Economic Development and Trade Across Borders: Free Trade Agreements in South America
According to the neoliberal policies of the world’s wealthier nations and global financial institutions such as the International Monetary Fund (IMF), the World Trade Organization (WTO) and the World Bank, a fundamental step toward fostering economic development in poorer countries is encouraging their participation in international trade. Through the adoption of Free Trade Agreements (FTAs), developing nations around the world have opened their markets in an effort to become more efficient, competitive, and integrated in the global economy. International boundaries are ignored to allow trade, investment, and money to flow easily, but borders remain tightly secured to prevent people and labor from crossing as freely. Yet despite the increased mobility of capital and the introduction of Multi-National Corporations (MNCs) in poorer countries, the positive results of free trade in the developing world are controversial.
The Free Trade Area of the Americas (FTAA) is an initiative that has been in negotiation between thirty-four countries since the implementation of the North American Free Trade Agreement (NAFTA) in 1994. Promoters of the FTAA seek to open the entire western hemisphere to trade and foreign investment with the establishment of the world’s largest free trade bloc. Unfortunately, like its predecessor NAFTA, the agreement largely disregards the discrepancies between the economies of the countries to which it applies, leaving little hope for an equal dispersal of free trade benefits among the different nations. Recognizing this, several Latin American nations — Argentina, Bolivia, Brazil, and Venezuela in particular — have spoken out against this model and instead are working toward improved and efficient regional integration. The Southern Cone Common Market (Mercosur), which was formally established in 1991 between Argentina, Brazil, Paraguay, and Uruguay, is an example of this type of regional accord. Although the trading zone was hit hard by Brazil’s currency devaluation in 1999 and the 2002 collapse of Argentina’s economy, Mercosur may have the capability to balance out other global economic blocs like NAFTA and the European Union, if its members continue to deepen integration through policies such as synchronizing macroeconomic policies and market regulations, adopting a common currency, reducing barriers to trade, and liberalizing migratory flows.23 In December 2004, the trade bloc signaled a shift toward increased regionalism when it entered talks with the Andean Community of Nations (CAN — comprised of Bolivia, Colombia, Ecuador, Peru, and Venezuela), culminating in a letter of intent calling for the establishment of the South American Community of Nations (CSN). CSN intends to apply the model of the European Union to their community by first lifting trade barriers throughout the continent, and proceeding to establish a common currency, passport, and parliament by the year 2019, thus opening borders in the region and establishing cohesive, universal economic development.
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23. Matias Braun, Ricardo Hausmann, and Lant Pritchett, “The Proliferation of Sovereigns: Are There Lessons for Integration?,” in Antonio Estevadeordal et al., ed., Integraing the Americas: FTAA and Beyond (Cambridge: Harvard University Press, 2004),105 and Ernesto Lopez-Cordova and Mauricio Mesquita Moreira, “Regional Integration and Productivity: The Experiences of Brazil and Mexico,” in Estevadeordal, Integrating the Americas, 599.