Economic Importance of Panama to Join the Pacific Alliance

Abstract

The Pacific Alliance is a powerful, new regional trading bloc. It is constituted by Colombia, Peru, Chile, and Mexico. Panama is applying to become the newest member. The Pacific Alliance represents more than 200 million people with a total of US$2.22 trillion GDP; their combined global trade accounts for half of the Latin American total, while the breadth of their free-trade agreements have positioned them to increase commerce with Europe, the US and specially Asia. This report is divided into four sections. The first section considers the emergence of the regional agreement and provides an overview of the analysis. The second chapter provides an economic and political analysis of Panama and discusses how it can take advantage of joining the Alliance, emphasizing the macroeconomic stability of the four countries. The third section analyses the role of the Alliance as a platform for global value chains to the Asian market. The final section debates the policy implications for Panama and its members, first its ramifications through trade agreements, the role of Asia in Latin America, and the emergence of other agreements complementary to the Alliance The study concludes that Panama should join the Pacific Alliance. Significant challenges remain, but the trade platform can benefit all of the member countries. The paper outlines a golden opportunity for Panama to achieve prosperity; it is optimistic, arguing that the benefits more than outweigh the costs.