LATIN AMERICAN INTEGRATION
ASSOCIATION (LAIA)



The Latin American Integration Association (LAIA) was established as a result of the Montevideo Treaty of 1980. While succeeding the Latin American Free Trade Association (LAFTA) of 1960, LAIA nonetheless strived to keep intact the economic integration process begun by LAFTA. The signatories to the 1980 treaty were Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela. The goal of LAIA is to reduce restrictions on trade between its members. It is hoped that this will be accomplished through the implementation of economic complementarity agreements that are "specific tariff reduction programs for lists covering just about all products." It is believed that LAIA programs will lead to balanced and complementary social and economic development for the region.

LAFTA was formed following negotiations that took place throughout 1958 under the direction of the United Nations Economic Commission for Latin America. These negotiations culminated in the signing of the Montevideo Treaty of 1960 by Argentina, Brazil, Chile, Mexico, Paraguay, Peru, and Uruguay. LAFTA membership increased throughout the 1960s with Colombia and Ecuador joining in 1961, Venezuela in 1966, and Bolivia in 1967. LAFTA did not originally call for a common external tariff nor did it immediately seek to form an economic union. A Latin American common market was discussed but only as a long-term goal. The newly formed association did call for the dismantling of tariffs and other trade barriers between member states. In 1969, however, in a meeting in Caracas, rancor developed over proposals to begin working toward a common market. Although consideration of the proposal was postponed until 1980, Colombia and Uruguay continued to disagree with the thrust of the 1969 meeting. Because of continuing internal dissension LAFTA became little more than a trade and marketing association. By 1980 only 14 percent of trade between LAFTA members could be related to the Montevideo agreement. One of the accomplishments of LAFTA, however, was the creation of the Multilateral Compensation and Reciprocal Credit Mechanism. The agreement was signed by the central banks of member countries in 1965 and began operating in June 1966.

In June 1980 representatives met in Acapulco and later in Montevideo, and voted to dissolve LAFTA and replace it with the Latin American Integration Association. It was decided that the new association would have less closely defined goals, no specific timetable for goal implementation, and fewer strictures overall. The aim of LAIA is to reduce or remove trade barriers while leaving members free to enter into separate trade and tariff agreements. While LAIA does not call for all-inclusive tariff reductions, there are preferential tariffs for regional products and regional agreements on matters related to agricultural products, technology exchange, and environmental and tourism affairs. LAIA also recognizes an economic hierarchy and its trade and tariff agreements take into account the level of economic development of each country. Member nations are divided into three categories: Argentina, Brazil, and Mexico are considered to be most developed; Chile, Colombia, Peru, Uruguay, and Venezuela are considered to be in a stage of intermediate development; and Bolivia, Ecuador, and Paraguay are the least-developed members. An "eventual objective" of LAIA is, however, is the establishment of a regional common market.

In 1982 LAIA members signed a Reciprocal Payments and Credit Agreement that set in place bilateral lines of credit between each pair of central banks. The lines of credit are pegged to the U.S. dollar. In 1984 LAIA ratified the Regional Tariff Preference program which was subsequently expanded by protocols in 1987 and 1990. This program is a series of tariff cuts based on the level of development of participating countries. During this period LAIA also approved various financial and monetary cooperative programs for less-developed member countries, and ended various nontariff barriers to trade. Also in 1984 an important LAIA proposal was the Regional Trade System. This program was aimed at enhancing intraregional trade and controlling bilateral trade agreements. In 1986 LAIA issued the "Buenos Aires Letter" and in 1987 the association expanded the Regional Tariff Preference program. Both of these plans were aimed at furthering trade between members and lessening sanctions and trade barriers. In 1988 LAIA expanded its areas of activity to include construction, transportation, information services, tourism, and insurance. By the 1990s LAIA members had signed 104 bilateral commercial agreements and 20 agreements with non-LAIA countries, and substantially increased trade between member states.

The principal governing organ of LAIA is the Council of Ministers of Foreign Affairs. This body is composed of the ministers of foreign affairs of the 11 member countries unless an official other than the Foreign Minister is responsible for LAIA matters. The council meets annually to review activities and set policy. LAIA's Evaluation and Convergence Conference reviews activities, promotes new programs, makes recommendations to the secretariat, and reviews preferential arrangements. The political body of the LAIA is the Committee of Representatives that is made up of a permanent representative of each member country and the representative's deputy. The committee is responsible for concluding agreements, implementation of treaty provisions, and convenes the council and conference. The aforementioned secretariat is headed by a secretary-general who is elected by the council for a renewable three-year term and is responsible for most LAIA technical and administrative tasks.

[ Michael Knes ]

FURTHER READING:

Inter-American Development Bank. "Latin American Integration Association." Washington: Inter-American Development Bank, 1997. Available from www.iadb.org/int/spa/index.htm .

International Monetary Fund. "Latin American Integration Association." Washington: International Monetary Fund, 1998.

Available from www.imf.org/extemalUnp/sec/decdo/laia.htm .



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