19.11.2018 in Marketing
Free Trade Area in Latin America


Several attempts have been made towards regional integration in Latin America. Creation of a Free Trade Area was seen as an important concept that would assist the region economically. However, this has not been possible and the constituent countries have ended up forming smaller integration blocs such as UNASUR (Union of South America Nations) and ALBA (Bolivarian Alternative for the Americas). This paper evaluates the possibility of creation of a free trade area in Latin America without the involvement of both the United States and Canada. The paper will also discuss benefits and disadvantages of the creation of a free trade area. Although the countries within the region have made several strides towards creating an integrated plan, there are several hindrances that may impede the process, such as ideological differences and other. Some countries have proposed economic-based integration while others support social and political integration. This paper argues that, although there is a possibility that the free trade area can be created, there are a lot of political uncertainties which may hinder the full realization of the process.

History of the Process of Integration

The Free Trade Area of the Americas (FTAA) was viewed as a form of trade colonization by the developing countries in Latin America and therefore it was largely opposed. The move towards the creation of the FTAA was seen as the United States move to impose its will upon the Latin Americans, something that was received with a lot of resistance in several countries in the region. Latin American countries have consistently been disapproving the economic involvement of the IMF which has participated in creating most of the problems experienced within the region. However, following the optimism in the economic progress of the region, IMF has been seen wanting to play an active role as an ‘expert’ in the pursuance of economic progress despite the previous role of under-developing the Latin American countries it had played.

Political and economic enmity exists in the region, making it hard to achieve an economic integration plan. For instance, enmity between the United States and Venezuela and Cuba is obvious. Although the United States is the biggest consumer of the oil exports from Venezuela, the latter has attempted to look for alternative consumers from the Asian regions, particularly India and Chinaò this fact highlights a problem in economic ties with the US. Bilateral trade between the two countries has been affected due to their apparent enmity. This means that economic cooperation is linked to other relationships, including the social and political ones.

There are other smaller economic functional blocs such as Petrosur, an organization in charge of coordinating mutual energy policies among Brazil, Venezuela and Argentina, which have been created in the region. This poses a great threat to the formation of the wider integration bloc that many countries are pessimistic about. Some of these countries may not see the need to be integrated with other countries, which they view as neo-colonizers or economically oriented states.

Mercosur was purposely created to advance political and social concerns of the people. In 2005, Chavez tried to control the direction the union was taking. According to him, Mercosur was heading to breaking away from its neoliberal roots. The initial plan of the union was to advance the social concerns of the workers, human dignity, life and children. Chavez seemed to have opposed the concept of seeking financial gains out of the integration. The emergence of different integration bodies with diverse goals impedes the process of achieving a single integration bloc in Latin America.

The goal of the United States in their call for an integrated Latin America has been to promote the NAFTA agenda to the rest of the countries, something that has been widely opposed by these countries. One of the agendas that have been openly rejected by the constituent countries in Latin America is the aim of the United States to compel all its trading partners to enforce and respect the regulations which are imposed by it. The objective behind the US carrying out such an activity is to advance its economic rate through reaping the benefits that are associated with free trade and open markets. To achieve the objective, the United States set up a bargaining organization, FTAA. Although the United States has tried to pursue the integration with very careful considerations, the process has taken a long time given the extent to which it is opposed by the countries in the Latin American region.

The formation of Mercosur (Mercado Común del Sur) has brought a lot of dynamics within the region. The member states include Brazil, Argentina, Paraguay, Uruguay, and other associate members such as Ecuador, Bolivia, Chile, Peru, Colombia and Venezuela. The main aim of the integration was to create a common market that could consequently allow free movement of goods and services within the region. They also adopted a common external policy, coordinated common interests in the international markets and focused on macroeconomic policies affecting them. The integration has sought a lot of successful agreements. For instance, EU has formed their prime trading partner. An agreement signed between the two unions to create free trade areas is a big challenge to the creation of the Latin American based integration.

Countries in the world have foreign policies carefully designed by their governments, which facilitates them in attaining their desired international integration goals. National interests of any country have to be safeguarded. The United States has been involved in relations with Latin America. The area is growing as a region. However, there are several social and political issues that the United States need to solve with them so that they can move towards common development. The United States for some time has complained about illegal activities taking place or being facilitated by the countries in the Latin American region. The United States has, for example, accused Cuba of allowing illicit drug trafficking within its borders, an issue that the United States relentlessly opposed. The Cuban government warned the US about the inappropriateness of interfering with their internal affairs. These kind of opposing stands have made many Latin American countries hold the United States in contempt to a position that they interpret the attempts by the US to bring integration as a way of neocolonialism.

Efforts to unite other countries in exception of the US and Canada require ideological harmony because politics seems to play a fair share in the process at the expense of the actual goals of integration. The efforts to form an integrated economic bloc might take time if they are successful.


Challenges of Future Integration

It is very difficult to evaluate the success of the future efforts towards the integration process of the Latin Americans. However, going by the current trend, there are issues that are already ascertainable. Current integration process has been a difficult one following social, political and economic differences among the countries in the region. The concept of integration has almost been completely polarized. This is because the situation has taken the political path. Due to its political nature, the American integration process is to a large extent indeterminate. The region is still working on other integration plans with little involvement of the United States and Canada.

The already existing integration blocs are largely working to ensure that they succeed without the back-up of the two great economies in the region. Their success depends on whether they have laid a foundation that surpasses both political and ideological differences. The greatest worry is whether the integrated countries can be able to succeed without bringing in their political differences present in each of the Latin American countries. For example, Chavez has been an active member of the ALBA integrated organization. He seems to hold strong reservations on certain issues, especially related to social and economic ideologies. From another perspective, Bachelet has been very active in the UNASUR organization. The greatest question that one would be left wondering about is whether Venezuela will continue being a member without Chavez and whether Chile will still be a member without Bachelet. The worry is whether these leaders magnify their personal opinions to reflect the will of their countries. Only time can be able to ascertain the truth or falsity of this concept.

The countries have been trying to hold divergent views behind the real reason for existence of a free trade area. Countries such as Brazil seem to lean more on economic interdependence while countries like Venezuela and Cuba seem to hold the perspective of opposing neo-colonial tendencies of the countries like the United States. The countries which majorly concentrate their approach on politics seem to handle issues in a circuitous way. For instance, they begin discussing dealing with the imperialistic status quo and the topic ends there. There is less progress that is achieved in other areas such as discussion of the economic development. On the other hand, the call for the changes they agitate for cannot be taken for granted. The greatest hope that the solidified blocs have realized is that with unity, these integrated regions can outweigh the strength of the United States.

Benefits of Free Trade to Latin American Countries

Latin America consists of developing countries which are mostly in the take-off stage of development. Strategic free trade agreements can be of a great benefit to these countries in a number of ways. First, they will increase the number of resources available. The developing nations can benefit from accessibility to financial sources from the other countries which they form the integration with. Developing countries usually have constrained resources that might not be enough to carry out certain development projects. The resources can be in the form of labor, land and capital. Free trade markets ensure that small and developing countries like those in the Latin America can be able to receive financial sources so that they can be empowered to produce either products or services to their end consumers.

Second, free trade leads to improved quality of life. For instance, countries are able to import products that they do not produce at relatively fair prices. Imported goods can in many times turn out to be cheaper than when the country attempts to produce these goods within their territories. Most countries in Latin America do not have the necessary technology and expertise required to convert raw materials into finished products that can be used by the end consumers. If the neighboring regions produce products that these countries need, they will be allowed to import on a regular basis because trade barriers will not act as an impediment. Importing goods from their neighbors will also guarantee them accessibility to utilization every time it is required.

Third, free trade creates good foreign relations. Developing relationships through trade with other countries makes the Latin American countries safe from the global threats. Trade can also be used by the developing nations to create interior strengths. In addition, it can be a major factor towards strengthening political ties. With the free trade, a lot can be learnt from the well doing regions and the weak countries can be able to borrow from the strong ones thus improving their governing systems. Through free trade, the societies in Latin America can be able to reach efficiency in their production. Most of the countries have their own skills of developing certain products. This can be an effective platform that the developing nations can use to fill the gaps in their methods of manufacturing. Experience or special skills can be gained in learning the unique manufacturing methods. This benefits the countries as they engage in an exchange program.

In addition, free trade leads to consumer savings. This is because competition in the supply of goods and services between the companies within the boundaries and those in other countries will lead to a fall in price. This makes it possible for the consumers to buy goods and services at affordable prices and still have enough to save.

Moreover, free trade leads to reduced inequality. Foreign investment makes it possible for people to acquire employment opportunities, earn an income and therefore bridge the gap between the poor and the rich.

Drawbacks of Free Trade in the Latin America

Free trade can have some disadvantages. Sometimes free trade can lead to unemployment. As the goods are exported to other countries, the opening up of the boundaries allows the companies of other countries to compete with the native companies in terms of pricing the products. In this case, some firms will be forced to close down if they cannot be able to competitively sell their products within the region. As a result, the employed people lose their jobs.

Second, free trade contributes to loss of sovereignty and causes increased dependency. Lack of restriction in the movement of goods and services between the boundaries of two countries makes the sovereignty be lost. This also paves a way for inter-country illegal trade to be carried out. On another perspective, nations tend to specialize on producing certain goods while depending on other countries to produce what they do not have. This creates a dependency syndrome. If the exports that the country produces are depleted or insufficient, then the country must make efforts to find or do without causing inconvenience. From another platform, overdependence on neighboring countries can sometimes cause inconveniences. Nations are prone to change their allegiance due to the change of national interests, social or political changes. This may make some countries to suffer since the free trade they used to depend on may be cut short.

Third, free trade contributes to inequality and poverty in developed countries. Most of the companies are likely to move to products that can be easily exported. Since the people with skilled labor are more, most of them might be rendered jobless as the company seeks for other few skilled people while investing intensively on technology to make sure that goods and services are continuously produced. This means that many people will not be able to earn an income. This increases the poverty levels while at the same time widening the gap between the poor and the rich, causing social and economic disparity.


Although there have been many attempts made to integrate Latin America through creating a free trade area, these efforts have been hindered by several factors. Most of the countries have already joined hands to create smaller organizations comprising of few countries. In addition, the formation of the free trade area has been hampered by the diverse expectations that every member state wants from the process. There are numerous social, political and economic benefits that this process is likely to bring to the area, such as creation of employment. However, many countries would still fear the impacts of the integration such as disparity in economic development. The choice of whether the region will enter into an agreement about the creation of the free trade area highly depends on the political dynamics happening within the countries.

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