Big Questions on Trade and Development for Latin America in 2015

Julieta Merlo visited NYU CIC from the Universidad de Chile for 3 months in 2014 to research the role of the BRICS and middle-income countries in shaping the post-2015 development agenda. In this blog, she comments on Latin America’s likely trade and development priorities in the near term.

Latin America will face some important economic and political challenges in 2015 because export commodity prices are falling. In this context, trade and development policies will be crucial for closing the economic and finance gap.

Governments and heads of state are also changing in 2014 and 2015, and these shifting political dynamics also affect Latin America’s major trade and development policies. The presidents of Chile, Brazil, Bolivia, and Colombia started new terms in 2014, and the president of Uruguay in March 2015. Argentina will hold presidential elections this year. Mexico and Venezuela will also have parliamentary and municipal elections respectively, which could bring about political changes. All of these governments are handling economic pressures. For example, in Chile, President Bachelet took office with promises to reduce inequality, but the fall in copper prices means economic growth projections are less optimistic for bankrolling government policies. In Brazil, President Rousseff is under pressure to expand efforts to reduce inequality by responding to social needs, and to guarantee more transparency in the government in the wake of the Petrobas investigations. In Bolivia, President Morales has had to moderate his political discourse to attract private investors. Colombia has shifted its political and economic focus outward on the region in recent years, ramping up participation in the Pacific Alliance, after many years of concentration on the FARC problem. Mexico has reinvested energy and focus in the region through the Pacific Alliance, having been mainly focused on NAFTA before. The outcome of Argentina’s elections in October this year is still uncertain. Its somewhat protectionist policies have led to debates with the other members of Mercosur, and the impact of its alliance with Venezuela could be weakened by the fall in oil prices.

These economic and political factors all shape evolving policy in the region, raising 3 important questions for trade and 3 for development.

3 Big Questions for Trade

1. What is Latin America’s position in the global trading system?

Latin America presents a unified voice in calling for reform of the global trading system. Latin America, along with other regions, has been critical of the current system, arguing for one that is more representative and democratic. Some countries (Argentina, Bolivia, Ecuador, and Venezuela) have pursued strong anti-imperialist discourses on trade, and there is also a call for the reform of international institutions (mainly the WTO) to be more democratic, representative and fair to all, and ensuring growth and development for everyone. One particularly heated issue is subsidies for exports or for agriculture in developed countries, which was also reflected in the negotiations on the Sustainable Development Goals.[SH1]  Latin America is likely to ramp up the pressure for reform through the WTO in 2015 and beyond.

2. What are the priorities for Latin American trade blocs?

The countries of the Pacific Alliance, composed of Chile, Colombia, Mexico and Peru, have pursued an integration process focused on free trade, and free movement of goods, services and people, in order to boost these countries’ economies. One of the main objectives of the bloc is to become the political, economic, and commercial platform with the Asia-Pacific region, and achieving intra-bloc agreement appears to be a priority. Chile and Peru have already managed to sign bilateral agreements with China, demonstrating the importance of the region to the Asian giant. The Pacific Alliance shares with China a similar pattern of international integration and productive complementarity, which could potentially give this group an advantage over Mercosur. Mercosur is the other major Latin American trade bloc and includes Argentina, Brazil, Paraguay, Uruguay, and Venezuela (Bolivia plans also to join the bloc). This trading bloc has tried for years to achieve a free trade agreement with the European Union without success. Trade with China is now a priority for Mercosur, but because of both political and commercial differences, which are reflected in a series of lawsuits in the WTO, a deal has so far failed to materialize. China, however, has shown new interest in achieving a deal after Venezuela joined the bloc.

3. Can Latin America benefit from the Trans-Pacific Partnership?

Chile, Mexico, and Peru are also in the process of negotiating the Trans-Pacific Strategic Partnership (TPP), which includes 12 countries (Australia, Brunei, Canada, United States, Malaysia, Japan, New Zealand, Singapore and Vietnam, as well as Chile, Mexico and Peru). This ambitious new agreement not only facilitates free trade, but also establishes new labor and environmental standards, and new rules on intellectual property and transparency.  Negotiations are ongoing, and have attracted criticism because they are happening in secret.

3 Big Questions for Development

1.How will Latin America contribute to the Sustainable Development Goals (SDGs)?

As discussed by CIC in A Laboratory for Sustainable Development? Latin America, the Caribbean and the Post-2015 Development Agenda, Latin America has an important role to play in framing the post-2015 agenda. The Rio + 20 conference and SDG negotiation process was a major example of how leadership in the region in general, and Brazil in particular, is recasting the rules of the game for international development. Latin America has an interesting role in implementation of the SDGs too. Most of the region has come to be regarded as middle income, leaving several countries off the list for receiving aid. This has led many countries in the region to develop new types of cooperation, such as South-South and triangular cooperation, whereby expertise, technology and knowledge is shared on certain issues based on countries’ own experience. Brazil is the most important provider of South-South cooperation in the region, while Chile and Mexico stand out in triangular cooperation (with Germany, Japan and Spain as the main partners).  

2.How did Latin America perform on the Millennium Development Goals?

The region made major achievements across all the MDG areas, including on poverty eradication (Brazil and Chile already accomplished the goal well within the MDG timeframes). Despite economic growth and development progress in recent years, the region is now confronting a period of stagnation with low positive projections. This will constrain progress on the unfinished business of the MDGs that have not yet been achieved in the region in their entirety. At the same time, governments are faced with new social demands, most prominently in health, education, and citizen security. Pursuing the SDGs post-2015 will be important for governments in connecting with Latin Americans’ aspirations.

3.What are the main development challenges in Latin America?

Latin America will face important development decisions in the coming years for meeting the SDGs. Above all, inequality, criminal violence, gender equality, and environmental sustainability will be major problems to resolve. Migration is also becoming a concern, with emmigration rates growing both to the US and other countries in the region. Labor migrants with low-skilled employment characterize these intra-bloc flows. Immigration policies, as well as other development problems, should be reviewed and settled jointly. This is a great challenge if one considers the great difficulties that the region already faces reaching joint solutions to drug trafficking and illicit activity affecting the region.

 

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May 07, 2015
Julieta Merlo
Latin America