UNITED WE STAND
Representatives of the Pacific Alliance member countries met last week in Santiago, Chile, to discuss options for diversifying trading partners, and will meet with Asian counterparts today to forge trade links to replace the TPP.
The Ministers of Finance from Chile, Colombia, Peru, and Mexico came together last weekend, agreeing to work together to boost trade with Asia in order to reduce their current commercial dependence on the US.
“We are all very interested in fostering deeper ties with Asia," stated Colombian Minister of Finance Mauricio Cárdenas, who also expressed support for Mexican policy moves in the face of worsening relations with the US since the election of President Trump there.
“Mexico is a good friend of ours, and for that reason we are going to support it," noted Chilean Minister of Finance, Rodrigo Valdes, a stance also backed by his Peruvian counterpart.
“By working together, we will generate certainty across the whole bloc," emphasized Antonio Meade, the Mexican Finance Minister, highlighting the importance of growing commercial activities with China. Trade between the two nations is low at present, with Mexico barely exporting USD4.8 billion to China in 2016. However, this figure has remained flat since 2011, even though imports of Chinese products have increased steadily to peak at nearly USD70 billion in 2015.
Although Mexico-China trade is still in its infancy, Chile and Peru have long-established trading relationships with the Asian giant. China is the primary export destination for both of these countries, with figures standing at USD19billion and USD7bilion respectively. The US is the second most important market for both. Raw materials, particularly copper, are the main products demanded by Chinese buyers active in South America. The growth of construction in Asia over the past decade is the principal source of this demand.
China is also Colombia's second biggest recipient of exports, however the country is generally heavily dependent on US trade. This economic relationship is not in jeopardy, as the American President has so far focused his attention on redefining trade with Mexico.
Even though trade among these four nations remains low, local businesses are increasingly interested in starting businesses within the bloc. Mexico became the second largest investor in Peru in 2014, while Chilean and Colombian firms have also expanded across the other countries.
While President Trump is effectively imposing a protectionist agenda, having withdrawn the US from the TPP deal and pursued a renegotiation of the North American Free Trade Agreement (NAFTA) with Mexico for the second part of this year, the four Pacific Alliance members are taking the lead in encouraging trade with Asia as well as promoting economic regional integration.
The 12 TPP signatory countries—the US included—will attend a meeting in the Chilean villa of Viña del Mar this week to discuss the future of trade between Asia and America. With China and South Korea in attendance, these four Latin American countries are likely to use the opportunity to further commercial links with their fellow Pacific nations.