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  Félix Peña

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Institutional building blocks of a region that faces its challenges?

by Félix Peña
September 2011

English translation: Isabel Romero Carranza


Adapting its regional institutions to the context of the new world reality and its challenges has become a priority for the South American countries and for its Latin American partners. Within this perspective, the role of the existing regional institutions, of which Argentina and its South American partners are members, should be questioned, especially their ability to work in an articulated manner in the area of diagnostics and concrete proposals for action.

There are three existing regional institutions that can be mentioned on this respect. Though not the only ones they are those that, due to their scope of action, have the greatest potential for working in an articulated manner. We are referring to the ALADI, UNASUR and Mercosur. These are regional institutions with different aims, functions, geographical scope and histories but which are complementary and may potentially benefit each other. Some recent events seem to signal the beginning a new era for them.

The political will to coordinate the strategies of the countries of the region in order to navigate the new world reality, face its challenges and take advantage of its opportunities, can be perceived. Those three institutions have a key role to play on this regard. An articulation of their activities that takes advantage of the recent appointment of head officers with vast political experiences may help maximize the services that they can provide to its member countries.

External circumstances that demand a clear need for joint action among countries of the region; existing regional institutions that may be put to good use; vastly experienced political personalities in charge of them; diagnostic reports prepared by prestigious institutions: everything indicates that the necessary elements for effective action have been put into place.

These are times of strong international challenges that need to be assessed and confronted. Within this perspective, the role of the existing regional institutions, of which Argentina and its South American partners are members, should be questioned, particularly if they are able to work in an articulated manner in the area of diagnostics and concrete proposals for action. That is, if they can become the building blocks of the joint institutional effort aimed at finding effective answers to the challenges currently being faced, effective because of their results and for contemplating the different national interests at stake. It would indeed require that each one of the member countries develops its own strategies for facing the new global and regional realities. Without them, whatever is attempted at the level of regional coordination might lack the adequate support.

Adapting the regional institutions to the new world reality and its challenges is thus a priority for South American countries and for its Latin American partners. This was made manifest by the recent UNASUR meetings held in Buenos Aires, first by the Ministers of Economy and Finance and the Presidents of the Central Banks and later by the Ministers of Foreign Affairs.

On this regard, three existing regional institutions deserve our attention. Although not the only ones, due to their scope of action they have the greatest potential for working in an articulated manner. We are referring to the ALADI (Latin American Integration Association - LAIA), UNASUR (Union of South American Nations) and Mercosur (Southern Common Market). Argentina has a relevant influence in all of them. Within their own scope of action, other institutions such as CEPAL (Economic Commission for Latin America and the Caribbean - ECLAC), the CAF (Andean Development Corporation) and the Andean Community of Nations -which is currently facing some difficulties - could also play a relevant role. In fact the two former institutions are proving this point.

In order to attempt to provide answers to the question that was raised previously, we could start by acknowledging the fact that the world context in which Argentina and the rest of the countries of the region are inserted is undergoing structural changes. As we have pointed out in previous opportunities, these changes are the result of a set of complex events which, if considered individually, may not fully account for the new realities that are now becoming so evident. For example, if we were to try to grasp them only through the perspective of the financial crisis that has shaken the world in recent years. In this sense, any attempt at deciphering the current reality that sets aside the logic of power relations, either at a global, regional or local scale, will most certainly lead to a misinterpretation of what is essential in many of the relevant events that fill the daily news pages.

These changes we are referring to will probably require time to mature and bring about their full effects. They will not show themselves in a straightforward course. Even when it would seem fateful to mention it, in the course of history -always a great teacher-, radical transformations and wars have frequently been closely linked. In any case, the scope and extent of their impact on the social and economic development of the countries of the "neighborhood" in which we live -South America in particular but Latin America as well- are still hard to fathom in all their extent.

They are becoming manifest in regards to the two simultaneous processes that are becoming increasingly obvious at a global scale. In their interaction, both have current and potential effects on the worldwide exchange of goods and services. They also have an impact on international trade negotiations -especially in the anemic Doha Round of the WTO- and in those related with climate change, as well as in many other relevant issues of the global agenda. Even when they are interconnected, these are processes that require diagnostics and approaches that are differentiated and coordinated at the same time.

One of such processes is that of the current financial and economic crisis and its well known consequences in, among others, production and consumption and in the international trade of goods and services. In the last three years the crisis has impacted the employment levels and the morale of people, relaying in some countries its effects onto the social and political. It is a known fact that, depending on the intensity of such effects, an international crisis can give rise to systemic problems that may affect the political stability of the most vulnerable countries.

This, in turn, may produce a chain reaction in other countries, especially those belonging to the same region. It is a process with very visible immediate outcomes and that poses a strong demand for answers in the short term - particularly at the national level, but also in the coordination between countries at a global and regional level- precisely due to its potential for social and political consequences.

The other process is that of the shifting of relative power between nations. It is deeply rooted in history. It is a phenomenon that has accelerated in the last twenty years. It is reflected by the emergence of new protagonists -countries, companies, consumers, workers- with an influence on global economic competition and also in international trade negotiations. However, its full effects, even in the case of international security, will probably become evident in the long term, at times through barely perceptible movements, almost as if in slow motion.

We are thus in the presence of a global systemic crisis that recreates the historical dialectic tension between order and anarchy in international relations. It is made manifest by the inability of the institutions belonging to the collapsing order to find efficient answers to the collective issues being faced at a global scale. The true danger is that this gives rise -as has happened in the past- to systemic problems within those countries that have been and still are relevant actors in the international scenario. These systemic crises can produce a domino effect in the different regional spaces and, eventually, at a global scale. This might happen in the measure that the citizens of the different countries, including the most developed ones, lose trust not only in the markets but also in the ability to find solutions within the framework of their democratic systems and thus become "outraged". It is a more tangible risk in the case of some European countries. If this were the case, the bleak forecasts of some analysts could pale in comparison to what might be confronted in the future.

Within this world context, developing a climate of mutual trust between the countries of the region and, at the same time, promoting a renewed regional integration, especially one that enables to connect the economic systems and encourage the proliferation of transnational production chains, would seem to be two priority courses of action that the current circumstances impose upon Latin America and, in particular, the South American space. Both courses of action are interrelated: one feeds the other generating a virtuous cycle between mutual trust and the density of the network of cross interests of all kinds.

Such circumstances are the result of the effects of the global financial and economic crisis on the region. However they are mostly the outcome of the deep transformations that are taking place in the distribution of world power, with their impact on global economic competition and on international trade negotiations. They imply structural transformations that are gradually generating a wide array of opportunities for each one of the countries of the region, whatever their economic dimension or relative power - both in terms of foreign trade as well as technical know-how and productive investment flows-. At the same time, they can generate different perspectives on how to profit from them and even with regards to the prevailing interpretations on their real scope and impacts. From there the importance of the climate of mutual trust among the countries of the region.

But if mutual trust is a necessary condition for regional governance, there seems to be a consensus in that it is not enough to achieve the rule of peace, democracy and political stability in the South American geographic space.

This is the reason why a necessary second course of action would be to encourage a renewed regional cooperation. This makes sense not only politically but economically as well. If it is addressed with pragmatism it can result in a denser network of multiple cross-interests that can support, at the same time, the climate of mutual trust. Such network has among its key players the companies that internationalize operations at a transnational scale -especially by articulating productive chains- and which contribute to the physical connectedness of the corresponding markets. However, it is also sustained by networks in the most diverse fields, such as energy, innovation, technology development, education and social solidarity. Much can be learned from Asia on this regard. The webpage of the Asian Development Bank (, as well as that of its Institute ( and its Center specializing in regional integration ( provide access to relevant information on this regard.

In several of its most recent reports, ECLAC has insisted on the idea that the driving force behind the construction of a renewed regional cooperation involves building on what has already been achieved and benefiting from what is available in terms of regional agreements and mechanisms. Under the current situation more than overly ambitious and difficult to reach goals, reality imposes the need to acknowledge differences and diversities, even conceptual ones -using for such end a wide array of approaches of variable geometry and multiple speeds-; of capitalizing on experiences and assets provided by fifty years of regional integration experiences -at times frustrating-, and of placing the stress on certain priority issues related to physical and economic connectedness, with solidarity in every aspect, and with granting preferential economic treatment compatible with the commitments undertaken within the WTO. Concretely, the new world context will demand a greater regional cooperation, both to control the eventual effects of the financial and economic crisis and to develop an assertive strategy for the insertion in world markets of all that the countries have to offer in terms of competitive goods and services with the greatest added value.

It is within this perspective that the articulation between ALADI, UNASUR and Mercosur becomes so important. Even when they have different goals, functions, geographical scope and even histories, these are complementary regional institutions that may potentially benefit each other.

ALADI is the oldest one. It originated from a transformation of the ALALC (Latin American Free Trade Association -LAFTA), created in 1960. At that time, the government of President Arturo Frondizi had a key role in its conception. It reflected a clear vision of the role of the region in the development of Argentina. Both in the ALALC and now in the ALADI the emphasis is placed on intra-regional trade with all its ramifications and implications, even the political ones.

Among other relevant functions, ALADI enables to include trade preferences between members without being necessary to extend them to third countries within the frame of the obligations entered into in what is now the WTO-GATT.

However, it always sought more ambitious goals to encourage regional integration. It is a noteworthy fact that it includes Mexico and Cuba among its members.

UNASUR is the most recent creation. Its goals are wide-ranging and are not limited to the economic but delve deep into the governance requirements for peace and political stability of the geographic space. It is an organization currently under construction and development.

At the same time Mercosur had, since it origins, an economic purport that acquires its full meaning within the framework of wider social and political objectives, deeply rooted in the bilateral strategic relation crafted since the 80s between Argentina and Brazil. Aside from this, it was conceived with a potential South American scope in mind and as a comprehensive part of ALADI's institutional framework.

Some recent developments seem to reflect the intention of beginning a new era in these three regional institutions. The first of these events is the creation of UNASUR's South American Economy and Finance Council. It first met last August in Buenos Aires (see the full text of the final declaration by the Ministers of Economy and Finance and by the Presidents of the Central Banks on issue number 67 of Veintitres Internacional magazine), and it was then agreed -among other things- that the current international scenario, characterized by the crisis of the main developed countries, would be tackled in a coordinated and joint manner. A few days later, UNASUR Ministers of Foreign Affairs, also gathered in Buenos Aires, endorsed the idea of encouraging the use of local currencies in intraregional trade and of reviewing the Agreement on Reciprocal Payments and Credits that exists within the framework of ALADI. The second relevant event is the political decision to designate, at the top of each one of the institutions, personalities with vast experience in the public office of their own countries. In UNASUR, María Emma Mejía, former Chancellor of Colombia, was designated as Secretary General. In Mercosur, Ambassador Samuel Pinheiro Guimarães, former Vice-chancellor and Secretary of Strategic Planning during Lula's Presidency, was appointed High Representative-General. In ALADI, Carlos Chacho Álvarez, once Vice-President of Argentina and who performed duties as President of Mercosur's Permanent Representatives Committee, was elected as Secretary General.

There seems to be thus a political will to coordinate the strategies of the countries of the region in order to sail across the new world reality while facing its challenges and profiting from its opportunities. The three institutions mentioned above have a key role to play on this respect. ALADI's new Secretary General raised this issue at the beginning of his mandate and referred to the need of articulating the organization's activities with those of other regional institutions.

An articulation of the functions that will be carried out by the three high officers mentioned above would enable to improve the services that these institutions can provide to their member countries. There are issues that are present in the agendas of the three institutions such as, among others: trade facilitation, physical and economic connectivity, use of local currencies in reciprocal trade and payment mechanisms, productive articulation with a strong participation of SMEs, economic asymmetries, coordination of interregional negotiation strategies, and definition of a new architecture of the global economic and financial system.

At the same time, ECLAC has just finished a diagnostic report on the impact of the international reality on Latin American countries, including an agenda of issues that require concerted action (see the reference to this document in the Recommended Reading Section at the end of this Newsletter). Some roadmaps may be extracted from this analysis to guide the concerted actions required to face the current economic and financial crisis and, in general, the new realities of world economic competition. These are actions that fall within the domain and possible agendas of the three institutions referred to above.

In conclusion: external circumstances that pose a clear need for concerted action among countries of the region; existing regional institutions that may be put to good use; vastly experienced political personalities in charge of them; diagnostic reports prepared by prestigious institutions. So, all indicates that the necessary elements have been gathered together in order to encourage an effective coordination of all regional efforts.

Recommended Reading:

  • Archivos del Presente, "Revista Latinoamericana de Temas Internacionales", Año 15, Número 55, Buenos Aires 2011.
  • Baldwin, Richard, "Sequencing Regionalism: Theory, European Practice, and Lessons for Asia", Asia Development Bank, ADB Working Paper Series on Regional Economic Integration, N° 80, May 2011, en
  • Bhattacharyay, Biswa Nath, "Institutions for Asian Connectivity", Asian Development Bank Institute, ADBI Working Paper Series, N° 220, June 2010, en
  • Blainey, Geoffrey, "Uma Breve História do Mundo", Editora Fundamento Internacional, São Paulo 2011.
  • Bland, J.O.P., "Li Hung-Chang", Henry Holt and Company, New York 1917.
  • Boorman, Scott A., "The protracted game. A wei-ch'I interpretation of maoist revolutionary strategy", Oxford University Press, London-Oxford-New York 1971.
  • Capannelli, Giovanni, "Institutions for Economic and Financial Integration in Asia: Trends and Prospects", Asian Development Bank Institute (ADBInstitute), ADBI Working Paper Series, N° 308, September 2011, en
  • CEPAL, "Panorama de la Inserción Internacional de América Latina y el Caribe, 2010-2011", Santiago de Chile, Agosto 2011, en
  • Chellaney, Brahma, "Water. Asia's New Battleground", Georgetown University Press, Washington D.C. 2011.
  • Dromi, Roberto, "Políticas para Gobernar. Programa Argentina 2011-2016", Ciudad Argentina-Hispania Libros, Buenos Aires-Madrid-México 2011.
  • Friedberg, Aaron L., "The Weary Titan. Britain and the Experience of Relative Decline, 1895-1905", Princeton University Press, Princeton-Oxford 1989.
  • Friedberg, Aaron L., "A Contest for Supremacy. China, America, and the Struggle for Mastery in Asia", W.W. Norton & Company, New York-London, 2011.
  • Gelmetti, Carlos J., "PYMES Globales. Estrategias y prácticas para la internacionalización de empresas Pymes", Edición actualizada, Ugerman Editor, Buenos Aires 2011.
  • Grupo de Estudios Internacionales Contemporáneos, "Revista de Economía y Comercio Internacional", Año I, Número 01, Córdoba, Marzo 2011.
  • Haggard, Stephan, "The Organizational Architecture of the Asia-Pacific: Insights from the New Institutionalism", Asian Development Bank, ADB Working Paper Series on Regional Economic Integration, N° 71, January 2011, en
  • Henning, C. Randall, "Economic Crises and Institutions for Regional Economic Cooperation", Asian Development Bank, ADB Working Paper Series on Regional Economic Integration, N° 81, June 2011, en
  • Iglesias, Fernando, "La modernidad global. Una revolución copernicana en los asuntos humanos", Sudamericana, Buenos Aires 2011.
  • Information Office of the State Council, China's Cabinet, "White Paper on China's Peaceful Development", September 2011, Beijing, en
  • Instituto de Relaciones Internacionales - IRI, "Revista de Relaciones Internacionales", Año 20, Número 40, La Plata, Mayo 2011.
  • Khadagiala, Gilbert M., "Institution Building for African Regionalism", Asian Development Bank, ADB Working Paper Series on Regional Economic Integration, N° 85, August 2011, en
  • Lamy, Pascal, "The Future of the Multilateral Trading System", Speech to CUTS in Delhi on 6 September 2011, en
  • Lehmann, Jean-Pierre, "End the Charade in Talks on Global Trade", Financial Times, 24 August, 2011, en
  • Mansour Kadah, Mohamed, "Trans-governmental networks: less than convincing vision of new world order", Portuguese Institute of International Relations and Security, IPRIS Occasional Paper, Lisboa August 2011, en
  • Mearsheimer, John J., "The Tragedy of Great Power Politics", W.W. Norton & Company, New York-London 2001.
  • Opertti Badán, Didier, "Globalización y Derecho Internacional. Reflexiones", Consejo Uruguayo de Relaciones Internacionales, Análisis del CURI N° 03/11, Montevideo 29 de agosto de 2011, en
  • Rachman, Gideon, "Zero-Sum Future. American Power in an Age of Anxiety", Simon & Schuster, New York-London-Toronto-Sidney 2011.
  • Wenqian, Gao, "Zhou Enlai. The Last Perfect Revolutionary. A Bibliography", BBS Public Affairs, New York 2007.
  • Wignaraja, Ganeshan, "The Peoples Republic of China and India: Commercial Policies in the Giants", Asian Development Bank, ADB Working Paper Series on Regional Economic Integration, N° 83, June 2011, en

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information. |

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