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  Félix Peña

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  Peace and Prosperity Through World Trade | September 2010
Reasons for an optimistic future view of trade and Latin America


The International Chamber of Commerce (ICC) was created in 1919 by business leaders who described themselves as 'merchants of peace' and whose motto was 'world peace through world trade'. Since then a number of initiatives, including the founding of the WTO in 1995, have provided the proper regulatory conditions for a dramatic increase in world trade. This has generated unprecedented growth and allowed many countries to enjoy great gains in wealth and welfare. Yet despite these gains we are still far from achieving the ICC's goal of world peace through world trade. This book provides a broad overview of the forces that shape international trade and global interdependence, showing business leaders and entrepreneurs how we can address the shortcomings of the multilateral trading system. Most importantly, it shows how we can turn international trade into one of the key global instruments to achieve peace and prosperity in the twenty-first century.

This volume was commissioned by the ICC Research Foundation to mark the ninetieth anniversary in 2009 of the founding of the ICC.

Published in the United States of America by Cambridge University Press, New York.

Information on this title:

There are several good reasons to hold an optimistic view about Latin America (LA) in world trade during the next ten years. These reasons are related to the region's learning process over the last decades, some significant cultural changes and the impact of new international realities. As a result, some LA nations are becoming more assertive, pragmatic and optimistic. This new attitude also accounts for the internationalization of many regional firms, including the growing number of small and medium enterprises (SMEs) that are integrating transnational production networks.

The trend towards improvements will continue despite occasional ups and downs. This is not to underestimate the huge and familiar challenges that remain to be overcome over the next years, including those related to the region's pattern of foreign trade.

It is precisely with those challenges in mind that it may seem convenient, before continuing, to raise a word of caution. Everyone knows that in a world of deep systemic changes, forecasting can be dangerous. Mindful of the views on LA that predominate in many quarters, it has always been safer to predict negative, if not catastrophic, scenarios. But today it appears that some factors enable one to risk a more positive forecast concerning the future contribution of the region to global trade and governance.

To begin with the bad news, let me briefly make reference to the well-known inventory of reasons to be sceptical about the future trade and investment performance of LA. The following are some of the factors, among others, that could feed into a pessimistic view: the extent of poverty and huge social inequalities; poor institutional quality and weak capacity to assure the rule of law; political instability with a continued recurrence of unsustainable populist approaches; absence of a sufficient number of firms capable of competing in fair conditions in national and global markets; low levels of innovation and investment in science and technology; and finally the potential political impact of organized crime and narcotraffic networks. These factors still prevail in many appraisals of the future of LA in world trade, even when compounded with positive structural factors such as natural resources, for example.

Let us now move to the good news, exploring the resilience of these factors. Before doing so, I must recall that they are not necessarily always valid for all LA countries. The region is sufficiently large and diverse to preclude any approach without differentiations. With this in mind, my argument is that factors which justify a more optimistic forecast about the future of LA in world trade are not necessarily evident in all of its countries. Today they are mostly visible in some key countries. And it is precisely those countries that appear to have a strong potential to spread their eventual successes to the rest of LA.

One of the most illustrative, albeit not exclusive, examples is Brazil. Deep changes are transforming the largest country in the region in what could eventually become a driving force towards a more positive future for the rest of LA in world trade. This does not imply that Brazil alone could lead the region - especially South America - to a different pattern of economic and political development. On the contrary, building a regional space that is functional to a scenario in which peace, political stability and sustainable development prevails will require cooperation between several countries, including third nations with strong interests in LA. But it does mean that the consolidation of its recent institutional and economic performance could stimulate, and also amplify, similar processes in other key countries. Working together, Brazil, Argentina, Chile and Uruguay in the south, as well as Mexico in the north, for example, now seem to be in a better condition to take on the role of a core group of rationality, democracy, economic modernization and social cohesion. In so doing, they could have a strong and positive impact on the rest of the region, including those countries which encounter greater difficulties in overcoming certain social conflicts with deep roots in their national history.

Let me now move to what I consider to be the main reasons for an optimistic view about the future of LA in world trade.

The first is that several countries of the region seem to have learned a lot from their past experiences. This learning process is more evident in a number of aspects. One is the recognition of the importance of fiscal discipline and macroeconomic'stability to assure development goals. The second is that institutional quality is now considered to be crucial for productive transformation and social cohesion. And the third is the clear understanding that, within the present international system, the destiny of every country should be shaped through the deeper and stronger participation of all society.

A second major reason to be optimistic is the existence of strong signals pointing to a cultural change taking hold in some LA countries concerning their future. These signals are related to the greater value attached to long-term goals and more pragmatic strategies. It implies owning a sense of where each country is willing to go, of what it can realistically achieve, and especially of what are the required steps to advance in the chosen direction. Here, differences among LA countries are more evident. Unresolved structural problems, including those related to the active participation of all social sectors in the nation-building process, explain some of these differences. Some countries are as yet in the transition toward more integrated societies. It is possible to observe in these cases greater political instabilities, as well as proposals for more radical economic and social policies. As a result, their future prospects could eventually become uncertain and controversial.

And finally, the third main reason is related to the impact of deep changes that are transforming the global landscape. Today, LA countries have more options in terms of foreign markets and external sources for investments and technologies. Diversification is increasing the scope of action for LA countries' external relations and for the internationalization of their firms. They also discern greater value in their potential contribution to solving some critical issues on the global agenda. Energy, food security, water and climate change are some of the central issues on which LA countries will have something (or eventually a lot) to say in the next ten years.

The fulfilment of optimistic scenarios for LA trade and development will require strengthening regional cooperation through patterns of collective leadership and a wide range of effective heterodox methodologies, including multiple speed and variable geometry agreements. Mercosur and other formal integration processes could yet play a positive role. But they will require the adaptation of their main instruments and working methodologies to the new regional and global trade and investment realities.

It will also require the drawing of multiple strategic alliances with countries from other regions with common interests, as well as the active participation of the region in future multilateral global trade negotiations. Without doubt, a strong WTO will continue in the future to be one of the key elements of LA's strategy for expanding its participation in world trade. And a stronger LA will also imply a positive contribution to a more effective and development-oriented multilateral global trade system.

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information. |

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