Regional Integration and Developing Countries

1. Regional Integration
Nicolas FOUCRAS Phd
University TEC de Monterrey
nicolas.foucras@itesm.mx

2. Definition
• A process in which neighboring states enter
into an agreement in order to upgrade
cooperation through common rules and
institutions (inter-governmental or
supranational)
• Goals of the agreement could range from
economic to political, environmental, social
or cultural

3. Activity:
• Form groups of 3
• Answer the questions (20 minutes):
– What are the goals and expectations of a
regional integration?
– What are the barriers to regional integration?
– What are the factors that can foster the
integration? (help to upgrade and to sustain
the cooperation)
• Make your presentation

4. What are the goals and
expectations of a regional
integration?

5. 1. To build Peace through interdependence + sharing
values + common identity + environment of mutual
trust… (Kantian philosophy)
2. To reach a Mutual consolidation (politically and
economically) (Argentina-Brazil after 1985 and the
military dictatorships) (Rojas 2008)
It allows:
– To consolidate mutually the national orders
– To stimulate together the same development model
(market economy and democracy in the case of
MERCOSUR)

6. Mercosur
• Sub-regional bloc
• 5 members: Argentina, Brazil, Paraguay, Uruguay and Venezuela
• Very deep integration since it established a customs union (common
external tariff = same tariffs in its relation with the rest of the world)
• Associate members: Chile, Bolivia, Colombia, Ecuador and Peru
• Observers: New Zealand and Mexico
• Goal: To promote free trade and the fluid movement of goods, people, and
currency
• Official languages: Spanish, Portuguese and Guarani
• Paradigm: Pragmatism (slow integration into globalization without affecting
internal sectors; many consider it as protectionist) + it gives a preference to
the relations South-South ≠ Pacific Alliance (neoliberal approach; total
open regionalism; to deepen relations with current hegemon)

7. • Founded in 1991 by the Treaty of Asunción; but actually originated in
1985, when presidents Alfonsín of Argentina and Sarney of Brazil
signed the Argentina-Brazil Integration and Economics Cooperation
Program
• Strong institutional architecture: Parliament
• Mercosur and the Andean Community of Nations have a FTA since
2012
Purpose is to merge into a common integration (Union of South
American Nations)
Problem: 2 different paradigms:
– Colombia and Peru: neoliberal (total open regionalism; both have a
FTA with USA)
– The rest: much more pragmatics; slow and under control integration
in the globalization, much more protectionists and south oriented
=> Lack of political synchronization between LAC affects integration
(upgrading cooperation)=> significantly weakens their negotiation
position (political weight)

8. 3. To create and to defend common strategies in global
governance (Kacowicz 2008) (i.e: Latin American and Caribbean
States Community; Shanghai Cooperation Organization;
Commonwealth of Independent States )
To Impact in the global model (to shape the new order)
To create a counter-power in order to balance alliances
dominating the current international/regional order:
– China and Russia in Asia
– Brazil, Argentina and Venezuela in Americas
– South Africa is trying in Africa with African Union
To allow a better insertion in the Globalization
The purpose is much more than economic
They also offer a platform to promote dialogue among members
to deepen sub-regional integration

9. Shanghai Cooperation Organization (SCO)
• Eurasian political, economic and military organization
• Founded in 2001 in Shanghai
• 6 members: China, Kazakhstan, Kyrgyzstan, Russia,
Tajikistan and Uzbekistan
• Oficial languages: Russian and Chinese

10. • Last week, it was decided to admit India and Pakistan as full
members => they are expected to join by 2016
• Observers: Mongolia, Iran, Sri Lanka, Belarus, Turkey…
• Officially: to promote cooperation against terrorism and
separatism but many say that the real purpose is to brake US
interest in the region (access to energy in the Caspian Sea) as
well to limit US military presence [strong after 9/11 and
intervention in Afghanistan])
• Many see SCO as a global counter-power undermining US and
European influence

11. Latin American and Caribbean States
Community (CELAC)
• Regional bloc of Latin American and Caribbean states
• Founded in 2010 and implemented in 2011 in Caracas
• 33 members (600 million people)
=> All the countries from Americas except USA and Canada and a couple
of Islands belonging to France, UK and Netherlands
• Goal: To deepen Latin American integration and to reduce the
interference of the USA in the region
=> It is seen as an alternative to the Organization of American States
(OAS) = the regional organization created by Washington in 1948

12. CELAC members

13. African Union (AU)
• Continental union
• 54 members => all African countries except
Morocco (AU accepted Western Sahara whose
status is disputed; territory claimed by Morocco =>
it felt betrayed so decides to withdraw)
• Founded in 2001 in Addis Ababa (Eth.)
• Wide range of Goals:
– To achieve greater unity and solidarity
– To defend the sovereignty, territorial integrity and
independence
– To accelerate the political and social-economic

15. Currently there are 8 Regional Economic Communities (REC)
recognized by the AU:
• Arab Maghreb Union (UMA)
• Common Market for Eastern and Southern Africa (COMESA)
• Community of Sahel-Saharan States (CEN-SAD)
• East African Community (EAC)
• Economic Community of Central African States (ECCAS)
• Economic Community of West African States (ECOWAS)
• Intergovernmental Authority on Development (IGAD)
• Southern Africa Development Community (SADC)

16. Arab Maghreb Union

17. Common Market for Eastern and
Southern Africa

18. Community of Sahel-Saharan States

19. East African Community

20. Economic Community of Central
African States

21. Economic Community of West African
States

22. Intergovernmental Authority on
Development

23. Southern Africa Development
Community

24. 4. To coordinate public policies; Goals:
– To slow destructive competition (to avoid competition
in order to receive FDI based on the sacrifice of the
national normative frameworks = race to the bottom)
=> Creating a common front it allows to balance global
market forces (FDI or financial flows) and to preserve the
welfare state (Gilpin)
– To create a political unity in the globalization
(coordination of PPs leads to common interests)
=> Increases to political power of the regional bloc (“critical
mass”)

25. 5. To create a regional market => to extend the market
perspective for all the actors => It improves the
competitiveness of economic fabric:
• It gives more opportunities to the Small and Medium-
sized Enterprises thanks to the wider market (CEPAL,
2009)
• It allows to Consolidate the value chains (=> it increases
the size of the production units)
• It gives more opportunities for the Diversification of
productive bases
• It increases the probability to connect FDI with regional
actors (allowing spill-over effects)

26. 6. It is easier for governments and firms to get funds
in the financial market
– Due to the size/visibility/stability of the regional economy it is
easier to get access to the global financial market (regionalism
allows to get a critical mass)
– To get a loan cheaper. Ex.: Before monetary union, when Italian
Government wanted to get money it issued bonds in Lira => due
to the limited market it had to pay a high interest rate
≠ with Eurozone: actors issues bonds in Euro, the potential
number of buyers is much more important than before => less
expensive and faster

27. What are the barriers to regional
integration?

28. 1. Different internal and external political agendas
(sometimes drastically opposed paradigms) => divergent
objectives
– Objectives are not necessarily regional (ASEAN, MERCOSUR,
Central American Market, CARICOM…)
– Lack of a common strategy for global integration: some
wants a rapid integration and others a pragmatic integration
(Kacowicz 2008)
2. In many DCs there is a lack of long-term vision due to the
political/social/economic instability/precarity => uncertainty
about commitment to the regional integration

29. 3. In many DCs there is a lack of a regional infrastructure =>
it is difficult :
– To create an integrated economy and society at the
regional level
– To foster the circulation of informations/ideas/products
– To promote a regional identity => to build up the idea of
“territoriality” among the population (i.e. sense of
belonging to the same community => it could be
necessary to have the support of the society to be a
sustainable project)

30. Constructivist perspective: new regionalism
(Habermas, Wendt, Hettne)
• Bottom-up vision (Giacalone): “Shared ideas” have to
build the regional order, more than the material
forces (market or officials)
• Integration based on shared conviction of belonging
to the same community of values (feeling of high
interdependence and the conviction that all the
region is sharing the same history)
 Regionalism is strong and dynamic (high level of adaptation) +

31. • Requires:
– To foster a Collective learning process
– to construct an Identity to guide the economic and
political behaviors
– To foster the construction of a “Social reality”
At the beginning it requires an important intervention of
the authorities to build regional infrastructures (to foster
regional synergy)
=> Integration has to be socially constructed

32. Preferential
agreement
(Commonwealt
h)
FTA (NAFTA)
Customs
Union
(Mercosur;
Andean
Community;
Southern
Africa
Customs
Union)
Common
market
(CARICOM)
Monetary
Union
(Customs and
Economic
Union of
Central Africa;
West African
Economic and
Monetary
Union)
Towards a
political
union
(Commonwe
alth of
Independent
States or EU)
It reduces
tarrifs but no
elimination
The purpose is
to eliminate
tarrifs among
members (free
movement of
goods) (1)
The purpose
is: (1) + to
adopt a
Common
Customs Tariff
against the
rest of the
world (2)
The purpose is:
(2) + free
movement of
capital, services
and individuals
(3)
The purpose: (3)
+ common
currency
Constructivism is opposed to the Functionalism (top-
down perspective) :
The Deepening and consolidation of the integration through a step by step strategy
promoted by material forces (Balassa)

33. Commonwealth
• Association of former members of the British
Empire
• Intergovernmental organization
• 53 members

34. 1. Different internal and external political agendas =>
divergent objectives
2. In many DCs there is a lack of long-term vision due to the
political/social/economic instability => uncertainty about
commitment to integration
3. In many DCs there is a lack of regional infrastructure
 It makes it difficult to foster circulation + economies of
scale => affect competitiveness
 Probability the integration will benefit a few people
(not an inclusive project)
What are the barriers to regional integration?

35. Other barriers…
4. Very often there is a strong concern for relative gains
among DCs i.e. it is important for the members to win more
than the others (they compare each other: “how much do
they earn?” is important) (Grieco 93) (they are afraid that
economic gains could be transformed in political power and
military threat) (Realist)
the high level of competition may brake the cooperation
≠Neoliberal approach: countries tend to privilege absolute
gains (do not care about how much other players will earn)

36. 5. Very often there is a Lack of complementarity among the
markets due to the low level of purchasing powers (similar
productive structure)
– Few incentives to deepen integration to avoid
destructive competition (Padrón 2007)
– Few trade relations
 Low interdependence (±8% average among LAC and less
important among African countries) (Hurrel 95)
=> Integration can vanish easiliy

37. 6. Weak regional institutions (Serbin 2014; Dabene 2014)
– Weak control mechanisms => low level of confidence
– National interests prevail  distrust
– Without normative framework, members do not know what
would be the future behavior of the others
7. Very often in a regional integration between DCs there is a
Lack of access to own funds and difficult fiscal situation
Necessary to search for external financing sources
It creates dependency and interference
It affects autonomy

38. 8. Absence of a strong and clear regional hegemon
– Competitive environment prevails
– May be there is a regional leader but it is often perceived as
a competitor
– Few countries are willing to assume the political-economical
support/leadership for integration
9. DCs (despite the regional integration) still depend a lot on the
political and economic situation in ICs => it means uncertainty
for regional integration

39. 2 schools analyze the presence of an hegemon in a regional
integration
Neorealism
• Integration requires the presence of an hegemon to be sustainable
• Hegemon fosters stability of regional order => confidence and
visibility + maintain integration active (has a long term vision) (SADC;
CIS; Mercosur)
Neoliberalism
• It is possible to reach an integration without any hegemon (Keohane,
Axelrod, CEPAL)
• There is a rational interests for cooperation- Why? Because
naturally States are seeking:
– To vanish uncertainty and to foster predictability
– To generate confidence with neighbors
=> they are willing to commit

40. What are the factors that favor
regional integration between DCs and
beyond?

41. 1. International outlook:
(1) Stagnation of Multilateral negotiations (impossibility to go
further): can create incentives to initiate regional cooperation
(TPP)
(2)Current crisis of the model and global
rearrangement: allows South-South
relations/alliances (BRICS; Shanghai
Cooperation Organization; Commonwealth of
Independent States)
2. Presence of an internal hegemon willing to boost the cooperation
(Solis 01)
2. Presence of an external hegemon (Fawcett) (EU supports Mercosur

42. ASEAN
• Founded in 1967
• Original States:
Indonesia, Malaysia,
Philippines, Singapore,
and Thailand.
• After cold war it
expanded to Brunei,
Cambodia, Laos,
Myanmar, and Vietnam
• 625 million people =
almost 9% of the world's

43. • AFTA (ASEAN FTA) implemented only in 1992 (25
years later)
• 1990: Malaysia proposed the creation of an East
Asia Economic Caucus: ASEAN + China + Japan +
South Korea
– Objective: to counterbalance the growing influence of USA in the
Asian region
– It faced heavy opposition from USA + Japan
– However in 1997 it was created an ASEAN + 3
– Most recently was created the East Asia Summit (EAS), which
includes “ASEAN +3” + India + Australia + New Zealand + USA +
Russia

44. • There is a project for a common currency since the
1990s however:
– ASEAN trade more with other countries (80%) than among its
member countries (20%)
– There is no sufficient macroeconomic convergence
• Currently it serves as a platform for FDI coming
from EU, Japan, USA and China to produce with low
cost (low wages, low taxation, low environmental
legislation, low labor legislation…)
Turned to be a “world manufacture center” i.e.
basis for production and export used by MNFs
Based on “open regionalism” and there are

45. 5. The small amount of “players” might benefit integration
(Haggard 97)
6. Connectivity (increases cohesion and mobility) (CEPAL)
7. Construction of the idea of “territoriality”, common
identity and shared vision, sense of belonging =
constructivism (Giacalone; Rojas)
8. Legitimacy of the project and the support for the
integration project among private sector and civil society
(Identification to the project; Ojeda 2010) => Allows a
Bottom-up construction (Giacalone)

46. 5. Cooperation not restricted only to trade dimension:
useful to open the cooperation in other areas to promote
the connection of many political and social actors (Serbin
2014)
6. Political/ideological coincidence/alignment: it impacts
positively on the degree of regional cohesion and on the
capacity to share goals
10. Existence of regional Institutions and control
mechanisms (CEPAL 2009; Perales 1997):
To allow “good behaviors”, transparency, certainty, long-
term vision, confidence and compromise