April 29, 2011 / 12:00 AM / 8 years ago

LatAm's ambitious traders deepen ties, eye Asia

* Pacific Alliance is alternative to Brazil for investors

* Colombia, Chile, Peru also integrating stock markets

LIMA, April 28 (Reuters) - Leaders of Latin America’s most aggressive free traders — Peru, Chile, Colombia and Mexico — agreed on Thursday to deepen their existing commercial ties and further open doors to lucrative Asian markets.

The so-called Pacific Alliance, which Panama could also join, creates a framework for “deep integration” that will eventually allow for the freer movement of goods, people and services.

It would help the bloc negotiate as a group with fast-growing Asian countries and offer an alternative platform for global firms who tend to look first to Brazil’s vast but relatively more closed economy when they come to Latin America to invest.

“This is a historic step for our continent,” Peruvian President Alan Garcia, who leaves office in July, said of what has become his signature foreign policy project.

The initiative, which would supplant a bevy of bilateral pacts the four countries already share, represents a greater emphasis on so-called south-south integration among booming emerging markets in Latin America and Asia.

Though the four countries have trade deals with the United States, it has lost its allure as a trade partner because of a sluggish economy. And Colombia has grown frustrated by a U.S. Congress reluctant to approve a bilateral agreement.

Mexico spent years sending roughly 80 percent of its exports to the United States, only to find itself thrown into recession during the global crisis when shipments north slumped.

In Asia, both Chile and Peru have trade pacts with China, among other markets. Peru, Chile and Mexico also belong to the Asia Pacific Economic Cooperation trade pact, a club of 21 economies that Colombia has long aspired to join.

Trade experts say the Pacific Alliance could progress more quickly than existing regional trade blocs such as Mercosur, which is led by Brazil and includes Argentina, Chile and Uruguay. It has been around for years but has made fewer advances breaking down trade barriers.

Brazil also balked at efforts to form the 34-nation Free-Trade Area of the Americas, backed by the United States.

“Of the many integration projects in Latin America, this agreement has a better chance of success,” said Carlos Aquino, director of the center for economic studies at Lima’s San Marcos University. “The four countries are stable democracies with open economies.”


In another integration effort, this month the stock exchanges of Colombia, Chile and Peru will formally launch an bourse known as MILA that cross-lists shares of the companies in all three countries.

MILA will trail only Brazil’s bourse in size, and Garcia on Thursday encouraged the Mexican stock market to join the group, though Mexican President Felipe Calderon did not openly support the idea.

At the end of December the Chilean, Peruvian and Colombian exchanges had a combined market cap of $718.8 billion.

Investors have worried Peru’s open economy and pro-investment stance will be threatened if left-wing nationalist Ollanta Humala is elected president on June 5, and markets have fallen as a result.

The most recent polls give him a narrow lead over right-wing lawmaker Keiko Fujimori.

Humala has in the past sounded skeptical about free trade but says he would work to boost exports and favors regional integration. (Reporting by Terry Wade and Caroline Stauffer; editing by Philip Barbara)

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