By Ingo Plöger, President, Strategic Council of CEAL
The highlight of G20 was to make the distinction of national interest versus international commitments. While the UK has to manage Brexit, the U.S. seeks to reduce its isolation, Russia wants more acceptance and three Latin American presidents enhance their efforts for more integration.
Mexico and Brazil are negotiating their commerce agreement to triple the items of cooperation. Argentina and Brazil are working to push the Mercosur-EU negotiations. All of them are ratifying their commitments to the Paris Agreement on sustainability.
Mexico, Colombia, Peru and Chile in the Pacific Alliance have begun negotiations with Mercosur. Mercosur and the Pacific Alliance have more or less the same GDP of $4 trillion. The difference is that Mercosur has long productive channels while the Pacific Alliance has short productive channels. Both are linked to the U.S., China and the EU. Cooperation between both will bring more inclusion into their channels. Consequently, Mercosur will be more open to their automotive, agribusiness, industrial components and service channels imports, while the Pacific Alliance will be open for more cars, engineering, service systems, machines and tools. It will be interesting to see integration not only of infrastructure but of integrated solutions. The biggest and most urgent request will be digital integration through optical fiber.
The 5G solution will require an exponential data transfer, and if Latin America does not invest immediately in this field, a collapse of data transfer will occur within the next five years.
The integration of economic regions such as the Paraná-Paraguay Basin will enhance not only infrastructure investment but will change the business model of agribusiness and will transform industries in that region, in a similar way to the Mississippi Basin.
The EU will give the best advice as how to manage intra regional integration, since it is the only continent where rivers connect more than four or five countries, like the Elba, Rhine or Danube. This will give the EU the opportunity not only to exercise a model of cooperation but also to induct an integration of economy, logistic and services.
After concluding negotiations with Japan, the EU will have more of an incentive to negotiate with Mercosur. After the elections in Germany, the EU will bring a more detailed proposal for industries and agribusiness. The actual negotiations between Mercosur and EU are going at such a good pace that a signing could be expected in the beginning of 2018.
Central America is moving forward with its integration plans, but with more effort since the U.S. has distanced from Mexico. The integration between Honduras and Guatemala is ongoing and with the renovated Panama Canal, the logistics business is going up. The meeting with U.S., Central America, Mexico and Colombia, was to reinforce cooperation on economy and security. In the last Inter-American Development Bank meeting in Asunción, the delegates approved plans for a new round of Trade Union.
Latin America faces a new perspective of integration. Different to other parts of the world, where more national interests have been launched as the priority agenda. This will bring much more synergy and economic stability in the region and will increase trade and investments. The alignment towards more market-oriented policies such as in Argentina, Peru, Paraguay, Brazil, Colombia, Panama, Mexico and others, show that the winds are blowing in a new direction.