Andean integration: status and prospects

Lima, Dec. 5, 2000. Trade between the five Andean countries recovered strongly despite the political crisis that hit the region in 2000, reaching an annual growth of 27 percent –almost three times the increase in the world trade in goods.

At the same time, the Andean Community (CAN) strengthened its international projection by reaching an agreement with Mercosur to put a free trade area between the two blocks into practice as soon as possible and no later than January 2002; taking an active part in hemispheric negotiations; and establishing closer relations with China, the Russian Federation, and Southeast Asia.

The Secretary General of the Andean Community, Sebastián Alegrett, supplied this information, at his press conference today on the status of the integration process this year and the major challenges ahead for 2001.

General Secretariat estimates place intracommunity trade in December 2000 at 5 billion 21 million dollars –up heavily from the 3 billion 940 million dollars attained in 1999, when international financial crises sharply curtailed trade flows.

The growth in trade was particularly important in Ecuador, where it reached 44.7 percent, followed by Venezuela, with 29 percent and Peru, with 26.2 percent. Colombia enjoyed the heaviest trade, of 2 billion 6 million dollars, followed by Venezuela, with 1 billion 575 million dollars.

The goods exported to the Andean Community by Bolivia and Ecuador, for their part, reached the highest levels ever in the 31-year history of the integration movement, at 358 and 644 million dollars, respectively.

This sharp recovery of intracommunity exports rested, in part, on the trade in crude oil and its byproducts, which rose 69 percent, by value, over the year. Even without considering oil and related exports, however, trade between the five Andean countries will have reached 20 percent by year-end 2000, a figure whose importance cannot be denied, Alegrett emphasized.

An examination of the performance of intracommunity exports over the last decade reveals that sales have increased fourfold, rising at a rate of 14 percent, from 1 billion 329 million dollars in 1990 to over 5 billion in 2000.

If this trend holds in coming years, exports within the Community will attain a figure of 10 billion dollars by 2005.

Alegrett drew attention in this context to the agreement signed by the CAN and Mercosur during the South American Presidential Summit, to establish a free trade area by 2002. Initial negotiations will be launched for that purpose starting in the first quarter of next year.

The Secretary General recalled that the CAN had signed a tariff preference agreement with Brazil in November 1999 and expanded it in 2000. A similar accord was reached this year with Argentina.

At the same time, in March 2000 the CAN and the Northern Triangle countries (Guatemala, Honduras and El Salvador) held their first trade negotiation meeting. Talks were subsequently started with the Caribbean Community (CARICOM) to strengthen trade relations between the two regions.

The Andean Community strengthened its international projection by participating under a single spokesmanship in the creation of the Free Trade Area of the Americas (FTAA); enhancing the subregion’s coordination in the World Trade Organization (WTO); establishing mechanisms for policy consultation and cooperation, one with the People’s Republic of China and the other with the Russian Federation, which is scheduled to be signed in March 2001; and reinforcing its links with the Association of Southeast Asian Nations (ASEAN).

With its second trading partner, the European Union, it jointly undertook a series of analyses and studies for the creation of a new association that will encompass a free trade agreement and the deepening of the ongoing political dialogue and cooperation.

The Community started orchestrating its Common Foreign Policy this year with the signing, during the Presidential Summit, of the Additional Protocol on the "Andean Community Commitment to Democracy," which recognizes that fully effective democratic institutions and the state of law "are essential to political cooperation and the integration process" and provides for sanctions to be applied in the event of a disruption of the democratic order in any of the Member countries.

Furthermore, a draft of the Andean Human Rights Charter has been drawn up with the intention of making it the "political linchpin of integration policy," Alegrett pointed out.

The Secretary General underscored the legislative importance of Decision 486 on the Community’s new Industrial Property Regime, which was adopted in October 2000. This instrument establishes levels of international protection in this area that will boost innovation and investment.

The major challenges the CAN faces over the next year center on the continued execution of the 2000-2001 Plan of Action for the establishment of the Andean common Market by 2005. The timetable envisages the fulfillment of all legal requirements for the trade in goods and services, adoption of measures for the unimpeded circulation of capital and people, harmonizing of macroeconomic policies, and specific actions in the area of integration and border development.

Alegrett also dwelled on the importance of creating a free trade area between the CAN and Mercosur, a project he considered to be "the cornerstone in the construction of the common South American space and of a unique area of democracy, peace, cooperation, political dialogue, and shared economic development."

The social agenda of the Community, for its part, provides for the adoption of a plan of action aimed at coordinating efforts in the areas of education, culture, health, science and technology, and environmental development. Specific programs on socio-labor issues will also be furthered and the participation of civilian society in the integration process will be strengthened.