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FINAL RESEARCH

“ ECONOMIC INTEGRATION FOR ECUADOR AND ITS JOIN IN THE

PACIFIC ALLIANCE”

BY: ESTEFANY VILLARREAL MORENO

INTERNATIONAL ORGANIZATION

DOUGLAS GELFELD, PH.D.

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Index
1. Introduction...............................................................................................................................3
2. Theoretical Framework..............................................................................................................4
3. Ecuador in the Pacific Alliance and the first intentions..............................................................5
4. The general context in Ecuador and the last crisis of October...................................................7
5. What is the Pacific Alliance?.....................................................................................................11
6. The benefits of joining the Pacific Alliance...............................................................................12
7. Conclusion................................................................................................................................15
8. Bibliography.............................................................................................................................17

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1. Introduction

“The establishment of free trade agreements can be a critical and progressive step towards

greater economic integration, and continues to become more valuable in an increasingly

global world.”

-Dan Kildee-

Economic Integration describes a process whereby countries create a link around

their economic policies. As the degree of economic integration increases, the trade barriers

decrease, and fiscal and monetary policies get similar between the states that are part of this

treaties. We are conscious that nowadays we are part of a globalized world and economy is

one of the most important things that are taken in account in this process of globalization.

That is why for this research we will discuss about Ecuador and its commercial opening to

the international market, because it is a willingness of the Ecuadorians to create change and

progress but that means risks. In this case, we have decided to take in account a specific

case that is the Pacific Alliance. Despite the understandable differences and reservations

about the Pacific Alliance, it is a good idea to Ecuador to join in to get into an economic

integration, because of many of the benefits that it can give to the Ecuadorian economy. In

this essay, we will have a first argument around the economic integration its importance

and how it is related with globalization. Secondly, we will see the first stance that Ecuador

has about being a member of this alliance. Then we will review the political, economic and

social context that Ecuador has been part in the last months, because it is important to give

a context about the general situation in the country and to define certain important aspects

about how Ecuador is. Then we will find a general description of the alliance and the

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principal aims of this economic process. We will also have to see the benefits that Ecuador

can get joining this alliance and finally conclude with the most important aspects along this

research.

2. Theoretical Framework
Economic integration is part of a process assimilated like overriding to the

internationalization of the economy. So, when we talk about integration, we are looking for

a country with really low barriers, with great statistics to make businesses and with indexes

that demonstrates how free people is in that country, principally the control that the

government has over the individuals at the time of trading and making businesses. Under

this concept we also refer to the low costs that states that are part of this integration can

have, especially in transportation and raw material, but also in final products. This

worldwide coordination contributes of a general order to the world that by the years could

be a tool to create calm and peace in the world. “As long as, it is harmonized under the

same monetary and fiscal policies and the principal advantages are related with

employment, trade benefits and political cooperation and coordination.” (Investopedia)

We are part of an era where the world is global and interdependent, that it so

globalization has directly affected the economy, but not politics. The definition of

globalization is represented by the integration of national economies into a global economic

system that is created under a frame of liberalization of capital flows, trade flows and an

increased share of information and general advances that leave nations create progress and

development. (Dorton & Blink) Now we see how State-nations became economic blocks,

as a product of globalization, that compete as a block and not alone, that create an effective

production and that share abilities to improve their incomes. We have a variety of industries

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in different countries and that multinational corporations contributes to the expansion of the

economy of the country where it comes and at the same time to the economy of the country

where it goes, and that is a characteristic of a globalized world. Trade and production are a

group of strategic alliances that makes possible that our lives are the reality that we have

nowadays, due to global factories that need from the goods in other countries to finally

produce one product that satisfies our necessities. So, globalization and economic

integration are linked because they are synonyms of cooperation, a play of sum – sum,

where globalization influence the connection between the states of the world and conducts

a globalized and integrated world.

3. Ecuador in the Pacific Alliance and the first intentions

Ecuador has already manifested the first intentions to be part of the Pacific

Alliance. “During different meetings Ecuador has affirmed that to join this alliance and in

general regional integration is seen as a fundamental action to generate opportunities and

growth.” (Ecuavisa) Efforts to increase cooperation between states is something supported

by the Ecuadorian government. Nowadays the countries that are more integrated and more

opened are the countries that have a great growing. The presidents of Peru, Mexico,

Colombia and Chile welcomed to Ecuador as a new candidate to associated state of the

Pacific Alliance, so far it represents inversion and economic expansion. But, is the Pacific

Alliance a necessary market for Ecuador? In the efforts that the actual government is

making to change the negative effects that the last ten years 1 had over the Ecuadorian

context there is also an important affair to talk about, and it is the commercial opening.

Essential. We can say that the most important measures are to protect the national industry,

1
When we talk about the last ten years, we are referring to the socialism that was implemented in Ecuador
under the government of Rafael Correa Delgado.

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but the road is clear for Ecuador, because we are part of a region in which closing our

frontiers and not having bilateral relations is not anymore part of the reality. The change in

the foreign policy has already give results to Ecuador, under the declaration made by the

member states of the Pacific Alliance in which they were totally opening the doors to

Ecuador.

During 2018, the country joined in the Pacific Alliance as an observative member.

And for 2019 Ecuador became an associated member. “For the government of everyone,

strengthen and expanding the international relations that already exist is part of an

opportunity to create employment, generate richness and welfare for the Ecuadorians.”

(Presidencia de la República del Ecuador) This alliance 2 was not created to only negotiate

between the members, its existence comes under a frame of a globalized world in which

economic blocks can make front to divergency with a stronger union. The Pacific Alliance

was merely created to negotiate with Asia and expand markets around the world, because is

different to trade from Ecuador to Asia than from the economic block to Asia. These were

the declarations of Rodrigo Gomez de la Torre, the President of the Agricultural Chamber

in Ecuador. This is not only an economic alliance, or even a commercial alliance it is also

considered as a geopolitical treaty, in the end it provides of force to Ecuador and if it is not

now when it will be the time to compete and grow.

2
Pacific Alliance

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4. The general context in Ecuador and the last crisis of

October
Ecuador has been part of a social, political and economic crisis during October.

The principal reason of this conflict is the end of 40 years of financial aid to maintain low

prices in gasoline. (Barría)3 The government declared the exception status in all the country

because of the manifestations in the street. Citizens believe that prices will increase and that

the measures will not benefit the economy. So, different Ecuadorian groups have suggested

to rethink the economic measures with the principal objective of going out from the crisis,

because it is impossible to continue with that low percentages of growth. “The Ecuadorian

economy is making front to certain troubles, that by consequence have contracted more

external debt, because of a growth of 0.3% during the second semester 2019.” (El

Universo) According to an analysis made by the IMF the Ecuadorian economy has not

suffered at all because of the dollarization that has provided of that “stability”. The policies

applied to the Ecuadorian economy did not have any coherence with the monetary system,

because the state increased the wages over the normal limit of productive growth and that

produced a lost of competitiveness. “The public debt has been duplicated in the last five

years and the international reserves had decreased to a smaller limit.” (IMF) All this

conflicts that we created because of economic reforms are necessary to get in the Pacific

Alliance, because the policies in Ecuador must be changed in order to be aligned to the

block and give a positive impact in the country. Sadly, the different solutions proposed by

the government do not satisfy the expectative of the political parties and a diversity of

social groups.

3
BBC mundo

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Additionally, let’s not leave by side the economic reality in Ecuador, we must pay

attention to diverse aspects that are really important. Firstly, the claimed productive matrix

that “is the interaction of different actors of the society (public or private) for using the

resources that are available or develop the ones that do not exist to generate productive

processes of goods, services and knowledge that in the future can bring growth and

development of the community involved.” (Taladrid) In the national context according to

the economic plans of the government of Rafael Correa one of the most important aims was

to change the productive matrix. A clear prove of it is a graphical comparison of the

Ecuadorian productive matrix that you can see below:4

4
Link for find out graphics of productive matrix: http://atlas.cid.harvard.edu/

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In general, the first graphic is about the exports on 1980 (yes more than 38 years

ago) and the second one is the exports of 2017. The question is, do you really think that

there have been significant changes in the productive matrix? Not so. A significant change

“The 19% of the exports in Ecuador go directly to the

member states of the Pacific Alliance”

(Cámara de Comercio de Guayaquil)

in the productive matrix will mean to introduce new products not to only improve or reduce

the level of production in certain goods and services. We have to be serious with the

productive matrix because we are talking about production, exports, GDP, development and

growth at the same time. We have to ask to the people that were in favour of the famous

“Revolución Ciudadana”5 if is really true the offer of changing the productive matrix.

Because, what their economic plan say is that they proposed a change in the productive

matrix under four axes that only talk about the strengthens of the industries, adding new

technologies and actual knowledge to the productive processes and substitution of prime

raw in the pharmaceutical and the technological industry, when that is not a strength in

Ecuador.6 While a true change in the productive matrix is more than a variation in

percentages.

Now, what about of the commercial policies. We do not have to go so far to make

a comparison of the reality of competitiveness that Ecuador has. The commercial policies

made by Ecuador are regulated by an Organic Code that is focused on the production,

5
Revolución Ciudadana is the name of the government of Rafael Correa during 10 years in Ecuador.
6
Economía en Bicicleta: http://economiaenbicicleta.com/cambio-de-la-matriz-productiva/

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commerce and investments. “The principal objective that this Organic Code has is regulate

the productive process, the distribution, the exchange, commerce, consume and

externalities that are guided by the ideal of the Good Living.” (Alvarado) So, what it looks

for is to increase the non- petroleum exports and to attract the international investments.

Although these objectives have not been achieved, because the most important percentage

of the productive matrix is concentrated in the petroleum and manufactures have not had

any luck because the impact that they have is only formed by the 13.8% of the total exports.
7

About treaties and free markets, we can see how Ecuador is not linked with

countries like Bahamas, Libya, Yemen, Argelia, Bosnia-Herzegovina, Lebanon, Iran,

Montenegro and Byelorussia. Furthermore, these are not countries that can be seen as

representatives for Ecuador, but the CMO has already suggested to negotiate new accords

with the European Union and the United States of America, because they are the most

important commerce allies. (CMO)

The risk country is an index used by a great amount of companies and

businessman to decide which is the future of the business in the world. It is also an image

of the economical system in the country and demonstrates how reliable can be to invest

there. In comparison with countries like Colombia and Peru, Ecuador is not reliable to

make businesses. Colombia and Peru have a tag of a reasonable risk and the index of liberty

denotates more that Ecuador is not a country with a liberty at all. In a top of 180 Ecuador

has the number 165. (Alvarado)

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https://publicaciones.ucuenca.edu.ec/ojs/index.php/REP/article/download/1959/1547/

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Moreover, the actual crisis and internal deals that Ecuador has to make front,

cannot being left by side, because it is an important aspect to take conscious around the

current situation of the country that we are talking about. We are not assuming that the

economic problems in Ecuador are going to be solved by joining the Pacific Alliance. Even

more the ideology that guide the decision-making process in Ecuador does not make a

match with opening the frontiers and the free trade established by the Pacific Alliance.

The principal problem is that in Latin America, Ecuador is not a country that

emphasizes the use of bilateral policies as a tool to compete with neighbours

like Peru and Colombia; while that countries are the ones with a better growth

and international commerce results in the last years along the region, in

comparison with Ecuador that is really far of that international markets,

business and inversions. (Montaño)

5. What is the Pacific Alliance?

The Pacific Alliance was born as an economic initiative to purchase the economic

development between four countries in Latin America: Chile, Colombia, Mexico and Peru.

Nowadays is a different guide to make business and trade in the continent. The key is to

create a unique force beyond the barriers. The members are looking for a progressive

advance in the free circulation of goods, services, people and currencies. As a result, they

construct a system that roads with more competitiveness and that focuses the work in a

global expansion to be a representative economy for the world. The consolidation of this

alliance keeps working in the strengthening of trade, human mobility, etc; as well it is an

example for the region.

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This is not a project reduced to economic and strategic alliances. It is guided to an

ideal of democracy of sharing policies and competing together in the world. Because it born

where the Latin-American economical history did not have any success like the Southern

Common Market8 or the Andean Community9, it is due to the political principles that used

to guide this economic integration examples. Because for establishing a good integration it

must have good aims, the same aims and must not be guided by a political ideology.

(Espinosa)

6. The benefits of joining the Pacific Alliance

The countries that are part of the Pacific Alliance have an accelerated growth.

“Since the conformation of this alliance in 2011 the production in this blockade has

developed in a 24%. It is positioned as the 8 th economy in the world with a GDP of 2

billion. In Latin America represents the 39% percent of GDP and 25% of the foreign

inversion.” (Cámara de Comercio de Guayaquil) Actually, this alliance after its creation has

too much things to provide to the development of the international community. It is already

clear the good impact that the Pacific Alliance has in other countries, commerce, imports

and exports, the development of many industries is a big contribution in the region.

“According to the IMF the members of this alliance will growth a 3.1% in comparison to

the percentage of the region that is 1.3%” (Cámara del Comercio de Guayaquil) Colombia

has a development in the agroindustry and in the auto mechanic, because of the trade in the

Pacific Alliance. In Peru, this agreement has allowed to develop value chains in the flour

and fish oil industries. In general, the economic activity is more dynamized after this

opening of frontiers and probably Ecuador can also have that benefits, and that more

8
MERCOSUR: Mercado Común del Sur
9
CAN: Comunidad Andina

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 Participation in the Pacific Alliance (Regional Index)
50%
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45%
40%
35%
improve 30%
25%
other 20%
15%
economic 10%
5%
0%
sectors to Foreign Investment Regional PIB Exports

Participation in the Pacific Alliance (Regional Index)

create

competitiveness in the domestic and international market.

(Cámara de Comercio de Guayaquil)

According to an analyse made by the Chamber of Commerce of Guayaquil the

countries that are part of this Alliance receive at least 20 times more inversion in

comparison with Ecuador. The volume of commerce is over the superior limit that is

managed by Ecuador, is almost more than two times. By side in the case of the foreign

investments is to worry more because Ecuador has only received $5 395 millions in this

period, while Pacific Alliance members have received around 20 times more investments.

Commerce 2011- 2017

900000
800000
700000
600000
500000
400000
300000
200000
100000
0
CHILE PERU COLOMBIA ECUADOR

NON-OIL TRADE FOREIGN DIRECT INVESTMENT

(TradeMa

p, BancoMundial)

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The free circulation of goods, services, capitals and people are part of the benefits

that this Alliance bring. But, the most important things that Ecuador can get from this

agreement are the great development of different industries because of sharing technology

and human capital without limitations. The principal barrier is that the process of join needs

of certain requirements like free trade agreements with the four states of the Pacific

Alliance and that will imply a period of almost two to four years. The good news is that the

members had demonstrated a profound support to Ecuador and making accords. And the

most relevant things are that getting this alliance on, we will get a free circulation of people

that will not limit anymore the opportunities of education almost in the countries that are

part of the Pacific Alliance. Education makes progress so it must be an aspect to pay a lot

of attention on. It is really important for Ecuador the Latin-American Integrated Market of

Actions, the integration of the stock exchange. Finally, for the free circulation it is not

enough to get down the taxes or eliminate any type of barrier. The norm has to be changed

to get similar standards, as well to look for similar and not same conditions at the time of

trading. In that way sovereignty will not be violated because of the homologation

committee.

7. Conclusion
In conclusion, Ecuador is a country that fortunately has changed their commerce

policies and has a beginning in the opening of its frontiers to the international integration.

We have made a general review over the theory of economic integration as a branch of

globalization. And we can assume that as near we are of other countries, we are nearer of

globalization and that means development and progress. In the case of Ecuador joining the

Pacific Alliance is a good idea because it will contribute to give a new order to the

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geopolitical and economical context in Ecuador. The requirements to be part of this

initiative makes Ecuador to try new things, new ideas and take actions aligned with the

liberalization. To liberalize a country and give that change is not a small period process, it

takes time, but the results are totally good. If not, lets put our eyes over the European

Union, that is the most important prove that economic integration is possibly successful.

We can not forget that the crisis in Ecuador has almost two months and is part of the

barriers to get in the alliance. It is the clear evidence of the fragmented society that Ecuador

has, and the existence of people that almost believe only in one model, and that the State

must be the one that has to guarantee the rights of citizens. Besides the general context of

productivity that it has, talking in terms of productive matrix, country risk and index of

liberty. Finally, we know that the Pacific Alliance is an initiative that can contribute to that

ambitious development needed by Ecuador, but we cannot accept that there will be certain

withdraws for the less competitive countries in Ecuador. But if it is not now, when will be

the moment to take risks and change the plans in the Ecuadorian economy. I am not saying

that everything will be solved, but I think that freedom is the answer to many of the

questions that any country in the world has.

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8. Bibliography

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ECUADOR. 20 de December de 2018.
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Alianza del Pacifico. ¿Que es la Alianza del Pacifico. 2019. https://alianzapacifico.net/que-es-la-

alianza/. 27 de November de 2019.

Ardilla, Martina. Ecuador en la Alianza del Pacifico: geoestrategia y desafios. . 2019.

https://nuso.org/articulo/ecuador-y-la-alianza-del-pacifico-geoestrategia-y-desafios/. 01
de Diciembre de 2019.

Barría, Cecilia. Crisis en Ecuador: 4 razones que explican la crisis que llevó a Lenín Moreno a
decretar el "paquetazo" que desató las protestas. 09 de October de 2019.
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Cámara de Comercio de Guayaquil. Ecuador en la Alianza del Pacifico. 07 de July de 2018.

http://www.lacamara.org/website/wp-content/uploads/2017/03/APE-024-Alianza-del-
Pacifico.pdf. 07 de December de 2019.

Economía en Bicicleta. CAMBIO DE LA MATRIZ PRODUCTIVA. 2019.

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Ecuavisa. Ecuador muestra interés en ser parte de la Alianza del Pacífico. 06 de July de 2019.
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El Universo. Economía de Ecuador crece 0,3 % en segundo trimestre de 2019. 01 de October de

2019. https://www.eluniverso.com/noticias/2019/10/01/nota/7543105/economia-
ecuador-crece-03-segundo-trimestre-2019. 03 de December de 2019.

Goded, Luis Espinosa. Ecuador en la Alianza del Pacífico: Un Proyecto Clave. July de 2018.
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Plan-Explained. 28 de Noviembre de 2019.

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pacifico/. 04 de December de 2019.

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Talarid, Blas. Matriz Prodcutiva. 27 de Febrero de 2017. http://blastaladrid.com.ar/a-que-nos-

referimos-con-matriz-productiva/. 04 de December de 2019.

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