My Masters Thesis (Adjudged best Thesis)

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INTRODUCTION

1.1 Background

Guyana has continuously pursued regional integration since it became involved in discussions at the first Caribbean Heads of Government Conference held in 1963. Guyana formally became a member of a regional integration group with the signing of the Treaty of Chaguaramas in 1973, which saw the establishment of the Caribbean Community and Common Market (CARICOM).[1] One of the principal objectives of CARICOM was the establishment of the Common Market.[2] The aim of the Common Market was directed toward forging closer economic integration among member countries through “the strengthening, coordination and regulation of the economic and trade relations among Member States”[3] in an effort to “promote their accelerated harmonious and balanced development.”[4]

The original agreement of CARICOM was revised in 2001 leading to the Grand Anse Declaration and the creation of the CARICOM Single Market and Economy (CSME). The CSME is primarily an economic blueprint for the region to outline how member states could integrate and harmonise their economies effectively to “respond to the challenges and opportunities presented by the changes in the global economy.”[5]  Although not explicitly stated, the global changes referred to in the declaration comprised the intensification of global economic interconnectedness that emerged after the Cold War ended in the early 1990s, which, in turn, were further spurred on by rapid technological advancement.[6] 

For some stakeholders in the region, this change represented the conclusive shift from the “old” to the “new” paradigm for how regional economic integration is effectively conceived in the Caribbean.[7]  The old paradigm, represented by the Treaty of Chaguaramas, was predicated on the proactive and direct coordinated involvement of governmental agencies representing member states. Furthermore, the old paradigm was premised on the pooling of regional resources to improve production and to use import tariffs for non-member countries in an effort to shield and develop member industries.[8] The new approach, on the other hand, as represented by the Grand Anse Declaration, advocated a limited government role and, instead, was premised primarily on an expanded role for the region’s private sector industries in terms of their capabilities for producing and distributing goods and services as necessary to meet market and trade demands. In addition, it was built on the objective of “opening up the region to the rest of the world.” [9] However, despite aspiring for a different approach to regional integration in the region as expressed through the Grand Anse declaration, the reality has yet to match the rhetoric. With the enormous influence of individual governments in the region never quite waning and the Common External Tariff in place, inward-oriented mechanisms, in effect, have created sustained trade advantages for member states while excluding non-members.

More recently, in 2008, Guyana signed the Treaty of The Union Of South American Nations (UNASUR), which, as the name implies, fosters regional integration with countries on the South American continent.  While encompassing various dimensions[10] -- including cultural, political, economic, and social – the aspects relating directly to economic development involve energy integration, infrastructure development, financial integration, and cooperation on research, innovation, technological transfer and technological production.[11] UNASUR, like CARICOM, was “created in response to a globalised world.”[12] However, unlike CARICOM’s long history, UNASUR, as of yet, only has a constitutive treaty and is still in its formative stage.[13]

1.2 Statement of the Problem

Every government and head of state of Guyana has supported regional integration with CARICOM being an important aspect of its external policy. Bharrat Jagdeo, the current president, reinforced this fundamental position when he said, “Guyana will always be committed to this Community.”[14] The president also has called Guyana’s regional participation and the integration of UNASUR as “crucial” and “essential” to solving the challenges the region faces and for creating wealth and prosperity for the region’s citizens.[15] Therefore, it is clear that Guyana intends to belong to both integration movements. In fact, President Jagdeo has staunchly advocated for a closer relationship between CARICOM and South America[16] and for positioning Guyana as the “bridge between South America and the Caribbean.”[17]

Regional integration has become a ubiquitous feature of Guyana’s economic and external policy despite often-widespread fluctuations in the country’s domestic circumstances, and this position has prevailed both in periods of economic prosperity and growth as well as those of downturn and economic recession.  As this inconsistency in Guyana’s economic performance exists despite regional integration, it is worth investigating if CARICOM and UNASUR are likely to achieve immense success in accruing gains for Guyana’s economy.

1.3 Purpose

Currently, there is no readily available academic literature that empirically examines the issue regarding the specific extent to which regional economic integration with CARICOM and UNASUR is potentially appropriate and effective for Guyana’s economic development.

This study is intended to provide fundamental information to Guyana’s policy makers and members of the academic and research community about the potential for success and gains from CARICOM and UNASUR and to advocate the most useful approach that Guyana should adopt in relation to its engagement with these two formal regional integration initiatives. Furthermore, the findings of this study can provide useful insight that will assist Guyana’s policy makers in designing trade policies and deciding which regional integration initiative carries a potentially greater chance of succeeding that provides economic gain for the country and justifies concentrating how scarce financial and technical resources are allocated.

Additionally, this study leads to a new conceptual framework – the Regional Integration Success Test (RIST) – by combining several salient variables from the academic literature concerning the likelihood for success or failure of regional integration agreements. Students, scholars, and policy makers interested in analysing the potential for success and gains of other regional economic integration agreements in any part of the world can also employ this theoretical framework. The formulation of RIST as a mechanism for assessing and monitoring integration schemes is an important development for the policy and academic domains. In fact, it has been suggested that “adequate monitoring tools for regional integration processes would allow better policy design and implementation, better scrutiny and participation by all stakeholders and affected groups and individuals as well as more in depth academic analysis of these complex social transformation processes.”[18]

1.4 Structure

This paper comprises eight sections. The first summarises the historical background concerning Guyana’s involvement in regional integration with CARICOM and UNASUR and describes the purpose and rationale for this study. The second section outlines the methodology of the study, drawing upon the principles of a highly structured content analysis incorporating primary and secondary research sources. The third section provides a broad yet extensive review of the literature concerning economic regionalism as based on its various definitions, taxonomy, and strategic rationale. The fourth section outlines the analytical framework used to assess the necessary conditions for success of regional integration schemes. The fifth section assesses the evidence of CSME and UNASUR against the theoretical considerations concerning the factors that favor successful regional integration initiatives. The sixth section gives an overview Guyana’s economy since the nation gained its independence in the 1960s and also examines Guyana’s current trade, as well as Foreign Direct Investment (FDI) with the two regions under study. The cumulative analysis is synthesised in the seventh section along with recommendations pertaining to the findings. The eight and final section comprises the conclusion, which establishes that Guyana should abandon the inward-oriented CARICOM project in favor of closer integration with UNASUR. Guyana also should simultaneously follow a highly open economic arrangement that allows the country to capitalise upon trade and economic opportunities with the entire global community.

1.5 Limitation

Regional integration is a complex multidimensional process. Regional integration can be viewed from political, social, economic, and functional perspectives. This research will be restricted to a focused political-economy approach. Besides the difficulties and complexity involved with a wider multi-dimensional approach, it is not useful to assess political integration without examining economic integration, or vice versa. In the context of regional integration, the two concepts are independent but also highly interrelated, especially when examining their impact and effectiveness.

Furthermore, the results of content analysis, the designated methodology for this study, are purely descriptive that effectively reveal the content and structure but not necessarily the underlying political, social, and functional impact the reports and communications being analysed might have had on the decision-making process being utilised by governmental leaders. However, the methodology is particularly suited for cross-national comparisons and for examining trends over time – both worthwhile points of analysis with regard to a study of regional integration. 

2. Methodology 

This study will rely on elements of the content analysis methodology for gathering, sorting, and analysing the content of text based on the research question themes.  The sorting and coding schemes will be relevant to the set of eight common measurable Indicators essential to the success of regional economic integration. These indicators are: ability to attract foreign direct investment (FDI) intra-regionally and externally; the capacity to create trade through increased volume of intra-regional trade; the existence of a hegemonic state within the group to drive, lead, and coordinate the process of regional integration; political will; the establishment of supranational or “commitment” institutions by member states; the ability to overcome limitations of small size as well as comparative size disadvantages with coalition partners and form ultimately a larger cohesive market; demand for integration from the private sector, and complementarity (i.e., not similarity) in the production and trade flows among regional group members. The effectiveness of CARICOM and UNASUR will be assessed along these eight characteristics.

The coding scheme will be used to reorganise theme-related content into manifest coding, a highly reliable approach incorporating an objective method, as well as latent coding, which will be effective in terms of distilling the semiotic meaning and significance of language and terms relating specifically to business and economic development. The scheme also will take into account factors such as geographic proximity and/or propinquity; linguistic and cultural similarities, and congruence of common political values and regional political cooperation with regard to leadership and security issues. These will be crucial in generating specific measures directed toward the set of eight characteristics outlined previously. Such measures would include, for example, the proportion of goods imported from within the region as opposed to those coming from outside the region; relative size of intra-regional markets; diversity of production infrastructure models within the regional group; costs of integration borne by member states, and political diversity of member states.

The content analysis will rely principally on primary as well as secondary sources, both qualitative and quantitative in nature.  Primary sources will include government and institutionally compiled statistical data relating to the national economy as well as regional integration entities (e.g., CARICOM) along with archival data and records, memos, and reports from various ministries of the government of Guyana.  Secondary sources will include newspaper and periodical articles from the national and regional press within a given time frame of analysis, books, peer-reviewed scholarly journals, Web site content, and other published reports specific to both regional integration and national economic development activities.

Content analysis has numerous advantages, including the capacity to handle flexibly large amounts of unstructured materials and to be context-sensitive especially with regard to multidisciplinary types of data.[19] This qualitative form of methodology precisely suits working with a wide spectrum of available digitised and online information that are characterised by ubiquity, globalisation, volatility, and interactivity.[20]

3. Literature Review

The purpose of this section is to lay out the conceptual literature as it relates to regional integration and its relevance to CARICOM and, more specifically, Guyana. The section starts with a review of the traditional and contemporary theoretical and conceptual approaches concerning regional integration. This is followed by an examination of the literature related to factors considered necessary preconditions for successful regional integration schemes. This is a crucial aspect as it forms the conceptual foundation on which the subsequent chapters will be anchored.

3.1 Definition of Regionalism and Regional Integration: Old and New Contexts

There is an overwhelming volume of literature on regionalism but there is no widespread conceptual and definitional cohesiveness of what the concept entails. The concept varies exceptionally across academic disciplines and acquires different meaning for different people. However, in order to provide some clarity and simplicity, the literature can be arranged and examined from the perspectives of two schools of thought: ‘old’ and ‘new’ regionalism.  The old regionalism theories, which emerged in the 1950s and 1960s, centered on the concepts of functionalism, neofunctionalism and inter-governmentalism. These theories were mostly concerned about attaining peace and security.[21]

Functionalism, synonymous with the work of David Mitrany[22], was not a theory but rather a conceptual approach to achieving peace,[23] centering on the question “on which political level various human needs (often defined in a rather technical way) could best be met.”[24] The answer to this was found beyond the nation-state, but not necessarily at the regional level, but by transferring authority from governments to common organisations. Moreover, this approach espouses that crucial functional goods and needs, -- such as trade, transportation, manufacturing and economic welfare – would necessitate the establishment of regional and global institutions and organisations to further facilitate those needs. In other words, the political entity being formed was predicated on organising specific functions rather than upon territorial boundaries of the nation-state members. [25] Schirm, offering his view on functionalism, postulates that it is premised on the notion that   “cooperation occurs where it is functionally efficient – that is, where specific government functions can be exercised more efficiently by means of regional cooperation than by an individual nation.”[26] The major drawback of functionalism was that it assumed that politics and economics could exist as separate entities and that economics trump politics. This, according to Hettne, made functionalism “technocratic and therefore unrealistic.”[27]

The notion of the separability of economics from politics led to emerging theories of neo-functionalism. The progenitor was Ernst Haas in his seminal work The Uniting of Europe.[28] Neo-functionalists argue that, with time and with greater interdependence, any economically motivated union will eventually lead to political integration and that politics is an ‘essential ingredient’ for regional integration.[29] Furthermore, neofunctionalism assumes that supranationality is the most efficacious method available for states to secure maximum welfare.  Instead of building a federation – or better yet, a community or confederation – along the lines of constitutional design, the neofunctionalist approach suggests a nuanced account of how integration unfolds over time. For example, the integration efforts in one functional area would eventually ‘spillover’ into others and a desire for interdependence would lead to the manifestation of common interests in economic unions that reconcile subnational and supranational group dynamics.[30] Pimoljinda[31] explains that regional integration compels existing state actors to shift and reshape their existing political agendas and expectations relative to a new central position that fortifies regionalism. As technical and expert knowledge facilitates activities conducive to regionalism, Pimoljinda describes how ‘epistemic communities’ arise that allow country representatives to defend national points of view while simultaneously arguing ‘back to their national capitals in favor of commission proposals, or in favor of making concessions to another member state in order to achieve agreement.’[32]

The main critique challenging neofunctionalism came from intergovernmentalism, which was inspired by realist and neorealist schools of thought in international relations.  Stanley Hoffmann and Andrew Moravcsik are the two prominent theorists associated with the development of this theory.[33]  It moves away from the spillover concept of neo-functionalism and articulates the central role played by states seeking rational self-interest.

Intergovernmentalism engages a sequence of interstate bargains triggered by a convergence of policy preferences among states. It serves to maximize states’ wealth and power. This is a realist perspective predicated on the objective of nations protecting their sovereign integrity where individual states hold the key controlling roles and domestic factors in the negotiation process. As opposed to the ideological claims of functionalists, regional cooperation is played out as an evolutionary process within the reality of national interests and state power is better managed and pursued in a multilateral setting as opposed to unilateral action.

Concerned that older theories were too heavily centered in the precepts and experiences of European integration, proponents of new regionalism[34], starting in the mid 1980s and increasingly mindful of the emerging globalised economy, have argued that integration is a multidimensional process incorporating social, cultural, and political elements with those of economics. Moreover, it is a process to be understood both in terms of its “extrovertedness” (i.e., the challenges relative to the international political economy) and “introvertedness” (i.e., emerging and shifting dynamics moving toward and away from regional cohesion as it occurs within the geographical region). Summarising this, Soderbaum suggest, “the new regionalism is both global and pluralistic, compared to the old regionalism, which was Eurocentric and narrow.”[35]

Perhaps most significantly, this complex process involves multiple economic and political casts involving state as well as non-state actors and engages interacting forces at the international, regional, national and domestic levels. [36] “New” or “Open” regionalism goes well beyond the previously predominant concerns of free trade, trade promotion, and protectionism to take into consideration multilateral and multidisciplinary issues ranging from security to environment in a market-driven and outward looking orientation. In other words, the era of “new” regionalism necessitates regional coordination in the short run and multilateral coordination in the longer term.

 A synthesis of what characteristics distinguish old from new regionalism came from Warleigh-Lack, quoting Andrew Hurrell and Bjorn Hettne.[37] Newer forms of regionalism are global in scope as opposed to being limited to a particular geographic region. There also is a high diversity of processes and structures as opposed to the single norm advocated by neofunctionalists. Likewise, ‘North’ and ‘South’ partnerships predominate while he older theories reflected only North-North or South-South cooperation. A varying perspective regarding the level of institutions necessary for integration drives newer regionalism perspectives while older theories place a premium on institutions. In newer forms of regionalism, multi-dimensional processes extend beyond economics and politics. Meanwhile, issues of identity regain their importance in new regionalism as opposed to being downplayed and ‘misunderstood’ in earlier theoretical formulations. New regionalism also emphasizes independence from foreign power influence and is shaped from the’ bottom-up.’

Another angle of the debate has been framed through the lens of ‘inward’ and ‘outward’ oriented integration schemes. The purpose of an inward-oriented strategy is to enlarge the domestic market for firms in the region while erecting barriers to external members. However, outward-oriented arrangements are often established as a ‘building block’ towards eventual integration with the global economy. This argument closely parallels the literature on ‘open’ and ‘closed’ regionalism.[38]  Radelet[39] found that outward-oriented strategies, in general, have had far more success and have contributed to greater gains for the regional integration movement.

The defining characteristic of open regionalism comprises a pair of opposing propositions. On the one hand, it advocates endogenous or regional integration as opposed to multilateral or global integration. Regionalism implies certain preferences and the removal of obstacles among the members along with a degree of protection against non-members. On the other hand, it simultaneously proposes openness to other countries, blocs and economies through different means, multilateralism being among them.[40] As Pimoljinda concludes, the relevant challenges in weighing theoretical and practical assumptions in regionalism emphasize less the issue of whether more or less integration is needed than how existing political and economic frameworks should be revised to adapt accordingly to economic globalisation.  In other words, it is more productive to examine how the models of regional integration have evolved in resolving the challenges of cooperation in securing the type of multilateralism that ensures region-wide economic liberalism and interdependence.  

3.2 Two Sides of the Same Coin?

Other authors[41] challenge the wisdom of the analytical and theoretical separation of old and new regionalism. Notably, Warleigh-Lack explains that the conceptual divide between ‘new’ and ‘old’ forms of regionalism are ‘exaggerated,’ ‘mistaken,’ ‘untenable,’ ‘unhelpful’ and ‘erroneous.’  The two concepts are not as different as perceived on the surface. That is, according to Warleigh-Lack, they are “capable of being understood as an unfortunate schism within a single paradigm rather than as evidence of separate paradigms incapable of meaningful communication between themselves.’’ [42]

Similarly, Gomez-Mera, in her analysis of MERCOSUR – an arrangement often cited by scholars of new regionalism as a successful model – found that the “interconnection between regionalism and globalization has not resulted in the qualitative changes predicted by new regionalism scholars”[43] and that MERCOSUR “retains several features of what they refer to as ‘old’ regionalism.”[44]  For Gomez-Mera, the extent of this ‘newness’ is highly ‘overstated’ and, in the MERCOSUR example, she found that realist perspectives of regional integration are still salient. Furthermore, MERCOSUR has remained principally a “state-led, primarily commercial and political initiative, and its origins and sustainability have been fundamentally linked to geopolitical factors and to the overlapping dynamics of asymmetric power at the regional and global levels.”[45] She concludes that in order to obtain a more comprehensive evaluation of contemporary regionalism, it would be useful to combine both intellectual camps – as each offers different but complementary analytical dimensions. 

3.3 Rise of RIA, FTA and RTA

The increase in regional integration agreements is considered one of the most important developments in contemporary international relations. At the end of the 1980s and the beginning of the 1990s, the number of regional integration agreements (RIA) began to grow rapidly and by late 2008, the World Trade Organisation (WTO) had been notified of a total of 418 regional trade agreements (RTAs), 227 of which were in force at the time.[46]

One of the explanations for the rise of RIAs was the intensification of the processes of economic globalisation. Prominent with this argument were new regionalism theorists who were part of the “world order” (WO) school. For WO scholars, new regional integration initiatives were part of the increasingly interconnected global transformation that was taking place and that both globalization and regionalism are highly intertwined. For instance, Payne postulates that the new regionalism has not contradicted globalisation but instead has rather been an “essential part of the politics of that process.”[47] Offering a pessimistic and critical view of the proliferation of regional schemes, Gamble & Payne argues that open or new regionalism is a negative manifestation of the process of globalisation and that it is a vehicle for facilitating the United States’ global and regional hegemony.[48] 

For others, RIAs were seen as a necessary defensive reaction for developing countries to offset the competitive and negative effects of globalisation and on one hand and to capture the opportunities they presented on the other.[49] This view is premised on the assumption that regionalism does not provide a respite from global capitalism but rather to improve developing countries’ capacity to effectively participate in it.[50] It also highlights the synergistic relationship between globalisation and regionalism where, on the one hand, globalisation leads to regionalism and, on the other, regionalism promotes and drives globalisation.

For some regions, globalisation was the impetus for reforming existing structures in their regional integration agreement. In CARICOM’s case this led to the establishment of the Revised Treaty of Chagaramus and the Caricom Single Market and Economy (CSME).[51]

Another major reason for the rapid growth in RIAs was related to the formation of Regional Trade Agreements (RTA) and the inclusion of the GATT Article XXIV, the Enabling Clause, and GATS Article V of the WTO rules which permit exemptions from its non-discriminatory regulations. In particular, this was the Most Favored Nation clause[52], and other elements, which afford RTA discriminatory preferential trading terms for both goods and services for members. RTAs are preferential trade agreements between two or more countries aimed at liberalising trade among them but do not carry any obligation to extend the preferences to members outside of the arrangement. The RTAs must comply with two main requirements as outlined in the GATT Article XXIV. First, the agreement must result in the reduction of trade barriers within the group. Second, the agreement cannot increase trade restrictions for non-participating members.

Four types of RTAs exist, including a Free Trade Area (FTA), in which members abolish trade barriers between each other, while maintaining their individual prerogative in determining its trade policy vis-à-vis non-member countries. A second is a Customs Union (CU), in which member countries liberalise trade among each other and apply a common external tariff towards non-member state. The remaining types include a Common Market, which has all the features of a CU but further reduces barriers that restrict movement of factors of production such as labor and capital among members, and Economic Unions, where members aspire to fully harmonized economic policies, including tax harmonization, exchange rate and monetary policies.

3.4 Building Blocs or Stumbling Blocs: Regional Agreements

There are two contending assumptions that emerge from the literature concerning regionalism and globalization. For some, regionalism poses a serious challenge and threat to globalisation. For others, regionalism builds favourably upon the processes of globalisation.

RTA proponents say such agreements act as building blocs or laboratories for member nations. These RTAs ultimately expand into global multilateral agreements (i.e., the objective of the WTO). Baldwin[53] is one such proponent who has constructed his arguments around two political economy models of trade liberalisation known as ‘the domino theory of regionalism’, and the ‘juggernaut theory of reciprocal liberalisation’. The domino theory is premised on the notion that an FTA’s success induces countries, previously opposed to joining the group, to clamor aggressively for membership. The premise distinguishes a country’s desire to join the agreement between ‘anti-membership’ and ‘pro-membership’ forces.  Pro-membership forces include profit-seeking firms that export to the bloc and closer integration, therefore, would stimulate more trade. Thus, these firms pressure their respective governments to join the integration bloc. The subsequent expansion of the trading bloc makes it more costly for non-members to compete for business within the bloc and thus leads to the bloc’s further enlargement.[54]

On the other hand, the juggernaut theory proposes a radically different approach that is premised on the belief that “liberalisation begets liberalisation, so once the liberalisation ball starts rolling, it is difficult or impossible to stop.”[55]

However, opponents have questioned this dynamic, arguing that RTAs present major “stumbling blocs” to global trade liberalization and such agreements only serve to hinder global trade liberalization.  Because RTAs are based on a preferential regime for member states, they argue that this would lead to retaliation from countries outside of the trade bloc. Krishna[56] argues that RTAs lead to trade diversion and this energizes closely vested interests to work against further global liberalization. Inefficient firms within the union, which can only export because of preferential market access, will oppose unconditionally any further market opening towards external countries with more efficient firms.

Another ardent opponent is Jagdish Bhagwati,[57] who refers to RTAs – or Preferential Trade Agreements (PTAs) as he prefers to call them – “termites.” He argues that regional liberalization is a proxy for multilateral liberalization favouring only rich countries and regions (like the EU) while smaller ones have to accept terms and conditions that are sometimes inimical to their interests.  Additionally, he concludes these discriminatory FTAs have proliferated in the international trading system today to the extent of creating the "spaghetti bowl" problem. This problem arises when countries “crisscross” PTAs while maintaining several PTAs, each having their own terms and conditions. As a result, implementation and compliance problems arise because of the high administrative costs involved and the confusion and uncertainty that abound as states try to do a juggling act. This has a deleterious effect on the multilateral trade system and slows its development.

3.5 Economic Approach to Regional Integration

The foundation of economic integration can be located in the seminal work of Jacob Viner and his conceptualisation of “trade creation” and “trade diversion.” [58] Viner explained that under a customs union arrangement, where tariffs among member states are eliminated and a common external tariff (CET) is imposed on countries outside of the regional arrangement, both positive and negative welfare effects could result. The welfare reinforcing effect is referred to as “trade creation” that emerges whenever efficient producers of goods and services, from within the bloc, replace inefficient ones after tariff structures have been removed. Consumers then are in an advantageous position to purchase from the low-priced producer in the bloc.

On the other hand, “trade diversion” is usually welfare reducing which results from applying a common external tariff (CET) that makes imports from external members more expensive. Without the price discriminatory effects of the CET, these imports could have been supplied at a cheaper price to consumers. 

In practice, trade diversion and trade creation are likely to occur simultaneously, so any measurement of net efficiency will rely upon which effect is greater. If trade creation eclipses trade diversion, then the effect of the regional arrangement on prosperity will be positive and vice versa.

4. Analytical Framework: Regional Integration Success Test (RIST)

4.1 Indicators of Successful Regional Integration

Indicators are useful instruments because they “tell us how a project programme is proceeding” and are useful yardsticks to “measure results, be they in the form of qualitative or quantitative change, success or failure.” And furthermore, “it allows managers, but also all the stakeholders involved in a programme, to monitor desired levels of performance in a stable and sustainable fashion.”[59]

However, when we are dealing with a process as complex as regional integration, it is appropriate to establish criteria for selecting indicators.  In this regard, Anderson has articulated a few considerations that one must take into account whenever developing ‘good’ indicators:  1.) The indicator, or the information from which it is calculated, must be easily obtainable and available; 2.) The indicator must be simple and easily understood; 3.) The indicator should be meaningful and hold high relevance to the issue under study; 4.) The indicator must be measurable and not abstract; 5.) The indicators should be based on data that can be used to compare specific findings and not just aggregates; 6.) The indicator should have comparability attributes that make it easy to make comparisons across international space. [60]

Utilising Anderson’s barometer of selecting appropriate indicators, I have developed a model from the theoretical academic literature to assess the current and potential success of a regional integration grouping. The model is called the Regional Integration Success Test (RIST) and it comprises eight indicators that are attributed to successful regional integration schemes. The indicators are: a.) Gains from trade; b.) Demand by private sector; c.) Political will and commitment; d.) Commitment institutions; e.) Presence of regional power; f.) Complementarities in Trade flows; g.) Size and economies of scale; h.) Foreign direct investment (FDI).

These indicators can be measured and evaluated through both qualitative (e.g., secondary sources and opinions from experts and authoritative figures) and quantitative (e.g., geographic size, trade and FDI statistics and numbers, etc.) methods. Some of these indicators are easier to measure than others. For instance, intra-regional trade and foreign direct investment can be easily calculated once the data are available as opposed to a more sophisticated approach to determine whether trade complementarity exists or what the levels of political commitment and popular will are being demonstrated by regional governments.

4.1 (a) Gains from Trade

A primary assumption as to why states enter into regional economic schemes is the expectation of significant gains.[61] A straightforward, uncomplicated way of assessing whether a regional integration agreement leads to economic gains and efficiency is to assess the level of intra-regional trade created since the establishment of the integration scheme. 

As mentioned earlier, the larger the value of trade creation is over that of trade diversion the greater the net gains to be achieved for member nations within the regional grouping. Measurement of the degree of trade creation over trade diversion is an extremely complex and multifaceted process. Radelet[62] has summarized several useful “broad generalizations”, from the academic literature, to look for that likely, but not necessarily definitively, will denote when trade creation surpasses trade diversion. For example, trade creation is more likely to result if members’ tariffs were elevated before the regional bloc is formed. After the RIA goes into effect, reducing tariffs creates a situation where non-domestic efficient firms in the region will increase output to satisfy the heightened demand and market share created by outperforming inefficient domestic firms. Likewise, the larger the membership and share of world trade possessed by the RIA, the more likely the possibility for trade creation over trade diversion.

Radelet explains the same result also will occur if intra-regional trade as a proportion of the total trade was higher before the RIA went into effect.  The higher current trading levels are with potential member countries relative to the remainder of the global market, the probability of trade being diverted from low-cost external producers to high-cost manufacturers from within the region will be diminished. Trade diversion also will be minimized if goods and services produced by member countries of a RIA are not similar to those that were previously imported from outside the region. However, the higher transportation and communication costs are in the RIA, the lower the potential benefits that could accrue from trade creation, according to Radelet.

4.1 (b) Demand by Private Sector

Mattli,[63] in offering a conceptual model that underscores the conditions necessary for integration schemes to succeed, argues that either – but preferably both – ‘demand’ or ‘supply’ conditions must be fulfilled for such undertakings to prosper. There must be a demand for regional institutional rules, regulations and policy from firms and other ‘market players.’  The catalyst for this demand depends on the “potential for gains”[64] as perceived by market players. These gains, which lead to reduced transaction costs and higher profit margins, could mean access to new and larger markets, greater economies of scale in production, and access to cheaper and higher quality sources of productive factors such as land, finance, and labour. This, however, is not a sufficient condition for the desired effect to occur and must be accompanied by the appropriate supply conditions which are discussed below.

4.1 (c) Political Will and Commitment

These supply conditions emerge when political leaders show “willingness” to facilitate integration schemes. Paulo Casella contends that where “political will” is lacking, integration is unlikely to be successful.[65] Mattli[66] posits that the higher the rewards, the more likely leaders will pursue integration. Moreover, in times of economic success, leaders are less likely to support integration because of the limited incentives of doing so. However, in time of economic calamity, leaders tend to turn toward policies, such as integration, which they hope will help reverse their country’s economic misfortunes.

Similarly, Gomez-Mera defines leaders’  ‘commitment’ according to what regional rules and norms entails. Commitment comprises two essential elements that are interrelated but distinct: implementation and compliance. In following the work of Underdal[67], implementation is defined as “the measures that governments take to translate international accords into domestic law and policy.”[68] And, compliance is defined as “the extent to which they adhere to the provisions of these agreements.”[69]

4.1 (d) Commitment Institutions

The presence of ‘commitment institutions’ is an essential supply conditions identified by Mattli in order to increase the likelihood of an integration movement’s success.. He explains that mutual distrust among members of the union will lead to inefficient outcomes and in order to manage this situation, establishing commitment institutions, such as “centralized monitoring” and “third party enforcement,” constitute a necessary condition.[70] These institutions  increase the “chances of sustained cooperation by acting as constraints in precisely those circumstances where self-help measures alone are insufficient to prevent reneging”[71] by helping to manage member relationships through the enforcement of common rules.

Similarly, Krapohl emphasizes that integrating members often have “conflicting interests” and “coordination and cooperation problems.” To overcome this, “common institutions are an instrument for the member states to commit themselves credibly to their common long-term interests, instead of following their particularistic short-term interests.”[72] He also draws a nexus between effective institutional rules and its positive effect on the efficiency and expansion of intraregional trade.[73]

4.1 (e) Presence of Regional Power

Additionally, a major supply condition, which addresses problems of coordination, as identified by Mattli, is the existence of a benevolent “undisputed leader” among the group of countries involved in the regional arrangement.[74] The presence of this august state significantly increases the chances of the integrative pact succeeding and it fulfills the function of an “institutional focal point” in constructing and synchronizing the necessary regulatory and policy mechanisms to effect regional cooperation and coordination. Moreover, this prominent state – in effect, acting as the regional ‘paymaster’ – can enhance the effective implementation of decisions relating to regionalism and can reduce tensions and conflicts that may arise from inequitable distributional issues.[75] Similarly, Gomez-Mera found that the presence of a regional hegemon facilitates the implementation of regional agreements.[76]

Additionally, Krapohl, citing the work of Olson,[77] postulates that whenever a regional grouping includes a “benevolent hegemon” it becomes a “privileged group,” and this makes cooperation much easier than in groups where power is distributed more diffusely and symmetrically.  Furthermore, he argues that “although the smaller member states of a privileged group have to adapt to the preferences of the hegemon, they still profit, because the hegemon can solve coordination problems and may be the paymaster in cases of distributive conflicts.”[78]

Mattli’s and Krapohl’s hegemonic leader theory has been contested. The central counter-argument assumes that a hegemon threatens the stability of the regional grouping by inducing fears among the other members, primarily as they relate to the distribution of benefits and member-states’ insecurities about the hegemon utilizing the process for its own economic and political authority. Furthermore, the higher the levels of income disparity and industrial sophistication and development within the region, the greater those fears will be among the smaller and poorer members of the regional group.

However, to overcome this deficit, the strong regional state – and especially emerging regional powers – should engage in what Pendersen[79] termed “co-operative hegemony” and which represents “a ‘soft’ form of domination by means of cooperative institutional arrangements based on long-term strategy.”[80] By relying upon positive incentives, cooperative hegemony facilitates regional stability and legitimacy that make any upstart efforts to form countering alliances either within the region or with external states more difficult to achieve. 

While useful, Mattli’s conceptual framework is too simplistic and straightforward to sufficiently examine what constitutes an undisputed regional leader.  To fill this gap, Nolte[81] articulates a comprehensive analytical framework for assessing the characteristics that make it possible to differentiate regional powers from other states. An ideal regional power candidate would be ‘ideationally delimited’ as a distinct member of the region in question and which, according to Nolte, ‘articulates the pretension of a leading position in the region’ (i.e., self-conception). Furthermore, it is the ideal representative for how it significantly influences the region’s distinguished sets of geopolitical and political-ideational characteristics. The regional power candidate’s legitimacy arises from its widely acknowledged assets of material, organisational, and ideological resources suited to holding the position as well as its own position of interconnectedness in terms of the region’s political, economic, and cultural environments. Likewise, a regional power exerts its merited influence in regional affairs by endorsing regional governance structures and by defining the region’s security agenda in a predominantly representative way. In other words, its leadership position is respected, or acknowledged at least, by endogenous states as well as those exogenous to the region. Furthermore, the ideal candidate is a regular, visible participant in interregional and global institutions and forums and which acts not only for its own interests but also, at least on rudimentary levels (as Nolte describes), as a credible representative for regional interests. 

4.1 (f) Complementarity in Trade Flows

Complementarity in trade flows is widely considered to be a major precondition for regional integration blocs to succeed. [82] Defined simply, complementarity exists when trading partners in the regional group produce a dissimilar or diversified range of goods and services that does not compete for exports of those goods to the same markets. Because one of the objectives of the regional arrangement is to increase intra-regional trade flows, the states involved cannot all be producing similar or substitutable goods[83] and then anticipate becoming attractive trading partners with each other. In this regard, states considering cooperative regional agreements must identify whom their ‘natural trading partners’ are if they hope to succeed. For Schiff, the current volume of trade is not a helpful criterion for selecting a ‘partner’ when joining a trading bloc. With regard to creating a complementary arrangement, “countries are defined as natural trading partners if they tend to import what the perspective partner exports,”[84] Moreover, a preferential trade agreement has a higher chance of increasing gains if each country imports what the other exports, rather than each country importing the same products as others. According to Schiff, in this scenario, “losses are similar but less likely, while gains are both more likely and the same or larger.”[85] (N.B.: CARICOM cannot do this because of small markets. However, UNASUR countries have this capacity.)

Furthermore, regional integration motivates activities that fuel adaptation and specialisation in production and industry development within a region. More directly, member states will move to curtail producing those goods a neighboring member carries a comparative advantage in producing while increasing production of goods they show have a higher comparative advantage than those found in a neighboring member.[86] However, there is a downside to this in the sense that the more economically developed a regional member is or those members that have the most diversified economic base would have the largest number of natural partners and, hence, dominate trade in the group.[87]

4.1 (g) Size and Economies of Scale

Small states have inherently small markets, weak institutional capacity and undiversified economies characterised by low levels of manufacturing exports.  They also are highly dependent upon primary commodity production, and are vulnerable to exogenous events that can quickly destabilise their economies. Likewise, they suffer from high costs of transport, production and diseconomies of scale in areas such as investments in infrastructure, technology and capital-intensive manufacturing.[88]

To overcome these problems of scale and size, regional integration is one of the prescriptions that have been advanced. In fact, there has been a recent proliferation of regional integrations initiatives among small states.[89] The expansion of market size and capacity of firms is a principal motivation for states to enter in a regional economic union. Moreover, regional economic integration leads to enhancements in economies of scale in small economies, which, in turn, fortifies prosperity.[90]  Economies of scale can be achieved, for example, through regional firm level collaboration where companies can establish joint production facilities, pool resources on R & D issues, subcontract productive activities, jointly seek to enter into new markets, and other initiatives.[91] These collaborations allow regional firms to better leverage their dispersed resources across the region. Furthermore, there is a positive relationship between the size of a regional economic bloc and trade creation – that is, the larger the economic size, the larger the capacity for trade creation.

4.1 (h) Foreign Direct Investment

Integrated regional economies create an environment where there is increased choice as to where firms can establish their presence. The contribution of Foreign Direct Investment (FDI) as an important lever of economic development for small developing countries, like the Caribbean territories, has not gone unnoticed in the academic literature[92] and there appears to be a growing consensus that regional integration leads to higher levels of FDI.[93]

Just as the literature suggests how larger geographical size impacts regionalism, FDI also results in trade creation.[94] FDI generates advantageous repercussions for regional integration, especially as it relates to increased income for domestic producers, inflow of capital, technological transfer and spillover, production, employment generation, the formation of new businesses, and other resulting factors.[95] Additionally, FDI helps small economies overcome their limited financial capacity to fund broader and more comprehensive development projects.[96] Moreover, because of these advantages, FDI directly enhances economic growth in a regional member particularly in developing countries.[97] Also, Schuler and Brown show that FDI flows are expected to be the highest for countries that have solid physical infrastructure and that are perceived to carry a low level of political risk and uncertainty.[98]

Despite all the positive reactions associated with FDI, smaller states’ governments and private sector continue to agonize about the rate of FDI infusions flooding and eroding their markets, thus making it difficult for their local companies to compete and survive in changed economic landscapes.[99]

5. Prospects for CARICOM and UNASUR

In this section, the presence of CSME and UNASUR will be assessed against the theoretical considerations concerning the factors that favor successful regional integration initiatives as discussed in the preceding section. The evaluation of each entity will be organised according to the eight prerequisites (gains from trade; demand by private sector; leaders’ political will; presence of hegemonic country; complementarity in trade flows; size, and FDI) as outlined in the previous chapter. The chapter begins with brief background profiles of both CARICOM and UNASUR, which are then followed by the evaluation.

5.1 Brief Overview of CARICOM

CARICOM replaced the Caribbean Free Trade Association (CARIFTA),[100] and was established in 1973 with four Caribbean countries becoming signatories to the Treaty of Chaguaramas in Trinidad and Tobago. At present, CARICOM comprises 15 territories: Antigua and Barbuda, the Commonwealth of the Bahamas, Barbados, Belize, the Commonwealth of Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, and Trinidad and Tobago.

Under the original Treaty, CARICOM had three central objectives, or what have become known as “pillars”: economic integration through the establishment of a common market regime; coordination of foreign policy, and functional cooperation.[101] A fourth “pillar” based on security issues was added in 2007.

With a changing international environment characterised by greater global economic interconnectedness, regional leaders signaled the establishment of the Caribbean Single Market and Economy (CSME) with the Grand Anse Declaration in 1989. The intention of the CSME was to “deepen the integration process and strengthen the Caribbean Community in all of its dimensions to respond to the challenges and opportunities presented by the changes in the global economy.”[102] In 2001, the CSME was formally established with the Revised Treaty of Chaguaramas.[103] The CSME objective is to “establish a single economic space within which business and labour operate; in order to stimulate greater productive efficiency, higher levels of domestic and foreign investment, increased employment, and growth of intra-regional trade and of extra-regional exports.”[104] The enactment of the CSME is being carried out in a phased approach with the CARICOM Single Market (CSM) being implemented in the initial phase followed by the CARICOM Single Economy in the second. The initial timelines indicated that the CSM would be implemented fully by 2008 and the single economy by 2015. The implementation of CSME officially began in 2006 and, as of 2011, the CSM has not been fully implemented.

5.2 Brief Overview of UNASUR

The idea of a South American Community of Nations was officially drafted in the Declaration of Cuzco in December 2004. Two subsequent meetings in 2005 and 2006 in Brazil (the Brasilia Declaration) and Bolivia (the Cochabamba Declaration), respectively, laid the foundations for the May 2008 signing of the Constitutive Treaty (CT) by twelve member states[105] in Brasilia, Brazil.

UNASUR’s objective is to provide a forum for South American countries to cooperate and coordinate their policies between and among the relevant cultural, social, economic, environmental, and political dimensions.[106] The constitutive treaty delineates the specific areas of cooperation, which include, among others,[107] the “strengthening of the political dialogue”; “the inclusive and equitable social and human development in order to eradicate poverty and overcome inequalities in the region”; “energy integration for the integral and sustainable use of the resources of the region”; “the development of an infrastructure for the interconnection of the region”; “economic and commercial cooperation to achieve progress and consolidation of an innovative, dynamic, transparent, equitable and balanced process; “the definition and implementation of common or complementary policies and projects of research, innovation, technological transfer and technological production;” “the exchange of information and experiences in matters of defense,” and the “promotion of cultural diversity and the expression of the traditions and knowledge of the peoples of the region.” Despite its apparent comprehensive breadth and depth of perspective with regard to the mission of regionalism, a noteworthy observation is that there is no specific mention of trade and the reduction of trade related barriers in the treaty. This omission represents a deviation in approach from the trade arrangements of the past in which members of UNASUR have been engaged and still participate. CARICOM, MERCOSUR and CAN have, as a central component, an explicitly stated trade policy, which categorises them as free trade arrangement, and are either Customs Unions or Free Trade Arrangements.

In 2010, the member states added a “democracy clause” to signify that undemocratic means of acquiring power would be considered unacceptable in the region and, in 2011, the treaty was officially adopted and entered into force.[108]

In practice, UNASUR has played a worthwhile role in a number of interventions, including the convening of special meetings to address the 2008 incursion by the Colombian military into Ecuadorian territory to pursue Revolutionary Armed Forces of Colombia (FARC) members[109] as well as the related stalemate between Venezuela and Colombia[110]; its swift reaction and intervention in the 2008 civil crises in Bolivia;[111] its positioning in condemning and favoring democratic solutions in response to the coup d'état in Honduras in 2009 and the squashed attempt in Ecuador in 2010.[112] UNASUR also played a role in humanitarian efforts in response to the catastrophic earthquake in Haiti.[113]

5.3 Evidence

This section presents the evidence[114] gathered from both secondary and primary sources and is organized under the RIST theoretical framework presented in the preceding section.

5.3 (a) Gains From Trade

CARICOM

The value of CARICOM intra-regional imports grew by 92 percent between 2004 and 2008.[115] Similarly, intra-regional exports in 2008 were US$3.78 billion, up from US$1.24 in 2004 – more than a three-fold increase. Meanwhile, intra-regional trade is weak within the CARICOM region when compared to total trade. In 2008, intra-regional imports accounted for less than 13 percent of total CARICOM imports, just marginally higher than the 12.6 percent share in 2004.[116]

Intra-regional trade in the aggregate is not evenly distributed among CARICOM countries and is concentrated in just a handful of countries. In particular, Trinidad alone accounted for almost 81 percent of total intra-regional exports in the 2004-2008 period with Barbados recording the second highest percentage at a distant 6 percent.[117]  Within this same period, the value of Trinidad intra-regional exports climbed from US$859 million in 2004 to US$3.2 billion in 2008, an increase of 279 percent. Additionally, Trinidad’s intra-regional trade balance has been increasing rapidly – up more than four and a half times from US$769 million in 2004 to US$3.13 billion in 2008.[118] In terms of total intra-regional imports, Jamaica accounted for almost 40 percent between 2004-2008. Barbados followed with almost 15 percent for the corresponding period.[119]

No data are yet available on trade between UNASUR[120] countries since the group was just formed in 2008. However, because UNASUR comprises a majority of countries of the Andean Community of Nations (CAN) and MERCOSUR, this paper will rely on analysing trade data from these two regional trade groups to offer a preliminary gauge of UNASUR’s potential. A number of studies have highlighted MERCOSUR’s success in the areas of intra-regional trade and extra-regional trade.[121] However, CAN’s share of intra-regional trade in the total trade of Andean countries was an extremely modest 1.2 percent in 1970. Nearly two decades later, CAN’s share had grown by a bare modicum to only 2.5 percent.[122]

5.3 (b) Demand by Private Sector

This is among the most difficult variables to assess because very little data exist in CARICOM countries that have tracked the private sector’s desire for regional integration. Most of the data available imply that demand is low and are generally prescriptive in nature[123] without much readily available empirical analysis to ascertain whether regional integration is, indeed, desired by the majority of firms in the region. One explanation for the private sector’s hesitance and uncertainty to push for change might be a lack of intra-regional trade along with the insistent position that many firms hold in defending national interests.[124] Moreover, few are willing to expand beyond national borders, primarily because of “the lack of capital, confidence, and, sometimes, family-owned merchant nature of many Caribbean firms.”[125]

Additionally, the CARICOM secretariat posits that small market size, low growth prospects, and firm ownership structure (i.e., a majority is privately owned) are deterrents when it comes to investing.[126] Only a handful of large domestic firms from within the more industrially developed territories such as Barbados, Jamaica and Trinidad, with the largest bulk originating from the last named member, are investing across the region and accruing worthwhile gains from the CARICOM market.[127] Further empirical testing will be needed in this area to pinpoint the areas in which incentives might persuade privately owned enterprises in those CARICOM states to broaden their investment presence across the region.

Likewise, with regard to demand in UNASUR, there is a lack of meaningful longitudinal empirical data concerning the propensity for regional firms to take on incentives for regional integration, primarily because the initiative was just recently instituted. However, in substituting MERCOSUR as a comparable measure, the evidence shows that there has been a “powerful lobby” by the group’s private sector for deeper integration.[128] Moreover, it has been shown that “although MERCOSUR had begun political leadership, the follow-up of the private sector through structural reform made it more extensive.”[129]

However, CAN’s experience has had the opposite effect as evidence shows limited participation of the private sector in the design and implementation of trade policy during the 1990s.[130]

5.3 (c) Political Will and Commitment

Gomez-Mera developed a systematic methodology – termed “Implementation Achievement Score” – to measure the implementation and compliance levels of four Latin America and the Caribbean (LAC) regional integration initiatives. These include MERCOSUR, CAN, CARICOM and the Central American Common Market (CACM). Her conclusion empirically showed that all four organisations suffered from commitment problems.[131] In her analysis, MERCOSUR was found to be the “worst performer” followed by CAN and CARICOM, respectively.

However, Gomez-Mera’s conclusion is at odds with those of Casella and Malamud. Casella argues that MERCOSUR exemplifies a successful model where strong political will was a major catalyst for its growth and development.[132] Similarly, Malamud explains, “the relevant role of presidents to keep integration from stalling is an outstanding characteristic of MERCOSUR.”[133]

In CARICOM, the general consensus is that there is a “lack of unequivocal political commitment to regionalism among CARICOM’S political leaders and lack of leadership on, or champions of, the regional project.”[134] With evidence suggesting a solidly entrenched attachment to national sovereignty among the region’s members, CARICOM leaders remain “unwilling to relinquish and pool sovereignty at the regional level in order to create the necessary supranational institutions of regional governance.”[135]

5.3 (d) Commitment Institutions

CARICOM and the CSME have created numerous institutions that are tasked with carrying out its mandate and ensuring formal adjudication whenever disputes arise. There are the Secretariat, the Caribbean Court of Justice (CCJ), the Community Council of Ministers, and Bureau of the Conference of the Heads of Government, among others. Despite these institutions, it has been generally noted that CARICOM suffers from an “implementation deficit”[136] and Girvan cites that one of the “original sins” of CARICOM integration is the “absence of supranationality, or collective sovereignty, in the execution of decisions.”[137] The long-standing failure to implement decisions made by Heads of Governments was acknowledged in a seminal report, which was commissioned by CARICOM heads, titled “Time for Action” in 1992, which called for the establishment of a ‘Caribbean Commission’ to be led by former Heads of States to ensure that decisions were implemented. However, this mechanism was totally rejected by the CARICOM Heads of Government.[138] More recently, the current Secretary General, on his appointment to the post, acknowledged the problem of implementation.[139]

Further evidence of the non-participation by member states in the institutions of CARICOM is located in the fact that even though the CCJ has been established to adjudicate and interpret the Revised Treaty of Chaguaramas, and thus disputes arising under the CSME, only three members have signed on to the appellate jurisdiction on the Court.[140]More telling, Trinidad and Tobago, which lobbied aggressively and was awarded approval for establishing the CCJ’s headquarters in its capital city, has not signed on to the appellate jurisdiction of the Court.

The present model that UNASUR is following is based on a presidential pro tempore approach with rotating style inter-governmental approach. There are no current supranational institutions to compel member states to adopt and implement decisions made. The General Secretariat is currently the only permanent institution of the organisation that is headed by a Secretary General who is appointed by the Council of Heads of State and Government. The Secretariat is responsible mainly for the administrative efficiency of the grouping. Additionally, Article 17 of the CT envisages the creation of a ‘South American Parliament’, which “will be the subject of an Additional Protocol to the present Treaty.” It still remains to be seen if this would eventually become a reality and no mention has yet been made as to the form and function this parliament would take.

5.3 (e) Presence of Regional Power

In UNASUR, Brazil exhibits many of the characteristics an ideal major regional power. Brazil ranks first among South American countries in terms of population, GDP and land area. Brazil has demonstrated leadership as it relates to UNASUR by proposing the initial formation of the grouping and for establishing the main security apparatus of UNASUR – the South American Defense Council. However, Brazilian leadership also has encountered competition and resistance from within the region. Venezuela, for example, has sought to expand its influence in South America and has established many initiatives that are aimed at uniting the countries of the region, including The Bolivarian Alliance for the Peoples of Our America (ALBA) and the Bank of the South (Banco del Sur). Additionally, Brazil has encountered stern opposition from Argentina for its candidacy for a permanent seat on a reformed UN Security Council (UNSC).

At the global level, Brazil has the fifth largest population, eight largest GDP and twelfth largest defense budget. In addition to its bid to join the United Nations Security Council as a permanent member, Brazil has raised its profile as a major contributor of official development assistance to poorer nations and has engaged in strategic partnerships with the European Union (EU) and the India-Brazil-South Africa Dialogue Forum (IBSA).

All of the above indicates that Brazil has the legitimate standing to be the “undisputed leader” in the regional arrangement along with the capacity and resources to act as regional “paymaster” and institutional builder to advance South American integration.

In the case of CARICOM, none of the territories qualifies as a regional leader under Nolte’s classification scheme. However, Simms and Simms, utilizing Mattli’s framework, identified Trinidad and Tobago as the “natural choice” for regional leadership.[141] The only justification that can be advanced for Trinidad and Tobago being selected for regional leadership is that it has the largest and most industrialised economy in the region.[142]

However, one also could assert that unlike the economical advanced countries in the EU which drove the European integration process, “the more powerful Caribbean countries, and especially Trinidad and Tobago, have never wished to play the same role.”[143] Moreover, one could ascertain that no Caribbean country has the operational capacity or will to finance regional policies that invite collaboration and convergence, much less the capacity necessary to establish “genuinely Caribbean-wide infrastructure.”[144] Trinidad and Tobago’s indifferent attitude in this regard was reinforced when the new government recently headed by Prime Minister Kamla Persad-Bissessar asserted that Trinidad should no longer be viewed as CARICOM’s “godfather”[145] and “ATM card.[146]”

5.3 (f) Complementarity in Trade Flows

The CARICOM Secretariat has acknowledged that the economies of the region lack regional complementarity. [147] Similarly, Khadan and Hosein[148] argue that CARICOM countries are “marginal natural trading partners,” referring to studies by Wint[149] and Worrell[150] that showed CARICOM economies did not have high levels of product differentiation and, hence, low trade complementarities.  Only the “more developed countries” (MDC) of the region (i.e., Trinidad, Guyana, Barbados, Jamaica and Suriname) produce products that are not similar or which could be described as substitutes.

Of the MDCs, Trinidad has the highest level of complementarity with the region’s other territories. This is due primarily to Trinidad being one of only two territories in the region (Suriname being the other) that has the factor endowment of petroleum and gas. Additionally, Trinidad has been able to develop a robust manufacturing and industrial society, enabling the country to produce unique value-added goods. Suriname also has high complementary with the region because of its petroleum products and manufacturing ability, but the country has not been able to penetrate the CARICOM market as effectively as Trinidad. Barbados has been able to diversify its economy and has developed some manufacturing capabilities. It also has been proficient in its financial services offerings. Guyana has complementarity in its agricultural industry but faces competition from Jamaica for similar agricultural products. The other small island territories, called “lower developed countries” (LDCs), mainly depend on tourism services and have very low levels of complementarity. Additionally, these LDCs compete with other MDCs like Jamaica, Barbados and Trinidad and Tobago for similar tourism services. 

The larger countries in South America – for example, Brazil, Argentina, Chile, Colombia, and Peru – have highly diversified economies[151] with offerings in mining (e.g., oil, cooper, iron ore, precious metals, bauxite, etc.), services (e.g., construction, financial, communication), agriculture (e.g., soybeans, coffee, rice, livestock, fruits), and manufacturing (e.g., consumer goods, furniture). The distribution of sectors and products in these countries is not linear, with some countries producing dissimilar types and quantities of products and services than others. This large diversity allows for high complementarity between these countries and allows for complementarities with the region’s other territories that are not as diversified. For instance, Brazil and Argentina trade significantly between them, with almost 31 percent of Argentine imports coming from Brazil. On the other hand, Brazil imported nine percent from Argentina in 2009.[152]

Also, smaller economies in the region can find trading partners in the region that export sufficient quantities of what they import. For instance, this was the case with Paraguay and Uruguay in MERCOSUR. Also, Guyana can find high complementarity with a number of UNASUR partners who export oil and petroleum products. It also can find high complementarity in services offered in the region – for instance, in the areas of technical knowledge for developing its hydropower potential and exploiting its vast natural resources for exports. Because of the sheer magnitude of the combined economies in the region and the highly diversified sectors with a wide range of products and service offerings, individual UNASUR countries have many options from which to choose potential natural partners.

5.3 (g) Size and Economies of Scale

Individually, CARICOM countries have small geographical areas and similarly small populations. Haiti has the largest population at approximately nine million, which represents more than half of the entire region’s numbers. Jamaica is the second closest territory with a population of just under three million.  When aggregated, CARICOM countries have a total combined population of approximately sixteen million, a GDP of approximately US$91 billion and total land area of 459,000 square kilometres. Moreover, only a few CARICOM firms[153] have entered into collaborative and strategic partnerships to strengthen economies of scale and lower unit costs of production.

By contrast, the 12 countries comprising UNASUR have a combined land area of approximately 18 million square kilometers and a population of close to 400 million and GDP of approximately $4 trillions. For example, Brazil is the world’s fifth most populous country with more than 190 million residents. Moreover, there have been numerous mergers and acquisition aimed at capitalising upon the large markets and economies of scale in the South American region, both from firms within the region and extra-regionally.[154] In 2010, this accounted for 65 percent of total FDI in the region, compared with just 32 percent in 2009. According to ECLAC, this trend is on the rise.[155]

5.3 (h) Foreign Direct Investment

In CARICOM, more than 90 per cent of total FDI inflows emanates from extra-Caribbean sources and has exhibited a rising trend for most CARICOM countries over the eight-year period ending in 2008. Total inward FDI flows peaked at a level of approximately US$6.9 billion in 2008, although it retreated to US$3.8 billion in 2009 as a result of the global recession.[156] Trinidad and Tobago dominated intra-regional investment between 2003 and 2009 to the tune of approximately US$889.9 million.[157]

In the two most recent decades (1990-2010), FDI inflows into South America increased from approximately US$5 billion to US$85 billion.[158] More recently, between 2009 and 2010, South American FDI increased by 56 percent to US$ 85 billion.[159] Brazil led the way with a record total of US$ 48.462 billion, which is more than half the total for the continent, followed by Chile and Peru with US$ 15.095 billion and US$ 7.328 billion, respectively. Other noteworthy performers were Colombia and Argentina, with each receiving US$ 6.76 billion and US$ 6.193 billion, respectively.  The lowest level of FDI flows came from Venezuela, which posted a negative balance of US$1.404 billion in 2010. This reflects the country’s strategy of nationalisation of foreign assets rather than on FDI as a core development objective.[160] Four countries experienced a substantially large jump in FDI in 2010 over the previous year: Brazil (87 percent), Argentina (54 percent), Peru (31 percent) and Chile (17 percent).[161]

Most of these investments were in natural resources and services with 43 percent and 30 percent, respectively.[162] Moreover, both intra- and extra-regional firms seeking local and regional markets have been attracted by high commodities prices and rising domestic demand, particularly in larger economies such as Brazil, Chile, and Argentina. Additionally, strong economic growth in Brazil, Chile, Peru and Uruguay was reflected in the record FDI figures. The ECLAC report also cited the rise of “trans-Latin firms” as being a part of the upturn in FDI flows in the region.[163]

6. Overview of Guyana’s Economy

In the last half century since the nation moved toward its independence, Guyana’s economy has experienced dramatic shifts in its economic performance that often followed major shifts in policies. For example, Guyana implemented sweeping economic reform in the late 1980s and early 1990s, which led to ‘very rapid economic growth.’[164] These widespread reforms reversed the policies of state-owned enterprises of the previous decade with a massive wave of privatization and a push for trade liberalization that replaced policies emphasizing import substitution.[165] However, starting in 1997, Guyana experienced a sharp decline in economic growth as a result of the political instability that erupted in the aftermath of general elections held in 1997 and 2001. The following discussion summarizes Guyana’s economic history in five key phases covering the last half-century.

In the advent of national independence, the first phase starting in 1961 was highly unsettled with strikes, racial disturbances, and violent coup attempts – both by domestic and international groups – to remove the government from office.[166] Economic policy coordination was extremely disjointed during this period and foreign investment flows were virtually nonexistent. The unrest in 1962-63 was so widespread in disrupting the economy that real GDP in 1963 fell by 8.9 percent.[167] The 1964 general elections resulted in a parliamentary coalition and new government headed by the Peoples National Congress (PNC) and the United Force (UF) – a coalition that “supported private enterprise, foreign investment, market policies.”[168] The new period of political stability bolstered investor confidence and the economy benefited substantially from significant capital inflows between 1964 and 1968, “which led to robust growth.”[169]

The second phase started at the outset of the 1970s, Guyana proclaimed itself a “co-operative republic” which meant the state would embrace fully the tenets of socialism for its economic policy governance. Completely devoid of any fundamental acknowledgement of the rising tide of economic globalism, Guyana’s economic policies of cooperative socialism reinforced the import substitution model of development over that of trade liberalization, which was beginning to take hold in other regions around the world.  This approach did not bring much success and bought with it an economic retraction as well as reductions in average incomes for its citizens.

The saving grace for Guyana’s economy, which grew rapidly especially during the first half of the 1970s, was the sharp spike in global commodity prices as demand for sugar and bauxite surged dramatically.  Yet, the gains were short lived as the economy weakened significantly in the decade following 1978 because the major deficiencies of Guyana’s economic infrastructure were repeatedly exposed. Per capita GDP fell consistently which, in turn, worsened living standards and further tempted an already weakened social and economic infrastructure to further isolate itself in a defensive position.[170]

The third phase was marked by yet another dramatic swing in economic orientation as the nation looked outward toward the global market for its rescue. In 1988, the Guyanese government implemented the Economic Recovery Programme (ERP) under the auspices of the International Monetary IMF-World Bank. Weary of the persistent failures of the experiment in cooperative socialism, Guyana readily embraced the new terms of free trade and free market policies including “trade liberalization,” “market determined exchange rate,” “privatization,” removal of price controls,” and “downsizing of the public sector.”[171]

The ERP proved to be the best rapidly effective therapy for a sick economic patient. Leading up to 1997, Guyana’s economy grew annually by an average of 7.1 percent, further supported by low, manageable inflation rates and major reductions in fiscal and external deficits.

Undoubtedly, the market-directed reforms renewed external investor confidence as Guyana enjoyed a dramatic increase in foreign direct investment during the 1990s.[172] The ERP succeeded in every sector where the previous economic infrastructure had failed so completely.

However, with the onset of the fourth phase, the December 1997 elections opened a new period of political instability, which seeped, as expected, into the other spheres of national performance, including the economy. The robust economic growth, which dominated most of the 1990s, came to an abrupt stop. In 1998, the economy contracted by 1.7 percent and then experienced modest growth of three percent in the following year. However, the recovery was too weak to be sustained on a wider scale as the economy contracted once again by 0.7 percent in 2000. However, it did expand by 1.9 percent in 2001, primarily due to increases in agricultural production.

Guyana’s developing economy, which had grown increasingly dependent upon the benefits of spillovers and technology transfer being facilitated by a steady stream of foreign direct investment, now was highly vulnerable as a result of the ongoing political turmoil and large-scale shocks that affected the global economy and political scene. From 1998 to 2006, Guyana’s annual economic growth averaged a mere 0.3 percent, which meant the nation’s previously robust work in industry and production development had come to a near-complete halt.[173] Likewise, as the political and institutional environments deteriorated, Guyanese workers left the nation in large numbers to seek employment elsewhere while equally large proportions of domestic and international interests stayed away from direct investment. [174]

The political turmoil, which actually had existed since the nation gained its independence, was fomented by the partisan tensions of two political parties that reflected the more general polarizing nature of the Guyanese society. Although there had been a semblance of a political truce during the country’s most robust periods of economic growth, general election cycles reignited partisan opportunities to such an extent that violent protests followed the elections of 1997 and 2001. In addition, a prolonged strike by civil servants in 1999 and a wave of organized crime in 2002-2003 exacerbated Guyana’s tenuous political climate.[175]

The current (fifth) phase, again, has seen a dramatic turnabout for Guyana as the nation’s economy, propelled by revitalized private and public investments, grew by approximately 5.1 percent in 2006. And, the economy has expanded each year since then, averaging an annual rate of 3.9 percent. Guyana’s GDP grew by 7.0 percent in 2007, 2.0 percent in 2008, 3.3 percent in 2009, 3.6 percent in 2010.[176] Despite this success of economic growth in Guyana the past few years, the country’s “post-independence history is characterised by social and political divisions. Political and ethnic conflicts have pervaded Guyana’s socio-political landscape for decades.”[177] Guyana has yet to resolve long-term problems dealing with “inefficient public investment, mass emigration, prolonged fiscal mismanagement and weak institutions resulting from political and social divisions.”[178] In addition, there are many other weaknesses that remains and which impede economic prosperity, including: crime, natural disasters, inefficient customs administration, inadequate infrastructure, pervasive government corruption, fragile protection of property rights and generally weak rule of law, inefficient bureaucracy, and high non-tariff barriers like import-licensing requirements.[179]

6.1 Guyana: Trade and Investment Profile

Guyana’s exports a narrow range of commodity products, including sugar, rice bauxite, gold, fishing, and forestry products. On the import side, petroleum products dominate followed by machinery and transport equipment.[180] 

Guyana’s total value of intra-regional trade with CARICOM is US$2.07 billion or 8.3 percent of total inter-regional trade for the period 2004-2008.  The country recorded a negative trade balance (i.e., exports minus imports) every year between 2004 and 2008, with 2008 recording the highest total value at US$268 million.[181] Total imports for the same period amounted to US$1.475 billion or 12.2 percent of the total for CARICOM. Total intra-regional exports for the period amounted to US$595 million or 4.7 percent of the total for CARICOM. This gives a total trade imbalance of US$880 million for the same period. In summary, Guyana has only been able to increase its intra-regional export to the rest of CARICOM markets by just 7 percent between 2004 and 2008.

In 2010, Guyana exported to seven countries that belong to UNASUR.[182] However, imports emanated from all UNASUR members except Paraguay.  Total exports had a value of approximately US$41 million, while imports recorded an approximate value of US$235 million, resulting in an enormous trade deficit of close to US$194 million. Venezuela represented the largest export market for Guyana with a total value of approximately US$32.5 million and which represents 3.7 percent of all exports globally. Suriname followed with a value of US$5.8 million.

The majority of imports came from Venezuela and Suriname (incidentally, the smallest UNASUR member in terms of population) respectively and accounted for 82.3 percent of all imports from the region. Notably, imports from Brazil (UNASUR’s largest member in terms of population) were approximately US$21 million as compared to annual exports totaling to just around US$887,000.

Moreover, in the five years preceding 2006, Guyana’s imports from the regional group of the Latin American Integration Association (ALADI)[183] recorded a total value of EC$948.8 million. Exports on the other hand recorded a value of EC$78.3 Million dollars. Total trade imbalance of EC$870.5 million.[184]

Guyana’s primary export markets are located in North America and Europe, respectively. In 2010, the country exported 41.6 percent of its total exports to the United States and Canada. For Europe, the figure was 27.3 percent among the United Kingdom, Germany, Ukraine and the Netherlands. [185]

Guyana’s FDI has increased progressively from an annual average of US$55 million during the 1995-2005 period to an average of US$144 million in the 2006-2009 period.[186] Most of the FDI inflows are concentrated into the forestry and mining sectors with investors from China, Canada, Europe, and Russia. [187]

7. Analyses and Discussion

7.1 CARICOM

At the moment, the potential for CARICOM’s success is strikingly low and the bloc overall has performed poorly on the array of economic and political indicators as established by the RIST framework. Generally, CARICOM territories have low levels of economic interdependencies and all are small in geographic size with most being classified as less or least developed and poor, undiversified economic sectors. The conspicuous lack of industrial capacity and undiversified, subsistence economies – where the few goods that are exported (e.g., oil and gas, gold, bauxite, rice, sugar) originate from the primary sector – result in tradable goods that are highly similar within the region and, thus, the opportunity to exploit complementarities remains at a minimum.

Particularly disappointing has been CARICOM’s inability to generate significant gains in intra-regional trade and investments that apply equitably and proportionately across the region.  There are several explanations that can be advanced to explain why intra-regional trade has not performed satisfactorily within CARICOM, particularly within its current framework.

CARICOM’s poor intra-regional trade performance, with the exception of Trinidad and Tobago, can be blamed on the fact that most of the region’s territories rely on their factor endowments with little emphasis being placed upon economic diversification through the application of technology, innovation and research and development. This has led to a persisting situation where there are limited or low levels of complementarity in productive output across the region.  Trinidad and Tobago has been successful because of the high demand for petroleum products, which constitutes more than 60 percent of intra-regional trade in the region[188], as well as from investment revenues earned from the oil and gas sectors that have been plugged into development of the nation’s manufacturing sector. 

A second explanation for CARICOM’s poor intra-regional trade performance deals with the inward-oriented model of integration (which still exists despite the revised treaty and the establishment of the CSME) that is based upon the “old regionalism” tenets of import substitution and exclusion through the application of the Common External Tariff (CET). These types of arrangements have not achieved much success in terms of trade growth and expansion[189] and the empirical evidence found in this study reinforces this finding that has been echoed repeatedly in the literature. As long as the CET remains in place, there is a low probability that the region will ever realise any significant sustained gains from trade.

Additionally, undeveloped and costly infrastructural linkages also stunt the potential for expanding intra-regional trade. For intra-regional exports to reach meaningful levels of economic success, members must commit to developing their respective transportation infrastructure in general and, more specifically, the infrastructure to handle the demands and gains that will be realised from regional integration.[190] The stubborn reality in the Latin American and Caribbean regions is that they continue to invest less than other regions in trade facilitating infrastructural development[191] and are thus saddled with high transport costs, poor transport and communication technology, undeveloped port facilities, and other factors limiting the expansion of intra-regional trade.

Intra-regional investment is another key area where CARICOM has performed poorly with only a few firms, from just a few countries in the region, expanding beyond their home base and even fewer engaging in collaborative activities such as mergers, strategic alliances and joint ventures. Possible explanations for this includes: small market size; low levels of intra-regional trade which has not motivated private firms to invest in the region, and the region is increasingly dotted with privately owned firms that are “reluctant to move outside their comfort zone.”[192]

Politically, the region has performed poorly in implementing many of the decisions made by Heads of Governments. While the rational for this implementation shortfall is not easily identifiable, the lack of political will from the political leaders to implement their decisions is incontrovertible.  Furthermore, in the absence of a large economic and politically influential member state and supranational institutions to bind and effect decisions made, the anemic levels of implementation will persist.

While CARICOM has performed poorly on all the RIST indicators, this does not mean, however, that the entire integration movement cannot progress from its current weak condition to a healthy status that could potentially accrue gains for the region. In fact, Bishop et al has provided a comprehensive antidote to revitalize the sick CARICOM patient.[193] Additionally, CARICOM leaders adopted the tenets of a study titled “Single Development Vision” authored by Norman Girvan[194] at the University of the West Indies and which laid out a comprehensive “framework for the growth of the Community and for the further implementation and development of the CSME.”[195] More recently, Tillman Thomas, Grenada’s prime minister, made an impassioned plea in a position paper directed to CARICOM Heads of Governments when he articulated specific policy proposals to re-energise CARICOM integration.[196]

All these initiatives represent an acknowledgement that the CARICOM project is not working and will require substantial reforms. However, structural regional limitations, such as small aggregate size and absence of a major regional leader, will remain despite the application of any treatment to cure the ills.

7.2 UNASUR

As it pertains to UNASUR, the group has a higher chance of succeeding than its CARICOM counterpart, according to favourable outcome on four of the eight indicators in the RIST assessment model. Being a recently formed regional groping, adequate information was unavailable for three indicators, specifically as it relates to intra-regional trade, private sector demand, and political will and commitment. Nonetheless, the experience of MERCOSUR and CAN was used as proxy to inform this study, however, the experiences of those integration movements does not definitively and empirically inform us on what the UNASUR experience will be; this can only be ascertained with time and experience.

UNASUR’s main strengths lie in it large combined market size, the presence of a regional power (i.e., Brazil), and its enormous trade and FDI potential as a result of its high complementarity in goods and services. The data show that MERCOSUR has had an impressive economic record in the areas of trade and investments, which were spurred on by many factors for success, including large combined markets, strong demand from the private sector for integrating economies, politicians eager to advance the process and the presence of a regional leader in Brazil. However, the experience of CAN has been quite the opposite and the grouping has failed to record much economic gains and has been plagued by issues of non-compliance, unequal distribution of costs and gains, politicisation of integration issues, and, at the domestic level of individual countries, political instability and social unrest.[197] A large part of UNASUR’s success will depend upon its leaders’ political will and enthusiasm for integration, including the commitment to fund the programmes identified in its Constitutive Treaty along with its willingness to surrender some elements of sovereignty and cede implementation authority to supranational institutions.   Moreover, it is worth noting that UNASUR is not a free trade agreement[198] and has not established – nor indicated its intention to – a Common External Tariff or similar preferential measures in order to increase trade among its members. The way UNASUR is currently structured can more aptly be described as an elaborate, multi-dimensional regional cooperation agreement that encompasses many elements of economic activities and areas of cooperation that facilitate trade, encourage infrastructure development and linkages, lead to energy harmonization, and stimulate collaboration on research, innovation, technological transfer and technological production. Some have argued that regional cooperation agreements are “easier to administer [than regional free trade agreements] and are less threatening to national sovereignty than formal trade agreements.”[199] However, this administrative ease can only be achieved through the adoption of a clear plan of action that addresses policy coordination and which ranks (by way of a hierarchical structure) the pivotal areas in order of relevant magnitude for achieving economic success and meeting the objectives of the Constitutive Treaty.

Additionally, member countries should be assigned individual leadership responsibility or “ownership” of the objectives as outlined in the Constitutive Treaty. For instance, Venezuela or Brazil could be assigned to advance the energy initiative while Chile, which has had a long-term relatively stable financial architecture, would have lead responsibility on financial integration. Brazil, with the most advanced military in the region, could be expected to lead on security. Guyana could be assigned to coordinate the mandate that deals with the environment and climate change.

Also, UNASUR need to accelerate the implementation of its stated objective for achieving “citizen participation through mechanisms for interaction and dialogue between UNASUR and the various social actors in the formulation of South American integration policies.”[200] To satisfy this, UNASUR must shed its current model of inter-governmentalism. This would entail redesigning the current organisational structure of UNASUR to incorporate mechanisms at every level for effective participation of civil society groups. These groups, endowed with enormous resources and technical capabilities, can also be tasked to lead on some the objectives for UNASUR. For instance, the region’s private sector can lead the process for designing and building the infrastructure network necessary to connect the region by sea, air and land. Non-governmental organisations can provide leadership by promoting cultural diversity within the region by expressing the traditions, knowledge, and insights specifically representative of the various peoples within the region. [201]

7.3 Conceptual Analysis of CARICOM and UNASUR

Conceptually both UNASUR and CARICOM exhibit elements of what are considered ‘old’ and ‘new’ forms of regionalism. And, in line with Warleigh-Lack and Gomez-Mera, there is no analytical utility in separating the two concepts especially because there are so many overlaps in both schools of thoughts. CARICOM remains fundamentally a closed and ‘old’ type form of integration. It is primarily geared at advancing its members’ interests, while excluding non-members, in all the ‘pillars’[202] that it has as its objectives. As an example, in the area of trade, the group still applies the CET to non-members. Also, the political apparatus is dominated by governmental elites who make all the major decisions with little or no participation from other stakeholder groups. Furthermore, there is still considerable outside influence from rich countries and donors, who have an enormous ability to frame the agenda for the group. For example, during negotiations for the European Partnership Agreements (EPAs), the EU was able to employ many coercive tactics and insisted that CARICOM negotiate the EPAs in collaboration with the Dominican Republic, despite reservations from member countries. As a result, the region was forced to accept an agreement that had “few discernible development benefits”[203] and included provisions beyond current WTO requirements (or WTO-plus) including a sign off deadline that involved potential sanctions if the deadline was missed.[204] As a ‘laboratory’ or ‘stepping stone’ to prepare and better cope in the global economy, CARICOM has not shown much growth and change from what it was prior to the establishment of the CSME. This stagnation epitomizes what the entire project is at the current moment.

As integration relates to UNASUR, at this early stage in its development, it is an inter-governmental initiative like its CARICOM counterpart. However, UNASUR has not adopted a closed approach in its integration efforts. There are no preferential trade mechanisms and the group leaves open the possibility for other countries to join.[205] Furthermore, its integration has been driven mostly from within the bloc and it has so far made highly important policy responses[206] without relying on outside participation, influence, or support. This is due in large part to the influence that the larger and more economically developed countries in the region exert.

An additional dimension we see playing out is the high level of realist manifestation of political assertiveness and independence. This is demonstrated by many countries in the region – in particular, Brazil, Venezuela, and Ecuador, which are resisting Western influences (particularly, the United States), that traditionally have dominated the Latin American and Caribbean regions. This dynamic motivates these countries to ensure that UNASUR succeeds and, in the process, offer an effective counterbalancing mechanism to their counterparts in the North. 

7.4 Guyana

Guyana’s less-than-impressive economic performance with its CARICOM counterparts is evident in the low levels of intra-regional trade and investment that has been generated between Guyana and the region. This is primarily a result of quite small CARICOM markets, poor transport infrastructure, Guyana’s undiversified economy and the nation’s nascent industrial sector. Moreover, the economy is still dominated by the primary agricultural production and commodities sectors (e.g., sugar, rice, fishing, gold and other minerals), which result in low intra-regional demand because other CARICOM territories also produce similar agricultural products for domestic consumption and exports within the region.

As it relates to UNASUR, the enormous trade imbalance that exists between Guyana and countries of the region is indicative of the poor manufacturing and industrial sectors in Guyana as well as the low demand for Guyana’s primary produce in UNASUR countries – an impact related to the low degree of complementarity in tradable goods. Moreover, the lack of access – as a result of poor and costly transportation and communication infrastructure – to South American markets is another critical dimension that has contributed to absolute minimum levels or no trade between Guyana and several UNASUR members.

Most of Guyana’s exports are destined for North American and European markets, which indicate there is a higher level of complementarity between Guyana and the developed world economy. Additionally, those markets are much larger and thus involve higher levels of demand.

The most pervasive and detrimental factors that have constrained Guyana’s development surround the issue of political instability. During the three longest growth periods – (1964-1968), (1992-1997), (2006-present) – the single common characteristic for success has involved some level of political accommodation or maneuvering space for the governing administration to operate. Another feature during these periods reflects open market economic polices. However, open market economic policies cannot achieve economic growth on their own without a politically stable environment and vice versa.  Moreover, political instability makes Guyana a poor candidate for membership in any regional integration agreement. Such a negative, volatile political climate makes it difficult for the country to attract investments, achieve macroeconomic stability, improve productivity and it discourages the government and firms from investing in product and process research and development. Additionally, the negative global and regional press that is generated whenever there is a politically unstable environment often leaves an exaggerated negative image of the country that frightens would-be investors and skilled personnel seeking employment.

Another element that has contributed to high economic growth in Guyana is the long-term experience of high commodities prices on the world markets. For example, in the early 1970s, despite the onset of the closed socialist economic approach, Guyana’s economy recorded significant growth as a result of high commodity and agricultural prices.  This shows that despite a less than stable political environment and socialist economic policies, the country could still record positive growth if commodities and agricultural prices were high.

The present economic environment is one where there has been no political destabilisation as the Guyanese government has pursued open market policies while the prices of agricultural products and commodities prices have remained high. This has resulted in five consecutive years of economic growth between 2006 and 2010.

Therefore, Guyana’s challenge is to ensure that the current economic and political environment is preserved. The evidence shows that Guyana’s economic success is intricately tied to its domestic policies and environment. Policy makers need to devise a political model to achieve sustained political stability. Additionally, the bulk of open economic market policies must continue to be pursued along with a diversification strategy that reduces the nation’s predominant reliance upon volatile commodities and primary products markets.

8. Implications and Conclusion

In employing RIST, a wide-ranging model of eight theoretical variables to sort and analyse the empirical data as it relates to the potential for success of the integration blocs of CARICOM and UNASUR, I have concluded, regarding regional integration when assessed from a political- economy perspective, UNASUR emerges as a potentially sensible option for Guyana. Meanwhile, CARICOM integration has not resulted in much, meaningful or long-term gain for the region or for Guyana after 38 years of operation. In addition, the empirical data show that it is unlikely to yield much benefit in the future. Therefore, Guyana should consolidate it scarce financial and administrative resources and explore new possibilities with another region while abandoning the CARICOM project. Such a move would require an act of political bravery and would amount to a seismic shift in the country’s foreign policy. This will no doubt have colossal reverberation both domestically and across the region (and can either further weaken the group’s potential for success, especially if it produces a domino effect, or strengthen the resolve of the remaining members to advance the process). However, with a clearly articulated case as to the futility and unfeasibility of the project, the Guyana government can reduce the blunt of any negative impact and achieve the support required from its populace. 

The main drawback of such a move is the fact that Guyana will no longer benefit from the functional areas of cooperation where there has been some success.[207] However, without commitment of resources, effective supranational institutions or implementing agencies, these functional areas will never achieve their full potential and will be vulnerable to leaders’ arbitrary and whimsical nature.  

Moreover, this should all be done while pursuing a policy of open or outward-oriented economic liberalisation with the rest of the world by removing both tariff and non-tariff barriers and engaging in bi-lateral trade arrangements. UNASUR exhibits many essential characteristics that are normally associated with successful regional economic schemes and its long-term prospects look promising.  Central to this potential is the large aggregate market size and the role that Brazil and other strong economic members, like Chile and Argentina, can play to advance the bloc’s prospects.

Another integral part of UNASUR’s appeal is that in its current incarnation, it does not have any of the characteristics that would suggest the regional framework operates as a free trade agreement. Rather, it contains many elements of economic activities and areas of cooperation that facilitates trade, like infrastructure development and linkages, energy harmonization, cooperation on research, innovation, technological transfer and technological production etc. UNASUR can more aptly be described as an elaborate, multi dimensional regional cooperation agreement[208], which makes it a more attractive option for Guyana. 

These collaborative initiatives will help the country build up physical infrastructural linkages with its neighbouring partners and will afford better access to previously inaccessible areas and markets in South America. Moreover, Guyana will benefit from enormous economies of scale, because the costs of such projects will be shared and will reduce the otherwise significant financial burden Guyana would carry if it were to accomplish these projects on its own. Energy cooperation schemes will certainly help Guyana access cheaper and more affordable energy, which, in turn, can reduce the burden that high costs of fuel and electricity place on the nation’s consumers as well as the country’s private sector.  Additionally, the pooling of technical, technological and intellectual resources throughout the region can certainly have a pronounced effect on Guyana’s private sector, which then can acquire new and sophisticated knowledge and techniques of doing business as generated from research and development initiatives.[209]

However, UNASUR’s complex and multifarious mandate makes some of its worthwhile economic initiatives vulnerable to serious problems as a result of other issues, such as political intervention and security that make take precedent or require more urgent attention and resources.  To address this, UNASUR will have to commit to building institutions that have supranational authority over members’ individual interests.

On the domestic level, Guyana continues to be plagued by a polarizing political environment, which often leads to disastrous political unrest and instability.  Additionally, it suffers from poor infrastructure in transport and communication along with many administrative and bureaucratic constraints to trade. Moreover, the country’s excessive reliance on the primary commodity sector needs to be addressed and measures need to be adopted that will diversify the economy and allow the nation to build its manufacturing and industrial sectors.  Also, domestic private sector firms need to address their capacity issues in order to effectively compete in the global – or regional – environment. These are all impediments that would undermine any partnership within a formal regional integration initiative. Guyana needs to focus its efforts on efficiently and effectively addressing these domestic constraints in order to constructively engage and achieve maximum gains from UNASUR.

Finally, because UNASUR does not include a preferential trade arrangement, it means that Guyana can, on the one hand, capitalise on the cooperation initiatives as outlined in the constitutive treaty and, on the other, adopt a non-preferential open-trade and economic policy with all nations in the global economy. This approach has the advantages of ensuring that trade diversion would not occur. That is, the most efficient global producer will be able to fill Guyana’s demands without facing a CET or other preferential tariff, and will enable Guyana to adapt efficiently to the continuously shifting dynamics of the world economy. This takes on an even more urgent dimension because the global political and economic environments are going through significant changes, especially with the arrival of emerging powers like China and India. Guyana could seek substantial linkages and cooperation with these countries. Moreover, this strategy leaves open the possibility for regional cooperation agreements, as opposed to integration, with any country in the global system covering a wide spectrum of specific areas where synergies and complementarities could be harvested with mutual benefits.

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---

[1] CARICOM Secretariat, Treaty Establishing the Caribbean Community, accessed March 14, 2011, http://www.caricom.org/jsp/community/original_treaty-text.pdf.

[2] Ibid., Article 4 (a).

[3] Ibid., Article 4 (a)(i).

[4] Ibid.

[5] As described in the opening sentence of the Declaration, accessed March 14, 2011, http://www.caricom.org/jsp/communications/meetings_statements/grand_anse_declaration.jsp?menu=communications.

[6] ECLAC, Globalisation and Development, (Santiago, Chile, 2002), 331-354, accessed April 09, 2011, http://www.eclac.org/publicaciones/xml/0/10030/Globalization-Chap11.pdf.

[7] Norman Girvan, “Reflections on the CSME” (Keynote Address to SALISES Conference on CSME, UWI St. Augustine March 31, 2004), accessed April 12, 2011, http://sta.uwi.edu/salises/workshop/csme/paper/ngirvan.pdf.

[8] Ibid., 2.

[9] Ibid., 3.

[10] See Article 2 of the Constitutive Treaty of UNASUR, accessed March 14, 2011, http://www.comunidadandina.org/ingles/csn/treaty.htm.

[11] Ibid., Article 3.

[12]Omar Cordero, “UNASUR And Its Future Impact On The Americas,” (Research Paper, U.S. Army War College, 2009), 1, accessed April 12, 2011,  http://www.dtic.mil/cgi-bin/GetTRDoc?Location=U2&doc=GetTRDoc.pdf&AD=ADA501218.

[13] Ibid.

[14] “CARICOM Integration Is As Strong As Ever,” Guyana Chronicle, June 13, 2009, accessed June 14, 2011, http://www.guyanachronicleonline.com/site/index.php?option=com_content&view=article&id=2513:caricom-integration-is-as-strong-as-ever.

[15] Bharrat Jagdeo, “Address By His Excellency Bharrat Jagdeo President Of The Republic Of Guyana” (Address to the Fourth Summit Of The Union Of South American Nations,” November 27 2010), accessed May 12, 2011, http://www.minfor.gov.gy/tsite/images/minfor_docs/other_speeches/opening_ceremony_unasur.pdf.

[16] Government Information News Agency (GINA), “UNASUR Chairman Champions CARICOM/South American Union,” December 17, 2010, accessed on May 21, 2011, http://www.gina.gov.gy/archive/daily/b101217.html.

Also, see Jagdeo, Address, 24.

[17] Jagdeo, Address, 25.

[18] Philippe de Lombaerde and Luk Van Langenhove, “Indicators of Regional Integration: Conceptual and Methodological Issues,” IIIS Discussion Paper, no. 64 (2005): 27.  Accessed June 12, 2011, http://www.tcd.ie/iiis/documents/discussion/pdfs/iiisdp64.pdf.

[19] Klaus Krippendorf, Content Analysis: An Introduction To Its Methodology, 2^nd ed. (Thousand Oaks, CA: Sage 2004).

[20] Christopher Weare and Wan-Ying Lin, “Content Analysis of the World Wide Web - Opportunities and Challenges,” Social Science Computer Review 18, no.3 (2000): 272-292, accessed on July 20, 2011, http://www.google.gy/url?sa=t&source=web&cd=3&ved=0CCgQFjAC&url=http%3A%2F%2Fciteseerx.ist.psu.edu%2Fviewdoc%2Fdownload%3Fdoi%3D10.1.1.89.6408%26rep%3Drep1%26type%3Dpdf&ei=k3xSTubpJ86itgf3oO3KCQ&usg=AFQjCNGqK-Kc54eLSdtCJiP6emxFukmiUg

[21] Bjorn Hettne, “Beyond The ‘New’ Regionalism,” Paper for Warwick University, Page 3, Accessed July 10, 2011, http://www.google.gy/url?sa=t&source=web&cd=2&ved=0CBwQFjAB&url=http%3A%2F%2Fwww2.warwick.ac.uk%2Ffac%2Fsoc%2Fcsgr%2Fevents%2Fconferences%2F2005_conferences%2F8_annual_conference%2Fhettne.doc&ei=EoBSTs_DFcmhtwfjkdTKCQ&usg=AFQjCNGLagsUNEAJQuO0QrRa0owL0tGk4g

[22] David Mitrany is a chief proponent of functionalism and its basic tenants was developed in his essay titled “A working Peace System” in 1943.

[23]  Hettne, “Beyond the ‘New’ Regionalism”, 3.

[24] Ibid.

[25] Ibid.

[26] Stefan Schrim, Globalization and the New Regionalism, (Cambridge, UK: Polity Press, 2002), 4.

[27] Hettne, “Beyond the ‘New’ Regionalism”, 3.

[28] Ernst Haas, The Uniting of Europe. (Stanford: Stanford Univ. Press, 1958).

[29] Hettne, “Beyond the ‘New’ Regionalism”, 4.

[30] Ibid.

[31] Thanawat Pimoljinda, “Theoretical Discussion on Regional Integration: EU-ASEAN Perspective,” 2010, available online at Academia.edu and accessed August 1, 2011, http://independent.academia.edu/DrThanawatPimoljinda/Papers/361690/Theoretical_Discussion_on_Regional_Integration_EU-ASEAN_Perspective.

[32] Ibid., 4-5.

[33] Ibid., 5

[34] For a comprehensive volume on some of the major theorists of NR scholarship see the book by Soderbaum and Shaw, “Theories of New Regionalism.”

[35] Fredrik Soderbaum and Timothy Shaw (eds.), Theories of New Regionalism, (New York: Palgrave Macmillan, 2003), 4.

[36] Bjorn Hettne and Fredrik Soderbaum, “Theorising the Rise of Regionness,” New Political Economy 5, no.3 (2000): 457-473, accessed July 20, 2011,  http://smp.fsv.cuni.cz/Hettne.pdf.

[37] Alex Warleigh –Lack, “Towards a Conceptual Framework for Regionalisation: Bridging ‘New Regionalism’ and ‘Integration Theory,’ Review of International Political Economy, 13, no. 5, (2006): 752-53.

[38] For comprehensive treatment on these two concepts see: Shang-Jin Wei and Jeffrey A. Frankel, “Open versus Closed Trade Blocs,” in Regionalism versus Multilateral Trade Arrangements, ed. Takatoshi Ito and Anne O. Krueger (Chicago: University of Chicago Press, 1997), 119 – 140.

[39] Steven Radelet, “Regional Integration and Cooperation in Sub-Saharan Africa: Are Formal Trade Agreements the Right Strategy?” Harvard Institute for International Development, Development Discussion Paper,  no. 592 (1997):16-17, accessed July 29, 2011, http://www.cid.harvard.edu/hiid/592.pdf.

[40] See: Anthony Payne, The Global Politics of Unequal Development, (London: Palgrave, 2004), 16 and Andrew Gamble and Anthony Payne, Regionalism and World Order, (Basingstoke: Macmillan, 1996), 251.

[41]See: Laura Gomez-Mera, “How ‘new’ is the ‘New Regionalism’ in the Americas? The Case of MERCOSUR,” Journal of International Relations & Development, 11 (2008): 279-308 and Warleigh-Lack. Conceptual Framework, 750-771. 

[42] Warleigh-Lack, “Conceptual Framework”.

[43] Gomez-Mera, “How ‘new,’” 280.

[44] Ibid.

[45] Ibid., 280-281.

[46] World Trade Organisation (WTO), Report Of The Committee On Regional Trade Agreements To The General Council. (WT/REG/19, 2008), 1, accessed on July 21, 2011,

http://www.unescap.org/tid/projects/rtaap_comrpt08.pdf.

[47] Payne, Global Politics.

[48] Gamble and Payne. Regionalism and World Order.

[49] See: Paul Bowles, “Regionalism & Development After the Global Financial Crisis,” in New Regionalism in The Global Political Economy: Theories & Cases, ed. Shaun Breslin, et al. (London: Routledge, 2002), 81-103, and

Nicola Phillips, “Governance after Financial Crisis: South American Perspectives on the Reformulation of Regionalism,” in New Regionalism in The Global Political Economy: Theories & Cases, ed. Shaun Breslin, et al. (London: Routledge, 2002).  Also, Shaun Breslin and Richard Higgott, “Studying Regions: Learning from the Old, Constructing the New,” New Political Economy, 5 no. 3 (2000): 333-52.

[50] Shaun Breslin, Richard Higgott, and Ben Rosamond,  “Regions in Comparative Perspectives,” in New Regionalism in The Global Political Economy: Theories & Cases, ed. Shaun Breslin, et al. (London: Routledge, 2002).

[51] ECLAC, “Globalization and Development,” 332.

[52] The MFN Clause forms the cornerstone of the WTO rules and it articulates that any favourable preference granted to a member of the WTO must apply and be similarly granted to all members.

[53] Richard Baldwin, “Stepping stones or building blocs? Regional and multilateral integration,” (paper prepared for the G-20 Workshop on “Regional economic integration in a global framework,” Beijing, China, September 22-23 2004), accessed July 21, 2011, http://phase1.nccr-trade.org/images/stories/publications/Baldwin_SteppingStones.pdf

[54] Ibid., 6.

[55] Ibid., 7.

[56] Pravin Krishna, “Regionalism and Multilateralism: A Political Economy Approach,” The Quarterly Journal of Economics, 113, no. 1 (1998): 227-250.

[57] Jagdish Bhagwati, Termites In The Trading System: How Preferential Agreements Undermine Free Trade (New York: Oxford University Press, 2008).

[58] Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950).

[59] Ilan Kapoor, “Indicators for programming in Human Rights and Democratic Development: A Preliminary Study,” Canadian International Development Agency, (July 1996): 4, accessed July 30, 2011, http://brownschool.wustl.edu/sites/DevPractice/Human%20Rights%20Reports/Programming%20in%20Human%20Rights%20and%20Democratic%20Development.pdf

[60] Victor Anderson, Alternative Economic Indicators. (London: Routledge, 1991), 49-51.

[61] Sebastian Krapohl, “New Institutionalism Meets International Political Economy: A New Approach to the Study of Regional Integration Dynamics In- and Outside of Europe” (working paper prepared for presentation at the GARNET Conference ‘The European Union in International Affairs’, Belgium, Brussels, April 24-26, 2008), 4, accessed July 18, 2011: http://www.ies.be/files/repo/conference2008/EUinIA_IV_3_Krapohl.pdf

[62] Radelet, “Regional Integration and Cooperation,” 12-14.

[63] Walter Mattli, The Logic of Regional Integration: Europe and Beyond, (Cambridge: Cambridge University Press, 1999), 14.

[64] Ibid., 42.

[65] Paulo Borba Casella, “The Common Market of the South (MERCOSUR): Models and Qualitative Mutations for Consolidating an Integrated Economic Area," Annual Survey of International & Comparative Law 9, no.1(2003),  accessed July 30, 2011, http://digitalcommons.law.ggu.edu/cgi/viewcontent.cgi?article=1070&context=annlsurvey

[66] Mattli, Logic of Regional Integration, 54.

[67] Arild Underdal, “Explaining Compliance and Defection: Three Models,” European Journal of International Relations 4, no.1 (1998), 26.

[68] Laura Gomez-Mera, “Obstacles to Regional Integration in Latin America and the Caribbean: Compliance and Implementation Problems,” Jean Monnet/Robert Schuman Paper Series 7, no. 8, (2007), 4, accessed July 30, 2011, http://www6.miami.edu/eucenter/GomezMera_ObstRegIntLatAmer_long07_edi.pdf.

[69] Ibid.

[70] Mattli, Logic of Regional Integration, 52.

[71] Ibid., 54.

[72] Krapohl, “A New Approach,” 6.

[73] Ibid.,11.

[74] Mattli, Logic of Regional Integration, 56.

[75] Ibid., 14.

[76]Laura Gomez-Mera, “The Impact of Regional Institutions: An Empirical Study of Implementation in Regional Trade Blocs” (paper presented at the International Studies Association Annual Meeting, San Francisco, USA, March 26-29, 2008).

[77] Mancur Olson, The Logic of Collective Action: Public Goods and the Theory of Groups, (Boston: Harvard University Press, 1965).

[78] Krapohl, “A New Approach,” 7.

[79] Thomas Pedersen, “Cooperative Hegemony. Power, Ideas and Institutions in Regional Integration,” Review of International Studies 28, (2002): 677-696.

[80] Detlef Nolte, “How to Compare Regional Powers: Analytical Concepts and Research Topics” (paper prepared for delivery at the ECPR Joint Session of Workshops, Helsinki 7 - 12 May 2007), 21, accessed July 30, 2011, http://www.essex.ac.uk/ecpr/events/jointsessions/paperarchive/helsinki/ws9/nolte.pdf

[81] Ibid., 15.

[82]See:  Maurice Schiff,  “Will the Real ‘Natural Trading Partner’ Please Stand Up?” Policy Research Working Paper no. 2161. Washington DC, World Bank, June 1999, accessed July 30, 2011,  http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/09/14/000094946_99081805502376/additional/118518322_20041117175550.pdf

And Rachel Simms and Errol Simms, “The Building Blocks of Successful Regional Integration: Lessons for the CSME from other Regional Integration Schemes,” (paper prepared for the 8^th SALISES Conference, St. Augustine, Trinidad, March 26-28, 2007), accessed July 30, 2011, http://sta.uwi.edu/conferences/salises/documents/Simms%20R%20-%20Simms%20E.pdf

[83] On the surface this logic seems obvious, but according to Simms and Simms, “Building Blocks,” the empirical evidence shows a different reality in the cases of CARICOM and MERCOSUR, with both regional groups achieving increases in intraregional trade flows despite high incidences of overlapping production of exported goods.

[84] Schiff, “Natural Trading Partner,” 22.

[85] Ibid., 22.

[86] See: Mattli, Logic of Regional Integration and Simms and Simms, “Building Blocks.”

[87] Simms and Simms, “Building Blocks,” 12

[88] Commonwealth Secretariat, “Small States: Economic Review and Basic Statistics”, Annual Series, 7 (2003): 35-36.  See also: Harvey Armstrong and Robert Read, “The Economic Performance of Small States and Islands: The Importance of Geography,” (paper presented at ISLANDS of the WORLD VIII International Conference, Kinmen Island, Taiwan, November 1-7, 2004).

[89] Maurice Schiff, “Regional Integration and Development in Small States,” Development Research Group, Washington DC: World Bank, (2002), 6.

[90] Bernard Hoekman, Maurice Schiff and L. Alan Winters, “Regionalism and Development: Main Messages from Recent World Bank Research,” Development Research Group, Washington DC: World Bank, Draft, September 1998.

[91] Kotios Aggelos, Saratsis Yiannis, and Galanos George, “Regional Development Strategies in Open Economies: Theoretical Questions,” Middle Eastern Finance and Economics, no. 8, 2010, accessed August 07, 2011, http://www.eurojournals.com/MEFE_8_04.pdf

[92] Ronnie Griffith, Kimberly Waithe, and Roland Craigwell, “The Significance of Foreign Direct Investment to Caribbean Development,” 2008, accessed June 15, 2011,

 http://www.ccmf-uwi.org/files/publications/misc/roland_craigwell/foreigninvestmentwithronnie.pdf

[93] Dirk Willem te Velde and Dirk Bezemer, “Regional Integration and Foreign Direct Investment in Developing Countries,” July 2004. Accessed August 12, 2011,  http://www.odi.org.uk/resources/download/1301.pdf

[94] Mikael Sandberg, James Seale, and Timothy Taylor, "History, Regionalism, and CARICOM Trade: A Gravity Model Analysis", Journal of Development Studies, 42, no.5, (2006): 795-811.

[95]See: Eduardo Borensztein, Jose  De Gregorio and Jong-Wha Lee, “How Does Foreign Direct Investment Affect Economic Growth?” National Bureau of Economic Research (NBER) Working Paper no. 5057, 1995. Also, Aggelos et al, “Regional development Strategies.” And Griffith et al, “Significance of FDI.”

[96] Griffith et al., “Significance of FDI.”

[97] Ibid., and Borensztein et al., “FDI Affect Growth.”

[98] Douglas Schuler and David Brown, "Democracy, Regional Market Integration, and Foreign Direct Investment," Business and Society 38, no. 4 (1999): 450-473.

[99] Manuel Agosin, and Ricardo Mayer, “Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?” Discussion Paper, No.146, Geneva: UNCTAD, 2000.

[100] Which as the name implies was a free trade area that lasted between 1965-1973. Its founding members included: Antigua and Barbuda, Barbados, Guyana, and Trinidad and Tobago, and later incorporated eight other members.

[101] Article 4 of the Treaty outlines the objectives, accessed July 30, 2011, http://www.caricom.org/jsp/community/original_treaty-text.pdf

[102] Grand Anse Declaration, accessed July 19, 2011, http://www.jis.gov.jm/special_sections/CARICOMNew/grandAnse.pdf

[103] Revised Treaty, accessed July 19, 2011,

 http://www.caricom.org/jsp/community/revised_treaty-text.pdf

[104] Norman Girvan, “Towards A Single Development Vision And The Role Of The Single Economy,” 2007, accessed July 20, 2011,

 http://www.caricom.org/jsp/single_market/single_economy_girvan.pdf

[105] The Twelve countries involved are: The Republic of Argentina, the Republic of Bolivia, the Federative Republic of Brazil, the Republic of Chile, the Republic of Colombia, the Republic of Ecuador, the Cooperative Republic of Guyana, the Republic of Paraguay, the Republic of Peru, the Republic of Suriname, the Oriental Republic of Uruguay and the Bolivarian Republic of Venezuela

[106] As stated in the Preamble of the CT

[107] See Article 3 titled “Specific Objectives” of the Constitutive Treaty of UNASUR, accessed August 05, 2011, http://www.comunidadandina.org/ingles/csn/treaty.htm

[108] “UNASUR now a legal entity with Constitutive Treaty in force,” Kaieteur News, March 13, 2011, accessed July 13, 2011,  http://www.kaieteurnewsonline.com/2011/03/13/unasur-now-a-legal-entity-with-constitutive-treaty-in-force/

[109] “Bolivia calls Unasur meeting on Colombia-Ecuador crisis,” Xinhua, March 04, 2008, accessed July 13, 2011, http://news.xinhuanet.com/english/2008-03/05/content_7721565.htm

[110] “UNASUR Leaders to Debate Venezuela and Colombia Crisis,” BBC News, July 25, 2010, accessed July 13, 2011,  http://www.bbc.co.uk/news/world-latin-america-10754663

[111] “UNASUR facilitates dialogue in Bolivian crisis,” Kaieteur News, September 28, 2008, accessed July 13, 2011, http://www.kaieteurnewsonline.com/2008/09/28/unasur-facilitates-dialogue-in-bolivian-crisis/

[112] “UNASUR Condemns Attempted Coup in Ecuador,” The Argentina Independent, October 01, 2010, accessed July 13, 2011,  http://www.argentinaindependent.com/currentaffairs/newsroundups/roundupslatinamerica/ecuador-unasur-condemns-attempted-coup-in-ecuador-/

[113] “Unasur pledges 300 m USD for Haiti; sees Ecuador and Colombia edging closer,” MercoPress,  February 09, 2010, accessed July 13, 2011,  http://en.mercopress.com/2010/02/09/unasur-pledges-300-m-usd-for-haiti-sees-ecuador-and-colombia-edging-closer

[114] Analysis will follow in the next section.

[115] CARICOM Secretariat, Caribbean Trade and Investment Report 2010: Strategies for Recovery, Renewal and Reform, (Jamaica: Ian Randle, 2010), 4.

[116] Ibid., 7.

[117] Ibid., 13.

[118] Ibid., 16.

[119] Ibid., 5.

[120] Even though UNASUR’s Treaty does not explicitly state that it is a trading arrangement, the potential for the group’s success will nonetheless depend partly on its ability to increase trade. It is easy to infer that trade is an objective of the group from the infrastructural and other economic projects it has outlined as part of its objectives.

[121] See: Andres Malamud, “Presidentialism and Mercosur: A Hidden Cause for a successful Experience,” in Comparative Regional Integration: Theoretical Perspectives, ed. Finn Laursen ( Aldershot: Ashgate, 2003), 57,

accessed  July 16, 2011, http://www.eui.eu/Personal/Researchers/malamud/Presidentialism_and_Mercosur_(Laursen_book).pdf

Also, Mattli, Logic of Regional Integration, 156.

[122] Mattli, Logic of Regional Integration, 146.

[123] Matthew Bishop et al., “Caribbean Regional Integration: A Report by the UWI Institute of International Relations,” (2011), 45-46, accessed July 12, 2011,

http://www.acp-eu-trade.org/library/files/Girvan&al_EN_230611_IIR_Caribbean%20Regional%20Integration.pdf

[124] Ibid., 32.

[125] Ibid., 35.

[126] CARICOM Secretariat, Trade and Investment, 36.

[127] Ibid., 37-40.

[128] Mattli, Logic of Regional Integration, 158.

[129] Japan Bank for International Cooperation, “MERCORSUR Experience in Regional Freight Transport Development,” JBIC Research Paper, no.13 (2002), accessed July 16, 2011, http://www.jbic.go.jp/en/research/report/research-paper/pdf/rp13_e.pdf

[130] See Juan José Echavarría and Cristina Gamboa, Columbia and Venezuela After the Uruguay Round: Trade Policy Reforms and Institutional Adjustments, p. 31, citing the work of Ocampo, J.A. & P.Esguerra, "Concertación y política industrial: la experiencia colombiana a la luz de algunos casos internacionales de éxito," (paper presented to the National Congress of Exporters (ANALDEX), Cartagena, Colombia, 1992), shows that the “decisions adopted within the Andean Group in Galápagos in December of 1989 that later were consigned in the Act of Barahona in 1991, resulting in the consolidation of the Andean free trade area… were made without private sector participation.

http://www.google.com/url?sa=t&source=web&cd=2&ved=0CCcQFjAB&url=http%3A%2F%2Fwww.netamericas.net%2Fresearchpapers%2Fdocuments%2Fechavarria%2Fechav2flacso.doc&rct=j&q=private%20sector%20demand%20to%20form%20Andean%20community%20trade%20agreement&ei=2WYhToPhCKHf0QHT7ujDAw&usg=AFQjCNH0YsEaJqSj3ZD8fjKShBbqT3cKrA

[131] Gomez-Mera, “Obstacles to Regional Integration.”

[132] Casella, “The Common Market.”

[133] Malamud, “Presidentialism,” 64.

[134] Matthew Bishop et al., “Caribbean Regional Integration,” 12.

[135] Ibid., 25.

[136] Ibid., 12.

[137] Norman Girvan, “CARICOM’S ‘Original Sin,’” (Paper prepared for delivery at the Caricom Regional Civil Society Consultation, Port-Of-Spain, Trinidad And Tobago, February 10-11, 201), 3, accessed July 10, 2011, http://www.normangirvan.info/wp-content/uploads/2011/02/caricoms-original-sin.pdf

[138] Anthony Payne and Paul Sutton, “Repositioning the Caribbean Within Globalisation,” Caribbean Paper no.1, (2007), 2, accessed July 20, 2011, http://www.cigionline.org/sites/default/files/1.%20Repositioning%20the%20Caribbean%20within%20Globalisation.pdf

[139] “ ‘It Cannot Be Business as Usual’-New Caricom SG,” Stabroek News, August 16, 2011,

accessed August 17, 2011, http://www.stabroeknews.com/2011/news/stories/08/16/‘it-cannot-be-business-as-usual’-new-caricom-sg/

[140] The CCJ is divided into original jurisdiction and appellate jurisdiction. All 12 CSME members have signed on to the original jurisdiction but only Guyana, Belize and Barbados have done so for the appellate jurisdiction.

[141] Simms and Simms, “Building Blocks,” 16.

[142] According to figures provided by the Heritage Foundation 2011 Index of Economic Freedom,  accessed July 13, 2011,  http://www.heritage.org/index/country/trinidadtobago

[143] Bishop et al, “Caribbean Regional Integration,” 25.

[144] Ibid.

[145] “Kamla: No more T&T godfather,” Trinidad Guardian,  July 05, 2010, accessed July 15, 2010, http://test.guardian.co.tt/?q=news/politics/2010/07/05/kamla-no-more-tt-godfather

[146] “Kamla cautions region: T&T no ATM card,” Trinidad Express, July 08, 2010, accessed July 15, 2011, http://www.trinidadexpress.com/news/97998514.html

[147] A fact acknowledged by CARICOM Secretariat in its “Caribbean Trade and Investment Report 2010,” page 1.

[148] Jeetendra Khadan and Roger Hosein, “Establishing CARICOM’s Real Natural Trading Partner,” (paper presented at the University of the West Indies’ Conference On The Economy (COTE), Trinidad, October 7, 2010), accessed July 30, 2011, http://www.ccmf-uwi.org/files/publications/conference/2010/8_3-Hosein_Khadan-p.pdf

[149] Alvin Wint, “The Economic Impact of Caribbean Regional Economic Integration:National Policy and Intra-Regional Performance Differences,” in Caribbean Imperatives: Regional Governance and Integrated Development, ed. Kenneth Hall and Denis Benn (Kingston: Ian Randle, 2005).

[150] Delisle Worrell, “Economic Integration with Unequal Partners,” in The Caribbean Community: Beyond Survival, ed. Kenneth Hall (Kingston: Ian Randle, 2001).

[151] US Department of State, “country profile,” accessed August 01, 2011, http://www.state.gov/r/pa/ei/bgn/

[152] Ibid.

[153] The usual suspects being Ansa McAL, Neal and Massy, Sagicore, Goodard Enterprises, Grace Kennedy, CL Financial, and TCL. See CARICOM Secretariat, “Trade and Investment,” 51-57.

[154] See:  ECLAC, “Foreign Direct Investment in Latin America and the Caribbean 2010,” Briefing Paper (2011), 42-43, accessed August 02, 2011, http://www.cepal.cl/cgibin/getProd.asp?xml=/publicaciones/xml/0/43290/P43290.xml&xsl=/ddpe/tpl-i/p9f.xsl&base=/tpl-i/top-bottom.xslt  

[155] Ibid., 51.

[156] CARICOM Secretariat, “Trade and Investment,” 69.

[157] Ibid., 43.

[158] ECLAC, “Foreign Direct Investment,” 8.

[159] ECLAC, “Foreign Direct Investment,” 29.

[160] Ibid., 47.

[161] Ibid., 8.

[162] Ibid., 9.

[163] Ibid., 7.

[164] Cornelia Staritz, Ruben Atoyan, and Judith Gold, “Guyana: Why Has Growth Stopped? An Empirical Study on the Stagnation of Economic Growth,” IMF Working Paper, (2007), 4, accessed July 20, 2011, http://www.imf.org/external/pubs/ft/wp/2007/wp0786.pdf

[165]Inter-American Development Bank (IDB), “Guyana: Country Strategy 2008-2012,” (2008),1,  accessed August 05, 2011,

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=1957643

[166] John Gafar, Guyana: From State Control to Free Markets, (New York: Nova Science, 2003), 37.

[167] Ibid., 39.

[168] Ibid., 41.

[169] Ibid., 57.

[170] Ibid., 45.

[171] See: Gafar, “Guyana;” IDB, “Country Strategy;” and Staritz et al., “Growth Stopped.”

[172] Staritz et al., “Growth Stopped,” 4.

[173] IDB, “Country Strategy,” 1.

[174] Staritz et al., “Growth Stopped.”

[175] Ibid., 6.

[176]Bureau of Statistics (BoS),  http://www.statisticsguyana.gov.gy/nataccts.html#natdiv

[177] Kari Grenade and Denny Lewis-Bynoe, “Reflecting on Development Outcomes: A Comparative Analysis of Barbados and Guyana,” Central Bank of Barbados Working Paper (2010), 26, accessed July 30, 2011, http://www.centralbank.org.bb/WEBCBB.nsf/vwPublications/22DDB7EE08B1A0A8042577F5007AABE1/$FILE/Reflecting%20on%20Development%20Outcomes%20A%20Comparative%20Analysis%20of%20Barbados%20and%20Guyana.pdf

[178] Ibid., 29.

[179] The Heritage Foundation, “Index.”

[180] Guyana National Working Committee on Trade, “Profile Of Trade In Guyana,” Caribbean Policy Development Centre,  8,  accessed  July 19, 2011, http://www.cpdcngo.org/guyana/index.php?option=com_docman&task=cat_view&Itemid=27&gid=36&orderby=dmdate_published

[181] Caricom Secretariat, “Trade and Investment,” 16.

[182] This is according to data supplied by the Guyana Bureau of Statistics. No exports were sent to Bolivia, Paraguay, Uruguay, and Argentina

[183] ALADI comprises twelve Latin American countries, including Mexico and Cuba and all UNASUR countries with the exception of Guyana and Suriname.

[184] CARICOM Secretariat,  “Statistics,” accessed  July 15, 2011,  http://www.caricomstats.org/Files/Publications/Quick_Ref2008/LAIA.pdf

[185] Guyana Bureau of Statistics,  accessed  July 14, 2011,  http://www.statisticsguyana.gov.gy/trade.html#partners1

[186] UNCTAD, “World Investment Report: 2010. Country Fact Sheet: Guyana,” accessed August 10, 2011, http://www.unctad.org/sections/dite_dir/docs/wir10_fs_gy_en.pdf

[187] Guyana National Working Committee on Trade, “Profile of Trade,” 14.

[188] CARICOM Secretariat, “Trade and Investment.”

[189] Jaime de Melo and Arvind Panagariya, New Dimensions in regional Integration, (Cambridge: Cambridge University, 1993).

[190] Pablo Guerrero et al. “Trade Logistic and Regional Integration in Latin America and the Caribbean,” IDB Working Paper 148, (2009), 20, accessed August 10, 2011,

http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35031936

[191] Guerrero et al.,“Trade Logistics.”

[192] CARICOM Secretariat, “Trade and Investment,” 36.

[193] Bishop et al., “Caribbean Regional Integration.”

[194] Girvan, “Single Development Vision.”

[195]CARICOM Secretariat, “Draft Strategic Plan for Development to be Presented at Port-of-Spain Conference,” (Press Release, November 26, 2010), accessed July 30, 2011,

http://www.caricom.org/jsp/pressreleases/press_releases_2010/pres472_10.jsp

[196] Tillman Thomas, “Re-Energising CARICOM Integration,” (paper presented to the CARICOM Heads of Government at their Retreat, May 21- 22, 2011),  accessed July 30, 2011,

 http://www.normangirvan.info/wp-content/uploads/2011/05/renergising-caricom-integration-1.pdf

[197] Andrés Malamud, “Latin American Regionalism and EU Studies,” European Integration  32, no. 6 (2010): 637–657, accessed July 17, 2011,  http://www.ics.ul.pt/rdonweb-docs/AndresMalamud_2010_n2.pdf

[198] UNASUR’s Constitutive Treaty makes not explicit mention of trade, customs union or free trade area.

[199] Radelet, “Regional Integration and Cooperation,” 26.

[200]Article 3 (q) of the Constitutive Treaty

[201] Article 3 (p) of the Constitutive Treaty

[202] The objectives of CARICOM have a multidimensional characteristic and are inline with the tenets of new regional theory in this regard.

[203]Matthew Bishop, Tony Heron and Anthony Payne summing up the feelings of academics in the region about the EPA. “Caribbean Development Alternatives and the CARIFORUM-European Union Partnership Agreement,” Journal of International Relations and Development, (Forthcoming): 1.

[204] See Tony Heron, “Asymmetric Bargaining and Development Trade-Offs in the CARIFORUM-European Union Economic Partnership Agreement,” (forthcoming), and also, Matthew Bishop, “lost in Translation? EU Development Policy in the Anglophone and Francophone Eastern Caribbean,” European Journal of Development Research 23, (2011): 337-353.

[205] Article 19 of the CT allows for “other Latin American and Caribbean States” to become ‘Associate States’ and Article 20 goes further and allows for these states to become full members after four years as Associates.

[206] As mentioned on pages 40-41 of this study.

[207] Bishop et al., “Caribbean Regional Integration,” 16.

[208] Radelet, “Regional Integration and Cooperation,”4, distinguishes between integration agreements and cooperation agreements, with the former focusing on formally integrating economies for long-term gains on trade and efficient maximisation of factors of production. Meanwhile, the latter is more concerned about members collaborating in selective policy areas that entail less long-term obligation than integration agreements, such as, for example, a joint infrastructure initiative or the adoption of unified standards and regulations in an industry. Moreover, Because of the flexibility of cooperation agreements, it does not require a regional group to focus on trade liberalization in the early stages, but rather it lays an appropriate foundation for deeper and further economic integration.

[209] This is not an exhaustive list of possible benefits that Guyana can accrue from UNASUR’s cooperation initiatives but rather just a few examples. It encompasses such a broad area that is beyond the scope of this study and leaves open the possibility for future research to fill the gaps in this area.