The Pacific Alliance is the regional integration of four Latin American countries – Mexico, Colombia, Peru and Chile.
The Alliance was formed in 2012 as an initiative to drive further growth, development and competitiveness of member economies, and to allow for the free flow of capital, goods, people, and services amongst them.
The region has demonstrated sustained growth, with an impressive 3% real annual GDP expansion since 2004. This growth is driven by strong demographics and increasingly through demand internal to the Alliance.
The Alliance also aims to expand trade between member countries and Asia-Pacific countries.
The Pacific Alliance represents more than half of Latin America’s merchandise exports, over a third of its total Foreign Direct Investment flows and nearly half of its GDP.
The Pacific Alliance Region offers a stable legal, political and regulatory environment which exploits trade opportunities within and outside of the region as a unique investment opportunity in Latin America.
The region is burgeoning – with a total population of 230 million and a collective GDP of US $2.2 trillion, the integration of a common market within the Alliance provides for efficiencies in accessing the region’s securities exchanges.
Mexico is the largest economy in the group and is positioning itself as a competitor to China for manufacturing, with low labour costs which challenge those of China and the US. Chile and Peru have emerged from a strong reform process in the 1990s, that underpins their current strong growth trajectories. Domestic consumption, record-low unemployment and wage growth in Colombia, Peru and Chile support expectations of 3% year-on-year GDP growth in the medium term 2020-2021.
Commitment to stable legal and regulatory systems
The countries within the Pacific Alliance share a focus on strong and transparent government and openness to foreign investment. They are viewed by external commentators as having a history of relative stability and a stronger commitment to free trade and rule of law within Latin America. This is consistent with a Country Risk Score below the average of both Global Emerging Markets and Latin America, and a higher ease to do business score relative to the rest of the developing world.
Along with Brazil, these countries comprise the MSCI Latin American Index. But unalike Brazil, these countries offer diversification from Australian trading partners and exports.
As an Emerging Market investment strategy, the Pacific Alliance provides significant diversification and strong performance benefits to support its inclusion in a growth portfolio.
It also offers sector and risk diversification to Asian emerging markets.