Policy Implementation and Current Issues: The Development of Latin America Free Trade Essay

Introduction to Latin American Free Trade

The pursuit for an integration scheme that would create a building block for a global trading system has resulted in the shift of economic policies. The shift from protectionism towards a greater economic openness has been the basic foundation of regional and sub-regional trading system. The success of the European bloc has been one factor why this economic trend is being adhered to by many countries in the world. Centripetal force situated in the western hemisphere has managed to create favorable ground that would pave the way for the creation of regional blocs, increasing foreign financial flow and generating more income for involved countries (Benedictis, 2002). Latin America saw this as a possible chance to expand their markets and achieve greater competitiveness with the rest of the world. The term free trade was born because of this vision, for an international economy which is more regional in nature and scope.

Free trade has not been clearly defined by scholars, which is why organizations like the WTO and GATT are left unable to establish legitimacy; these said organizations defined free trade in three ways that are uncertain of what is really considered as free trade. For GATT, free trade is that which is free from the laws concerning taxes and regulations that single out foreign products from domestic products. This runs contrary to other descriptions of free trade which represent it as trade that is unconstrained by actions that promote non-discriminatory environmental laws towards nations that go against it. On the other hand, WTO regards free trade as trade that is totally free of national regulation (Driesen, 1989).

Latin America, which consists of Mexico, Cuba, Dominican Republic, Puerto Rico, the Caribbean and most parts of Central and South America has a long history of trading (Latin America and the Caribbean in the World Economy, 1998). It began way before the Spaniards colonized this continent, but the presence of this colonial power has introduced this land to other parts of the world. The empire-like system of colonial power has enabled their colonies to perform basic trading that gave way to a small economic integration between these colonies (Benedictis, 2002). The famous Galleon trade between Acapulco of Mexico and Manila of Philippines during the 16th up to the 19th century has allowed local products of these two colonies to be sold and spread in Spain and to the rest of Europe. Even after Spain lost its power, these two countries still continue to trade (Benedictis, 2002).

Recently, Latin America has witnessed and experienced great economic progress due to the emergence of regional trade agreements. These trade agreements resulted in the formation of several Latin America free trade zone. Although the concept of a free trade zone is standardized, free trade zones in Latin America vary according to the goals set by their national government and the characteristics of their economic policies (Braga, 2002).

These characteristics range from open-border areas specifically concerned with products directed into domestic markets up to isolated border areas meant for production of goods directed for exportation and importation (Braga, 2002). This characteristic indicates the level of development of free trade zones in certain places in Latin America. Though there have been great success of free trade zones in areas such as Mexico and the Caribbean, there are still countries which are having trouble in succeeding in free trade.

This paper focuses on the Latin America free trade and will tackle the recent issues that surround it. In addition, it will also discuss the possible free trade trends that are likely to transpire in the future. To begin with, the paper will provide an overview of Latin America free trade and its zones. Towards the last portion, the paper will discuss some of the policies and legislations which affect Latin America free trade.

Overview of Latin American Free Trade

The history of free trade zones dates back to the early decades of the last century, starting from the first trade zones enacted by Argentina and Uruguay in 1920 (Alemann, 1963). But it was in the years of the 1960’s up to the 1970’s that free trade zones became a phenomenon and when many countries adhered to this kind of economic trend (Braga, 2002). Although there are numerous free trade zones which have existed in Latin America, they are categorized into seven major groups. They are:

The Andean Community free trade zones
Chilean free trade zones
The Manaus free trade zone and the Argentine “Area Adueana Especial de Tierra del Fuego”
The Brazilian export processing Zones and the Argentine “Zonas francas”
The Mexican,  Central American and Caribbean “maquiladoras”
Mercosur free trade zones
The South American Union of Nations (UNASUR)

The Andean communities consist of Bolivia, Colombia, Ecuador and Peru. The association was formed in May 1969 and was known as the Andean Pact until 1996 (Baumann, 2008). Chile and Venezuela were part of the association when it was formed; however, Chile left in 1974 and Venezuela in 2006. The latter left the association believing that the trade negotiations among Colombia, Peru and the United States affected the essence and purpose of the Community (Baumann, 2008). Chile rejoins the association after agreeing to form a free trade zone in the pacific coast. Venezuela, on the other hand, opted out the option of rejoining the association after it joined the Mercosur. There are a total of 40 free trade zones situated in the said 5 countries. The Andean communities allow for product sale into their domestic market. Products that came from Free trade zones area are still subject to normal procedures concerning their quality and legality. These free trade zones focus on export, transformation, industry, trade and services (Baumann, 2008).

The complex institutional structure of the Andean Communities made it different from Mercosur. The Andean communities also adopted common norms for intellectual property, trade services and investment. Unlike Mercosur, there are no exceptions to product preferences in Andean communities which made its market more open for trade services and investment (Baumann, 2008).

After leaving the Andean Communities, Chile managed to establish free trade zones in their area. There are 2 free trade zones located in Chile, the “Zona Franca de Iquique” and the “Zona Franca de Punta Arenas”. The first one focuses on industrial and commercial services just like the free trade zones located in East Asia, and the second one was created to induce development in scarcely populated areas in Chile just like the Argentine “Tierra del Fuego free trade zone” (Baumann, 2008).

The “Zona Franca de Manaus” (ZFM) situated in Brazil represented more than 300 well established enterprises and industries that sell around 97% of its production in the Brazilian market (Braga, 2002). ZFM is also the largest free trade zone in South America. Following it, the “Tierra del Fuego free trade zone” of Argentina is considered as the second largest free trade zone in South America. It functions just the same as ZFM; the goods that are produced were meant to be suppled and to be sold in the Argentine domestic market. Rather than the traditional free trade zone which focuses on export and international services, these two free trade zones were created as instruments to induced development in the remote and populated areas of these two countries (Braga, 2002).

The “maquiladora” is a Mexican corporation which operates under the maquila program. A maquila program entitles a company to several benefits, namely, participation of foreign investments in the capital without any special authorization and special customs treatment (Villareal, 1991). The number of “maquiladora” firms situated in Mexico, Central America and the the Caribbean is now over the 1000th mark. For the past 35 years, the “maquiladora” industry has boosted the financial earnings of every country that is involved.  It was also responsible for the 1.3 million jobs that were created during the building of “maquiladora” plants and the production of goods intended for domestic and export sale. Additionally, the “maquiladora” industry grew faster after the North American Free Trade Agreement (NAFTA) was signed. It allowed the “maquiladora” firm and companies to sell their product in the domestic markets up to 100%. The famous “Zona Libre de Colon” could also be found in Central America. This free trade zone consists of 1700 enterprises which focus on global logistics and financial services and was responsible for the $11.2 billion of import and export sale (Braga, 2002).

The Mercosur was an association formed by Paraguay, Uruguay, Argentine and Brazil under the Treaty of Asuncion on marched 1991 (Baumann, 2008).  Mercosur was created in order to synchronize macroeconomic policies and business sectors that will allow free movement of goods, services and productive factors in a single market. Other members include Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela (Baumann, 2008).

Mercosur chose to adopt an inter-governmental model rather than copying the European Union supranational structure. This lack of institutional rigidity has made Mercosur officials flexible enough to change agreements and laws during negotiating process (Baumann, 2008). However, misinterpretation that resulted in the lack of cooperation and slow implementation of rules has delayed multilateral and regional treaties because of the absence of a supreme entity capable of giving a higher degree of discipline that will ensure the implementation of common rules (Baumann, 2008).

In 2004, a free trade agreement between the Mercosur, Andean community, Chile, Guyana and Surinama will lead to the creation of South American Union of Nations. Its goal was similar to European Union, to create a free trade area in South America. UNASUR agendas was not entirely focused on trade issues but it also cover issues concerning infrastructure development and energy integration as well as the promotion of social and cultural heritage. Together with the Latin American Integration Association (LAIA), these two comprises all South American countries in a free trade zone (Baumann, 2008).

The main function of free trade zones was to create favorable grounds on which companies and manufacturers could access raw materials for warehousing, re-packing, processing and export (Teichman, 2001). Free trade zones could also provide traders easy access to duty free equipments and a bureaucracy-free environment for investors. A bureaucracy-free environment/free trade zone is safe from sudden change of administration or political crisis. Free trade zones are usually approved by the congress and there are corresponding laws created to protect them (Braga, 2002).

Although Latin America is well known for frequent changes in economic and administrative regulations, the legal basis of free trade zones makes it more difficult to change or be affected during turbulent times. However, the traditional path of development for free trade zones will not be suited to some countries in South America. For instance, free trade zones located in the Caribbean’s and Mexico could offer low cost labor that is not present in countries such as Brazil and Argentina. Low cost labor allows investors and businessmen and companies to maximize their earnings and save more money for their business. Foreign investors usually refrain from countries with high labor cost such as Brazil and Argentina, since it would logically minimize their profits (Braga, 2002).

The lack of precise rules relating to free trade has been a longstanding concern in the free trade zone community. Unfair competitions and agreements could be generated among free trade zones at the regional level and could hinder economic growth and development. For this reason, the “Comite de Zonas Francas de las Amercias” has submitted several proposals to the World Trade Organization (WTO). The proposals are sets of regulations and laws that would harmonize business operations in free trade zones. Unfortunately, the World Trade Organization has also set its own agenda regarding free trade zones situated in Latin America. This difference between the WTO and the Comite de las Americas has posed greater risk concerning the efficiency and freedom of free trade zones (Braga, 2002).

Analysts have concluded that WTO agreements put aside the welfare of free trade zones and export processing zones. WTO agreements are more concentrated on the welfare of investors and shareholders. For an instance, the “maquila” regime was maintained during the North American Free Trade Association (NAFTA) negotiations and that “maquiladoras” have grew faster after the NAFTA agreement was put into effect (Braga, 2002).

The growing worldwide support for free trade zones especially in the Latin America has emphasized the benefits that the people could experience from free trade zones. Reducing regional imbalance, strengthening the balance of payments and furthering technological advantages for the countries involved in free trade (Braga, 2002) Moreover, free trade zones are traditionally export oriented which make them more attractive, since export promotion mechanisms are free from any WTO policy. Of course, these are just mechanisms and success is not always guaranteed, especially with Latin American countries that lack the precondition to establish free trade zones (Baumann, 2008).

Current Issues in Latin American Free Trade

Latin Americans experienced an average 80% growth in income per person during the year of 1960’s and 70’s. But with the following two decades, the registered growth of income per person was only 11%. Additionally, Latin American governments for the last 25 years have employed economic policies mandated by the Washington-dominated International Monetary Fund and the World Bank (James, 2005). The majority of Latin Americans are still living below the poverty level, even after 25 years of opening up its borders to foreign investors, privatization of essential public services and performing numerous de-regulations of important industries. The support for free trade zones has declined in the recent years due to the increasing number of people living below the poverty line (James, 2005).

The problem lies in the current structure of free trade agreements. Free trade agreements usually happen between those multinational companies and the economic elites found in Latin America with the help of the government.  The governments and economic elites are engaged in the trade negotiations without adequate information being made available to the public which often result in the neglect of the public’s welfare and concern (Catholic News Service, 2004). The result of these agreements often resulted into landless rural farm workers, small businessmen being put out of their businesses and others who are forced to leave their place in order to compromise with the agreements.

The political, economic and social balance in the region tends to favor few people; most of them are economic and political elites of the region. This condition has promoted not only the aggravation of poverty but also put the brakes on the consolidation of integral and sustainable human development. Revisions that would improve the quality of life and will open commercial possibilities should be done in order to consolidate the political, economic and social balance in the region (Catholic News Services, 2004).

The United States, an avid adherent and promoter of free trade zones in Latin America have proposed a plan that will ease the tension between the elitist and the public. The Central America-Dominican Republic-United States Free Trade Agreement (CAFTA) was modeled after the existing North American Free Trade Agreement (NAFTA). Its intention is to promote the same level of trading operations just like in Mexico. However, citizens of Central America have already voiced out their disagreement with CAFTA (Catholic News Services, 2004).

Scholars based in Central America have studied and witnessed how NAFTA failed to fulfill the promises and benefits that were written in the free trade agreements. For instance, 1.5 million farmers have lost their land due to cheap corn dumping that came from the United States. Even in the U.S. congress, democrats who are usually in favor of free trade laws are opposing the ratification of this free trade agreement (Catholic News Services, 2004).

The condition of CAFTA reflects the diminishing popularity of the so called “free trade” especially when the US is involved. The US for the past ten years has initiated and campaigned heavily for the establishment of a Free Trade Area of the Americas (FTAA) which involve 34 countries situated in North, Central and South America. But most South American nations backed out of FTAA because the U.S. demands that they hand over their public services, investment, and other key sectors while the U.S. maintains unfair agricultural subsidies that block market access for their exports. These have made this free trade area doubtable and uninteresting (James, 2005).

The citizens of Central America do not believe that the privatization of public services would benefit them since rates to avail these services would go up once it is privatized.  The U.S. tried the “divide and conquer” strategy when the talks for FTAA began in 2003. Using the CAFTA as a stepping stone for FTAA, the United States started to pursue smaller countries situated in Central America in order to make early development concerning FTAA (James, 2005).

Migration issues became prevalent as more countries adhere to free trade agreements. The leading source for migration to the United States, both legal and illegally came from Mexico, Central America and the Caribbean’s. Due to poverty, most immigrants are seeking well paying job that would support their family back at home. According to statistics, Mexico is the largest source of illegal and legal migrants to the United States. The U.S. and Mexican Congress both pointed out that it is impossible to stop the flow of illegal migrants not only in Mexico but also from other countries as long as there are no job opportunities presented to them.  Mexico, to reduce the growing numbers of illegal migrants, has asked the United States for the creation and promotion of a guest worker program (Sullivan, 2007).

The guest worker program was intended to normalize the status of illegal migrant workers and to facilitate migration patterns so that workers could avoid legal problems and could return to their countries of origin (Sullivan, 2007). Along with it, Mexico has committed itself to imposed legal emigrations until the guest country could offer a sufficient number of visas that would could cover the number of illegal workers working in that country. Both the United States and Mexico are committed with this resolution through the principle of shared responsibility. The United States responded by increasing its border defenses and the coverage of the guest worker program (Sullivan, 2007).

Other countries such as El Salvador, Honduras and Nicaragua have asked for possible immigration reforms to their countries. The Department of Homeland Security, in response to this, has granted the extension of temporary protected status to these three countries. The Temporary Protected Status (TPS) is a discretionary, humanitarian benefit granted to eligible nationals after the Secretary of Homeland Security determines that a country has been affected by ongoing armed conflict, natural disaster, or other extraordinary conditions that limit the affected country’s ability to accept the return of its nationals from the United States. This extension was in accordance with the Immigration act of 1990 which established TPS (Sullivan, 2007).

Along with the migration problem, the increasing crime rate and violence in Latin America especially in Central America have raised the concerns of authority against the possible transnational activities of criminal gangs.  Experts have asserted that illegal migration and human trafficking are the drivers of criminal activities in the region (Sullivan, 2007).

To counteract the rise of criminal activities, several U.S. agencies have created the inter-agency task force called National Security Council (NSC). This task force allows the U.S. government to pursue criminal activities through five broad areas: diplomacy, repatriation, law enforcement, capacity enhancement and prevention (Sullivan, 2007).  The U.S. congress has also introduced the North American Cooperative Security Act. Its purpose was to raise the level of cooperation between the U.S., Mexico and Central America in pursuing criminals to curb criminal activities (Sullivan, 2007).

The spread of HIV/AIDS in places like Central America and the Caribbean was an unexpected problem brought by the increasing numbers of immigrants and tourists. The spread of these diseases started to affect social developments and has also brought negative effects to the economies of Central America and the Caribbean. Heterosexual transmission made AIDS/HIV impossible to contain especially when carriers are situated in populated areas. Infection rates in places such as Bahamas, Guyana, Haiti, and Trinidad and Tobago fall between 2% to 4% while in places such as Jamaica, Honduras and Dominican Republic is around 1% to 2% (Sullivan, 2007).

Bilateral donors (such as European Nations and United Sates), Regional and Multilateral organizations especially Nongovernmental Organizations (NGO’s) supported the government of Caribbean and Central America in its campaign to contain and if possible to stop the growth AIDS/HIV (Sullivan, 2007). Funding for AIDS/HIV prevention program has increased in the recent years especially in places such Guyana and Haiti. For the year 2006, U.S. funding reaches the amount of $93 million dollars, a huge difference from the previous financial assistance of $33.8 million dollars in the years 2000 to 2003. The increase in financial aid was attributed to the inclusion of Guyana and Haiti in the President’s Emergency Plan for AIDS relief (Sullivan, 2007).

Scholars have asserted that the main causes of migration and criminal violence  was poverty, easy access to arms, no job opportunities and social exclusion starting from youth.  Trying to solve the problem in a holistic manner could only widen the gap between government officials and concerned citizens. A step by step process which aims to answer one problem at a time could be much efficient since it would give enough time to formulate adequate and focused interventions for each issue.

Future Trends in Latin American Free Trade

The rise of petroleum prices has made Latin America the fastest growing regional trade partner for U.S.  The growth was mainly attributed to the success of “maquiladoras” plants situated in Mexico. Mexico in 2006 has experienced an export growth of 11.5% and the U.S. export to Latin America grew by 15.8% (Hornbeck, 2008).  On the import side, Latin America experiences a significant 13.3% growth and was mainly attributed to the increase of U.S. imports and dollar value. Price increase in petroleum’s products, metals and other commodities are also attributed by experts as the reason for the sudden export growth in Latin America (Hornbeck, 2008).

The growth of total merchandise trade (exports plus imports) from 7.9% of gross domestic products (GDP) in 1970 to 21.4% in 2006 has emphasized the importance of Latin America as a U.S. trade partner (Hornbeck, 2008). More importantly, many Latin American countries have adopted broader economic reform through trade liberalization since 1980’s (Teuchman, 2001). Low tariffs rate have contributed greatly to the economic integration among countries of Latin America. Average Latin American import tariffs have declined from 45% in 1985 to 9.3% by 2002, although rates varied among countries such as Mexico and Costa Rica (Laird, 1992).

Trade liberalization has been the topic of multilateral, regional and bilateral negotiations between the United Sates and Latin America. For Latin America, reducing the tariffs and tariff quotas, domestic subsidies, and the use of antidumping provisions to reduce barriers for agricultural trade is the top concern for every negotiation and agreement that they share (Grant, 1993). However, for the sake of preserving their bargaining leverage to other subsidizing countries, the United States has to decline the demands of Latin America regarding agricultural trade talks. This unwillingness has resulted in inherent differences between the United States and Latin America that slowed down comprehensive agreements at the multilateral and regional levels (Hornbeck, 2008).

The numerous multilateral and regional negotiations coupled with bilateral and plurilateral agreements have been the proliferation of FTA’s in the Western Hemisphere courtesy of the United States. Unlike the Andean Preference Act (ATPA), the Generalized System of Preferences (GSP) and the Caribbean Basin Trade Partnership Act (CBTPA), the U.S. FTA’s are permanent and doesn’t need the regular reauthorization of the congress (Hornbeck, 2008). However, the implementation of this FTA is being blocked by countries that are not in agreement with the United States. Brazil for example has supported the entry of Venezuela full member of the Mercosaur and Brazil led the formation of South American Community of Nations (Hornbeck, 2008).

Additionally, the recent nationalization of key industries in Bolivia, Ecuador and Venezuela does not go along the market-based trade solutions that the U.S. has been implementing. Moreover, multiple FTAs, could promote cumbersome trading system that have its origin, customs administration and law enforcement could complicate trading decisions and hinder investments. Sub-regional groups could not exist if they share different traditions and values. Custom administrations which are uniform in nature should be formulated in order to unite these existing subgroups (Hornbeck, 2008).

An FTAA without advancement in agricultural issues will be unlikely to be heard at the World Trade Organization (WTO). On the other hand, a less comprehensive FTAA may not be considered worth expending the political capital needed to approve it and it also became less competitive to on-going multilateral agreement (Hornbeck, 2008). Aside from this, the possible admission of other Latin American countries that are not in favor with U.S. policy in Mercosur or other sub-regional groups just like Venezuela could result in a total standoff not only to FTAA but to other U.S. trade agreements (Hornbeck, 2008). Despite the logical solution that could integrate sub regional FTA’s together to form Western Hemispheric bloc, the future of FTAA is doubtful.  However, the talks concerning the creation of a western hemispheric bloc has not been abandoned since economic reforms and development are always concerned with trade issues (Hornbeck, 2008).

Policy / Legislation Implications

The United States of America formulated an initiative called Andean Counter-drug Initiative (ACI) which began on the year 2000 in order to help the campaign against narcotics in South America along with its alternative ways of development (Sullivan, 2007). The US Congress provided $1.3 billion (which reached $5 billion from 2000 to 2006) to outlaw drug trafficking and to assist Colombia’s development and its other six regional neighbors, namely Bolivia, Peru, Ecuador, Venezuela, Brazil and Panama. ACI is considered to be a regionalized program due to the fact that the neighboring nations of Colombia manufacture and transfer narcotics; this is also being hindered by other cross-border issues (Sullivan, 2007).

This program also goes hand-in-hand with Plan Colombia, a six-year plan which lives by its goal to go against drug trafficking and lessening guerilla activities – it was formulated by the Colombian government in 1999 (Sullivan, 2007). Though it is one of the factors that caused the stabilization of the said government, it is being criticized as being unsuccessful. However, the ACI supporters still state that giving a hand to Colombia is still worthwhile. On the other hand, there are others who say that the policy does not support human rights since it gives more importance to military and counter-drug assistance. In addition, more critics claimed that the program focuses on exterminating of crops and strengthening of the military not on development plans (Sullivan, 2007).

The US has been one of the nations that helped Latin America to promote their trading especially during the 1970s and 1980s where the countries have faced economic, social and political turmoil. Subsequently, trading is one of the liveliest issues between the two regions. From the 1970s to the 1980s, US trade policy emphasizes on export-led economic growth and development, but during the 1990s, changes occurred and the US trade policy now focuses on reciprocal free trade agreements (Weintraub, 1991).

Aside from the US trade policy, another legislation which affects Latin American free trade is the Andean Trade Preference Act (ATPA). This legislation holds out special duty treatment to some of the U.S. imports coming from Bolivia, Colombia, Ecuador, and Peru. This act aims to encourage export-led economic growth and alternative crop production in order to fight illegal coca cultivation (Sullivan, 2007).

The US has engaged with trading partnership with most of the Latin American countries and along with it are respective promotion agreements. One of them is the US-Peru Trade Promotion Agreement which was signed and approved on 2006. This was made possible by President Bush’s willingness to engage in a free trade agreement with Peru (Sullivan, 2007).

However, the US congressional action on the said agreement was still postponed in order for the Bush administration to create new text regarding the labor and environment coming from the principles of the “New Trade Policy for America” . Thus, at present, the said agreement between the two countries is still not certain, as the Peruvian government might not agree to adopt the changes that were made while reopening the FTA. A promotional agreement with Peru will only affect the US economy minimally since the economy of Peru is not really huge compare to the US’. Peru’s nominal GDP in 2006 was just 0.7% of the US’ GDP (Sullivan, 2007).

In August of the same year, the Bush government also expressed its willingness to enter into another promotional agreement with Colombia. Subsequently, both nations have signed a FTA months after and if ever Colombia Trade Promotion Agreement should introduce and implement legislation, the said promotion agreement will be measured under the accelerated actions provided by the TPA (Sullivan, 2007). Any changes on the bilateral agreement will be applied on the promotion agreement as long as the changes are in line with the “New Trade Policy of America”. However, the promotion agreement with Colombia provided some challenges the US Congress, one of which is the violence that is directed to the trade unionists. Just like in the case of Peru, Colombia will also have a small amount of effect in the US economy; its GDP when compared to US is slightly higher than Peru’s (Sullivan, 2007).

However, before President Bush’s willingness to engage in a promotion agreement with Peru and Colombia in 2006, his first target has been Panama. He first eyed Panama in 2003 but the agreement was only concluded on 2006 after Peru’s and Colombia’s. The delay was caused by (1) delicate issues regarding the agriculture of Panama; (2) the national referendum on the expansion of Panama Canal which caused to any rejections on negotiations of the Panamanian government until 2006; lastly, (3) the language that should be used on the labor and environment chapters. The promotion agreement with Panama states that 88% of US exports will become duty-free and will have tariffs (Sullivan, 2007).

Conclusion

Regional agreements for economic integration are possible if economic gains could achieved using agreed upon rules. Moreover explicit benefits may be attained even though different concessions exist in neighboring countries situated in Latin America. Looking for possible reasons to achieve such preconditions would stress the importance of economic links within the region. The emphasis on securing strong economic links would justify the efforts of strengthening regional integration and will induce participant to search for mutual objectives that they could achieve together. The reasons for the creation of regional agreements vary according to economic conditions and circumstances of each country.  Potential reasons could include complementing domestic supply of basic inputs, such as energy and water; reducing bilateral exchange rate, increasing market access, improving negotiating capacity in international forums, reducing oligopolistic gains and other tentative terms. Moreover, convergence of different opinions and interest in each sector of the society could be an obstacle in identifying the main objective/s for a possible regional integration agreement.

It seems that the terms or arguments that are in favor of regional integration were far more identifiable in the past decades especially when free trade zones are on their early stage of existence. Simple trade agenda like increased market access are being replaced by more ambitious and grand ideas that somehow made free trade agreement improbable. Furthermore, citizens of Latin America have taken careful note of the incidences that happened after NAFTA was put in effect, and this somehow created a marked negative impression on regional trade agreements.

The lack of intelligibility regarding Latin America’s expectations with the regional integration has made the negotiating process sluggish and time consuming. The point here is that countries in Latin America should see that regional integration could be an alternative to a deteriorating multilateral system. Convergence of different interests could help in identifying the tool needed to reach common goals.

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