Latin American Domestic Politics Could Hamper TPP

Latin American Domestic Politics Could Hamper TPP

While various Latin American nations have expressed support for the Trans-Pacific Partnership (TPP), internal political turmoil and scandals in various nations threaten to undermine trans-regional efforts at trade liberalization.

Much of the discussion around the TPP has focused on the two largest players in the negotiations: Japan and the United States. However, the political environment in several other TPP countries have become increasingly complicated by what is expected to be the most comprehensive free trade agreement in history, as well as one that will cover 40% of global trade.

The Latin American countries in the TPP negotiations – Mexico, Peru, and Chile – share several similarities that encourage the development of trade agreements, but also share similar political barriers that could make final ratification difficult.

In economic terms, all three Latin American TPP countries would benefit from increased trade in the Pacific Rim. Peru and Chile are major commodities exporters (particularly in copper), and increased access to high growth and industrializing TPP countries, like Vietnam and Malaysia, will provide job and growth potential to the two countries. Mexico, with a slightly more diversified economy (in part due to its closer integration with the U.S. market), will benefit from increased telecom and computer technologies exports to both the developed and developing countries in the TPP.

Regional leaders largely favour trade liberalization

Politically, all three countries are led by centre-left presidents and mostly centre-left congresses (Michelle Bachelet in Chile, Ollanda Humala in Peru, and Enrique Peña Nieto in Mexico), though this masks more complex realities.

President Bachelet and several of the centrist and centre-left political parties in her coalition have generally supported trade liberalization with caveats (and not to the same extent her predecessor did), in contrast to strong protectionist resistance from leftist political parties in other major South American economies to relaxing trade barriers (particularly Brazil and Argentina). Despite current apprehension in Chile over the TPP, the President is a largely pro-trade executive: in Bachelet’s first term from 2006-2010, her administration oversaw 9 Chilean free trade agreements, and was an early supporter of the TPP in its initial stage, the P4 (Chile, Singapore, Brunei, and New Zealand).

President Peña Nieto has pursued a number of liberalizing reforms since his inauguration as Mexico’s president in 2012, notably in the oil and telecom markets. He has received significant support for both endeavours from both the PAN and PRI, and he will likely need another strong cross-party coalition to ratify the TPP. It is worth noting, however, that the Mexican government has historically proven slightly more resistant to pursuing free trade partnerships than its economically smaller Latin American neighbours.

Peru’s President Humala had been relatively reluctant to endorse trade liberalization policies that are opposed by environmental and indigenous rights groups, and his own administration has only strongly pursued FTAs with two relatively small economies: Guatemala and Honduras. In addition, President Humala’s trade and industry minister, Magali Silva, noted a series of red lines that Peru would refuse to cross, including extending IP and access to medicine rights beyond the US-DR-CAFTA free trade agreement. This record stands in stark contrast to Humala’s predecessor, Alan Garcia, who signed Peruvian free trade agreements with the United States, Mexico, Japan, South Korea, China, the EFTA, and Canada, in addition to others.

Local scandals and political turmoil threaten trans-regional agreement

Although the executives in Chile and Mexico appear more eager to conclude the TPP than Peru, both President Peña Nieto and Bachelet have undergone significant scandals in the last few months that have decreased their popularity and sapped political capital.

President Peña Nieto’s reaction to the killing of 43 students in Iguala was perceived as ineffective by much of the populace, and President Bachelet has undergone a drop in her popularity with allegations that her son and daughter-in-law may have engaged in influence peddling in exchange for real estate preferences.

Although President Humala has not undergone the same sort of trials as his Mexican and Chilean counterparts, his handling of Congressional relations (the current prime minister is the 7th in the Humala administration since 2011) has undergone significant scrutiny.

In addition, presidential elections next year in Peru could also complicate matters as presidential candidates are pressured to take positions on the TPP without alienating key constituencies (a parallel challenge currently faced by US Democratic presidential front-runner Hillary Clinton).

The largest hurdles that appear to remain in TPP negotiations centre on market access in Japan and the United States (and to a lesser extent Canada and New Zealand), as well as intellectual property disputes on everything from content publication to pharmaceutical access.

The resolution of these areas, while promising to reach a final conclusion of the 12-nation agreement, does not remove the fact that ratification of a massive FTA in 12 countries’ parliaments could represent a monumental challenge (even without accounting for the frayed politics of trade policy in the United States).

The three Latin American countries in the TPP negotiations are likely to benefit from increased trade and market access, but the political environments in Peru, Chile, and Mexico should not be disregarded.

Categories: Economics, Latin America

About Author

Brian Daigle

Brian is an energy and Latin America researcher at a political consulting firm in Washington, D.C. He is a London School of Economics (LSE) graduate in political science and political economy, where he focused on trade and transatlantic relations. Brian received his dual BA in political science and history at the University of California-San Diego.