LATIN AMERICA, once as riddled with tariff barriers as it is with rivers, mountains and jungles, is about to claim global trade’s starring role. The race to head the World Trade Organisation (WTO) is now down to a Mexican and a Brazilian. Their candidacies highlight a schism that splits the region down the middle.
In terms of competence there is probably little to separate Herminio Blanco, the Mexican, from his Brazilian rival, Roberto Azevêdo. Mr Blanco casts himself as an outsider, who proved his credentials when he negotiated Mexico’s entry into the North American Free-Trade Agreement (NAFTA) in 1994. Mr Azevêdo has been Brazil’s ambassador to the WTO since 2008, which he says has given him a ringside seat on its problems.
Both believe that it is crucial to break an impasse on the 11-year-old Doha round of trade talks to rescue the WTO from irrelevance; neither wants to abandon Doha altogether. Yet they provide little detail on how they will achieve this outcome.
Where there are differences between them is in the way the countries sponsoring them, Brazil and Mexico, see trade liberalisation. Brazil, with a large domestic market that is enshrined in the country’s constitution as part of the national patrimony, has been a less-than-fervent advocate of free trade. Mexico has become one of the most open manufacturing economies in the world since joining NAFTA, even if it is overdependent on the United States. In some ways this divergence represents a rift that runs down the centre of Latin America, as well as through the WTO.
The protectionist wing of Latin America is on its Atlantic coast and is grouped in Mercosur, a common market founded in 1991 that comprises Argentina, Brazil, Uruguay and Venezuela (landlocked Paraguay was suspended in 2012). During the China-led commodities boom, these countries thrived. Since commodity prices have peaked, protectionism has increased. Free-trade talks with the European Union remain stalled, and Mercosur has signed only relatively undemanding deals with partners such as India, Egypt and the Palestinian Authority.
On the other shore Mexico, Chile, Peru and Colombia established the Pacific Alliance in 2012. All are starry-eyed about free trade, and the first three are part of talks to create the American-led Trans-Pacific Partnership (TPP), which could become one of the world’s biggest trading blocks (Colombia also hopes to join).
Between them they have scores of free-trade agreements with North America, the EU and Asia. Augusto de la Torre, chief Latin American economist at the World Bank, hopes that they will eventually stitch together a supply chain running from Chile up to Mexico. Such regional integration, modelled on “Factory Asia” in the Far East, has long been an unfulfilled dream in Latin America. Adding to the current optimism is the sweet smell of GDP growth. Having lagged behind their Atlantic cousins during the commodities boom, the Pacific countries are now expanding far faster.
Brazil’s interests more closely align with those of big commodities producers in the developing world, whose primary aim is greater access to the agricultural markets of the United States and the EU. Mexico, which sends almost 80% of its exports to the United States, shares America’s desire for more open goods markets and, as a member of the TPP club, is likely to consider the rules expected to come out of those negotiations to be a model for any multilateral trading system. Mr Blanco’s candidacy for the WTO job will probably be backed by the United States and Europe, which are also hoping to forge another powerful bloc: the Transatlantic Trade and Investment Partnership.
A decision on the WTO leadership is expected in May. Whoever wins, both Mr Blanco and Mr Azevêdo insist they will act independently of their governments. But their nationalities mean that the choice will inevitably send a wider signal.