Pacific Alliance and Finnish companies

24.04.2017

Latinalainen Amerikka

The Pacific Alliance is an economic and cooperative integration mechanism between Chile, Colombia, Mexico and Peru. Its main goal is to create a deep integration area that fosters growth, development and competitiveness for its member countries, by increasing the free movement of goods, services, capital, and people.

So far, the trade between Finland and the Pacific Alliance countries has been modest despite of the huge potential that these countries offer.

Why enter the Pacific Alliance markets?

In a global context marked by volatility, the slowing of the Chinese economy and the strong irruption of protectionism on both sides of the Atlantic, the Pacific Alliance stands as a solid block of economic integration within the Latin America region. Originally established in 2011, the Alliance is comprised by Chile, Colombia, Mexico and Peru, four of the continent’s most dynamic, open and resilient economies. Therefore, it is not surprising that the Pacific Alliance integrates two regional members of the OECD, Chile and Mexico, while Colombia and Peru are currently in the accession process.

These four countries have a combined population of 221 million and together account for almost 40% of the region’s GDP with an average growth rate of 2%. Furthermore, the Pacific Alliance as a block accounts for half of Latin America’s exports and it is the destination of 57% FDI flow to Latin America. Financial experts point at the Pacific Alliance as the eighth largest economy in the world and this is precisely the reason Finnish corporations and SMEs should shift their attention to the region.

The Pacific Alliance represents an important effort to foster and increase cooperation not only in the economic arena but specifically within it. Currently and since the entering into force of the Additional Protocol of the Framework Agreement in 2014, 92% of the commerce amongst the four countries is liberalized, giving the remaining 8% tariffs and accurate period to phase out. By 2030 all products will circulate freely between the four countries.

As an open-market region, one of our ineluctable priorities has been to expand the Pacific Alliance’s outreach to third markets, after all the Alliance is conceived as a gateway to the Asian region. Actually, the last ministerial meeting on March 14-15 in Viña del Mar (Chile) served to boost trade facilitation amongst the Asia Pacific countries like Australia, China, New Zealand, Singapore or South Korea.

Mr. Eduardo Gálvez Carvallo, Ambassador of Chile to Finland, noted that the Pacific Alliance is an appealing region because it seeks to function externally as a unified commercial entity instead of a mere agglomeration of countries. “We have launched the paperless trade or one-stop window project to facilitate business between the countries of the alliance and we have moved forward in initiatives to deepen financial integration and regulation of foreign trade in the digital economy. A key example is the integration of the four countries’ stock markets into MILA, the Integrated Latin American Market, which is now the region’s largest bourse in terms of capitalization”.

The Pacific Alliance is one of the two largest blocs in Latin America. It is opening up, engaging and building partnerships, both regional and global. During the Chilean Presidency of the Pacific Alliance and in order to facilitate trade with all South American countries with outward economies, Chile has promoted special relations with Mercosur, the bloc constituted by Argentina, Brazil and Uruguay, among others, and Finland and Finnish companies are welcome to witness the flourishing of this region and join in by doing business within the four markets.

Experiences of Finnish companies in doing business in the Pacific Alliance region

Latin America is an attractive destination for investments and exports for Finnish companies. It is a modern and organized region enabling free moment of goods, services, capital and people. The Pacific Alliance has competitive advantages in mining, forest resources, energy, agriculture, and manufacturing. These fields also match well with the Finnish offering. The Pacific Alliance countries are also interested in the Finnish education system. Changes in regulations and legal framework offer vast business opportunities, and companies are advised to follow the developments in these sectors.

Numerous visits to meet potential customers are need in order to build up a new customer relation in Latin America. It is also good to have a local representative to overcome the geographical distance and maintain frequent contact with the customers. Legal and other qualified advisers are needed to help companies to understand the local business environment and its distinctive features. Since the bureaucracy in these countries can be time-consuming, the companies should have enough resources to manage the formality in communications and take care of legal paper work. Risk management should be regarded as an investment, and should be given enough attention at every stage of the activity to minimize and to control potential risks such as contracts. As Spanish language is widely used in Latin America, companies should be prepared to learn to communicate with the local language.

When entering the Latin American markets, it is wise to concentrate on one country at the time, not on the entire continent. To start and to maintain a successful business in Latin America takes a long-term commitment and needs active efforts to gain market shares. Market research should be done properly. The offered product or service should be the right one for the customer and adopted to the chosen market. In addition, the company and its sales people should have right mind-set and good ability to adapt to a new culture. After all, Latin America does not differ too much from the other markets. Doing homework is the key to business success in every market.

Written by Mr. Eduardo Gálvez Carvallo, Ambassador of Chile to Finland, Chile’s Pro Tempore Presidency of the Pacific Alliance 2016-2017 and Ms. Anne Hatanpää, Liaison Manager of the Finland Chamber of Commerce, and the Secretary for the Finnish-Latin American Trade Association.

The Pacific Alliance seminar was co-organized by the Embassies of Chile, Mexico, Colombia and Peru, Finpro and the Finnish-Latin American Trade Association on April 19, 2017 in Helsinki.

Attached please find the presentations of the seminar.

PROGRAM Pacific Alliance Seminar

PA – A new form of integration General Framework Eduardo Gálvez Carvallo

PA – Achievements in the Field of Economic Integration Marco Antonio Loustaunau Caballero

PA – Student exchange and visa facilitation Fulvia Elvira Benavides Cotes

PA – The External Relations of the Pacific Alliance and the Role of The Observer Countries Eduardo Chavarri García