Latin American Free Trade Association Research Articles

Regional Integration in Latin America: States, Markets and Organizations

This paper is based on the research related to regional integration attempts in Latin America and their effect on the economic development of Latin American countries. Recent analyses clarify that the US’ intervention in the politics of Latin America has been the main obstacle of the regional integration process. Most importantly, political fragmentation of the countries in the region affects the success of the organizations that are formed for the regional integration. This is especially visible in the political processes of the countries such as economic crises in Argentina, political instability in Venezuela and increasing migration to the US from Latin American countries. Notable studies reveal that despite the regional integration efforts, the economic benefits to the region has been limited compared to the benefit of the global economic powers. Different from the current literature, this paper focuses on the internal dynamics of Latin American countries. In this respect, this paper investigates the effect of the regional integration attempts for the economic development of the countries in Latin America. In this regard, the rational state behaviour was found as an important element to explain in relation to the Latin American integration attempts. With a liberal intergovernmentalist perspective, this paper aims to reveal the success of regional integration attempts in Latin America with the cases of Latin American Free Trade Association (LAFTA), Southern Common Market (MERCOSUR) and Andean Community (CAN). The main argument of this paper is that increasing economic cooperation and creating a reconstruction model with a financial assistance to the less developed countries in the region have led to a regional economic development in cohesion with the policies of the regional powers of Latin America.

Evolution of Mercosur intra-regional trade from 2016 to 2020

The first attempts at the Latin American integration process showed a highly pragmatic character, without many concerns for medium and long-term projects. The main concern was to expand intra and extra-regional trade. However, since the 1980s (the decade considered the lost decade for Latin America), when the external debt crises and the adjustment policies recommended by the International Monetary Fund (IMF) led the region to a higher poverty rate due to the social costs of such policies, Latin America has been rethinking its integration. The creation of LAIA (Latin American Integration Association), in 1980, replacing LAFTA (Latin American Free Trade Association), in 1960, and its sub-regional integration have changed Latin America’s economic growth trajectory from the 1990s. Within the scope of LAIA, Mercosur was created in 1991, with the objective of promoting intra and extra-regional trade expansion through the elimination of tariff barriers among its members, implementing a Common External Tariff. The full members of Mercosur are Argentina, Brazil, Paraguay and Uruguay. The bloc also has associated members: Bolivia, Chile, Peru, Colombia, Ecuador, Guyana and Suriname and observer members, namely Mexico and New Zealand. This work was developed to verify whether Mercosur, with the elimination of tariff barriers between full members and the Common External Tariff, has been able to meet its main objective, which is to expand intraregional trade among its members. Therefore, the main objective was to verify whether there was trade expansion between the bloc's full partners between the years 2016 and 2020. The methodologies used for this purpose were descriptive statistics and literature review. Aiming to evaluate the annualized rate of change of trade in the period covered, it was decided to use the Compound Annual Growth Rate (CAGR), which is a differential of this research. The results showed that within the bloc, Brazil had Argentina as its main trading partner. It was observed that there was an expansion of intraregional trade between 2016 and 2018, followed by a considerable reduction of this trade during the period 2019-2020, but that Brazil still continued to be the member that obtained the largest intra-regional trade balances. Paraguay, in turn, did not show the same trend of commercial reduction for all other partners in 2019 and 2020. In addition, in 2020, even with the COVID 19 pandemic, Paraguay managed to increase its exports to Brazil and Argentina, showing a contrary trend only to their exports to Uruguay. Uruguay, in turn, expanded its imports from partners throughout the period, except for Paraguay in 2020, where its exports exceeded imports. With regard to Argentina, its exports to members began to fall in 2019 and increased in 2020, especially in relation to Brazil. The country also drastically reduced its imports from Brazil and Paraguay in 2019 and 2020, although it also considerably expanded imports from Paraguay

Un Órgano de Solución de Controversias para la ALADI

The Latin American Integration Association (ALADI) was created by means of the Montevideo Treaty of 1980. Its creation is due, on the one hand, to the failure of the project to create a Latin American common market through the Latin American Free Trade Association (ALALC), which had been created through the Treaty of Montevideo in 1960. From that perspective, the function of ALADI was the preservation of the "historic heritage" of LAFTA, which is nothing more than giving effect beyond the late LAFTA to the partial agreements of trade liberalization that had been reached in the multilateral and bilateral rounds within the framework of that organization.

Exploring the Causes for Change in Regional Third Party Dispute Settlement

AbstractWhat explains change in third party dispute settlement in regional international organizations (RIOs)? This paper confronts this question by exploring the extent to which different explanations of institutional change hold in the context of trade RIO third party dispute settlement. The paper considers the role of three variables in explaining dispute settlement reform: the balance of power, the level of trade interdependence between member states and the nature of the organization's founding contract. A truth table reveals that although power and trade interdependence can explain some cases of institutional reform, the nature of the organization's founding contract is the strongest predictor for change in dispute settlement. Nevertheless, the analysis shows that not all cases can be explained, and that the influence of other institutions on the same issue can also play an important role. A case study of the Latin American Free Trade Association illustrates the importance of the institutional environment in which the RIO operates for institutional reform.

Corporaciones públicas multinacionales para el desarrollo y la integración

Latin American integration, like any similar experience, must be accomplished both between spaces of vast aggregate dimension, and between a variety of national groups structured in socio-economic, institutional, political and cultural systems; all this as part of a general process in which the aspects and levels interact, interpret and condition each other. This work tries to draw a balance of integration through the Latin American Free Trade Association (LAFTA/ALALC), and proposes the formula of multinational public corporations as one of the agents of this process. These appear as one of the agents, instruments and mechanisms that can participate in a combined process of development and integration.

The Evolution of NAFTA

Today, the world has indeed become more sharply demarcated in regional terms. The tendency for regionalism is evident both in developed as well as developing countries. The three distinct dimensions of regional space for the tendency to regionalism are: area (commonly known as territory); contiguity (parts are proximate to other or remote); and size (the extent of its scope). After the end of the Cold War phase in international politics, some very important developments took place, that is, ‘regionalism’. Regionalism has become an inescapable international political reality and an acceptable alternative to understand unilateral action and undependable United Nations (UN) intervention. Europe was merely a starting point for a further set of comparable experiments in integration. And, on the heels of European experience, there duly came attempts to create common markets and free trade associations in the Middle East, Africa, the Pacific and the Americas: the world was indeed filled in the 1960s with proposals for North American Free Trade Agreement (NAFTA), Pacific Free Trade Area (PAFTA), Latin American Free Trade Association (LAFTA) and even more. The NAFTA is the single example of a free trade area representing a group of two developed and one developing country. The NAFTA involves the creation of the world’s largest free trade agreement (FTA), with combined gross national product (GNP) of $6.3 trillion and a population of 363 million. The NAFTA, unlike other trade agreements, is not concerned exclusively with trade but also deals with environmental and labour standards. It is the first case of a developing country’s accession to this type of agreement with developed states on a fully reciprocal basis.

El papel del capital multinacional en los procesos de integración regional (ALALC y Mercosur)

En este artículo se analiza la función de la inversión extranjera directa en general, y del capital multinacional en particular, en el proceso de integración cristalizado en la Asociación Latinoamericana de Libre Comercio (alalc, 1960) y en el Mercado Común del Sur (Mercosur, 1991). Se revisan las posturas teóricas de mayor peso en materia de integración económica en el ámbito regional, tanto en la posguerra como en la actualidad, y se articulan con estadísticas sobre inversión extranjera directa y estrategias de las empresas multinacionales provistas por la onu, la cepal y la alalc para comprender la incidencia de los mecanismos que promueven las economías centrales en los espacios periféricos como América Latina.

Integración económica latinoamericana: Proceso ALALC/ALADI, 1950 – 2000, vol. 3

The last tome of Gustavo Magariños’s three volumes examines efforts to promote economic integration in Latin America. In this volume, Magariños amplifies his focus dramatically; whereas the prior studies were characterized by curt observations, his analyses in the third are expanded as he surveys the political and economic crises that hit the movement throughout the 1960s and 1970s. He discusses Cuba, the election of Salvador Allende, and the strains that these developments placed on the Latin American Free Trade Association (LAFTA), known as ALALC in Spanish. The author argues that the integration process ultimately failed due to lack of political will. He maintains that politicians disowned the integration movement from the very beginning by leaving it in the hands of technocrats responsible for negotiating trade concessions via industrial sectoral commissions. LAFTA thus died a slow death, officially expiring in 1980. During LAFTA’s existence, legislators and presidents (civilians or generals) were nowhere to be seen, a reflection of their ambivalence and hostility to the process.Economic integration was part of a larger public debate concerning economic growth, which became the victim of a rivalry between foreign or domestic commercial interests seeking to protect their internal markets, however limited, and those that favored broader regional development. Commercial interests eventually prevailed in the encounter because of their control of the sectoral commissions, which were tasked with determining tariffs concessions to be made by each national industry, such as automobiles, petrochemicals, electronics, and so on. As an example of this struggle, Magariños cites the duplicity of Eduardo Frei. While claiming commitment to LAFTA, Frei worked behind the scenes to create the rival Andean Community (AC) in 1968, which continued to serve officially as an organization within LAFTA. The AC’s objective was to protect domestic industry from foreign competition regardless of its point of origin. It soon became clear in this dual world of technocracies that the AC was the liege lord for member states. Globalization figures prominently in the post-1980 Latin American states as they sought to expand trade via bilateral agreements in the new Asociación Latinoamericana de Integración (ALADI), which took over from LAFTA. Significantly, ALADI invited Cuba to join the organization in 1980. Magariños argues that a major problem of LAFTA/ALADI was that a “strong element of regional autarky sought to strengthen resistance to a long period of dependency,” thus hindering integration by promoting import substitution against other Latin American states. Though Latin American states might balk at tariffs concessions with each other, they could only buy time. Eventually, international competition forced Latin American states to embrace integration as the raison d’être.This Spanish-language work requires the reader to have an above average command of the language due to the writer’s elegant literary manner. The book is well documented with extensive Spanish-language primary and secondary sources. The author is reluctant to deal with the personalities involved in the process; hence, we have little insight into the dynamics between individual negotiators. Adding this approach would have allowed the author and reader an opportunity to highlight the many complex issues in the integration process. This is not an oversight, as the author clearly believes it is the process and issues that merit consideration rather than individuals. This makes for a rather dry and tedious study. Nevertheless, Magariños’s book is indispensable for understanding the globalization process in Latin America. Readers will conclude that economic integration is too important to be left to technocrats and politicians. The author is to be commended for his important contribution to our understanding of a complex and often ignored process.

Integración regional andina en salud

Despite their shared history, the Andean countries are socially and politically diverse, with heterogeneous health realities and complex integration processes. General developments such as the Latin American Free Trade Association and Latin American Integration Association have existed for decades, along with others of a regional scope, like the Andean Community of Nations, Caribbean Community, and Central American Common Market. The health field has a specific instrument in the Andean Region called the Hipólito Unánue Agreement, created in 1971. Integration processes have concentrated on economic aspects, based on preferential customs agreements that have led to an important long-term increase in trade. Less progress has been made in the field of health in terms of sharing national experiences, knowledge, and capabilities. Analysis of experiences in health has shown that integration depends on the countries' respective strengths and to a major extent on national political processes.

Trade creation and trade diversion in the EEC, the LAFTA and the CMEA: 1960-1994

In a simplified version of the gravity model, appropriate dummy variables have been introduced to analyse the effects of both trade creation and trade diversion by three economic organizations, the European Economic Community (EEC), the Latin American Free Trade Association (LAFTA) and the Council of Mutual Economic Assistance (CMEA), for the period 1960-94. Five-year intervals are the main subject of measurement. The results show that both trade creation dummies and trade diversion dummies have statistically significant coefficients, which show the appropriateness of this new approach. The trade creation effect and trade diversion effect of each institution are proved to be generally weakening during the 1990s. It is also observed that each Organization has a distinctive international trade character. For Japanese trade, a similar approach is used to analyse nonaligned trade by Japan, with particular interest in the effects of these three institutions on trade with Japan. The result is that there is no strong evidence that the EEC and the LAFTA trade with Japan any more or less than the hypothetical level predicted by basic explanatory variables, while the CMEA increased its trade with Japan up to the hypothetical level during the analysis period.

Explaining regional integration outcomes

Perhaps the most striking fact that emerges from a close study of various integration schemes, past and present, is their wide range of outcomes. At one extreme, the highly successful European Union has managed over the past forty years to establish an array of institutions and policies, as well as a broad and clearly defined set of rules. At the other extreme, projects such as the Latin American Free Trade Association, the Andean Pact, and the Economic Community of West African States failed to make any progress towards integration. Between these polar cases are a few integration projects with mixed results. What explains variation in integration outcomes? The study argues that two sets of conditions must be specified in order for integration to succeed, namely, demand side and supply conditions. Regional groups that satisfy both demand and supply conditions stand the greatest chance of succeeding, whereas groups that fulfill neither set of conditions are least likely to attain any significant level of integration.

Acteurs et stratégies dans le processus d'intégration économique en Amérique latine

Actors and Strategies in the Economic Integration Process in Latin AmericaThis article examines two forms of economic integration in Latin America: the Latin American Free Trade Association (LAFTA) and the Andean Pact. Although inspired by the work of the Economic Commission for Latin America (ECLA) and, theoretically, having as the principal actors in the integration process both the industrial bourgeoisie and the State, these two forms of integration have had different results.LAFTA was created in the early 1960's at a time when the most developed countries of the region began policies of import substitution of essential goods. The analysts of ECLA expected that the dynamism of the industrial bourgeoisie would lead the integration process. The state would only subsidize the “deficiencies” of private enterprise, and would intervene only at the level of joint planning. But for the industrial bourgeoisie, it was not the appropriate time to begin creating integrated economies, either at the national or regional levels. Their primary concern was to develop the connections with the bourgeoisie of the western industrial countries.The Andean Pact was created at the end of the I960's among countries in which the industrial bourgeoisie was weak or virtually nonexistent. The leadership of the integration process thus devolved upon the State. The new dynamism of integration had three actors: the state, multinational corporations, and the industrial bourgeoisie. Integration should be conceived not only as a means of amalgamating the economies of the members, but also as a mechanism to strengthen the bargaining position of the main actors vis-a-vis the multinational corporations. Integration, in short, is conceived as an instrument for the renegotiation of dependency.

SHORT-RUN TRADE EFFECTS OF THE LAFTA

SUMMARY This article uses ordinary least squares to estimate the trade effects of the Latin American Free Trade Association (LAFTA). Estimates are made for total LAFTA and for each member country. The basic models use income, foreign exchange and a proxy for economic integration. The findings indicate that economic integration promoted an expansion of intra-LAFTA trade for all member countries. And most of the increased intra-LAFTA trade was diverted from third countries. The findings also confirm the importance of the foreign exchange constraint for the trade of developing countries. An analysis of the reciprocity of concessions indicates that the effective concessions which Argentina received were less than those it granted to other LAFTA members. More pronounced were the similar findings for Chile and Colombia. In contrast, the ‘favored’, less developed LAFTA members (Ecuador, Paraguay, and Uruguay) received concessions worth many times the value of the concessions which they granted.

The Andean pact: A model of economic integration for developing countries

This paper examines the framework in which the Andean Common Market was created, the provisions of its charter, and the Group's initial achievements. The Andean Common Market was formed in response to the inadequacies of the Latin American Free Trade Association. The Ancom charter contained several provisions, such as that for a common external tariff, investment planning, and policy harmonization, which make it uniquely suited for promoting its members' development. Its record to date has been good, though much work remains to be done. A more cooperative and less nationalistic attitude must be developed by the various member countries if the Group is to be successful.

The Politics of Regional Organization in Latin America: The Latin American Free Trade Association

The Politics of Regional Organization in Latin America: The Latin American Free Trade Association

The Politics of Regional Organization in Latin America. The Latin American Free Trade Association

Journal Article The Politics of Regional Organization in Latin America. The Latin American Free Trade Association Get access The Politics of Regional Organization in Latin America. The Latin American Free Trade Association. By Edward S. Milenky. New York, Washington, Praeger; London: Pall Mall. 1973. 289 pp. Bibliog. (Praeger Special Studies in International Politics and Government.) £7⋅75. P. Robson P. Robson Search for other works by this author on: Oxford Academic Google Scholar International Affairs, Volume 50, Issue 4, October 1974, Pages 686–687, https://doi.org/10.2307/2615987 Published: 01 October 1974

TRADE LIBERALIZATION AND STRUCTURAL CHANGES IN LATIN AMERICA*

ABSTRACTWide disparities in growth potential and performance and hence, presumably an unequal sharing of benefits of trade liberalization, are among the most pressing issues facing the future course of economic integration in South America. The customary indices of changes in intra‐zonal trade among members of a preferential trade area do not adequately capture these tensions. This paper develops a framework based on differential rates of growth for analyzing the relative changes in production structure and per capita income in each member country vis‐à‐vis the corresponding set of free‐trading partners. The empirical investigation is carried out for member countries of the Latin American Free Trade Association (LAFTA) and of the Central American Common Market (CACM) for the period of their existence.Preliminary results suggest that although ‘reciprocity’ of benefits has been an elusive goal, there is no evidence that structural imbalance in the continent is worsening. In fact, in terms of per capita incomes there appears to be a modest trend toward convergence.

Industrial Integration and the Multinational Enterprise

A major objective of economic policies among nations is to achieve industrial development in ways which not only accelerate national industrial integration, but also integrate regional and international economies. The new phenomenon of the multinational enterprise, and the resulting international production, is a means of gaining industrial integration. But the resulting pattern of production and trade is not likely to be that which would have arisen with free trade under classical assumptions. At the national level, the multinational enterprise (ME) can respond to inducements to locate in "depressed" areas, helping to integrate the economy. Regionally, it is more responsive to policies directed at integration among members than are most local companies, and it has in fact been a catalyst for integration in the European Common Market, though it has not been permitted to be such in the Central American Common Market or in the Latin American Free Trade Association. At the international level, it is already integrating the advanced economies, but the pattern of industrial integration between the advanced and developing countries leaves much to be desired, partly because the MEs are not being used effectively. In addition, some restrictions are imposed by states, not so much because of the fact that the firm is "foreign," but because it will not necessarily produce the kind of integration sought by host countries. If governments moved to cause the multinational enterprise to support objectives of industrial integration at all levels—national, regional, and international—it would become a more acceptable addition to Western economic institutions. To achieve this, new governmental guidelines are necessary.

LAFTA’s successes and failures

The Latin American Free Trade Association (LAFTA), established by the Treaty of Montevideo in 1960, was an attempt by the participating countries to seek a way out of the dilemma of declining demand for their exports, on the one hand, and the inadequacy of a solely inward-looking strategy in development policy, on the other.

The Andean Common Market: A New Thrust at Economic Integration in Latin America

The decade of the 1960s could well be termed the First Economic Integration Decade in Latin America. During this period the republics of Latin America experienced a “collective awakening,” inspiring an environment in which superficial and exclusivist values gave way to pragmatic and cooperative attitudes. Economic alliances were formed among neighbors, predicated on the rationale that, by joining forces in the spirit of cooperation and applying an ecumenical approach to common problems, each of the participating countries would be better off than pursuing a strictly autarkic course (see Figure 1).The initial effort at integration was the Central American Common Market (CACM), formed in late 1960 and including all the countries of Central America except Panama.1 That same year, the Latin American Free Trade Association (LAFTA) was created and, measured in terms of territory and population, represented the most significant economic cooperative. A third grouping was the Caribbean Free Trade Association (CARIFTA), established in 1968 as an agreement among eleven British Commonwealth nations and territories.