Latin American Free Trade Association (LAFTA)

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Latin American Free Trade Association (LAFTA)

Latin American Free Trade Association (LAFTA), an organization comprised of eleven nations dedicated to furthering economic integration in Latin America. Established by a treaty signed in Montevideo, Uruguay, on February 18, 1960, the Latin American Free Trade Association (LAFTA) served as a forum for the creation of greater economic ties among Latin American nations. The Montevideo agreement was initially signed by representatives of Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, and Uruguay. Bolivia, Paraguay, and Venezuela became members shortly thereafter.

The treaty signed at Montevideo proposed the gradual easing of trade barriers between the member nations, culminating with completely free trade by 1973. A permanent body was created to facilitate periodic tariff reductions and regular negotiations between the members. LAFTA met with some early success, as these nations had traded very little in the years preceding the agreement. However, progress toward integration moved slowly throughout the 1960s as the disparities of the member nations became more apparent.

Frustrated by the slow process of integration, the LAFTA nations signed the Caracas Protocol in 1969, thereby extending the deadline for free trade to 1980. The divisiveness and imbalance that had threatened LAFTA throughout the 1960s only increased during the 1970s. Many members, whose level of industrialization at this time might be described as intermediate, felt ill-equipped to compete with the large industrialized nations—Argentina, Brazil, and Mexico. The perceived inequity inherent in LAFTA led to the 1969 ratification of the Andean Pact by Bolivia, Chile, Colombia, Ecuador, Peru, and, later, Venezuela, which pursued their own agendas for integration independent of LAFTA, an action which further inhibited LAFTA's original goal of free trade throughout the hemisphere. In 1980, the year in which free trade in Latin America was to have occurred, the members of LAFTA formed the Latin-American Integration Association (LAIA), initiating a renewed effort toward integration.

In the early 1990s, the United States began establishing free-trade agreements with individual countries. The most prominent among them was the North American Free Trade Agreement (NAFTA), which created a free-trade zone between Mexico, Canada, and the United States. This new trade again sparked interest in a larger free-trade area of the Americas. Consequently, in 1993 the Organization of American States proposed the Free Trade Area of the Americas (FTAA) to be implemented in 2005. However, as of 2007, political opposition in the United States and Latin America has prevented its adoption. Nevertheless, more Latin American countries have established free-trade agreements with the United States, and in 2004 the United States and Central America signed a free-trade pact. In 2007 the United States was still in the process of negotiating economic agreements with Peru and Colombia.