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Challenges for Regional Integration in Latin America and the Caribbean Mauricio Mesquita Moreira. Principal Economist Integration and Trade Sector XXXVII Meeting of the Network of Central Banks and Finance Ministries. Washington D.C. June 18, 2013. Outline. The motivation The road so far

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  1. Challenges for Regional Integration in Latin America and the Caribbean Mauricio Mesquita Moreira. Principal EconomistIntegration and Trade SectorXXXVII Meeting of the Network of Central Banks and Finance Ministries.Washington D.C. June 18, 2013

  2. Outline • The motivation • The road so far • The results • The challenges

  3. Motivation • Geopolitics security and political stability. • Economic Transformationeconomies scale and learning, competition, public goods, FDI, lock in structural reforms, move faster with economic liberalization.

  4. The Road So Far Where are we after decades of “new” regionalism?

  5. Pre1994: The first steps EFTA EU Canada Japan Dominican Republic Bahamas Haiti USA Korea Mexico China Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago El Salvador Guatemala Honduras Nicaragua Costa Rica CACM Panama CARICOM ACN Colombia Venezuela Thailand Ecuador Brazil Peru Bolivia Paraguay Singapore Uruguay MERCOSUR Argentina Brunei N.Z. Australia Source: IDB.

  6. 2000s: The Spaghetti bowl EU, EFTA NAFTA PA EU Canada EU-CARIFOUM EPA Canada-CRI USA Japan CAFTA-DR Dominican Republic Bahamas Haiti Mexico (CARICOM members but not in CSME) Korea China Antigua & Barbuda, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia, St. Kitts & Nevis, St. Vincent & the Grenadines, Suriname, Trinidad & Tobago El Salvador Guatemala Honduras Nicaragua ASEAN +3 Costa Rica CACM G-3 Panama Chile- Cent. Amer. Venezuela CARICOM CSME ASEAN Colombia ACE 59 ACN Ecuador ACE 59 Thailand ACE 59 Brazil Peru Bolivia ACE 36 PA Paraguay Singapore ACE 58 Chile Uruguay ACE 35 Argentina Brunei N.Z. MERCOSUR ARCO TPP Australia UNASUR ASEAN+6 Source: IDB.

  7. Do results meet expectations? Partly… • Geopolitics • Achievements in MERCOSUR (democratic safeguards, Brazil-Argentina military rivalry) and CARICOM; • But difficulties in the Andean Community (rivalry Colombia/Venezuela, individual negotiations) and in MERCOSUR (Doha, Europe and China)

  8. Economics • The agreements were effective in bringing down barriers and boost intraregional trade but have lost momentum in the last decade and…

  9. …the impact on extra regional competitiveness was marginal at best

  10. The challenges How to interpret the results? Is the “new” regionalism doomed to be irrelevant? Not necessarily, but governments have to double their “bets”

  11. The challenges Three key issues 1) Convergence 2) Investment in infrastructure 3) Deepening

  12. ALCA Bahamas Haití USA Canadá CA-4 - - USA MCCA - Canadá USA Chile - Mercosur Nicaragua Uruguay Paraguay Guatemala Costa Rica MCCA México Honduras Argentina Brazil Chile El Salvador Trinidad y Tobago Republica Dominicana Dominica Suriname Panamá Jamaica Sta. Lucia Belize Barbados San Kitts y Nevis Grenada St. Vincent & Grenadines Guyana CARICOM Antigua y Barbuda Colombia Ecuador Perú Bolivia Venezuela CA ALADI 1) Convergence • Need for a regional market without the “spaghetti” (rules of origins), key to maximize economies of scale and develop regional value chains..

  13. 2) Infrastructure Without investment in infrastructure, there is neither “enlarged market effect” nor greater share of the world markets

  14. 3) Deepening LAC South-South agreements can only make a difference in the context of deep integration. But that requires: • Bring external tariffs down to avoid trade diversion; • Get rid of the remaining intra-regional tariff and non-tariff barriers • level the regulatory “playing-field” • Convergence of the macro policies frameworks. • The key question: Is there political will for this agenda?

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