Latin American Integration Association: concept, forms, factors and processes

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

The Latin American Integration Association was established to promote the social and economic development of the region. The association is aimed at the constant and progressive development of the Latin American market. The process began in the late 1950s and continues to this day. You can find out which countries are members of the Latin American Integration Association, as well as its tasks, goals and development by reading this article.

Backstory

Since independence, Latin American countries have been trying to unite together both politically and economically. Unity is a necessary condition for maintaining the newfound regional freedom from Spain. The Latin American Integration Association (LAI) considers the political unity of Latin America as a means of establishing regional conflicts. It is also calledestablish the dominance of regional international law and reduce the vulnerability of Latin American countries to the action of the great powers, especially the UK and the US.

Historical background

The history of the creation of the Latin American Integration Association leads to the period of the Great Depression. At that moment, the economy was dependent on exports, which began to decline due to a decrease in external demand. Only government protection and foreign aid prevented a complete collapse of the economy. It was necessary to consider the protection of industries in order to create a viable economy for the country. The Latin American Integration Association originated from this need, which began to be realized after the end of World War II (1941-1945) by convincing leaders of the need for import substitution at the national and regional levels.

Features

Unlike Europe, where a single process of regional integration has gone through several waves of expansion, Latin America is characterized by a series of four waves, during which the signing of agreements initiated or activated several separate, but very similar integration processes in 1950-1960, 1970 -1980, 1990 and 2000-2010. Most scholarly efforts have focused on the evolution of each regional integration process in Central America, the Andean and Caribbean regions and the Common Market of the South.

Another feature of the Latin American Associationintegration is the unification of interests and ideas with a combination of external and internal incentives in a historical context.

Prebisch Theory

After the publication in 1949 of the report of the Argentine economist and Secretary General of ECLAC Raul Prebisch, Latin America was offered a "road map" for its development strategy. This seminal work, en titled "The Economic Development of Latin America and Its Main Problems", laid the foundation for the theory of unequal exchange and caused a paradigm shift in a region where the theory of comparative advantage had long been popular. Prebisch's theory was based on observations and professional practice as the CEO of the Central Bank of Argentina. After the Great Depression, Argentine export earnings skyrocketed. Industrialization has become an urgent need of the country. The Latin American Integration Association was supposed to be the solution to this problem.

Start

Prebisch's proposals were published in the early 1950s, during the Korean War, when prices for Latin American goods rose on world markets. In this context, the pessimistic theory of unequal exchange could hardly convince Latin American politicians. Soon, Latin America's terms of trade worsened. In addition, the United States opposed the creation of the Latin American Integration Association from the very beginning, arguing that it duplicates the functions of the Inter-American Economic and Social Council. These unfavorableinitial conditions did not prevent the opening of a sub-regional office in Mexico City in 1951 and lobbying in Central America.

First wave of development

The Latin American economy has grown significantly since the end of the World War. The raw materials of these countries (meat, sugar, cocoa) were in great demand in the markets of Europe. This economic need was shared by Argentina, Brazil, Chile, Paraguay, Mexico, Uruguay and Peru. In 1958, the first multilateral Free Trade and Integration Treaty was signed. It contained a very short list of products. In February 1960, the Treaty of Montevidei was signed to create the Latin American Integration Association, the goals and objectives of which included the unification of various countries for the implementation of interregional trade and the expansion of their national markets. Colombia, Ecuador, Bolivia and Venezuela joined the organization a few years later. The purpose of the treaty was to gradually eliminate trade restrictions between participating countries.

Second wave

This stage of development was long and rather inactive. The private sector played an important role in maintaining some level of intra-regional trade in times of economic nationalism. All integration processes have come to a standstill. This went on for almost two decades. The Caribbean Community, established in 1973, was a big disappointment. Economic integration became the agenda of the second wave. Countries included inThe Latin American Integration Association, in this wave, they tried to conclude bilateral agreements. The Contracting Parties sought to develop the following core functions:

• mutual trade and economic cooperation;
• developing measures that will help expand markets;
• creation of the Common Latin American Market.

Third wave

In June 1990, US President George W. Bush launched the "Enterprise for America" initiative. He emphasized free trade, investment, and debt relief. This initiative was intended to help the Latin American countries, locked in the implementation of neoliberal reforms. To be eligible for debt reduction funds, a country had to sign a standby agreement with the International Monetary Fund and receive a structural adjustment loan from the World Bank. Negotiations with the Latin American Integration Association began in June 1991. The first free trade agreement was signed. All countries except Cuba, Haiti and Suriname have signed framework agreements as a prelude to free trade negotiations with the US. LAI has spread the concept of service promotion, sanitation measures and intellectual property rights. Public procurement and investment rules have been established.

Fourth wave

The neoliberal era ended after the crisis in the late 1990s. Social activists and the political leftparties across the continent vehemently criticized the Washington Consensus and devised an alternative. Waves 1 and 3 were based on paradigm shifts that were never completely undeniable. The fourth wave was based on mutual agreement. A multi-level regional management system was created. In 1999, the first European-Latin American summit was held in Rio. The European Union has supported the best practices and concepts of the ALA. In 2000-2010, the Latin American Integration Association ventured into new territories. The fourth wave was not exclusively trade-focused like the third, nor is it protectionist like the first. By dismantling the old schemes, it has brought some innovation without exhausting the neoliberal momentum. The fourth wave was driven by Brazil and Venezuela, with external factors lagging behind with their political orientations unchanged from the previous wave. The most promising regional integration process in decades has been launched.

Today

Current members of ALA are Bolivia, Argentina, Brazil, Colombia, Venezuela, Cuba, Panama, Mexico, Paraguay, Uruguay, Peru, Ecuador and Chile. Nicaragua is in the process of joining. Any of the Latin American states can apply for accession. The LAI group of 13 members covers an area of 20,000 km². This is almost five times larger than the area of the 28 countries that make up the European Union. The Latin American Integration Association is headquartered in Montevideo, Uruguay.

Meaning and general principles

The development of the integration process developed within the framework of the ALI is aimed at promoting the harmonious and balanced socio-economic development of the region. The long-term goal of the Latin American Integration Association is the gradual and progressive formation of the Common Latin American Market. Main Features:

• regulation and support of mutual trade;
• economic cooperation;
• develop the economy and expand markets.

General principles:

• pluralism in political and economic matters;
• progressive merging of private markets with the common Latin American market;
• flexibility;
• differential treatment based on the level of development of participating countries;
• various forms of trade agreements.

Mechanisms of organization

The Latin American Integration Association promotes the creation of an economic preference zone in the region through three mechanisms:

• Regional tariffs applied to goods from participating countries compare favorably with tariffs applicable to third world countries.
• Regional agreements in which all countries of the association participate.
• Partial coverage agreements involving two or more States of the region.

Relatively less economically and socially developed states of the region (Paraguay, Bolivia,Ecuador) a preferential system can be used, which offers special mutual assistance programs: investments, business tours, technical assistance, financing). Compensatory funds are also used in favor of inland countries. The ALA contains the strongest legal, sub-regional agreements of a multilateral and bilateral nature. Their number on the continent is constantly growing. As a result, the Latin American Integration Association is developing measures to support and stimulate efforts to gradually create a common economic space, while acting as a legal and institutional framework.