UN agency has a planBy Peter A. Buxbaum, AJOTAt one time, it appeared as if South America was well on its way toward economic integration, a position which would benefit the region in its trade relations with the rest of the world, especially Asia Pacific. The customs union Mercosur—comprising Argentina, Brazil, Venezuela, Uruguay, and Paraguay as full members and Colombia, Bolivia, Chile, Ecuador, and Peru as associate members—was formed in 1991 and is still the third largest such organization in the world, behind the European Union and Nafta. But progress toward regional integration is moving too slow, according to one United Nations official, and might even be stalled in its tracks. While this dies not bode well for the economic future of South America, said Osvaldo Rosales, director for International Trade and Integration with the UN Economic Commission for Latin America and the Caribbean (ECLAC), there are steps which can still be taken to promote economic integration. “Considering the reality of the global economy, the integration process in Latin America and the Caribbean is getting more urgent, and we would like to see steps taken faster,” Rosales said. Whatever the difficulties with integration, the region has taken off on a growth path since the global economic crisis abated. GDP expanded by 5.9 percent in Latin America and the Caribbean in 2010, according to figures supplied by ECLAC. “The expansion in output was driven by strong domestic demand in the forms of both consumption and investment and by buoyant external demand,” said Rosales. “On the domestic demand side, private consumption was up 5.9 percent and was sustained by an upturn in employment and wages, an expansion in lending, and, in some countries, an upswing in remittances from emigrant workers.” For 2011, ECLAC projects regional GDP growth of 4.7 percent. “The slippage compared with 2010 may be attributed to the loss of momentum in the international economy and, in some cases, the gradual withdrawal of public policy stimulus implemented to deal with the fallout from the crisis,” said Rosales. “For 2012, regional growth is projected at 4.1 percent.” Patterns of trade between the United States and the Latin America-Caribbean region is reflective of the integration problems Rosales referenced. A push toward a Free Trade Agreement of the Americas (FTAA) by the Bush administration some years ago fell through, largely due to opposition from within Mercosur. “The United States has not had a comprehensive trade strategy towards the region since the abandonment of the FTAA project,” said Rosales. “It opted instead for a policy of bilateral FTA negotiations with particular countries.” The approach presents a major problem for South America, according to Rosales. “Trade agreements between the United States and Latin American and Caribbean countries remain of the hub-and-spokes type, with the United States as the hub and the Latin American and Caribbean partners as the spokes,” he explained. “This means that the benefits of connecting the several FTAs are not exploited.” Rosales calculates that the current climate in South America is not conducive to bringing the ambitious trade convergence initiatives that were launched in the mid-2000s to fruition. “This limits the scope for progress towards a larger integrated economic area, even though this would promote the further development of intraregional trade, with all the associated benefits,” he said. Those benefits would include integration of production among regional members and a reduction in the transaction costs associated with trade between those countries, according to Rosales. “It would foster productive integration and economies of scale enhance the region’s attractiveness internationally,” he said. To help advance the integration process of Latin America, ECLAC has presented a proposal advocating the advancement of trade convergence and other issues including infrastructure, logistics, transportation, innovation and education.