12.2 Regional Integration and Trade Agreements

Latin American countries have embraced regional integration through trade blocs like MERCOSUR and the Pacific Alliance. These agreements aim to boost economic cooperation, reduce trade barriers, and strengthen ties with global partners.

Multilateral organizations like CELAC foster political dialogue and address regional issues. Meanwhile, trade policies have shifted from protectionism to free trade agreements, promoting economic growth and integration within Latin America and beyond.

Regional Trade Blocs

MERCOSUR (Southern Common Market)

• Customs union and trading bloc established in 1991 by the Treaty of Asunción
• Aims to promote free trade and fluid movement of goods, people, and currency among member countries
• Full members include Argentina, Brazil, Paraguay, and Uruguay, with Venezuela's membership currently suspended
• Associate members are Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname, participating in free trade agreements but not fully integrated into the customs union

Pacific Alliance

• Regional integration initiative formed in 2011 by Chile, Colombia, Mexico, and Peru
• Focuses on free trade, economic integration, and strengthening ties with the Asia-Pacific region
• Aims to create an area of deep economic integration and move gradually toward the free circulation of goods, services, capital, and people
• Observers include countries from Latin America, North America, Europe, Asia, and Oceania, demonstrating the alliance's global reach and influence

Other Regional Trade Agreements

• ALBA (Bolivarian Alliance for the Peoples of Our America): Left-wing political, social, and economic integration organization founded in 2004 by Venezuela and Cuba, emphasizing solidarity, complementarity, and cooperation among member states
• CAFTA-DR (Dominican Republic-Central America Free Trade Agreement): Free trade agreement between the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic, signed in 2004 to eliminate tariffs and trade barriers
• NAFTA/USMCA (North American Free Trade Agreement/United States-Mexico-Canada Agreement): Trilateral trade bloc and agreement among the United States, Canada, and Mexico, originally signed in 1994 as NAFTA and renegotiated as USMCA in 2018, creating one of the world's largest free trade zones

Multilateral Organizations

CELAC (Community of Latin American and Caribbean States)

• Intergovernmental organization established in 2010, consisting of 33 countries in Latin America and the Caribbean
• Aims to deepen Latin American integration, reduce inequality and poverty, and promote inclusive social development
• Serves as a forum for political dialogue, cooperation, and regional integration, addressing issues such as sustainable development, education, culture, infrastructure, and energy
• Represents the region's interests in global forums and strengthens ties with other regional and international organizations

Trade Policies

Free Trade Agreements and Economic Integration

• Free trade agreements (FTAs) reduce or eliminate trade barriers, such as tariffs and quotas, between signatory countries to promote increased trade and economic growth
• Economic integration involves the reduction of trade barriers and harmonization of economic policies among participating countries, fostering closer economic ties and cooperation
• Latin American countries have pursued various levels of economic integration, from preferential trade agreements to customs unions and common markets (MERCOSUR, Pacific Alliance)

Tariffs and Trade Barriers

• Tariffs are taxes imposed on imported goods, often used to protect domestic industries or generate government revenue
• Non-tariff barriers include quotas, subsidies, and regulations that restrict or discourage imports, such as licensing requirements, sanitary and phytosanitary measures, and technical barriers to trade
• Latin American countries have historically employed tariffs and trade barriers to protect domestic industries and promote import substitution industrialization (ISI) policies
• However, since the 1980s and 1990s, many countries in the region have embraced trade liberalization, reducing tariffs and trade barriers to promote export-led growth and regional integration