Attempts at integration among Latin American countries had a rocky beginning. The first try, the Latin American Free Trade Association (LAFTA), was formed in 1961. The agreement first called for the creation of a free trade area by 1971 but then extended that date to 1980. Yet because of a crippling debt crisis in South America and a reluctance of member nations to do away with protectionism, the agreement was doomed to an early demise. Disappointment with LAFTA led to the creation of two other regional trading blocs—the Andean Community and the Latin American Integration Association.
Formed in 1969, the Andean Community (in Spanish Comunidad Andina de Naciones, or CAN) includes four South American countries located in the Andes mountain range—Bolivia, Colombia, Ecuador, and Peru (see Map 8.1). Today the Andean Community (www.comunidadandina.org) comprises a market of around 97 million consumers and a combined GDP of about $220 billion. The main objectives of the group include tariff reduction for trade among member nations, a common external tariff, and common policies in both transportation and certain industries. The Andean Community had the ambitious goal of establishing a common market by 1995, but delays mean that it remains a somewhat incomplete customs union.
Several factors hamper progress. Political ideology among member nations is somewhat hostile to the concept of free markets and favors a good deal of government involvement in business affairs. Also, inherent distrust among members makes lower tariffs and more open trade hard to achieve. The common market will be difficult to implement within the framework of the Andean Community. One reason is that each country has been given significant exceptions in the tariff structure that they have in place for trade with nonmember nations. Another reason is that countries continue to sign agreements with just one or two countries outside the Andean Community framework. Independent actions impair progress internally and hurt the credibility of the Andean Community with the rest of the world.