The Opportunities Created by the Fall of the Populist Left in Latin America

A new free-trade alliance in Latin America could usher in a new era of economic prosperity, as the populist left continues to decline.

The potential alliance of two free trade blocs in Latin America would be a momentous occasion (EFE).

By Victor H. Becerra

Before our very eyes, a process with important implications, decisive for our future, is unfolding.

This involves the intention of the two dominant trade blocs of the region (the Pacific Alliance and Mercosur), to seek greater integration and to create, in the future, a large free trade area in the region (after the failure of the FTAA in 2005), which would imply the free circulation of goods, services, capital, and people among the member countries.

This was announced at the XIII Alliance Summit, held from July 21 to 24. Let us recall that the Pacific Alliance was formed in 2011, and has gradually emerged as the most dynamic and open trade bloc in the region, which 52 countries have joined as observers and four nations (Australia, Canada, New Zealand, and Singapore) are currently in negotiations to join the bloc. Altogether, the Alliance is the eighth largest economy in the world, accounts for 41% of all the investment that arrives in the region, and is the fifth largest recipient of foreign direct investment at the global level. It forms a market of 220 million people and constitutes 36% of Latin America’s GDP and 57% of the region’s total trade, with 92% of the products traded between the member countries.

Facing an international context marked by protectionism, exclusion and unilateralism based only on power, the intention to relaunch Latin American integration and invigorate inter-regional multilateralism with Mercosur, together with the Asia-Pacific region, may be the best strategic plan in today’s challenging world scenario.

A possible integration of the two blocs would concentrate 90% of the region’s GDP and foreign direct investment flows, and would represent a market of more than 500 million consumers. Such integration would help diversify the region’s productivity and exports, and create more efficient economies of scale, in order to take advantage of the explosive growth of the middle classes in Asia.

The road to that horizon will still be arduous. As the Uruguayan president, Tabaré Vázquez, pointed out at the Summit: “They are not identical blocs but neither are they exclusive.” Both blocs will have much to do and resolve in the coming years, before considering taking decisive steps. But the political intention exists, as indicated by the symbolic importance of this first meeting of the presidents of both blocs, which had never happened before.

However, intention does not necessarily imply that such plans will come to fruition. Everything could change, tomorrow. In this regard, let us note that two of the four presidents of Mercosur were missing, and that of the six attendees to the Summit, three are about to leave office in the coming months. So much will depend on the policies of new presidents who will soon be assuming office, especially in Mexico and Brazil. In the particular case of Mexico, Andrés Manuel López Obrador’s refusal to attend the Summit, despite having confirmed his attendance, leaves serious doubts about his real commitment to free trade and the alliance. Many suspected that his absence was due to pressure fom his political base not to meet with Michel Temer, the current Brazilian president, who has been beset by scandal.

The possible creation of a large free trade zone in Latin America would be a momentous event, if it were to materialize, that would result in a continuous improvement of the productive and economic capacities of our countries and their societies. In this regard, let us note that all the processes of improvements in productivity and welfare of the world were generated in times of free competition and trade; never in times of protectionism, which is merely a means to guarantee the unfair demands of those who are not competitive. In Latin America we need trade and competition to improve. And the opportunity is on the horizon.

Finally, let us note that this is possible now, thanks in large part to the collapse of the populist left in the region. Governments such as those of Correa in Ecuador, Lula and Dilma in Brazil, Chávez and Maduro in Venezuela or Evo in Bolivia were active enemies of free trade and established an ideological agenda in Mercosur and other organizations. Their political defeat, and the international discrediting of their economic agendas, has doomed the Latin American left, as exemplified by the critical situation today of Unasur (the Union of South American Nations, created by Chavez and Lula), which has been torn apart by the defection of its members, the vacancy of its governing body, and its painful eviction from its headquarters. Today the possibility of Latin American integration will be facilitated through the acceptance of diversity and economic rationality, not by ideological uniformity or the politicization of relations.

Hopefully we take advantage of this newfound opportunity. Someday the populist left will return, because people often forget the past, and succumb to the fallacy that the grass is always greener on the other side. This is the current case in Mexico: Mexicans have forgetten our painful past with the old PRI and by electing López Obrador, we have freely and cheerfully decided to give a new opportunity to the archaic practices, logic and culture of that party, under a new name.

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