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Peru 2015 | DIPLOMACY | FOCUS: THE PACIFIC ALLIANCE

In October 2015, Peru will become the first Latin American country to host the IMF and World Bank Annual Meeting since Brazil in 1967.In October 2015, Peru will become the first Latin American country to host the IMF and World Bank Annual Meeting since Brazil in 1967.

Having shown signs of “economic rebound,” mainly due to the drop in commodity prices which is hurting others on the continent, its economy is set to grow by 3.8% in 2015, according to a recent IMF forecast. However, as it is increasingly becoming apparent, it is also through cooperation with the region—particularly Chile, Colombia and Mexico—that Peru has emerged from the global financial crisis as a thrusting economy.

In early 2011, the leaders of these countries signed the Lima Declaration which would create a framework for “deeper integration” among the so-called Pacific Alliance. However, unlike existing regional scope, free trade organizations such as ALADI or the Andean Community, the Pacific Alliance, and Peru's integral role within it has risen to global prominence due to its sector-wide and international appeal.

A recent US Congressional Research Service report observed: “the objectives are to build an area of deep economic integration; to move gradually toward the free circulation of goods, services, capital, and persons; to promote economic development, regional competitiveness, and greater social welfare; and to become a platform for trade integration with the rest of the world, with a special emphasis on the Asia-Pacific region.” With a collective population of almost 215 million people and accounting for over 37% of Latin American GDP, "the region of the Pacific Alliance has captured the attention of the global investment community, given the optimum growth of the region and the liberalization of its economy and its market in recent years,” according to a S&P Dow Jones director.

While international interest certainly has been high—with observer states ranging from America to Singapore and Belgium—a number of internal achievements have established the group as the latest emerging trend. Namely, it succeeded in diverting investment interest away from other continental, emerging giants such as Brazil by integrating the Lima Stock Exchange with the Colombian and Santiago bourse to create Mercado Integrado Latinoamericano, known as MILA. By embracing the “spillover effect” of integration, “transactions are performed in their respective local currency without the need to leave the country, and with book-entry through the local broker,” meaning that investors from Chile, for instance, can buy Colombian stock with their local pesos. For Peru's growing market, this has helped attract the sale of 3.79 million shares of the Lima Stock Exchange to Mexican investors, thus paving the way for Mexico's integration onto the bourse. Likewise in the financial sector, the Canada-based Bank of Nova Scotia has recently confirmed its acquisition of Citigroup's operations in Peru, principally in order to further boost its presence in the Alliance.

Another key achievement of the Pacific Alliance has been to develop new forms of political dialogue amongst its members. In May 2013, the leaders “reaffirmed the ties of friendship, solidarity and cooperation that exist between their countries” by signing the Cali Declaration which agreed to open shared Embassies in Ghana, Algeria, Morocco, and Vietnam, while urging member states to continue developing joint-diplomatic efforts. For its part, this has helped Peru soothe an internal rift that has emerged with Chile over a drawn-out spy scandal. Instead, in December 2014 the four-member bloc pledged to stand together on climate change and expanding economic cooperation to other sectors.

One industry which Peru is particularly keen on boosting is tourism, where out of the 33 million international visitors to the region in 2014, Peru received just over 3 million. In fact, considering Mexico has enjoyed the lion's share of tourists within the Pacific Alliance, with over 24 million visitors annually, the remaining members have pooled their efforts by actively promoting their leisure and hospitality potential to each other's markets. As such, in April 2014, PromPeru, a public entity attached to the country's Foreign Trade and Tourism Ministry, announced its participation on a joint “Pacific Alliance Workshop” designed to boost the cultural and tourist appeal of the region.

Testament to the success of the Pacific Alliance lies in reports that the organization is on the brink of expansion, with Costa Rica and Panama expected to join imminently. Nonetheless, as set out in the Lima Declaration, what will be crucial for existing members is that the integration process is deepening in addition to widening.