Canada deepens ties with Pacific Alliance

By Karen McNaught

As one of the first countries invited to become an Associated State of the Pacific Alliance, Canada is gearing up for talks in Australia in January 2018 to negotiate a free trade agreement with Alliance members as a bloc.

The Pacific Alliance is a regional integration initiative created in 2011 by Chile, Colombia, Mexico and Peru. The Alliance’s overarching goals are to foster the free movement of goods, services, capital and people and to promote greater competitiveness and economic growth for member countries. In June 2017, Canada was among the first countries invited to become an Associated State of the Pacific Alliance, along with Australia, New Zealand and Singapore.

This process requires the negotiation of a free trade agreement with the Pacific Alliance as a bloc. With a combined GDP of almost $2.3 trillion, and more than 220 million inhabitants, the Pacific Alliance constitutes an important market for Canada.

Canada currently has one-on-one free trade agreements (FTAs) in place with each of the Pacific Alliance member countries: Chile, Colombia, Mexico and Peru. In August 2017, Canada launched public consultations to get input on the possible negotiation of an FTA with the Pacific Alliance as a bloc. Formal negotiations were subsequently initiated in Cali, Colombia, in October 2017.

Developing closer ties with the Pacific Alliance in general, is a move welcomed by members of the Canadian business community, and the launch of talks to become an Associated State is viewed as an important milestone by many.

Data: Trade Data Online
Source: Office of the Chief Economist, Global Affairs Canada

“We are very interested in Canada’s potential for joining the Pacific Alliance as we see the member countries as part of our strongest emerging markets, specifically in South America” says Todd Burns, president of the Winnipeg, Man.-based Cypher Environmental Ltd. “With Mexico, Chile, Colombia and Peru all having strong mining industries and the need for significant infrastructure development, they fall into a category we hope to capitalize on for the future growth of Cypher.”

Nacho Deschamps, group head of international banking and digital transformation for Scotiabank, agrees: "The Pacific Alliance countries are a major contributor to international banking earnings, which represent 28 percent of the bank's total earnings in 2016.” Mexico, Peru, Chile and Colombia are “key engines” of the bank's growth, serving more than 11 million customers through more than 1,300 branches, Deschamps says.

“These markets have stable and well-capitalized banking systems, strong regulatory environments, credible central banks and strong balance sheets,” notes Deschamps. “The portfolio we have today in these countries has been built over45 years with positive results and we will focus on growing in these markets."

With FTAs in place with each of the Pacific Alliance countries, Canada has established an important presence in these countries. For example, Pacific Alliance member nations accounted for $49.6 billion of Canadian direct investment abroad (CDIA) in 2016, 19 percent of the total CDIA in Latin American countries. Canada’s total merchandise trade with Pacific Alliance countries reached $48 billion in 2016, representing 75 percent of Canada’s two-way trade with the region.

"As the investment figures indicate, the Pacific Alliance countries are critically important to Canadians doing business and investing in Latin America,” says Kenneth Frankel, president of the Canadian Council for the Americas. “We believe these numbers are going to increase further. We also think that the Pacific Alliance countries are an important geopolitical partner for Canada. The importance of the Pacific Alliance will continue to grow as other countries, particularly Argentina and Brazil, look to deepen their relationship with the Pacific Alliance."

The Pacific Alliance member nations are some of Canada’s largest and most “like-minded” trade partners in Latin America and the Caribbean, say members of the Canadian Trade Commissioner Service (TCS).

“With increased economic integration underway among the four dynamic markets of the Pacific Alliance coupled with the launch of Canada-Pacific Alliance FTA negotiations, now is the time to explore new trade and investment opportunities in these four countries,” says Brenda Wills, a trade commissioner in Bogota, Colombia. “The Trade Commissioner Service can help you make valuable in-market connections to help expand your business.”

Canada has been actively deepening its engagement with the Alliance since becoming an observer country in 2012. In 2016, Canada signed the Canada-Pacific Alliance Joint Declaration on Partnership. This was followed by the implementation of four cooperation projects worth more than $23 million over the five-year period from 2016-2021. The projects aim to support education and training, trade promotion for Pacific Alliance small and medium-sized enterprises, and action on climate-related issues.

View recent webinars on doing business in the Pacific Alliance (Business Opportunities in Peru and Chile, Business Opportunities in Mexico and Colombia).

Consult the TCS Spotlight on Free Trade for more information on free trade agreements.

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