MERCOSUR- Pacific Alliance Summit. The dream of Simon Bolivar or one step closer to the ALCA?

Two weeks ago the 13^th summit of the Pacific Alliance took place, the initiative of regional integration conformed by Chile, Colombia, Mexico and Peru created in 2011. The relevance of this meeting was the participation of the members of MERCOSUR, the other important initiative of integration of the region, 20 years older and formed by Argentina, Brazil, Uruguay and Paraguay. Was this the beginning of a process of convergence between both mechanisms?
 

 The Pacific Alliance and the MERCOSUR have different conceptions, the former was created with the objective of having a traditional free trade zone in the inside and a higher tariff for non-members; the latter is based on the premise of allowing its members to freely negotiate trade agreements with other countries, but giving priority to the negotiation as a group with the Asian region. In the end, the difference is the ideological approach to free trade.

 The first decade of the XXI^st century appeared as the time to shine for Latin-America, with most governments of the region politically left oriented and supported by commodity high prices. Big plans were made for the region based on a common agenda that rejected the proposal of the United States of a Pan-American free trade zone, the ALCA (Free Trade Area of the Americas) in 2005 and concluded with the creation of a regional financial institution “el Banco del Sur” the bank of the south. That was the time of Hugo Chavez in Venezuela, Luiz Inácio Lula da Silva in Brazil and Néstor Kirchner in Argentina, among others, the time passed and Banco del Sur never started operations.

 Nowadays the ideological pendulum has shifted and most countries in the region have right wing presidents and the MERCOSUR is stuck, first they admitted Venezuela, then the country was suspended and no additional steps have been given to conform the common market, each one prefers to move individually, protecting their exportations. That is the core reason why MERCOSUR countries have turn their look to the Pacific Alliance, there is no ties with the commercial block.

 In a deeper look the Pacific Alliance there is more a marketing strategy than an integration process, there is no such a thing as a common market. Whenever someone talks about it, the data shown is the internal product of the region as percentage of the world and the potential consumers of the region, but it is often forgotten to mention the low exchange of goods between members and the scarce results of the strategy to remove 92% of tariffs on goods traded since 2016. In other words, the Pacific Alliance has been successful in one thing, the idea of Latin America as a single Market.  As the Comunidad Andina became irrelevant compared to the MERCOSUR, the MERCOSUR now has become less attractive for investment compared to the Pacific Alliance. In the beginning, the Pacific Alliance was planned to accept other countries as full members under the same conditions, free trade agreements with the rest of the members; Costa Rica and Panama got in the middle of that process but finally desisted, now it appears to be limited de facto, with a new category of members (Associate states) for those countries with free trade with the Alliance members, at the moment Canada, Singapore, New Zealand and Australia.

 Is that process the right pad for the region? It depends on the expectations, so far, the results are more cosmetic than structural: common embassies in Asia, common stands in commercial fairs, academic cooperation and many, many plans but not as ambitious as to compromise their monetary policy by a common reserve fund as the Latin American Reserve Fund or a unit of accounts that ease commerce. So far, it looks that the future of Latin America Integration is more close to the ALCA proposed by United States than to the Patria Grande (Great Fatherland) of Simon Bolivar.

AMLO WON

Since the beginning of 2018, polls for the presidential election showed a growing trend in favor of the leftist candidate Andres Manuel Lopez Obrador (AMLO) that exhibited at least 20% of difference from his closest rival. Even though, a few days before the election, an unhealthy uncertainty was felt in the environment.

 

Since the 2006 election confidence in the Federal Electoral Institute disappeared; AMLO lost the election and half the country claimed that there had been a fraud in favor of Felipe Calderon, the conservative candidate of the Partido Acción Nacional (PAN). In 2012 in his 2nd campaign, AMLO lost against a very popular candidate of the Partido Revolucionario Institucional (PRI), the 70-year-old official party, Enrique Peña Nieto. In both elections there was evidence of unfair competition, undue intervention of political actors and illicit money. In 2018, AMLO was in his 3rd race for Mexico´s presidency, on this occasion, the suspiciousness was not different, with a highly mistrust for the electoral judges of the TEPJF (the institution that qualifies the legality of the election) due to their appointment by the congress through political interest; the inclusion of two independent candidates that committed fraud in the fulfillment of the official requirements; and the legalization of the distribution of prepaid cards for campaign benefits (at the beginning of the 2018 election it was consider an illicit practice for vote buying). AMLO supporters did not know what to expect, because the principal promise of the candidate was to eliminate corruption and the present administration had corruption as its sign, ¿would they allow a man that might go after them get in office?

 

The electoral process went as expected, with no mayor setbacks and the surprise came with the first unofficial results from the polls after 8 p.m., Not only does AMLO have a clear advantage over his opponents but he also got more voters than it was forecasted. Today, the difference as percentage of voting is more than 30 points and his electoral alliance “Juntos Haremos Historia” (together we will make history) is forecasted to have majority of seats in the congress, in both the lower house and the senate, allowing him to search for constitutional changes and of course revert Peña Nieto´s reforms.

 

On Monday 2nd people woke up feeling different, did AMLO really won? It is not an unknown feeling, Mexicans experienced a similar feeling in 2000, when the PAN candidate, Vicente Fox, was the first president of alternation, we woke up optimistic, feeling faithful for the future, but years later disappointment overcame, Fox did not make any significant change, he decided it was more important to keep things as they were and enjoy his historical place as the man that defeated the PRI. He betrayed the Mexican people and hindered the first attempt of AMLO for the presidency.

 

What kind of government could be expected?

 

AMLO did a great campaign, one of his best strategies was to disclose the people who will be governing with him. Individuals such as Olga Sanchez Cordero (government ministry), Carlos Urzúa (finance ministry) or Jorge Alcocer (health ministry) who have a great reputation as experts in their fields and in their personal life, this presentation served for two purposes: (i) to keep confidence in the financial markets, in case he wins the election, and (ii) to make sure that people know that he is a tolerant person, the people in his future cabinet do not have to be submissive and they even can dissent from the president´s point of view.

 

Now that he won, the first task is to begin working with Mr. Peña´s government in the preparation of the federal budget for 2019, there will be the first signs of how he plans to change the budgetary distribution to favor the lower income levels. He made very difficult compromises, such as: (i) increase the amount of money for elder people; (ii) fund school for all; (iiI) keep gasoline prices low; (iv) dismantle reforms (educative and maybe energetic) of the previous administration; (v) but the most complicated one is to expel corruption; it is a giant challenge that of course will take time, but his victory was so overwhelming that his party MORENA and his political alliance will have the majority in congress to make constitutional changes.

 

Mr. Lopez Obrador has no excuses, he wishes to make history, but will he do it as the heroes he admires or will he be the first leftist president that let down Mexico´s hopes of being a better country when it was most needed?