ANDEAN COMMUNITY

Statistics
 Total population covered – 98 million
 Total area covered – 47,00,000 square kilometer
 Gross Domestic Production – US$ 745.3 billion (2005)
Introduction
 Trade bloc established in year 1969.
 Headquarted in Lima, Peru.
 Establishing members
 Bolivia
 Columbia
 Ecuador
 Peru
 Initially called Andean Pact and converted to Andean
Community after announcement of Cartagena Agreement
in 1996.
History
 Andean Pact was largely based on European Union
model.
 1969 – Original Andean pact was formed
 1973 – Pact gained its 6th member Venezuela
 1976 – Chile withdrew its membership
 2006 – Venezuela withdrew its membership
Objectives
 Internal tariff reduction
 Common external tariff
 Common transportation policy
 Common industrial policy
 Concession for small members like
 Bolivia and Ecuador
Major Events
 Andean pact collapsed by mid 1980s
 The countries dealt with low economic growth and high
unemployment
 In 1990 Galapagos declaration was formed
 To reduce the internal tariff levels
 Andean pact entered into a negotiation with MERCOSUR
 They established a South American free trade area
 These negotiations broke down in 1999
Impacts
 Zero Intra-region tariff since 1993 (except Peru)
 Intra-region exports grew 47 TIMES (1970-2000) while
exports to ROW grew 10 times.
 Common External Tariffs under negotiation: four levels
expected: 0, 5, 10 and 20 %
 System of “Price Bands” applied to 13 agricultural
commodities (since 1995)
Andean Countries: Economy
 Economy of member countries is not homogenous.
 Each country shows a marked dependency on certain
specific economic sectors.
 Manufacturing plays an important role for economies of
comparatively advanced countries of group like
 Chile
 Columbia
 Peru
Bolivia
 The Bolivian economy grew, between 1965 and 1969 at
an annual rate of 6.3%.
 Most prominent sector – Agriculture, provides
employment for over half of the labor force, expanded at
an average rate of only 2.6%.
 Othe important sectors
 Industry
 Mining
 Hydrocarbons
 Electric power
Bolivia (contd.)
 Poor performance of agriculture resulted in fall of share
in GDP, from 28.5% in 1965 to 24.18% in 1969.
 Rice and sugar production increased at an approximate
annual rate of 11%; and livestock, cotton, and coffee
showed healthy improvements in the late 1960's.
 The total f,o,b. value of mineral exports rose to 21 % in
1969.
Bolivia (contd.)
 Most dynamic sector – Hydrocarbons indicated by the
increase of petroleum export earnings from $0.7 million
in I965 to US$28.4 million in I968.
 Manufacturing sector – Contribution in GDP
 1965-68  7.6%
 1969  14.9%
Exports rose at an average rate of 8.6% in the I965-69
period to $l8o million, compared to an 8.1 % rate of
growth of imports which reached an estimated $220
million.
Chile
 The GDP growth of the Chilean economy showed a slight
recovery in 1969 but again declined in year 1970.
 In 1970 there was a growth of 2.1%, compared to 3.5% in
1969 due to severe drought.
 Agriculture sector grew with an annual rate of 3.3%
during 1965-1969 but maintained constant share in GDP
to 8.5%.
Chile (contd.)
 Manufacturing contributed 27.2% of GDP in 1969,
compared with 26.7% in 1965 and grew at 4.3% during
this period.
 Protective tariffs had been established to protect the
nation al manufacturing industries.
 While labor productivity Increased by l4 % in 1965-1669
real wages increased 4l % over the same period.
Chile (contd.)
 Mining accounted for 12% share in GDP during 1965-
1969.
 Due to fall in copper prices, Chile's balance of payments
deteriorated during the last half of 197O and the first half
of 1971.
 In 1969 this sector brought into the economy $65.5
million in export earnings.
 Agricultural and manufacturing exports increased by $13
million in the first half of I97O over the corresponding
period in 1969
Colombia
 From 1965 to 1969 Colombia's real GDP grew at an
average rate of 5.2 % a year, a slight improvement over
the annual rate of 4.9 %attained in the preceding five-year
period.
 In 1970 the growth rate reached an unprecedented 7%.
 Agriculture – Most important sector - Accounts for about
30% of the national GDP and employs approximately
45% of the total labor force.
 Experienced a growth of 5.5% in 1971.
Colombia (contd.)
 "In 1965-69 the industrial sector accounted for 18.8 per
cent of GDP, compared to 17.8 per cent in I96O.
 The sector's average annual growth was 5.6 per cent in
1965-69.
 Construction sector grew at 12% annually in 1965-1969
and its share increased from 2.7% in 1965 to 3.7% in
1969.
 Colombia is South America's largest producer of gold and
the world's principal source of emeralds
Colombia (contd.)
 Colombia's exports increased by l4.3 per cent during
1965-69, reaching $6l6 million in 1969, their highest
level in the decade.
 The minor exports category increased by 93.5 per cent,
with the result that their share of total exports grew from
19.9 per cent in 1965 to 33-6 per cent in 1969.
 Imports rose by 71 per cent in 1965-70.
 In I969 Colombia had a foreign exchange deficit of $428
million.
 In June 1970 the country had net international reserves in
the amount of $185 million.
Ecuador
 Ecuador grew at an annual average of 4,8 per cent in
1965-69.
 Ecuador's gross industrial production, after rising rapidly
in the late 1950's and early 1960's.
 Ecuador's overall economy suffered a serious recession in
the 1965-69 period.
 exports expanded slowly at an annual average rate of 1.6
per cent in I965-69, and in fact contracted by 9,3 per cent
in the latter year
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