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Financial Integration in the Pacific Alliance

By Federico Mazzella ,
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The challenges ahead and an action program for the optimization of the bloc.

The report Financial Integration in the Pacific Alliance addresses the current state of affairs in the Pacific Alliance by examining the blocs history and taking a financial perspective. The report is the result of research carried out by the Inter-American Development Bank’s Integration and Trade Sector (INT) and Capital Markets and Financial Institutions Division (CMF) in collaboration with the Woodrow Wilson International Center for Scholars.

The authors point out that the PA fits into the modern vision of “open regionalism,” as it promotes trade and capital flows with other regions, particularly East Asia and the MERCOSUR, and it is still open to receiving new members.

The PA seeks to achieve free flows of goods, services, capitals, and workers (within Chile, Colombia, Mexico, and Peru, at present) and to strengthen cooperation in various areas. Since its beginnings in 2011, it has made significant headway toward these goals.

The report shows that significant financial integration already exists within the bloc and that there is a considerable degree of harmonization in relation to financial regulation, cooperation, and supervision. The bloc has also made a bold attempt to partially integrate the four countries’ stock markets to create the Latin American Integrated Market, although the actual transactions made using this mechanism are still limited.

The document concludes that the increased integration of financial markets, especially capital markets, would bring member countries potential short- and long-term benefits.

After examining the challenges ahead, the report puts forward an action program for regulators which could eventually lead to the full integration of the bloc’s capital markets through a single stock market.

Perry, Guillermo, and Auvert, Diego. 2016. Financial Integration in the Pacific Alliance. Washington: IDB.

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