Members of the Pacific Alliance have reached an agreement to cut tariffs on goods and services traded between them by 92%. This historic deal is aimed at boosting Latin America’s economy which is currently struggling to weather a slowing demand for energy resources in China.
The Alliance – comprised of Chile, Colombia, Mexico, and Peru – is likely to scrap the remaining 8% tariff in the months ahead, with the member states planning to open up their infrastructure and energy sectors for foreign investment.
But the deal, signed in the colonial Colombian city of Cartagena, needs to be ratified by the parliaments of the member states.
The agreement will lead to the creation of thousands of jobs in all four countries, said Colombian President Juan Manuel Santos. “These four countries of the Alliance are now relatively better prepared, we are more protected from the storms and the volatility of the markets,” he said in a statement.
According to Santos, Chile, Colombia, Mexico and Peru have relatively high economic growth, low inflation and better investment climate.
The Alliance members reported more than 5% growth for 2012, and reports say their combined GDP makes up about 35% of Latin America’s total output. The four countries also account for nearly 50% of foreign trade in the region.
The influence of the Pacific Alliance is rising these days, with Costa Rica and Panama standing in the queue to join the economic bloc. Costa Rica’s President Laura Chinchilla signed a declaration of intent to join the Alliance on Monday, while Panama’s accession is yet to be ratified by the member states.
Barely a year ago, the Alliance members imported goods worth $551 billion and earned $556 billion in exports revenue, with mineral and energy sources contributing greatly to this sudden spurt in foreign trade.
The Pacific Alliance, founded in 2012, is currently setting up a fund to finance infrastructure projects, and a forum to monitor the price of medicines in member states.