The Trans-Pacific Partnership (commonly referred to as the ‘TPP’) is the world’s largest free trade agreement (‘FTA’). When (if) it is finally signed, it will encompass:

• Canada
• The United States

Plus the the Pacific Alliance members:

• Chile
• Colombia (the newest country to express a desire to join the TPP)
• Mexico
• Peru

Plus the following Asia Pacific countries:

• Australia
• Brunei Darussalam
• Japan
• Malaysia
• New Zealand
• Singapore
• Vietnam

Other countries expressing a desire to join:

• China
• Cambodia
• Thailand

We’ve been talking about the TPP for years, but it has yet to make tangible progress. Its path to implementation has been fraught with furious objections to some of its clauses, the most contentious of which are the increased ability of corporations to litigate against sovereign governments for infringements on their intellectual property and the fast-track authority being requested by the US Trade Representative (‘USTR’), which would force Congress to pass the agreement (when it comes) as a whole package, without the ability to add, delete or pork-barrel its contents.

A cornerstone of the TPP is Latin America’s Pacific Alliance, which has three important factors of interest to Asian Pacific investors:

1. 200 million people
2. A rapidly growing middle class
3. $2 trillion of combined GDP
4. Which represents 38% of Latin American economic activity
5. Pro-business and pro-private property environment

Indeed, Japanese Prime Minister Shinzo Abe has identified the Pacific Alliance as being of great importance to his economic strategy, “Abenomics.” At the International Institute of Strategic Studies-sponsored Cartagena Dialogue on the Trans-Pacific Partnership in early March, several Asian trade ministers spoke of their determination that ASEAN Economic Community, which comprises 10 Southeast Asian countries with a combined GDP of $2.4 trillion, should link.

There are already significant Trans-Pacific links: Mexican state-owned oil company Pemex has had major investments in Asia for some time now, while 874 Japanese companies are currently invested in Latin America’s Pacific Alliance.

For all this goodwill, though, significant challenges remain for the Pacific Alliance to lure more ASEAN investment:

1. Rising wages
2. Insecurity and violence
3. Institutional weakness of the Pacific Alliance, which necessitates one-by-one negotiations with its members.

As ever, investment will go where there is good and secure opportunity — secure both in terms of freedom from physical violence to personnel or PP&E (property, plant and equipment), as well as a reliable judicial system for redress in case of contractual default.

Latin America’s future is in its own hands now. If it wants to grow and prosper, it will strengthen its requisite institutions to take advantage of the ASEAN opportunity. There is very good reason for optimism.