Major trade Blocs in Latin America are explained below:
The major trade blocs (or agreements) in the region are the Union of South American Nations, composed of the integrated Mercosur and Andean Community of Nations (CAN). Minor blocs or trade agreements are the G3 Free Trade Agreement, the Dominican Republic – Central America Free Trade Agreement (DR-CAFTA) and the Caribbean Community (CARICOM).
However, major reconfigurations are taking place along opposing approaches to integration and trade; Venezuela has officially withdrawn from both the CAN and G3 and it has been formally admitted into the Mercosur (pending ratification from the Paraguayan legislature). The president elect of Ecuador has manifested his intentions of following the same path.
This bloc nominally opposes any Free Trade Agreement (FTA) with the United States, although Uruguay has manifested its intention otherwise. On the other hand, Mexico is a member of the North American Free Trade Agreement (NAFTA).
Chile has already signed an FTA with Canada, and along with Peru are the only two South American nations that have an FTA with the United States. Colombia’s government is currently awaiting its ratification by the U.S. Senate.
1. Union of South American Nations:
The Union of South American Nations is an intergovernmental union integrating two existing customs unions: Mercosur and the Andean Community of Nations, as part of a continuing process of South American integration. It is modeled on the European Union.
The Unasur Constitutive Treaty was signed on May 23, 2008, at the Third Summit of Heads of State, held in Brasilia, Brazil. According to the Constitutive Treaty, the Union’s headquarters will be located in Quito, Ecuador. The South American Parliament will be located in Cochabamba, Bolivia, while the headquarters of its bank, the Bank of the South are located in Caracas, Venezuela.
The combined population of the 12-member Union as at 1 July 2010 was estimated at 396,391,032.
On 4 May 2010, at an extraordinary heads of state summit held in Campana, 75 km (47 mi) north of Buenos Aires, former Argentine President Nestor Kirchner was unanimously elected the first Secretary- General of UNASUR for a two-year term, providing Unasur with a defined political leadership on the global stage.
This new office was conceived as a first step towards the establishment of a permanent bureaucratic body for the supranational union, eventually superseding Mercosur and CAN political bodies.
Although the Secretariat headquarters were originally planned to be located at Quito, Ecuador, it was reported that it will probably start operating at Buenos Aires, Argentina. On 1 December 2010, Uruguay became the ninth nation to ratify the UNASUR treaty, thus giving the union full legality.
As the Constitutive Treaty enters into force on 11 March 2011, Unasur will become a legal entity during a meeting of Foreign Ministers in Mitad del Mundo, Ecuador, where they will put the foundation stone for the Secretariat Headquarters.
2. Andean Community of Nations (CAN):
The Andean Community is a customs union comprising the South American countries of Bolivia, Colombia, Ecuador and Peru. The trade bloc was called the Andean Pact until 1996 and came into existence with the signing of the Cartagena Agreement in 1969. Its headquarters are located in Lima, Peru.
The Andean Community has 98 million inhabitants living in an area of 4,700,000 square kilometers, whose Gross Domestic Product amounted to US$745.3 billion in 2005, including Venezuela, (who was a member at that time).
The original Andean Pact was founded in 1969 by Bolivia, Chile, Colombia, Ecuador and Peru. In 1973, the pact gained its sixth member, Venezuela. In 1976, however, its membership was again reduced to five when Chile withdrew. Venezuela announced its withdrawal in 2006, reducing the Andean Community to four member states.
Recently, with the new cooperation agreement with Mercosur, the Andean Community gained four new associate members: Argentina, Brazil, Paraguay and Uruguay. These four Mercosur members were granted associate membership by the Andean Council of Foreign Ministers meeting in an enlarged session with the Commission (of the Andean Community) on July 7, 2005.
This move reciprocates the actions of Mercosur which granted associate membership to all the Andean Community nations by virtue of the Economic Complementarity Agreements (Free Trade agreements) signed between the CAN and individual Mercosur members.
3. G3 Free Trade Agreement:
The G-3 is a free trade agreement between Colombia, Mexico, and Venezuela that came into effect on January 1, 1995, which created an extended market of 149 million consumers with a combined GDP (Gross domestic product) of US$486.5 billion.
The agreement states a ten percent tariff reduction over ten years (starting in 1995) for the trade of goods and services among its members. The agreement is a third generation one, not limited to liberalising trade, but includes issues such as investment, services, government purchases, regulations to fight unfair competition, and intellectual property rights.
Venezuelan President Hugo Chavez announced in May 2006 that his country would withdraw from the trade bloc, due to differences with its two partners. In April, Venezuela had also announced its plans to leave the Andean Community, after Colombia and Peru reached free trade agreements with the United States and Ecuador kept in negotiations for one. Venezuela has since applied to join Mercosur.
Mexico announced that a replacement for Venezuela would be sought among interested countries, such as Panama, Ecuador and Peru.
4. Dominican Republic – Central America Free Trade Agreement:
The Dominican Republic – Central America Free Trade Agreement, commonly called DR-CAFTA, is a free trade agreement (legally a treaty under international law, but not under US law). Originally, the agreement encompassed the United States and the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, and was called CAFTA. In 2004, the Dominican Republic joined the negotiations, and the agreement was renamed DR-CAFTA.
DR-CAFTA together with the North American Free Trade Agreement (NAFTA) and active-bilateral free trade agreements, including the Canada-Costa Rica Free Trade Agreement, is seen as bloc agreements instead of a Free Trade Area of the Americas (FTAA) agreement.
Panama has completed negotiations with the US for a bilateral free trade agreement (ratification of which is pending), and Belize is a member of the Caribbean Community (CARICOM). Haiti, also a CARICOM member, was expected to be given certain additional trade preferences with the US under the Haitian Hemispheric Opportunity through Partnership Encouragement Act before Congress adjourned during 2006.
5. Caribbean Community:
The Caribbean Community (CARICOM) is an organisation of 15 Caribbean nations and dependencies. CARICOM’s main purposes are to promote economic integration and cooperation among its members, to ensure that the benefits of integration are equitably shared, and to coordinate foreign policy.
Its major activities involve coordinating economic policies and development planning; devising and instituting special projects for the less-developed countries within its jurisdiction; operating as a regional single market for many of its members (Caricom Single Market); and handling regional trade disputes. The secretariat headquarters is based in Georgetown, Guyana.
Since the establishment of the Caribbean Community (CARICOM) by the mainly English- (and English Creole-) speaking parts of the Caribbean region CARICOM has become multilingual in practice with the addition of Dutch speaking-Suriname on 4 July 1995 and Haiti, where French and Haitian Creole are spoken, on 2 July 2002.
In 2001, the heads of government signed a Revised Treaty of Chaguaramas thus clearing the way for the transformation of the idea for a Common Market aspect of CARICOM into instead a Caribbean (CARICOM) Single Market and Economy. Part of the revised treaty among member states includes the establishment and implementation of the Caribbean Court of Justice.
The Caribbean Community (CARICOM), originally the Caribbean Community and Common Market, was established by the Treaty of Chaguaramas which came into effect on 1 August 1973. The first four signatories were Barbados, Jamaica, Guyana and Trinidad and Tobago.
CARICOM superseded the 1965-1972 Caribbean Free Trade Association (CARIFTA), which had been organised to provide a continued economic linkage between the English-speaking countries of the Caribbean following the dissolution of the West Indies Federation which lasted from 3 January 1958 to 31 May 1962.
A Revised Treaty of Chaguaramas establishing the Caribbean Community including the CARICOM Single Market and Economy (CSME) was signed by the CARICOM Heads of Government of the Caribbean Community on 5 July 2001 at their Twenty-Second Meeting of the Conference in Nassau, The Bahamas.