ALADI, the mechanism for Latin American integration that could stimulate regional exports

August 29, 2023

Many Latin American countries have signed trade agreements under the ALADI umbrella. This Association, although ignored, is in force and could contribute to increase exports.

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The Latin American Integration Association (ALADI) was established in 1980 by the Treaty of Montevideo. Today, it is made up of thirteen of the twenty-one Latin American countries: Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Panama, Paraguay, Peru, Uruguay and Venezuela. ALADI covers an area of 20 million square kilometers and has 510 million inhabitants.

Its predecessor was the Latin American Free Trade Association (LAFTA), created in 1960, within the context of policies that promoted the active role of the State and industrialization efforts.

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In times when integration processes in the continent have been the scene of disputes and have ideological connotations, ALADI has managed to sponsor treaties between very diverse countries.

Political and economic pluralism, the progressive path towards a common market and differential treatment, taking into account the different levels of development and the diversity of trade instruments, are some of the issues that ALADI has put on the agenda.

ALADI: A diversity of integration mechanisms

The mechanisms used by ALADI to advance the region’s integration are tariff preferences, which are granted to member countries with respect to those in force for third countries; regional agreements for all members; and Economic Complementation Agreements, which cover both tariff relief and industrial programming.

In some cases, free trade zones may also be established, with a timetable and agreed exceptions.

According to ALADI regulations, treaties may include partial and temporary tariff reductions. In addition, each country establishes which tariff items are exempted from the tariff reduction processes contemplated in the Free Trade Agreements.

Partial Scope Agreements are those established between two or more countries, but do not commit the members of ALADI and are of the most diverse type, constituting a network of treaties on economic, cultural and scientific matters.

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Over time, various disciplines such as services, intellectual property, investment or public procurement have been included, so that the format of the latest economic complementation agreements ends up resembling that of the Free Trade Agreements.

However, within the framework of ALADI, the signing of specific trade agreements, agricultural agreements and trade promotion agreements is also contemplated, which do not refer to tariff matters but to issues such as tax, customs, sanitary and government procurement cooperation.

Another element to be mentioned is that, within the framework of ALADI, countries that are considered less developed, such as Bolivia, Ecuador and Paraguay, have regional agreements. In these, all ALADI members grant them preferential systems and special cooperation programs.

Many other specific topics can be included in the agreements established within the framework of ALADI, such as agricultural trade, financial, scientific and technological cooperation, environmental preservation, promotion of tourism and the definition of technical standards, among others.

Scope of integration under the ALADI umbrella

The last countries to join ALADI were Cuba (1999) and Panama (2012), and the accession of Nicaragua and the Dominican Republic is in process. Finally, ALADI has links with various integration processes with third countries outside the region.

ALADI has five regional agreements and most of the agreements established between Latin American member countries are Partial Scope Agreements and not Free Trade Agreements.

The trade agreement between Colombia and Venezuela is the only specific trade agreement that has been adopted within the framework of ALADI, and it is the Mercosur countries that have signed the largest number of agreements under the institutional framework of ALADI.

The LAIA legal framework has also been used for agreements between South and Central American countries. Only Colombia, Cuba and Venezuela have used them for their relations with the Caribbean countries.

Although agreements continue to be signed within the framework of ALADI, in recent years its representatives have largely limited themselves to participating in summits such as those of Mercosur, Celac, the Hispano-American Summit and the Pacific Alliance.

The multiplicity and diversity within LAIA is an expression of the complexity of regional integration.

The treaties within the framework of ALADI differ from the rigid format that has been imposed with the free trade agreements. It is possible that, in the immediate future and with the renewed importance of regional agreements, the rise of protectionism and the search for nearby markets, ALADI will regain importance.

Especially considering that many countries want to maintain protection for strategic sectors and that manufacturing exports have traditionally been of great importance in intra-regional trade.

If there is talk of reindustrialization and value-added exports, ALADI can play an important role in the debate on regional integration.