New potential member emerges as Pacific Alliance expands

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The expansive ambitions of the Pacific Alliance — a decade-old economic bloc established by Chile, Colombia, Mexico, and Peru — could soon be bolstered further, after the government of one of Latin America’s most prosperous economies made clear its desire to join the organization, following Ecuador’s formal application earlier this year.

A photo of representatives of the Pacific Alliance and their counterparts from Singapore (source: Facebook)
Pacific Alliance & Singapore reps (source: Facebook)

Having originally been established by its founding members in 2011, the Pacific Alliance has shown increasing intent to grow in recent years, with Ecuador making a formal application to join the organization in January, after a bid to become an associate member was accepted as far back as 2019. That quickly evolved into a move for fully fledged membership following the election of Ecuador’s business-friendly President Guillermo Lasso in April 2021.

Meanwhile, following years of anticipation regarding its expansion into the Asia Pacific region, the Pacific Alliance concluded negotiations with Singapore to become a new associate member in mid-2021. That was followed by the two parties signing a free trade agreement (FTA) in January, as a precursor to Singapore’s associate member status being formally established.

Notably, Singapore is the first of four long-mooted potential associate members from the Asia Pacific region to sign an agreement, with Australia and New Zealand having opened FTA talks with the Pacific Alliance, while South Korea — which has individual FTAs in place with three of its members — is widely expected to follow suit. Canada has also opened FTA negotiations with the organization and is similarly expected to attain associate member status.

SEE ALSO: Legal requirements to register a company in Colombia

In recent years, a number of other countries from Latin America have been mentioned as potential future members of the bloc, including Honduras and Costa Rica, with the government of the latter now making clear its intentions to reactivate membership discussion which previously stalled.

Speaking on national television on June 12, Costa Rica’s foreign trade minister Manuel Tovar said the current government wishes to “correct this mistake.”

Costa Rica looks to become sixth Pacific Alliance member

With Singapore becoming an associate member of the Pacific Alliance now little more than a formality and Ecuador widely expected to become a full member in the coming months, it seems almost certain that by the end of 2022 the bloc will have grown to five full members and one associate member.

While talks between the Pacific Alliance and prospective associate members Australia, Canada, and New Zealand are likely to be ongoing for some time, it also appears probable that Costa Rica will have formally re-opened negotiations regarding full membership by the end of the year.

The recent statement from Tovar made clear the Costa Rican government’s intention to “correct” a mistake he said has dragged on for eight years, after discussions to join the Pacific Alliance begun during the 2010 to 2014 administration of Laura Chinchilla but stalled under her successor Luis Guillermo Solis.

A graph by Biz Latin Hub showing the members of the Pacific Alliance
The Pacific Alliance

One of the things that Costa Rica’s current President Rodrigo Chaves stated on the campaign trail, ahead of winning the presidency during elections held in February, was his intention to reactivate negotiations to join the Pacific Alliance.

Since assuming office in May, he has reiterated that intention, outlining how membership would generate employment and attract more investment to the Central American country.

Agriculture is expected to benefit to a significant degree, with export opportunities for the likes of dairy and pork expected to increase considerably.

Costa Rica, a prosperous and developed market

Costa Rica is one of the most politically and economically stable countries in Latin America, with a long democratic tradition and strong institutions and constitutional checks.

A photo of San Jose, the capital of Costa RIca
San Jose, the capital of Costa Rica

Since the turn of the century, GDP has grown exponentially, only registering its second annual decline in almost four decades when the COVID-19 pandemic hit in 2020.

Meanwhile, the country’s low levels of violent crime and high levels of English proficiency have also contributed to making Costa Rica a particularly attractive destination for foreign investors and visitors — with the country named the second best place in the world to retire to in the 2022 Annual Global Retirement Index.

The popularity of the country as an investment destination is made evident by the fact that prior to the COVID-19 pandemic, FDI accounted for 7.8% of GDP. While that figure fell in the face of the economic disruptions caused by the global crisis, the Costa Rican government has implemented a series of measures to encourage foreign visitors and capital back to the country. 

Those have included a move to lower investment barriers by cutting the minimum investment required for residency, the introduction of a “digital nomads visa” to attract remote workers, and efforts to develop closer economic ties with neighbouring countries.

Costa Rica’s strong growth, robust democracy, and popularity among investors have contributed to it emerging as one of the most prosperous nations in Latin America, with a gross national income (GNI) of $11,530 registered in 2020 placing it at the top end of “upper-middle income” status, based on classifications established by the World Bank.

That also places it among the four most prosperous nations in Latin America, based on GNI per capita, with Chile the only Pacific Alliance member with a higher figure. Notably, with the addition of both Ecuador and Costa Rica, the bloc would be composed of six of the top 12 most propserous countries in Latin America.

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If you found this article on the growth of the Pacific Alliance of interest, check out the rest of our coverage from the region. Or read about our team and expert authors.

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