation of a common external tariff and a joint trade policy. This action was followed by the establishment of a common market through the free movement of goods, persons, and capital. According to Balassa, after the common market, policy harmonization and economic unification followed (see Balassa, 1961). If the provisions of Article 1, paragraph 1, of the Framework Agreement are taken as a reference, deep integration is limited to achieving the free movement of goods, services, capital, and people, which is simply a common market according to the Balassa approach. Neither a customs union nor the harmonization of economic policies appear to be part of such deep integration. Economic (or even political) unification does not seem to be a phase of this deep integration. Still, the Framework Agreement states that the Alliance is a platform for trade negotiations with third countries, especially those located in the Asia-Pacific region. If these negotiations are carried out by the four countries as a group, as has happened in the negotiation with the candidates to become associated countries, we can argue that one of the elements of a common commercial policy exists—joint negotiation—, but it is difficult to assert that the bloc is moving closer to having a common trade policy. Under this second interpretation of the concept of deep integration, there is no doubt that the PA has failed to achieve it. Intra-zonal trade is very low, even though 92% of tariffs between member countries were eliminated when the Additional Protocol to the Framework Agreement entered in force in 2016, as noted above. The free movement of capital, services, and people has also not been achieved. A third position on what is understood as deep integration in the PA combines Lawrence's (1996) approaches and the “Balassian” interpretation of Article 1, paragraph 1 of the Framework Agreement. In this framework, deep integration would be a common market, without a customs union, but with an agenda for regulating intellectual property, investments, government procurement, services, and labor and environmental issues linked to trade. In this case, there would be legislative harmonization on these issues, but not a broad harmonization of economic policies (exchange rate, monetary, fiscal, e.g.). The final position to understand the meaning of deep integration would be that this concept entails a common market, without a customs union, combined with the regulation of trade-related issues (investments, services, government procurement), but at the same time including new goals such as the promotion of value chains, which would imply some form of integration of the production. This view of deep integration would also include joint negotiations with third countries. In this approach to deep integration, the Alliance shows mixed results. Despite the rhetoric about the need to promote value chains, there is no evidence that any have been created. On the other hand, regarding the joint negotiations with third-party countries, there have been interesting developments, such as the negotiations to incorporate some countries into the bloc as associate members, as has been the case of Australia, Canada, New Zealand, and Singapore. If we apply any of these four interpretations of deep integration to the PA, the regional bloc is far from achieving the goal. The initial enthusiasm has waned, and criticism of the regional bloc has been growing (Briceño-Ruiz, Prado Lallande, & Legler, 2021; Tremolada Álvarez, 2019; Vieira, 2015). When the Lima Declaration and the Framework Agreement marked a decade of existence in 2021 and 2022, respectively, no major celebrations were held, and the Alliance has entered a phase of questioning and loss of dynamism, due largely to the political changes in its member countries toward left-wing parties. Does this situation imply that the Alliance has completely failed? Of course not. First, the Alliance has succeeded in achieving the active incorporation of the private sector in the process of regional integration, which has become one of the engines of the regional process. A second aspect that could be highlighted is the flexible and pragmatic institutionality, which meant the decision to avoid the creation of cumbersome institutional structures that end up being inefficient. It is valid to ask if this institutional model will work if deep integration is eventually achieved, but so far, in its current form, it has been quite effective. A third aspect that should be highlighted is the increase of societal interactions in the PA, especially the movement of tourists, because of visa-elimination policies. The Alliance has also been successful in the creation and implementation of cooperation mechanisms such as the educational exchange program, which allows students and scholars from the four countries to carry out exchanges and academic stays at high-level institutions. In financial matters, the integrated stock exchange market, known as MILA, has been operating for several years. Partly because of its marketing strategies, the PA has generated interest in other countries in the region, especially in the Mercosur countries, whose leaders have supported a convergence between the two blocs since 2014. Supporters of the Alliance also stress the fact that the Alliance had 61 observer states in 2022, but in my opinion this fact shows the visibility of the Alliance, partly a result of its marketing strategy, but has little or no effect on achieving the goal of deep integration. After more than 10 years of existence, the PA has lights and shadows, successes and failures, but it certainly does not go unnoticed. Yet, it cannot be ignored that the Alliance is currently going through a crucial moment due to the ideological changes that have come about in the regional bloc since 2019. The rise to power of left-wing governments critical of neoliberalism raises serious questions about the continuity of the integration model promoted by the Alliance since the Lima Declaration in 2011. The current political crisis in Peru and the questioning by the governments of Andrés Manuel López Obrador, Gustavo Petro, and Gabriel Boric of the repression and human rights violations by the interim government of Dina Boluarte in Peru raises new questions about the internal cohesion of the regional bloc. As a contribution to the analysis of the PA, Latin American Policy has prepared this dossier in which the past, present, and future of this Latin American regional bloc is scrutinized. To this end, a leading group of experts analyze the critical aspects of the integration process in the PA mentioned in this introduction. Eric Tremolada Álvarez analyzes the institutional problem of the Alliance. Julissa Castro Silva examines the deepening of the bloc's trade agenda. Rita Giacalone presents a study on the role of entrepreneurs in this regional scheme. Juan Pablo Prado Lallande and Vladimir Rouvinski offer an innovative study on transnationalism in the Alliance. Julia Borba Gonçalves studies the effects of the PA in South America; in another text with Regiane Nitsch Bressan, she examines the process of convergence between the Alliance and Mercosur. The dossier closes with a contribution by Oscar Vidarte Arévalo and Mayte Díaz Quichua on ideological changes and pragmatism in the PA. José Briceño-Ruiz is a PhD in Political Science at Institut d'Etudes Politiques d'Aix-en-Provence, France, and is a specialist on Regional Integration and International Political Economy. He is currently a professor at the Research Center about Latin America and the Caribbean (CIALC) at the National Autonomous University of Mexico (UNAM) and is a regional editor of Latin American Policy.

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