In office only a week, the new foreign minister of Chile, Heraldo Muñoz, is already signaling the intention of the government of Socialist president Michelle Batchelet to weaken the pro-free-market Pacific Alliance in favor of its more statist competitor, Mercosur.
A move like this would seem to confirm rumors of a high-pressure campaign launched by Brazilian president Dilma Rouseff. Rouseff would rather see Chile in Mercosur, a grouping her country founded in the 1990s.
A move to align or combine the two agreements would ultimately pit the relatively economically free Pacific coast of South America against the unfree Atlantic coast. This would have serious consequences for Chile, Colombia, Mexico, and Peru, members of the Pacific Alliance that benefited from the agreement. The alliance’s market-led approach—which has focused on enhancing transparency and efficiency and in the flows of capital, goods, and ideas; maximizing investor confidence in the rule of law with the enforcement of contracts; and the protection of intellectual and real property—has contributed to combined growth rates of over 4 percent since it was first established in 2012.
A move closer to Mercosur could undermine this agenda. Mercosur remains a protectionist and ideological grouping dominated by Brazil (and somewhat by Argentina) that, as a political and economic alliance, has consistently failed to deliver any of the benefits it promised to the people of the Southern Cone when it was established (with great fanfare) in the early 1990s.
In addition, since The Heritage Foundation began tracking economic freedom 20 years ago, trade freedom in the Pacific Alliance countries has grown at a quicker pace, on average, than in the Mercosur countries. Joining Mercosur or aligning the two trade blocs would likely not be beneficial. If Chile, Mexico, Colombia, and Peru could outpace Mercosur in trade freedom before the alliance was even formed, imagine what they can do now.
This week, Heritage analysts presented the findings of the 2014 Index of Economic Freedom in Chile and drove home the point that Chile has come too far down the road of economic freedom and prosperity to turn back now. With Chile’s economy slowing as the price of copper falls, now is the time to stick to the principles of economic freedom to encourage growth, not turn away from them.