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April 13, 2016
Located on the west coast of Colombia, near to Cali is the port of Buenaventura where cranes work tirelessly through the day and night loading and unloading containers. The continued growth of the Pacific Alliance trade bloc will bring even more action to this already busy port which manages more than half of Colombia’s maritime cargo. Traditionally, there has always been cargo coming and going from Mexico, Peru and Chile however, more so now than ever the amount of trade passing through Buenaventura is growing especially from Chile. As a direct result of the bloc’s influence, annual activity at the port has been growing at a rate of 12.5% compared to earlier figures of 9.5%.
Although Buenaventura had a difficult history of violence and poverty, today it acts as the main gateway to the Pacific, receiving goods from Asia and the growing number of Chilean cargoes carrying wine and goods for its retail sector. Exports from Buenaventura and the rest of Colombia include Colombia’s prime good and industry of premium grade coffee which is bound for Japan as well as a range of food products from Colombia’s main manufacturer, Nutresa.
In spite of the numerous advantages the Pacific Alliance is estimated to bring from increased investment, the freedom of movement of people and the sharing of resources, in terms of trade, the benefits may in fact be more limited. This is not only true in Latin America but also in Asia where the alliance has been making special efforts to strengthen ties with many nations seeing Asia, in particular China, as a major growth market. Interestingly, a great number of Latin American nations view China as much more favourable than Latin American and European markets however they face the challenge of building the brand and conquering cultural and language barriers.
Many of the companies operating within the Pacific Alliance are in fact more interested in the prospects of the Trans Pacific Partnership. This more ambitious trade agreement will include the US and various Asian countries and open up a world of opportunities for the Pacific Alliance countries. As it currently stands the Pacific Alliance is still seen as an important opportunity for those companies that are well-established yet do not currently have investments in other member countries. This means that a special stress has been put on the companies acting within the Pacific Alliance, their productivity and competitiveness for the future. For a country like Colombia that is making all efforts and indeed succeeding at reinventing its image the Pacific Alliance allows companies to keep growing internationally whilst maintaining a sustainable connection with the other countries along the Pacific Coast.
There is one area of the Pacific Alliance where work still needs to be done, most notably with financial integration. Although there has been some progress in this area, many are not satisfied with the depth of their local markets. This has translated into fund management groups from Chile and Colombia setting up pension administration companies in other neighbouring countries. The Pacific Alliance therefore holds great opportunity for pension funds to diversify their investments within four different local markets. Therefore the Pacific Alliance bloc provides a more agile and flexible investment environment. However, the integration of Pacific Alliance member stock exchanges has been less than successful with this ambitious plan being marked as a pure failure and not working by those working to solve this very issue.
The future of the Pacific Alliance looks set to be one full of opportunities and with the growing economies of Chile, Peru, Mexico and Colombia as well as the added interest from Asian markets, the Alliance has all the ingredients needed to succeed. With Costa Rica and Panama beginning the process to join and to become incorporated into the Alliance respectively, the Pacific Alliance looks set to grow from strength to strength. With the obvious downfalls of the Pacific Alliance in what is merely its infancy of 2 years, it will need to iron out its financial integration issues if it is to truly reach its full potential.
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