Latin American Business

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Latin American Business

• David J. Boggs, Ph.D.
• Trade and FDI

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(No Transcript)
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Regional Economic Associations

• Free Trade Agreement
• Customs Union
• Common Market
• Economic Union
• Everything in Between

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Trade Blocs (Wikipedia)

• Andean Community (CAN)
• Asia-Pacific Economic Cooperation (APEC)
• Association of Southeast Asian Nations Free Trade
  Area (AFTA)
• ASEAN 1 (Mainland China) Free Trade Area
• Caribbean Community (CARICOM)
• Central European Free Trade Agreement (CEFTA)
• Closer Economic Partnership Arrangement (CEPA)
  between Hong Kong, Macau and China
• East African Economic Community (EAEC)
• Economic Community of West African States
  (ECOWAS)
• Eurasian Economic Community (EURASEC)

• European Economic Area (EEA)
• European Free Trade Association (EFTA)
• European Union (EU), formerly the European
  Community
• Gulf Cooperation Council (GCC)
• Mercado Comun del Sur (MERCOSUR or MERCOSUL)
• Mercado Comun Centro Americano (MCCA)
• North American Free Trade Agreement (NAFTA)
• South American Community of Nations (CSN)
• South Asian Association for Regional Cooperation
  (SAARC)
• Southern African Development Community (SADC)

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Proposed Trade Blocs (Wikipedia)

• Association of Caribbean States (ACS)
• Dominican Republic-Central American Free Trade
  Agreement (DR-CAFTA)
• Commonwealth of Independent States (CIS) Common
  Economic Space
• Free Trade Area of the Americas (FTAA)
• South Asia Free Trade Agreement (SAFTA)
• ASEAN 3 (Mainland China, South Korea, and
  Japan) Free Trade Area

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NAFTA

• Total GDP?
• GDP per capita?
• Objectives and components?
• Supporters and opponents?
• Success or failure?

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NAFTA

• NAFTA is a comprehensive rules-based agreement
• NAFTA goes beyond tariff reduction
• It opened previously protected sectors in
  agriculture, energy, textiles, and automotive
  trade.
• It opened up the U.S.-Mexico border to trade in
  services with specific rules in finance,
  transportation, and telecommunications.

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NAFTA

• It set rules on intellectual property rights.
• It set specific safeguards, including how to deal
  with subsidies and unfair practices it set up
  procedures for dealing with private commercial or
  agricultural disputes and it set up a process
  for dealing with NAFTA implementation concerns.

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ANCOM or CAN

• Andean Community
• Bolivia, Colombia, Ecuador, Peru, Venezuela
• Implemented in 1988

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Andean Community
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Andean Pact/ Andean Community of Nations (CAN)
(Ancom)

• History
• Agreement of Cartagena 1969
• Original Members Colombia, Peru, Ecuador,
  Bolivia, Chile
• Addition Subtraction
• Venezuela joined
• Chile withdrew
• Panama is an observer
• 1992 FTA with all members except Peru
• 1995 Common External Tariffs (CET)

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Andean Pact/ Andean Community of Nations (CAN)
(Ancom)

• Facts Figures
• Main objective first establish free trade and
  then set a CET with eventual integration into a
  common market
• US is the main trading partner
• Population 113 million in 2001
• GDP 258.1 billion US in 2001

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ANCOM Objectives

• Customs union
• Implement a common external tariff
• Reduce trade barriers
• Common market 2005

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ANCOM Economic Issues and Key Indicators

• Economic instability
• GDP 213 Billion USD
• GDP per Capita 2,045 USD
• Will ANCOM attempt to grow by integrating with
  other trade blocs?

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MERCOSUR

• The Southern Common Market (Mercado Common Sur)
• Fully Implemented in 1995

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MERCOSUR (1991)

• Charter Members
• Brazil
• Argentina
• Uruguay
• Paraguay
• Associate Members
• Chile
• Bolivia
• Peru

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Mercosur
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MERCOSUR Objectives

• Customs union
• Liberalize trade and investment
• Work jointly on regional problems

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MERCOSUR

• MERCOSURs effect on non-member countries is set
  by a Common External Tariff. (CET)
• 11 different levels varying from 0-20 percent.
• The average CET was close to 11 in 1996, while
  it was closer to 30 before integration.

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MERCOSUR Key Economic Indicators

• GDP 758 Billion USD
• GDP per Capita 3,657 USD
• Paraguay, Bolivia, Peru less wealthy than other
  members

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Can the Two Come Together?

• ANCOM and MERCOSUR have discussed the possibility
  of integration.

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During 2003. Cyan for largest value, green for
smallest, among the blocs compared.Source CIA
World Factbook 2004, IMF WEO Database. From
Wikipedia
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Central American Common Market (CACM)

• History
• Managua Agreement 1960
• Original Members El Salvador, Guatemala,
  Honduras, Nicaragua
• Costa Rica in 1963
• 1960-1970 regional trade rose ten times higher
  than before pact
• 1970s-1990 little progress
• Revitalization plan Central American
  Integration System (SICA) 1991

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CACM Economic Issues

• Small, undeveloped countries
• 35 million people total
• GDP 50 Billion USD
• GDP per capita 1,550 USD
• Can the CACM grow more powerful within Latin
  America?

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CACM Objectives

• Economic union
• Common external tariff
• Reduce trading costs between member countries
• Forming a common price for all agriculture

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DR-CAFTA

• NAFTA-like CAFTA agreement concluded and approved
  by the USA Congress in 2005

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CARICOM

• Caribbean Community
• Formed on July 4, 1973
• 14 Member countries and 11 observing countries,
  trade agreement involving the most countries in
  Latin America

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CARICOM

• Jamaica
• Montserrat
• Saint Lucialt St Kitts and Nevis
• St. Vincent and the Grenadines
• Suriname
• Trinidad and Tobago

• Treaty of Chaguaramas
• Members of CARICOM
• Antigua
• Bermuda
• The Bahamas
• Barbados
• Belize
• Dominica
• Granada
• Guyana

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CARICOM

• CARICOMS Objectives
• Economic cooperation through the Caribbean Single
  Market and Economy
• Coordination of foreign policy among the
  independent Member States
• Common services and cooperation in functional
  matters such as health, education and culture,
  communications and industrial relations.

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CARICOM Economic Issues

• Still Poor, but not doing as Bad as the CACM
• GDP of 20.4 billion USD
• GDP per Capita at 3,122 USD

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Can the Two Come Together?

• Several Meetings have been held, bringing up the
  Issues of the environment, politics, drug
  trafficking, and joint international decisions
• What about the FTAA?

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CACM versus CARICOM (Source ECLAC)

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Trade as a Percent of GDP (Source ECLAC)
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ALADI (LAIA)

• Latin American Integration Association
• Began on August 1, 1980 by the Montevideo Treaty
• Argentina, Bolivia, Brazil, Chile, Colombia,
  Ecuador, Mexico, Paraguay, Peru, Uruguay, and
  Venezuela

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ALADI (or LAIA)

• Replaced the Latin America Free Trade Agreement
• Allowed Cuba in on August 26, 1999
• Hoped for Balanced Socioeconomic Development

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Objectives of The Agreement

• Promotion and regulations of reciprocal trade
• Development of economic complementarity
• Support of actions for economic cooperation to
  encourage market expansion

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GDPs of the Five Trade Agreements
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GDPs per Capita
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FTAA

• What is the FTAA?
• Countries involved?
• Objectives?

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34 Countries Negotiate for a FTAA

• Antigua and Barbuda Argentina Bahamas
  Barbados Belize Bolivia Brazil
  Canada Chile Colombia Costa Rica
  Dominica Dominican Republic Ecuador El
  Salvador Grenada Guatemala

• Guyana Haiti Honduras Jamaica
  Mexico Nicaragua Panama Paraguay
  Peru St. Kitts and Nevis St. Lucia St.
  Vincent and the Grenadines Suriname
  Trinidad and Tobago United States Uruguay
  Venezuela

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Trade Agreements

• Supporters?

• Opponents?