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Peru makes a significant economic impact on the Pacific Alliance

by | Nov 23, 2023

The Peruvian Ministry of Foreign Affairs considers the challenges and opportunities of the regional integration mechanism.

In 12 years, the Pacific Alliance became the eighth world economy and the sixth exporting power. The member countries represent 42.9% of the GDP of Latin America and the Caribbean and 57.4% of trade in the region.

The Pacific Alliance meets regional challenges

This mechanism, which integrates Peru (in the Pro Tempore Presidency), Chile, Colombia, and Mexico, aims to achieve more significant development, growth, and competitiveness of these economies, thus constituting an agenda with more than 30 technical work groups in areas such as education, work, social inclusion, fishing, aquaculture, among others.

The Pacific Alliance seeks to respond to the regional agenda’s new challenges, such as environmental sustainability through the responsible management of plastics, inclusive economic development led by women, and adaptation to the technological era through the construction of a Regional Digital Market.

Pacific Alliance facing economic crises

The Vice Minister of Foreign Affairs, Ignacio Higueras Hare,  recently explained that some of the common challenges faced by the countries of the Pacific Alliance were, for example, the impact of the COVID-19 crisis, for which adopted actions aimed at promoting the reactivation of the tourism sector, strengthening the digital capabilities of teachers and promoting policies in favor of occupational mental health with support from the Pacific Alliance Cooperation Fund.

Also, given the natural disasters to which these nations are exposed, in 2018, the World Bank approved the first regional catastrophe bond for earthquake risk management, becoming the largest catastrophe bond transaction of the World Bank, with 1.36 million dollars.

Opportunities for the member countries

Because the bloc promotes conditions for more significant commercial activity through the Additional Protocol, the Alliance’s free trade agreement, a tariff reduction of 98% was achieved, being very close to consolidating a Free Trade Zone.

The signing of the Free Trade Agreement between the Pacific Alliance and Singapore must add to this. Such was the effect that Peru became the first country in the bloc to ratify the agreement.

The Pacific Alliance also encourages commercial and investment opportunities, with more than ten editions of the ‘Business Macro Roundtable’ and the ‘Investment Opportunities Forum.’

“Currently, given the need to promote economic reactivation, the Pro Tempore Presidency of Peru has the strengthening and internationalization of micro, small, and medium-sized enterprises (MSMEs) among its priorities. These companies are the main sources of employment in the country. To this end, work is being done on a public-private roadmap with the contribution of the Business Council of the Pacific Alliance and the technical assistance of the Inter-American Development Bank,” added Ignacio Higueras Hare.

Jobs for youth

Through the ‘Vacation and Work Program,’ young people from the four countries can travel to see these nations and, at the same time, obtain permits for temporary paid activities.

Likewise, to promote labor mobility in the member countries of the bloc, the Pacific Alliance, with the support of the European Union, is implementing the homologation of labor skills certifications.

Recently, at the VIII Youth Meeting of the Pacific Alliance, a job fair was held in which numerous companies from the four countries offered 4,500 direct job opportunities to young people from Peru, Chile, Colombia, and Mexico.

Peruvian exports have had great success

According to figures from the Ministry of Foreign Trade and Tourism (2023), Peruvian exports to the member countries of the Pacific Alliance increased by 13% since 2011, reaching approximately 3.9 billion dollars in 2022. This is due to the participation of more than 3,000 companies, of which more than 50% were micro, small and medium-sized enterprises ( MSMEs ).

The figures mentioned above show that the export increase in the non-mining energy sector was 48.7% since 2011. Likewise, more than 500 products have increased their exports since the beginning of the Pacific Alliance. For example, avocado and paprika have increased 11-fold.

New challenges for the Pacific Alliance

Now, the bloc has a critical challenge: to increase intra-Alliance trade, which remains between 6 and 7%. For this reason, the Strategic Vision for 2030 of the Pacific Alliance aims to double the trade between the four countries.

“To contribute to this objective, the Pro Tempore Presidency of Peru is promoting workshops for the use of the Additional Protocol, disseminating the advantages that it offers to various economic actors, as well as the possibility of modernizing the Protocol, incorporating actors such as trade, SMEs and components of productive chains,” revealed the Vice Minister of Foreign Affairs.

Considerable private investment

According to data from Proinversión (2023), an increase in private investment is reported from the launch of the Pacific Alliance to the present, highlighting the case of Chile, which registered a growth in investment in Peru of 157%, and Mexico and Colombia, whose investments in the Peruvian nation grew 27% and 20% respectively. This is based on 2011 figures in contrast to those reported in 2022.

Regarding investment items in Peru as a capital contribution, Chile concentrates higher figures in the Communications (US$ 1,613 billion) and Finance (US$ 1,061 billion) sectors; Colombia focuses on the Industrial (US$517 billion) and Energy (US$494 billion) sectors; and Mexico in Communications (US$ 407 billion).

The regional bloc is advancing in this matter through the Council of Finance Ministers of the Alliance, which brings together the ministries of Economy of the four countries and is also led by Peru. The group develops issues of financial integration, tax treatment, investment in infrastructure, and catastrophic risk management.

Tourism in the Pacific Alliance countries

Ignacio Higueras Hare also highlighted the growth of the flow of tourists to Peru from the countries of the Pacific Alliance. Currently, Chile represents the first source of tourists to Peru, Colombia the fourth, and Mexico the ninth worldwide.

Since 2011, the flow of tourists from the member countries has been increasing progressively. It has tripled in the case of Mexico and doubled in the case of Colombia from 2019 to before the COVID-19 pandemic.

“We have the important challenge of recovering the flow of tourists after the pandemic. In this framework, joint tourism promotion actions were carried out during the Pro Tempore Presidency of Peru, such as the First Sustainable Tourism Business Meeting held in a virtual format on August 9, 16, and 17. Additionally, the First Investment Attraction Seminar for Tourism was held on September 5 in Santiago de Chile, where the ‘Treasure of the World’ video was launched. In it, the Pacific Alliance countries invite international travelers to spread the tourist wealth of the four member countries,” he indicated.

Peru is a promoter of the trade union

Peru was the great promoter of the Pacific Alliance through the Lima Declaration of April 28, 2011, which gave rise to the organization. This bloc was a commitment to “open regionalism,” an integration initiative that promoted the liberalization of goods, services, capital, and people among its partners without opposing each State’s opening towards the world, thus stimulating participation in global markets.

The history of the Pacific Alliance showed a vital degree of pragmatism that allowed this integration process to advance. Thus, since its creation, it was agreed that this bloc does not have a General Secretariat but rather a Pro Tempore Presidency that is transferred among its members.

The interest created by the Pacific Alliance since its inception led many countries to apply for Alliance Observer status. To date, a total of 63 countries are observers.

Likewise, this integration bloc has attracted the interest of States that aspire to become full members. In this sense, Panama signed the Lima Declaration of 2011. It participated in various summits, as did Costa Rica, a country that signed the Paranal Declaration in 2012 and began an accession process that was paralyzed in 2014. Now that the Central American nation has resumed its interest in being part of the Pacific Alliance, the Pro Tempore Presidency of Peru will seek to bring about its integration.


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