In all parts of the world, a number of regional institutions have emerged to better address joint challenges and opportunities among neighbouring countries. Their existence demonstrates that nation-states are willing to trade a measure of autonomy in exchange for greater economic integration, better management of joint projects and resources, or a stronger voice on the global stage. Latin America and the Caribbean have not been left behind, with a range of bodies promoting regional integration and strengthening connections with the rest of the world.
In today’s world, regional collaboration is essential to fulfill a wide range of tasks. Economic integration is perhaps the most classical example: countries forego some degree of autonomy to conduct their trade and investment policies in exchange for the benefits of a larger regional market. But regional collaboration is also needed to coordinate large-scale, multi-country infrastructure projects, to deal with intra-regional migration flows, to jointly manage shared natural resources, to adopt common approaches to shared environmental problems, and the list goes on. Regional coordination is also increasingly necessary to speak with a single voice in global debates.
It is therefore not surprising that over time all regions have developed institutions tasked with facilitating cooperation among their members. Those institutions are very diverse, on many counts. Some are truly regional in their membership, whereas others have a sub-regional scope. Some have a mainly economic focus, while others have a wider mandate including social, health or environmental policies, among others. Some have a supranational character, whereas others remain strictly intergovernmental. Some involve binding agreements that their members must legally implement, while others mostly provide a forum for political dialogue and for countries to seek voluntary coordination on topics of common interest. Perhaps inevitably, overlaps in membership and mandate emerge, raising questions about the optimal institutional architecture for regional collaboration.
Latin America and the Caribbean (LAC) has not been absent from the worldwide trend towards the development of regional institutions: its first economic integration bodies date from the 1960s. In the last decade, two new regional fora – the Community of Latin American and Caribbean States (CELAC) and the Union of South American Nations (UNASUR) were created to facilitate political coordination and cooperation at the region-wide and South American levels, respectively. CELAC in particular has evolved into the locus for the whole region to regularly engage key partners such as the European Union and China.
Especially since the 1990s, new bodies have emerged to promote region-to-region dialogue and cooperation. This is the case, for example, of the Asia Pacific Economic Cooperation forum (APEC) and of the Forum for East Asia – Latin America Cooperation (FEALAC). Both mechanisms seek to strengthen bi-regional ties, with APEC focusing on an economic agenda and FEALAC including other areas like science, technology, transport and the environment. There is much promise in region-to-region dialogue and cooperation, to strengthen economic ties, to learn from each other’s development experiences and to discuss approaches to global issues of common interest such as the implementation of the Agenda 2030 for Sustainable Development and the Paris Agreement on climate change. An innovative experience in this regard is China’s “Belt and Road Initiative”, which seeks to spread prosperity by better connecting Asia with Africa and Europe. The LAC region, while geographically distant, also seeks to become a part of this grand vision. How the region can integrate into, and benefit from, the Belt and Road framework will be an important topic at the upcoming meeting of CELAC and China’s Foreign Ministers, to be held in Santiago (Chile) in January 2018.
Together with strengthening links with other regions, LAC has plenty to do in terms of its own regional integration agenda, especially in the economic sphere. The regional market is the most conducive to the export diversification the region needs so much to develop. For most LAC countries, the region is where the highest number of products is exported, and where most industrial exports go. It is also the most important market for the majority of the region’s exporting firms, especially small and medium enterprises (SMEs). The regional space is the natural locus for the development of modern, multi-country production networks.
Regrettably, intraregional trade remains very low by international standards, accounting for just 16% of LAC total exports. The reasons for this are manifold, including the region’s vast size (over 20 million square kilometers), its difficult geography, its poor transport infrastructure, the overlapping natural resource endowments of many South American countries and the gravitational pull that the US economy exerts on Mexico and Central America.
“There is much promise in region-to-region dialogue and cooperation, to strengthen economic ties, to learn from each other’s development experiences and to discuss approaches to global issues of common interest.”
Taken together, these are formidable obstacles to economic integration. But they are compounded by the very high fragmentation of the regional market. Several integration agreements coexist, each with their own rules on everything from product standards to government procurement and the treatment of foreign direct investment. These regulatory discrepancies impose high costs on firms (especially SMEs) exporting to, or investing in, regional markets. They also make it harder for regional value chains to develop. Economic integration continues to be mostly seen with a sub-regional lens rather than a truly regional one. Thus the great potential of a regional market with over 620 million people remains underexploited.
Against this background, action is needed on several fronts. At the regional level, coordinated efforts are required to carry out ambitious infrastructure projects to expedite the flows of people, ideas, trade and investment. It is also high time to begin building bridges among LAC’s different integration mechanisms. This is the key rationale behind the so-called “convergence in diversity” between the region’s two largest economic integration agreements, MERCOSUR and the Pacific Alliance. Through this initiative, a common work agenda was agreed earlier this year to ease trade and investment flows between the two groupings, which together account for over 80% of the region’s population and over 90% of its GDP and trade. This is a pragmatic approach that relies on incremental, bottom-up progress rather than on large formal negotiations that today are not politically feasible.
There is much untapped potential in deepening economic integration within our region. The case for it has only grown stronger after the end of the commodity supercycle of 2003-2011. A great dose of pragmatism and a long-term vision will be essential to gradually move towards a truly integrated economic space encompassing the whole region. Through its almost 70 years of existence, ECLAC has been an enthusiastic promoter of that vision, for the benefits it will bring our region, and its broader contribution to global governance architecture.