Background & History

Established: 28 April, 2011

The PA traces its origins to earlier trade liberalization efforts in Latin America. In 2007, Peruvian President Alan Garcia led 11 countries in forming a regional trade initiative called the Pacific Arc. The Arc comprised countries along the Pacific coast, such as Ecuador, Honduras, Nicaragua and Panama, as well as the PA founding members. With a shared focus on harnessing opportunities for greater interaction with Asia, the Arc was designed as a forum for members to advance negotiations in areas including trade, investment, and the movement of people

Peru and Colombia were central in driving the formation of the Arc. With the prospect of initiatives such as the Free Trade Agreements of the Americas (FTAA) looking dim, and other regional efforts such as Mercosur pursuing more protectionist and inward-looking goals, the Arc provided an opportunity for these two countries to chart a more open, pro-market path to growth.

While the group held several ministerial level meetings to discuss the potential of forming a trading bloc, progress was hampered by conflicting opinions on a number of issues. In response to this, Chile, Colombia, Mexico and Peru decided to form their own bloc, announcing the commencement of preliminary negotiations on the side of the Ibero-American Summit in 2010.

Known as the Pacific Pumas of Latin America, these countries are known for their high growth rates, stable macroeconomic fundamentals, good governance and liberal attitudes towards trade.4 The decision to form a scaled-down version of the Arc was a logical one, potentially providing for a more expeditious and expansive agreement.

The four countries officially announced the formation of the PA through the Lima Declaration of 28 April 2011. The Declaration set out the guiding principles of the Alliance, codifying the members’ commitment to “progressively [advance] towards the free flow of goods, services, capitals and persons.”5 Following from this, the members developed the Pacific Alliance Framework at the Antofagasta Summit in 2012 which detailed the Alliance’s commitment to reducing tariffs, facilitating intra-bloc investment, and improving ties with other regional trade initiatives, particularly in the Asia Pacific.

Most of the PA’s major initiatives are contained in the Additional Protocol of the Framework Agreement, developed and signed at the eighth summit in Cartagena in February 2014. The Additional Protocol announced the immediate cessation of 92% of trade tariffs and duties, with a provision that the remaining 8% be gradually phased out; changes to rules of origin; harmonization of sanitary and phytosanitary standards; easing of visa restrictions; and an ambition to incorporate Mexico into the Mercado Integrado Latinoamericano (MILA) - an integrated stock market already consisting of Chile, Colombia and Peru.

While a relatively young bloc, the PA has quickly established a reputation by virtue of its broad and ambitious agenda, and the speed with which it has delivered palpable results. It has already attracted over 30 observer countries, with Costa Rica set to join the Alliance in the near future. Adopting a harvest approach to reform measures, the PA continues to negotiate further areas of cooperation.

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