Lecture 7. Integration Processes in Latin America.

Plan:

7.1. Peculiarities of integration process in Latin American region 7.2. Models of the South American economic integration

7.2.1. Andean Community of Nations

7.2.2. MERCOSUR

7.2.3. Chilean model

7.3. Central America and the Caribbean 7.4. Perspectives of economic integration in Latin America References:

1. Троненко В. І. Курс лекцій з дисципліни Міжнародна економічна інтеграція. – К.: КиМУ, 2002.

2. Міжнародні інтеграційні процеси сучасності. Монографія/ А. С. Філіпенко – кер. авт. кол., В.С. Будкін, М.А. Дудченко та ін. – К.: Знання України, 2004. – 304 с.

3. Глинкин А. Н. Интеграционные процессы и перспективы создания зоны свободной торговки в Западном полушарии. // Латинская Америка, 2001, №5.

4. 10 лет МЕРКОСУР // Латинская Америка, 2001, № 7.

5. Международная экономическая интеграция: уч. пос./ под ред. д-ра эк. наук, проф. Ливенцева. – М.: Экономист, 2006. – 430 с.

6. Кузьмин В.В. Латинская Америка: интеграция и двусторонние экономические связи // Латинская Америка, 2008, №2. – с.15-49 (к.э.н)

7. Кудрявцева Є.Ю. Mercosur: трудности и ожидания современного этапа// Латинская Америка, 2008, №3, с.47-60.

8. Лезгинцев Ю.М. Соглашения о свободной торгове в условиях глобализации// Латинская Америка: прерванное развитие// Латинская Америка, 2009, №4. – с. 4-10.

7.1. Peculiarities of integration process in Latin American region

Integration process in Latin America has some peculiarities. It goes back after the II World War and is a manifestation of deepening of internationalization of economic life and aspirations of the region to accelerate economic growth.

Latin American integration is based on the ideas of unity efforts within enhanced cooperation at the level of South-South, leaving the state of peripherals in the world economy, strengthening the position in international economic relations and in international division of labor.

These ideas were ground by the experts of UN Economic Commission for Latin America and the Caribbean - ECLAC, investigation of which for some period of time was the main theoretical foundation of Latin American integration.

Latin American Free Trade Association Montevideo 1960 Argentina Bolivia Brazil Venezuela Ecuador Colombia Mexico Paraguay Peru Uruguay Chile

In particular, former executive secretary of ECLAC, an Argentine economist Raul Prebish was the first who launched theoretical study of Latin American integration, focusing particular attention to cooperation in industrial and agricultural areas, with coordination of national programs of economic development. According to R. Prebish, integration would help to solve problems such as creating a more spacious multi-common market, to expand regional trade. The ideas of Latin American Integration were considered on the one of ECLAC’s sessions in 1949.

Latin American Free Trade Association - LAFTA - became the first integration unity in the region. International legal basis for its creation was the first Latin American agreement on the international economic integration, signed in 1960 in Montevideo (Uruguay). Signatories were Argentina, Bolivia, Brazil, Chile, Ecuador, Colombia, Mexico, Paraguay, Peru, Uruguay and Chile.  According to the agreement the creation of free trade zone was expected within the term of twelve years. The prediction happened to be unreal.

The first steps of Latin American economic integration was quite limited. "... Economies of South American countries weakly complemented each other and were not focused on the close trade and financial cooperation" – said experts.

Unlike Western Europe, “sufficient political motivation in Latin America, able to overcome the trade and economic restrictions, which could happen during the process of integration, was absent.  Therefore, development of integration in the Latin American region in 60-70ss was considerably slower than it was foreseen”.

Only in the early 80s economic integration in South America is growing rapidly, the integration process takes effect: the volume of intracontinental trade increases, bilateral and multilateral tariff agreements become more frequent. Countries of the region are transformed into profitable partners for each other in trade, especially in manufactured goods and semifinished products.

The Acceleration of Latin America economic integration is caused by a number of factors.

Firstly, in the region have found expression of tendencies inherent in general for the global economy, focused on globalization and regionalization. In Latin America began to understand that the closure, the limited domestic market will inevitably lead to further marginalization.

Regional economic integration 80's became a "testing ground" towards increasing include in the world economy and yet attractive design for potential foreign investors.

Secondly, to accelerate economic integration prompted the liberalization of foreign trade during this period began to be established Latin American countries.

The fact that circulated in the region autarchycal import-orientical model of national economies has exhausted itself, and programs for the introduction of uniform tariffs and removing non-tariff restrictions created favorable conditions for the signing of bilateral and multilateral agreements on the liberalization of foreign trade. The format of relations was impossible under the conditions of closed national economies.

The introduction of preferential tariffs or their complete abolition in certain sectors of the economy stimulated exchanges in the region.

Latin American Integration Association Montevideo 1980 Argentina Bolivia Brazil Venezuela Ecuador Colombia Mexico Paraguay Peru Uruguay Chile

Thirdly, a radical review of mechanisms of economic integration in the region. Mentioned Treaty of Montevideo in 1960 predicted a tough tariff system, often disadvantageous to members LAFTA: tariffs were determined by the most favored nation, that all countries, not for each partner separately. Such a regime, not all partner countries have been prepared. In 1980 member countries LAFTA revised terms of the Treaty of Montevideo. Made possible the signing of trade agreements with several or even one state. It was recognized also that a general reduction of tariffs will not further the objectives of Latin American economic

integration, which should gradually deepen, by signing agreements limited membership. Such agreements should be those "building blocks" with which you can climb to the level of elimination of tariffs in the future between all members of the newly created Latin American Integration Association (LAIA), which replaced LAFTA.

Fourth, to accelerate the integration process in Latin America affected by relaxation of tension in political relations between countries in the region, which in turn was largely the result of the democratization process.

The democratization process that began in 70-80 years, partly dispelled doubts and mistrust that had occurred earlier. Countries began to see each other as important and beneficial partners.

All the above indicates that essentially been eliminated the most difficult obstacles to deeper economic integration, and integration programs are regarded as South American countries reached important means of strengthening the norms of democracy.