In response to the article "Trade pacts: Latin America's new faultline", published on May 24 in the digital edition of the Financial Times, the Minister of Foreign Affairs, José Serra, sent to the newspaper the following reply, which was fully published in today´s, May 30, print edition:
“South America trade is built on strong strategic alliances
As a long-time reader and admirer of your newspaper, I was surprised and disappointed to read “Trade pacts: Latin America’s new faultline” (EM Squared, FT.com May 24).
Besides being based on the highly questionable argument of a “new split” in Latin America, supposedly brought about by the opposition between Mercosur and the Pacific Alliance integration mechanisms, the article disregards objective differences and overlooks relevant circumstances and data in comparing the two blocks.
Mercosur has welcomed the establishment of the Pacific Alliance, has trade agreements with its three South American members (Chile, Colombia and Peru), which will lead to a free trade zone by 2019, and is negotiating with Mexico the widening of tariff reduction agreements. The two mechanisms hold regular meetings to advance their co-operation. They share the goal of enhancing their role in the global trade markets and consider that ever growing co-ordination between them, at many levels, can be achieved and should be pursued. There is no divide, only convergence based on shared goals.
While comparing the performance of the two integration processes (Mercosur, established 25 years ago, and the Pacific Alliance, established in 2011), the article overlooks the different stages of their evolution. It is only natural that the intensification of trade flows should have a faster pace in the initial years of any such arrangement. That is exactly what happened to Mercosur. Also, one should consider that the two main partners in Mercosur have been affected by the worst macroeconomic downturns in their recent history. Weak growth in the short run tends to slow down trade exchanges.
The authors mistake structural patterns for dynamic vectors of the agreements. Mexico and Chile, for instance, had a higher export/gross domestic product rate than Mercosur countries even before the Pacific Alliance had been set up.
It is not the best approach to try to infer long term trends in foreign direct investment from a rather small sample (three years). In fact, what the data really show is that Mercosur has a larger FDI/GDP ratio than the Pacific Alliance. On top of that, to talk about a “rivalry” between Argentina and Brazil in 2016 is laughable. In fact, the two largest countries in South America have built a strong strategic partnership which is at the very core of Mercosur.
Also, contrary to what the article suggests, I am fully convinced of the importance of Mercosur, and I am ready to work with our partners with a view to its strengthening.
Minister of Foreign Affairs,
The Federative Republic of Brazil"