Canning Papers

Central America has experienced significant transformations in the last 25 years, moving from war to peace, from dictatorship to democracy and from a state-led, agricultural-based model to a market-oriented, service-based one. Governments in the region are increasingly focused on attracting for- eign direct investment (FDI) and promoting new non-traditional agriculture and manufacturing exports.

Since late April, widespread commentary in mainstream media has alluded to the possibility that, by some measures, China may overtake the United States (US) to become the world’s largest national economy before the end of 2014. Whether or not this happens, it remains true that developments in China have considerably greater potential to affect economies in Latin America than they used to. The title of this paper, ‘China and Latin America, 2014-2016: Three Dimensions’ reflects several aspects of the relationship between the country and the region that we consider important.

Following last month’s Canning Paper, which described the rivalry and com- parative performance of Mercosur and the Pacific Alliance, this report takes a broader look at the experience of trade blocs in Latin America over the past two decades. It notes that relative to the claims for free trade the results of the process of economic integration have been disappointing, giving rise to intense dispute and rival initiatives.

This report compares and contrasts two Latin American trade blocs: the long-standing Mercosur alliance (the Southern Common Market formed by Argentina, Brazil, Uruguay and Paraguay in 1994, with Venezuela becoming a full member in 2012) and the more recently created Pacific Alliance (formed by Chile, Colombia, Mexico and Peru in June 2012).

Seven countries will hold presidential and/or general elections in Latin America in 2014: Costa Rica (general), El Salvador (presidential), Colombia (general), Panama (general), Bolivia (general), Brazil (gen- eral) and Uruguay (general).