Social Mobility in Latin America: The Effects of Regional Trade Agreements on Distributional Outcomes

This research examines the relationship between regional trade agreements and social mobility in Latin America through theoretical and empirical lenses.

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August 29, 2023

Inquiry-driven, this article may reflect personal views, aiming to enrich problem-related discourse.


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This research examines the relationship between regional trade agreements and social mobility in Latin America through theoretical and empirical lenses. Beginning with a comprehensive review of historical and political contexts of regionalism in Latin America, including economic liberation, peace agreements in Central America, and democratization of the Southern Cone, this study will highlight the emergence of regional trade agreements as a tool of economic integration. In analyzing the macroeconomic implications of these agreements, we pay particular attention to their effects on income distribution and social mobility – two crucial factors in determining inclusive and sustainable growth. This brief draws on empirical assessments of trade openness and reforms to find evidence suggesting an inclusive multilateral approach to trade can positively contribute to social mobility and income equality in Latin America.

Executive Summary

In recent decades, economic integration, facilitated by regional trade agreements (RTAs), has become a prominent trend in historically disadvantaged regions. Riding the wave of globalization that brought about multilateral organizations like the GATT and later the WTO following the end of World War II, geographic proximities and similar economic development trajectories prompted regional cooperation on trade. 

One such region was Latin America, where RTAs aimed to foster cross-border commerce, investment flows, and growth in a region with historically low levels of economic integration. Attempts at regional trade integration were made as early as 1960 with the formation of LAFTA, yet not until the 1990s did RTAs gain prominence in the region, with agreements such as Mercosur and The Andean Community. However, Latin America's growth potential has not translated into more equal distributional outcomes. Despite the potential for RTAs to promote social mobility and reduce income inequality, evidence suggests that these agreements have had little effect on leveling the playing field in Latin America, as they did in other regions such as Europe. In evaluating the impact of RTAs on social mobility in Latin America, this brief will examine the theoretical underpinnings of regionalism and income inequality, review the history and context of RTAs in Latin America, and analyze empirical evidence on the effectiveness of these agreements in promoting social mobility and reducing income inequality.


Grinding poverty and limited social mobility have plagued Latin America for decades. Through periods of neoliberalism, democratization, and economic liberation, unfulfilled promises of inclusive growth and equitable distribution have led to persistent inequality and limited upward mobility. As worldwide trends toward economic integration continue – emerging in response to shifting geopolitical alliances, protectionist movements, and technological advancement – it is crucial to examine the applicability of regional trade agreements in a Latin American context. Where do these agreements fit into the region's historical, political, and economic landscape?

Pointed Summary

  • Latin America faces persistent challenges in income inequality, economic disparities, and limited social mobility.
  • Strengthening institutional frameworks, policy coherence, transparency, and accountability are essential for successful implementation.
  • Harnessing diverse perspectives from policymakers, academics, economists, and civil society representatives through nonpartisan approaches enables holistic and nuanced policymaking.
  • Stakeholders must transcend partisan divides and identify shared priorities to enact policies prioritizing social inclusion, economic diversification, and sustainable growth.


The Gini coefficient is a commonly used measure of income inequality, with a score of 0 indicating perfect equality and 1 indicating a complete absence of equality. In Latin America, the Gini coefficient ranges from 0.38 to 0.53, making it the most unequal region in the world with persistent levels of poverty, income inequality, and social exclusion (Figure 1). The coexistence of high levels of inequality alongside RTAs in the region raises questions about the effectiveness of these agreements in promoting social mobility and reducing income disparities.

Figure II
Gini Coefficients comparing Latin America to other countries

In exploring this issue, it is necessary to consider the potential means through which RTAs could affect income distribution. One mechanism is increased cross-border trade, which could create new employment opportunities and increase access to goods and services at lower prices; this could benefit lower-income households, reducing income inequality. We see examples of this positive impact in some areas, such as the success of Mexico's manufacturing industry under NAFTA, where employment and wages have increased, creating a robust middle class. While applicable to some cases, this is not universally true throughout Latin America. Instead, studies have shown that south-south RTAs – agreements between two or poorer countries – are likely to generate trade diversion and exacerbate income inequality, especially when external tariffs are high. Trade liberalization in Latin America often involves the removal of protections from unskilled-labor-intensive sectors, ultimately reducing the price of labor and disproportionately increasing income inequality. Previous research on Chile found that liberalization has substantially increased wage inequality due to technological changes and transformations in the economy's productive structure, ultimately leading to a rise in skilled labor demand and leaving unskilled workers vulnerable. This pattern reverberates in other studies, which suggest that financial liberalization and high-technology exports, in the context of a liberal trade regime, contribute to increased inequality. A secondary consequence of trade liberalization is increased competition from cheap, unskilled labor-intensive products from poorer countries, particularly in industries like farming, textiles, and apparel. Domestic producers in these industries may suffer job losses and shrinking markets, while wealthier households benefit from affordable imported goods. We see an example of this in the impact of NAFTA on Mexico's agricultural sector, where small farmers failed to compete with subsidized American agribusiness. Rural poverty increased, inequality deepened, and migration to urban areas rose. Similar outcomes may be predicted in contexts with comparably vulnerable unskilled labor-intensive sectors, as found in various Latin American countries. In order to avoid exacerbating income inequality and further marginalizing vulnerable sectors within these economies, it is essential to consider the short-term and long-term impacts of regional trade agreements.

Current Stances

The consensus among scholars is that the effects of regional trade agreements on distributional outcomes in Latin America are not homogeneous; rather, the impact depends on a variety of factors like the strength and nature of each region's economic engagement with external trade partners, the level of protection afforded to vulnerable sectors, and the overall functioning of domestic labor markets.

In analyzing the relevance and desirability of multilateral free trade agreements in the region, contemporary research differentiates between preferential trade agreements and multilateral free trade agreements, highlighting the potential economic welfare benefits of the former. A preferential trade agreement, such as a regional trade agreement, targets specific countries or regions for tariff concessions, granting preferential treatment to signatories over non-signatories. These agreements can facilitate increased trade flows and economic integration among participating countries, which can translate into positive distributional outcomes such as increased wages for workers in specific sectors or geographic regions, plus decreased prices for consumers. 

The European Free Trade Association (EFTA) has seen such benefits through regional integration and trade liberalization: formed of Iceland, Liechtenstein, Norway, and Switzerland in 1960 as a response to the formation of the European Community, EFTA's members have all seen significant economic growth as a result of mutual trade agreements and an increase in cross-border investment. Members now enjoy free trade relations and access to other regions' markets through EFTA-managed free-trade agreements, including benefits like access to the single energy markets. 

Economists believe such a template can be emulated and customized in Latin America to cater to the region's specificities. Current theories suggest that reducing trade barriers in Latin America through preferential trade agreements, as opposed to multilateral free trade agreements, can likely boost intra-regional trade and spur economic growth. However, as the stagnation of other regional trade agreements in Latin America has shown, these benefits are not automatic or guaranteed, and a reevaluation of the potential effects is necessary as Latin America moves to expand its preferential trade agreements.

The current stance of Joe Biden's administration on regional trade agreements for Latin America reflects a distinct approach that focuses on enhancing economic prosperity in the region through means other than new trade agreements. The plan – The Americas Partnership for Economic Prosperity – aims to mobilize new investments, fortify supply chains, promote decarbonization and biodiversity, facilitate inclusive trade, and update the "social contract" between governments and their people. Although not explicitly rejecting regional trade agreements, this approach acknowledges the potential downsides and seeks to prioritize human rights, labor standards, and environmental protection in economic development efforts.

Tried Policy

A convergence around economic liberalization began following the paradigm shift towards neoliberal policies in the 1980s, which saw Latin American countries adopt market-oriented reforms to tackle economic inefficiencies. The emphasis was on competitiveness, private entrepreneurship, and technical competence - a neoliberal consensus that became the focus of development efforts, as seen in Chile's political alliance through the Concertacion coalition of parties. Pinochet-era reforms were the first to pave the way for this transition, embracing free market policies and privatization to attract foreign investment. These policies initiated a trend that would be implemented by other countries in the region as well: debt crisis and change in government prompted Venezuela to loosen trade restrictions, instability in Peru catalyzed its embrace of market-oriented reforms, and Argentina's economic recession pushed it towards privatization initiatives. Through this paradigm shift, companies switched from government to private ownership, legal and political restructuring supported free-market business activities, and financial instruments created room for international investors. These policies, known as the Washington Consensus, prioritized fiscal discipline as a means to improve social mobility and encourage long-term economic growth in the region. Although not a formal agreement, the Washington Consensus acted as a blueprint for trade agreements that emerged in Latin America after its introduction. However, these attempts to liberalize regional trade resulted in mixed distributional outcomes with rising inequality due to increases in wealth concentration and cuts in social spending. Surface-level reforms, including those emerging from early neoliberal policy measures, did contribute to the region's liberalization; yet, it was later policy initiatives of the United States and other global actors which actuated the process of regionalism in Latin America. With the conceptualization of NAFTA came the consolidation of North America as the dominant player in regional integration, leaving Latin American nations to play a supporting role. Initially, bilateral agreements were connected to the US hub, replacing the original blueprint for regional integration and reinforcing Latin America's place within a North-Americanized system. Although a few Latin American countries received fast-track offers of accession in the 1990s, these offers were ultimately not accepted due to concerns around sovereignty and labor rights; thus, regional integration saw reorientation towards promoting the development of regional trade blocs.

In 1991, the Southern Cone Common Market (Mercosur) was established as a free-trade region, reflecting Latin America's renewed effort at regional integration. The agreement's loose structure offered member countries some flexibility and autonomy in policy-making while providing opportunities for coordinated governance within the bloc. However, as the bloc's economy grew, so did its inequities.

Firstly, major economic players within Mercosur, such as Argentina and Brazil, consolidated power at the expense of smaller member states like Paraguay and Uruguay. We find evidence of GDP disparities among Mercosur countries, with Brazil and Argentina making up 95% of the bloc's total GDP, with economies of scale rendering smaller nations uncompetitive. Moreover, the shift towards free trade within Mercosur was not accompanied by social policies adequately addressing displacement and the effects of market forces on labor, as had been seen in early Western European integration initiatives like the European Coal and Steel Community. Unaccountable economic growth and the absence of social safety nets marginalized low-income populations, particularly in rural areas, where social movements like the Landless Workers Movement in Brazil have been born out of agrarian reform struggles perpetuated by the growth of neoliberal economic policies.

Attempts at improving social inclusion within Mercosur have been made, such as the creation of the Social and Productive Development Fund in 2004; however, structural inequalities persist, with the bloc continuing to prioritize neoliberal economic growth over social welfare. Although Mercosur has brought about economic growth and integration within member states, this growth is unsustainable if not accompanied by equitable distribution of benefits and social protections for vulnerable populations; thus, policymakers must prioritize the development of social policies that counteract market forces while also creating pathways for low-income communities to benefit from regional integration.

Policy Problem


As with any economic or political initiative, regional integration within Latin America must consider its impact on all stakeholders, particularly those marginalized or underrepresented. Considerations must be made for smaller member states and low-income populations vulnerable to displacement, unemployment, and inequality in the face of neoliberal economic policies, as evidenced by the disparities within Mercosur.

One of the key stakeholders in this process is the Governments and International Organizations involved in implementing regional integration policies. The objective of these entities, primarily following the Pinochet-era "Washington Consensus," was to prioritize economic growth based on neoliberal principles – the proliferation of deregulation and privatization, among other measures, at the expense of social welfare. The parasitic effects of these policies, like the United States 301 actions targeting the Brazilian licensing regime, presented themselves through increased poverty and environmental degradation, leading to widespread social unrest. Today, Governments and International Organizations understand they must prioritize the development of social policies that counteract market forces while also creating pathways for low-income communities to benefit from regional integration. It is in these stakeholders' best interest to ensure that the benefits of regional integration are distributed equitably across member states and communities, focusing on providing necessary social protections for vulnerable populations.

Another key stakeholder in this process is the private sector, particularly multinational corporations and investors. These entities have historically often been beneficiaries of regional integration, as they can leverage their resources and capital to take advantage of the increased economic opportunities presented by free trade agreements. Latin America has seen a surge in foreign direct investment in recent years, particularly in sectors like energy and extractive industries, creating a dual effect of economic growth and environmental degradation. Thus, the region is no stranger to the exploitative practices of multinational corporations seeking profit at any cost, often with little regard for social and environmental consequences – often known as the "extractive imperative." Evidence of such practices can be seen in the Magdalena Medio region of Colombia, where oil and mining companies have displaced indigenous communities, destroyed ecosystems, and contributed to human rights violations. These practices must be counteracted by regulatory frameworks and increased accountability measures for the private sector. The private sector, in turn, should be encouraged to invest in socially responsible and sustainable business practices alongside public-private collaborations that ensure the equitable distribution of benefits from regional integration. This approach will not only mitigate the damaging effects of the extractive imperative, but it will also help achieve the inherent goals of these business entities – profit and economic growth.

A third important stakeholder in the conversation around distributional outcomes in Latin America is the marginalized and vulnerable populations – indigenous communities, small-scale farmers, and workers in the informal sector. These groups have historically been excluded from the benefits of regional integration, with their lands and livelihoods often threatened by large-scale development projects and extractive industries. In the face of liberalization policies, these populations prioritize not only economic benefits but also the protection of their human rights and the preservation of their environments and cultures. Despite legal frameworks recognizing their collective rights, these communities often face asymmetric relationships with the private sector due to their cultural diversity and dependence on foreign direct investment in their regions. The Amazon Rainforest fires that devastated Brazil in 2019 are a tragic example of the intersection of economic growth and environmental degradation, disproportionately affecting indigenous communities. In this case, agribusiness interests seeking to expand monoculture farming operations were the driving force behind the deforestation and destruction of critical ecosystems. As such, these groups seek mechanisms that ensure their participation in decision-making processes, granting them agency and a voice in determining the future direction of regional trade agreements.

Risks of Indifference

To indulge in apathy and disregard the unequal distributional outcomes of regional trade agreements is immoral and poses a grave threat to socioeconomic and environmental stability in Latin America. Indifference erodes the region's social fabric, perpetuating systems of inequality and hindering inclusive economic growth – a prerequisite for achieving sustainable development goals.

One area of concern regarding indifference is Latin America's economic competitiveness in the global market. In an era of globalized markets, nations must seek to enhance their productivity, diversify their economies, and attract foreign direct investment (FDI) to foster sustained growth. Liberalization and regional integration are key components to achieving these goals; however, indifference to the unequal distributional outcomes of regional trade agreements can have the opposite effect – neglecting social mobility in this process will result in stagnant economies, decreased competitiveness, and increased poverty rates. Failing to participate in regional integration initiatives leaves Latin American countries isolated from vital economic networks, hindering their capacity to innovate, grow and compete.

A secondary concern of indifference is the risk of squandering critical geopolitical opportunities and relegating the region to the fringes of global economic governance. Latin America is home to abundant natural resources, a young and growing population, and emerging economies that together have the potential to shape the trajectory of global economic and political systems. In an increasingly interconnected world, where regional blocs shape international trade dynamics, passive disengagement diminishes Latin America's voice and influence in setting trade rules, forging strategic partnerships, and safeguarding its long-term economic interests. In navigating the region's growing inclusion in global trade, proactive policies are necessary to address income disparities and promote economic growth.

Nonpartisan Reasoning

Nonpartisanship is a prerequisite to addressing the issue of social mobility and economic growth in Latin America. By transcending partisan divides, stakeholders can identify shared priorities and enact policies prioritizing equitable economic development – one that emphasizes social inclusion, economic diversification, and sustainable growth.

Harnessing diverse perspectives through nonpartisanship is one way to bring proactive policies to the forefront. Individuals from diverse backgrounds, including policymakers, academics, economists, and civil society representatives, can come together to evaluate the link between trade liberalization/deindustrialization and its ultimate impact on poverty and income inequality. This convergence of knowledge enables a holistic and nuanced approach to policymaking in Latin America, one that can identify the root causes of economic stagnation and adopt targeted solutions to drive inclusive growth.

Another benefit of nonpartisanship is the long-term stability and resilience it fosters in the region. Nonpartisanship, transcending short-term political cycles, enables policymakers to implement sustainable solutions that can weather economic and political shocks in the long run; policies that promote social mobility and economic growth must be grounded in long-term planning and foresight. Without political gridlock, confidence in the region's future economically is strengthened, incentivizing investment and creating a virtuous cycle of sustainable growth and development.

A third advantage of this dynamic approach is the broad public support it garners. Collective accountability in the formulation/implementation of policies enhances trust in public institutions, empowering citizens to hold their representatives accountable for delivering on their commitments. Such an approach builds momentum for economic reform and bolsters the legitimacy of trade agreements, ensuring their broad-based adoption; partisan divides, on the other hand, can erode public trust and hamper momentum for structural reforms.

Policy Options

Three policy options emerge from the current economic affairs in Latin America: Inclusive Multilateral Trade Agreements, Bilateral Trade Agreements with Social Clauses, and Preferential Trade Agreements with Development Focus.

Let us first analyze the possibility of an Inclusive Multilateral Trade Agreement in a Latin American context. Against the backdrop of increasing economic openness and socio-political stability in the region, such an agreement promises to stimulate exports and encourage privatization, ensuring trade benefits are distributed fairly across different sections of society. The defining characteristic of such an agreement is its broad scope and inclusivity – incorporating a wide range of countries, trading partners, and industries to create a robust and diverse economic network. This agreement type is all-encompassing; it addresses traditional trade issues such as tariffs and quotas while incorporating labor standards, environmental protection, and intellectual property provisions. Such loose criteria ensure that countries of varying economic development and political orientation levels can participate in the agreement, creating a more equitable distributional outcome. The approach's "inclusive" nature also strengthens the agreement's legitimacy, ensuring a collective effort towards shared goals rather than an imposition by one or more dominant actors. However, the challenge in achieving such a multilateral agreement lies in its complexity and difficulty reconciling disparate interests. Harmonization of regulations and standards, coupled with resistance from players unwilling to relinquish advantageous positions, can result in a lengthy negotiation process – this may lead to a loss of momentum and eventual collapse of negotiations. We can also not ignore that the current global political climate, featuring increasing protectionism and nationalist sentiments, may make it even more challenging to achieve an inclusive multilateral trade agreement in the near future. The WPO attempted to create such an agreement with the Doha Development Agenda in 2001, but the negotiations have remained stalled due to disagreements among member countries and increasing protectionism. Nevertheless, there are still reasons to be optimistic about the prospects of an inclusive multilateral trade agreement. Considering social mobility in the region, an inclusive approach can help rebalance the gains from trade and mitigate potential negative impacts on vulnerable groups by incorporating labor standards and environmental protection provisions.

Now let's analyze the possibility of Bilateral Trade Agreements with Social Clauses in a Latin American Context – our second option. This type of agreement, while more limited in scope than multilateral agreements, still has the potential to address issues related to inequality and social mobility. The "bilateral" aspect allows for countries to negotiate the terms directly with one another, enabling a more tailored approach that can better attend to specific domestic concerns. Because two countries negotiate these agreements – as opposed to larger multilateral forums – it can lead to a quicker negotiation process and the ability to focus on specific areas of concern. Specific reciprocity and quid pro quo mean that each country can negotiate for concessions in areas of importance to them, such as reducing tariffs on certain goods or improving market access; this contrasts the one-size-fits-all approach of multilateral agreements, where each country is required to make concessions across the board. The "social clause" aspect of bilateral agreements refers to a commitment by participating countries to adhere to labor and environmental standards in the trade relationship. In Latin America, where income inequality is a pervasive issue, such agreements could serve as a tool to promote social mobility and reduce the concentration of wealth – something exacerbated by free trade. United States Trade Promotion Agreements, such as the 2011 United States-Jordan Free Trade Agreement, have successfully utilized this framework to incorporate labor standards and environmental protections into trade agreements in a bilateral context. In this example, Jordan agreed to an enforceable labor rights provision, which helped to improve working conditions and wages for Jordanian workers. However, it's important to note that there is still debate surrounding the effectiveness of such provisions and whether they address underlying issues related to inequality. For one, bilateral agreements risk trade diversion, whereby countries may divert trade away from more efficient producers in favor of members of a preferred trade agreement. In this scenario, intra-regional exchange may increase at the expense of global efficiency gains. A second concern is that bilateral agreements may contribute to increased fragmentation and politicization of the global trading system by superseding more universal rules with a patchwork of conflicting regulations. Bilateralism has emerged as an increasingly popular approach to international trade relations, offering a more efficient and targeted solution for countries seeking to negotiate favorable deals with trade partners. Consequently, a network of bilateral agreements has sprouted, with each agreement tailored to countries' specific needs and interests. If applied in Latin America, bilateralism could address pressing social and economic issues, such as income inequality, in a more targeted fashion.

Finally, a third option that requires consideration is a Preferential Trade Agreement with a Development Focus. Such an agreement would prioritize the economic development of participating countries – promoting trade liberalization and increased market access – and would seek to alleviate poverty and reduce economic disparities indirectly. This form of regionalism has the potential to support a more liberal trading system, as it promotes free trade within a bloc and helps build a multilateral system through trade negotiations among a smaller number of larger regional groups in the long run. Liberalism, when applied in conjunction with a development-focused approach in a Latin American context, would be achieved by reducing tariffs/trade barriers and providing technical assistance and capacity-building initiatives to help less-developed countries improve their competitiveness. Measures such as these, plus targeted investment in infrastructure and human capital, could help create an environment that fosters economic growth and reduces the region's inequality. In its current form, MERCOSUR can be characterized as a Preferential Trade Agreement with a Development Focus, as it aims to promote economic development and social rights among its members while also pursuing a liberal approach to international trade relations. Since its inception in the early nineties, the southern cone bloc has expanded and deepened its integration efforts, effectively reducing tariffs and non-tariff barriers among member countries. Having evolved into a cohesive regional organization, integration within MERCOSUR has resulted in intensified economic activity and the creation of a sizable internal market; yet, the organization faces ongoing challenges related to coordination and implementation, particularly regarding external trade negotiations and the strengthening of institutions. Divergent interests among member countries and their respective economic priorities have hindered the organization's ability to address these issues – the level of inequality in contemporary Latin America reflects the effectiveness of MERCOSUR's approach to promoting development-focused trade liberalization. However, we cannot overlook MERCOSUR's efforts toward post-neoliberal regionalism. With the democratization of Latin America providing a catalyst for economic liberalization, MERCOSUR has become a means of promoting free trade within a development-focused approach that considers the region's unique needs and priorities. The bloc's institutional redesign in the early 2000s was a significant step towards advancing a social and economic development agenda by implementing political projects that emphasized the need for a more democratic arena in which subnational actors participate. As such, we must consider the potential long-term effects of MERCOSUR's prospects for advancing greater socioeconomic inclusion throughout the region and if it can overcome current challenges. Implementing a Preferential Trade Agreement would essentially be a continuation of MERCOSUR – a means of consolidating regional integration and addressing economic disparities by reducing trade barriers. Despite this, the lack of a unified system for the recognition, protection, and promotion of products within MERCOSUR contributes to market disparities and poses obstacles to the bloc's overall integration. For this policy option to be successful, the bloc must prioritize institutional strengthening and coordination to ensure that all member countries can fully participate in the emerging internal market.

Conclusions and Recommendations

The pace of globalization and interdependence within markets is accelerating. Continued efforts towards promoting development-focused trade liberalization through a post-neoliberal regionalist approach have sought to address persistent issues in Latin America – including income inequality and economic disparities – through initiatives such as MERCOSUR and the Andean Community. Liberalization can be a tool for socio-economic inclusion by building on the bloc's institutional redesign and inclusion of subnational actors.

Regionalism is not isolationism; it promotes cooperation, dialogue, and harmonization between nations with unique needs. The European Union (EU) exemplifies this. Formed in 1957 as the European Economic Community (EEC), it has grown into a sprawling political and economic union of 27 member states bound by shared values, history, and geography. Using an inclusive multilateral approach, the EU has developed a unified product recognition, protection, and promotion system that has facilitated economic relations among its members while promoting the alignment of ideas and goals. Their Erasmus+ program is a prime example of how cross-border cooperation can foster mutual understanding and drive progress; the European Regional Development Fund has played a crucial role in financing infrastructure projects that benefit all members; the EU's common market has allowed intra-regional trade to account for 67% of total exchange. Who would not want to emulate such success?

Considering the experience of the EU as a model, we recommended that Latin America continue to prioritize regional integration through an Inclusive Multilateral Trade policy. A multilateral approach is characterized by loose cooperation between states without exclusivity, thus allowing countries to pursue policies that serve their interests while contributing to the growth of the region as a whole. This model is purposely wide-reaching, focusing on promoting free trade between diverse subgroups and accounting for different levels of economic development within them. A rising tide lifts all boats – in the Latin American context, inclusive multilateralism can address issues in income distribution through improved market access. The recommended approach achieves this by incorporating tariff concessions, regulatory harmonization, and capacity-building programs to strengthen the region's economic linkages, channeling investment toward the most disadvantaged populations. Institutional frameworks can, furthermore, enhance policy coherence and ensure transparency in decision-making, promoting accountability among the stakeholders involved. The current fragmented approach – characterized by various subregional agreements – perpetuates a "spaghetti bowl" effect of multiple overlapping arrangements that create a patchwork of regulations that hinder market access rather than facilitate this. Conversely, an inclusive multilateral policy can streamline regulations and achieve economies of scale, prompting greater regional integration and creating a more competitive economic bloc.

The neoliberal era of Latin American regionalism, and the culmination of subregional agreements like MERCOSUR, have shown that a sovereignty-protective approach is insufficient to promote sustained progress in social mobility. Inequality in the region remains pervasive, with the top 10% of earners holding over 70% of the income share. Multilateralism is not a silver bullet solution, but it offers a vetted and proven approach to regional integration that prioritizes inclusivity and a shared commitment to free trade.

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