Pacific Alliance: business opportunities in a new regional context

PACIFIC ALLIANCEBusiness Opportunities in a new regional context

Loreto Leyton – Chile Pacific FoundationSydney, October 2016

A Regional Integration Area- Intended to progressively advance to the free movement

of goods, services, capital and people

Areas of Work:- Movement of business people and facilitation of

migratory movements

- Trade and integration, including trade facilitation measures

- Trade in services and movement of capital

- Cooperation and dispute settlement

PACIFIC ALLIANCE

PACIFIC ALLIANCE IN FIGURES

• 2.4% of world GDP (currentprices)

o 3.3% of world GDP (purchasing power parity)

• 39% of Latam’s GDP

o 44% in PPP

• 225m population

• Per capita GDP (PPP)USD 16,462 vs. USD 11.800 (Latam)

• 55% of Latam’s exports (USD 512bn of goods)

• 3% of world trade (2014)

• Attracted USD 70bn in FDI (2014)

(IMF, Oct. 2016)

0 5.000 10.000 15.000 20.000

1. US

2. China

3. Japan

4. Germany

5. India

6. UK

7. France

8. Brazil

9. Pacific Alliance

10. Italy

World’s 9th biggest economy

PACIFIC ALLIANCE IN FIGURES

Average GDP growth rate over10 years2012-2021, based on IMF forecasts

Economic growth

(IMF, Oct. 2016)

2,00

2,50

3,00

3,50

4,00

4,50

5,00

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Output will rebound next year

Chile 3.0%

Colombia 3.8%

Mexico 2.6%

Peru 3.9%

Pacific Alliance 3.3%

PACIFIC ALLIANCE IN FIGURES

Market efficiency rankings

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Total tax rate

PACIFIC ALLIANCE IN FIGURES

Market efficiency rankings

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2

4

6

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10

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Trade tariffs, % duty

PACIFIC ALLIANCE IN FIGURES

Market efficiency rankings

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1

2

3

4

5

6

7

Business impact of rules on FDI[1 = extremely restrictive; 7 = not restrictive at all]

PACIFIC ALLIANCE IN FIGURES

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

• Acquisition of significant international interest and participation (49 observer countries to date)

• Launch of the Interoperability of Trade Single Windows among the four countries

• Mutual recognition agreement of digital signatures

• Mexico’s incorporation to the Latin American Integrated Market (MILA) of the Stock Exchanges

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

• Launch of the Information Exchange Platform for immigration security

• Establishment of the Pacific Alliance Entrepreneurs Association (ASELA)

• Launch of the Public-Private Innovation and Entrepreneurship Agenda of the Pacific Alliance

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

• Launch of the PA Entrepreneurship Venture Capital Fund

• Joint investment promotion strategy

• MOU among PA Consumer Protection Agencies to promote protection of consumers in the PA countries

• Scholarships students: In 3 years 1,400 fellows

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

• Plan of Action for the Mutual Recognition Agreement of the Authorized Economic Operators Programs (AEO)

• MOU for obtaining Patents through an Accelerated Process

• Joint Promotion Investment Events in Asia and Europe (China, Japan, Korea, Germany, England, Spain, etc.)

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

Visa exemption to the interior of the Pacific Alliance for foreigners from third countries with permits of permanent residence in any of four countries AP.

measure currently implemented by 4 countries except for Chile that limits it to a number of countries

Electronic certificates, today it have already been issued:

Around 85 certificates, from 01/05 to 30/09 2016

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

PA Entrepreneurial Capital Fund

aims to have a capitalization of US $ 100 MM, with a first closing estimated of US$ 40 million

Public-private partnership

Will provide intelligent capital to companies in AP countries (seed capital and entrepreneur funds for high growth companies).

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

PA countries have low participation in global value chains (except on a smaller scale of Mexico), and when they are involved, make it mostly in the lower chain (with little added value).

Evidence suggests that in the medium term this number could increase by 40% with an integration agreement type PA

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

If PA countries succeed in improving quality of logistic infrastructure (ports, airports and telecommunications) to the level of the average in the EU

this would increase foreign direct investment associated with international value chains in countries of the PA in 15%.

PACIFIC ALLIANCE MAIN ACHIEVEMENTS

PACIFIC ALLIANCE V/S ASIA PACIFIC

• The Asia-Pacific region as a whole has emerged as an important trading partner for the Pacific Alliance:

$57 billion (11%) of the Alliance’s 2015 exports went to the Asia-Pacific region

There is room, however, for Alliance countries to increase trade with the fast-growing ASEAN-5 countries (Indonesia, Malaysia, Philippines, Singapore, and Thailand)

WHY?

PACIFIC ALLIANCE V/S ASIA PACIFIC

Alliance exports to these countries totaled USD 2.7 billion in 2015 less than 1% of its exports to the world

On the other hand, the ASEAN-5 countries represented 3.7% of total imports by the Pacific Alliance

They can become an increasingly important source of intermediate goods which:

raises potential for greater participation in global value chains

fundamental for increasing productivity and creating better quality employment opportunities

PACIFIC ALLIANCE V/S ASIA PACIFIC

Considering that the PA integration will:

- Involve a single rule of origin - Free access to a market expanded with the possibility of

using inputs from any part of the agreement to 2031

This will allow to enter the Asian market with new products

PACIFIC ALLIANCE V/S ASIA PACIFIC

A springboard to Asia-Pacific

PA: Total trade with Asia China, Japan & Korea

2011 2014(IMF 2016 data)

China: 64%

Japan: 21%

Korea: 15%

USD 176bn USD 212bn

China: 69%

Japan: 17%

Korea: 14%

PACIFIC ALLIANCE V/S ASIA PACIFIC

Pacific Alliance: Trade with Asia Pacific's Big Three breakdown

* Data for 2014, latest available comparable figures according to IMF's

Department of Trade Statistics (2016). In USD bn.

China Japan South Korea

Exports ImportsTotal trade

Exports ImportsTotal trade

Exports ImportsTotal trade

Chile 18,20 14,99 33,19 7,38 2,30 9,67 4,65 2,31 6,96

Colombia 5,76 11,79 17,55 0,42 1,53 1,95 0,52 1,50 2,02

Mexico 5,96 72,88 78,85 2,65 19,30 21,95 2,03 15,16 17,19

Peru 7,03 9,79 16,82 1,58 1,22 2,80 1,21 1,52 2,73

Total 36,94 109,46 146,40 12,03 24,34 36,37 8,41 20,49 28,90

PACIFIC ALLIANCE V/S ASIA PACIFIC

PACIFIC ALLIANCE V/S ASIA PACIFIC

• PA Additional Protocol

• Trans Pacific Partnership (TPP)

• Regional Comprehensive Economic Partnership(RCEP)

• Free Trade Agreement of Asia Pacific (FTAAP)

PACIFIC ALLIANCE BUSINESS COUNCIL

• Group of business men who, in a voluntary and individual basis, agreed to become promoters of the PA

• Constituted in Mexico in 2012

• Four chapters, one for each PA country: Chile, Colombia, México and Perú

• Each chapter is composed by prominent business men and representatives of the business sector of each country

• It meets at least twice a year

PACIFIC ALLIANCE BUSINESS COUNCIL

Objectives:

• Promote the Pacific Alliance within country members and the business community in general

• Develop recommendations and suggestions to governments to improve the integration process

• Suggest joint actions to access foreign markets, mainly in the Asia Pacific region.

PACIFIC ALLIANCE BUSINESS COUNCIL

Cosmetic new annex:

• Article 1 of the amending Protocol to the Additional Protocol added the annex 7.11 named Elimination of Technical Barriers to Trade in Cosmetic Products to Chapter 7 of the Additional Protocol

• Harmonization of definition of cosmetic products based on the definition in Regulation (EC)N|1223 / 2009 of the European Parliament and of the Council of 30 November 2009 about cosmetic products in the European Union

PA BUSINESS COUNCIL ACHIEVEMENT

PACIFIC ALLIANCE

MANY CHALLENGES AHEAD

PACIFIC ALLIANCE

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