Latin American Integration Association
Encyclopedia
The Asociación Latinoamericana de Integración (the Latin American Integration Association; known as ALADI or, occasionally, by the English acronym LAIA) is a Latin America
n trade integration association, based in Montevideo
. Its main objective is the establishment of a common market, in pursuit of the economic and social development of the region. Signed on August 12, 1980, the Montevideo Treaty is an international legal framework that establishes and governs the Latin American Integration Association. It sets the following general guidelines regarding trade relations between signatory countries: pluralism, convergence, flexibility, differential treatment and multiplicity.
, Brazil
, Chile
, Mexico
, Paraguay
, Peru
, and Uruguay
. The signatories hoped to create a common market in Latin America and offered tariff rebates among member nations. LAFTA came into effect on January 2, 1962. When the trade association began, it had seven members and its main goal was to eliminate all duties and restrictions on the majority of their trade within 12 years. By the late 1960s, the area of LAFTA had a population of 220 million and produced about $90 billion of goods and services annually. It also had an average per capita gross national product of $440.
The goal of the LAFTA is the creation of a free trade
zone in Latin America. It should foster mutual regional trade among the member states, as well as with the US and Canada
, the Pacific Union
, the African Union
, and the European Union
. To achieve these goals, several institutions are foreseen:
The LAFTA agreement had important limitations: it only refers to goods, not to services, and it does not include a coordination of policies. Compared to the European Union, the political and economic integration was very limited.
By 1970, LAFTA expanded to include four more Latin American nations: Bolivia
, Colombia
, Ecuador
, and Venezuela
. It now consisted of 11 nations. In 1980, LAFTA reorganized into the Latin American Integration Association (ALADI). LAFTA brought many new positive changes to Latin America. With LAFTA in place existing productive capacity could be used more fully to supply regional needs, industries could reduce costs as a result of potential economies through expanded output and regional specialization, and attraction to new investment occurred as a result of the regional market area.
Although LAFTA has brought many constructive results, like other FTAs, it has also brought problems to individual nations and to Latin America as a whole. Some of the problems which individual countries face are the way they are grouped together by their economic strengths according to LAFTA. The grouping was originally Argentina, Brazil, and Chile in one group, Colombia, Chile, Peru, Uruguay, and Venezuela in the second group, and the last group which included Bolivia, Ecuador, and Paraguay. There is a problem in this classification because it ignores the great economic and other differences between the countries. Problems which Latin America faced as a whole had to do with many of the nations in the continent being underdeveloped. The Free Trade Agreement was seen as a way of the countries having greater economic interactions among each-other and thus improving the economic state of the poorer nations.
was the last to accede, becoming a full member on August 26, 1999. In addition, ALADI is also open to all Latin American countries through agreements with other countries and integration areas of the continent, as well as to other developing countries or their respective integration areas outside Latin America. ALADI is now the largest Latin-American group of integration. It is responsible for regulations on foreign trade which includes regulations on technical measures, sanitary regulations, environment protection measures, quality control measures, automatic licensing measures, price control measures, monopolistic measures, as well as other measures. These regulations are put into place in order for trade to be even handed amongst members of ALADI.
Either regional or partial scope agreements may cover tariff relief and trade promotion; economic complementation; agricultural trade; financial, fiscal, customs and health cooperation; environmental conservation; scientific and technological cooperation; tourism promotion; technical standards and many other fields. As the Montevideo Treaty is a "framework treaty", by subscribing to it, the governments of the member countries authorize their representatives to legislate through agreements on the economic issues of greatest importance to each country.
A system of preferences — which consists of market opening lists, special cooperation programs (business rounds, preinvestment, financing, technological support) and countervailing measures on behalf of the landlocked countries — has been granted to the countries deemed to be less developed (Bolivia, Ecuador and Paraguay), to favour their full participation in the integration process. As the institutional and normative "umbrella" of regional integration that shelters these agreements as well as the subregional ones (Andean Community, MERCOSUR
, G-3 Free Trade Agreement, Bolivarian Alternative for the Americas
, etc.) the Association aims to support every effort to create a common economic area.
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
n trade integration association, based in Montevideo
Montevideo
Montevideo is the largest city, the capital, and the chief port of Uruguay. The settlement was established in 1726 by Bruno Mauricio de Zabala, as a strategic move amidst a Spanish-Portuguese dispute over the platine region, and as a counter to the Portuguese colony at Colonia del Sacramento...
. Its main objective is the establishment of a common market, in pursuit of the economic and social development of the region. Signed on August 12, 1980, the Montevideo Treaty is an international legal framework that establishes and governs the Latin American Integration Association. It sets the following general guidelines regarding trade relations between signatory countries: pluralism, convergence, flexibility, differential treatment and multiplicity.
History
The Latin American Free Trade Association (LAFTA) was created in the 1960 Treaty of Montevideo by ArgentinaArgentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
, Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
, Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, Paraguay
Paraguay
Paraguay , officially the Republic of Paraguay , is a landlocked country in South America. It is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Paraguay lies on both banks of the Paraguay River, which runs through the center of the...
, Peru
Peru
Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
, and Uruguay
Uruguay
Uruguay ,officially the Oriental Republic of Uruguay,sometimes the Eastern Republic of Uruguay; ) is a country in the southeastern part of South America. It is home to some 3.5 million people, of whom 1.8 million live in the capital Montevideo and its metropolitan area...
. The signatories hoped to create a common market in Latin America and offered tariff rebates among member nations. LAFTA came into effect on January 2, 1962. When the trade association began, it had seven members and its main goal was to eliminate all duties and restrictions on the majority of their trade within 12 years. By the late 1960s, the area of LAFTA had a population of 220 million and produced about $90 billion of goods and services annually. It also had an average per capita gross national product of $440.
The goal of the LAFTA is the creation of a free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
zone in Latin America. It should foster mutual regional trade among the member states, as well as with the US and Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, the Pacific Union
Pacific Union
The Pacific Union is a proposed development of the Pacific Islands Forum, suggested in 2003 by a committee of the Australian Senate, into a political and economic intergovernmental community. The union, if formed, will have a common charter, institutions and currency...
, the African Union
African Union
The African Union is a union consisting of 54 African states. The only all-African state not in the AU is Morocco. Established on 9 July 2002, the AU was formed as a successor to the Organisation of African Unity...
, and the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
. To achieve these goals, several institutions are foreseen:
- the council of foreign ministers
- a conference of all participating countries
- a permanent council
The LAFTA agreement had important limitations: it only refers to goods, not to services, and it does not include a coordination of policies. Compared to the European Union, the political and economic integration was very limited.
By 1970, LAFTA expanded to include four more Latin American nations: Bolivia
Bolivia
Bolivia officially known as Plurinational State of Bolivia , is a landlocked country in central South America. It is the poorest country in South America...
, Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
, Ecuador
Ecuador
Ecuador , officially the Republic of Ecuador is a representative democratic republic in South America, bordered by Colombia on the north, Peru on the east and south, and by the Pacific Ocean to the west. It is one of only two countries in South America, along with Chile, that do not have a border...
, and Venezuela
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
. It now consisted of 11 nations. In 1980, LAFTA reorganized into the Latin American Integration Association (ALADI). LAFTA brought many new positive changes to Latin America. With LAFTA in place existing productive capacity could be used more fully to supply regional needs, industries could reduce costs as a result of potential economies through expanded output and regional specialization, and attraction to new investment occurred as a result of the regional market area.
Although LAFTA has brought many constructive results, like other FTAs, it has also brought problems to individual nations and to Latin America as a whole. Some of the problems which individual countries face are the way they are grouped together by their economic strengths according to LAFTA. The grouping was originally Argentina, Brazil, and Chile in one group, Colombia, Chile, Peru, Uruguay, and Venezuela in the second group, and the last group which included Bolivia, Ecuador, and Paraguay. There is a problem in this classification because it ignores the great economic and other differences between the countries. Problems which Latin America faced as a whole had to do with many of the nations in the continent being underdeveloped. The Free Trade Agreement was seen as a way of the countries having greater economic interactions among each-other and thus improving the economic state of the poorer nations.
Entry
Any Latin-American country can join the 1980 Montevideo Treaty. CubaCuba
The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...
was the last to accede, becoming a full member on August 26, 1999. In addition, ALADI is also open to all Latin American countries through agreements with other countries and integration areas of the continent, as well as to other developing countries or their respective integration areas outside Latin America. ALADI is now the largest Latin-American group of integration. It is responsible for regulations on foreign trade which includes regulations on technical measures, sanitary regulations, environment protection measures, quality control measures, automatic licensing measures, price control measures, monopolistic measures, as well as other measures. These regulations are put into place in order for trade to be even handed amongst members of ALADI.
Methods
The ALADI promotes the creation of an area of economic preferences in the region, aiming at a Latin American common market, through three mechanisms:- Regional tariff preference granted to products originating in the member countries, based on the tariffs in force for third countries
- Regional scope agreement, among member countries
- Partial scope agreements, between two or more countries of the area
Either regional or partial scope agreements may cover tariff relief and trade promotion; economic complementation; agricultural trade; financial, fiscal, customs and health cooperation; environmental conservation; scientific and technological cooperation; tourism promotion; technical standards and many other fields. As the Montevideo Treaty is a "framework treaty", by subscribing to it, the governments of the member countries authorize their representatives to legislate through agreements on the economic issues of greatest importance to each country.
A system of preferences — which consists of market opening lists, special cooperation programs (business rounds, preinvestment, financing, technological support) and countervailing measures on behalf of the landlocked countries — has been granted to the countries deemed to be less developed (Bolivia, Ecuador and Paraguay), to favour their full participation in the integration process. As the institutional and normative "umbrella" of regional integration that shelters these agreements as well as the subregional ones (Andean Community, MERCOSUR
Mercosur
Mercosur or Mercosul is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay. Founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people,...
, G-3 Free Trade Agreement, Bolivarian Alternative for the Americas
Bolivarian Alternative for the Americas
The Bolivarian Alliance for the Peoples of Our America is an international cooperation organization based on the idea of social, political, and economic integration between the countries of Latin America and the Caribbean...
, etc.) the Association aims to support every effort to create a common economic area.