Chile - Foreign policy

Lagos has promised he will not tinker with his country's free trade policies, and is in fact committed to increased integration with the world's largest markets. He will seek tighter relations with the Mercado Comun del Cono Sur (MERCOSUR—Southern Cone Common Market) trade bloc of South America. Chile has the lowest tariffs in Latin America, but a free trade agreement with the United States would likely result in rapid growth in export revenue. Chile has been so far unsuccessful in establishing a free trade agreement with the United States, but Lagos is not expected to give up as the country continues to seek economic alliances elsewhere. In May of 2002, Chile reached a free trade agreement with the European Union.

In an interview with El Mercurio, Chile's largest daily newspaper, Lagos said the country needs to establish key alliances with other South American nations to counterbalance the great trading blocs of North America, Europe, and Asia. Without an alliance, Latin America does not stand a chance to compete, he said. He also wants greater economic and political coordination in Latin America similar to the European Union. (Lagos has compared MERCOSUR to an evolving European Union.)

Lagos indicated that he is willing to renew relations with Bolivia if that country is willing to enter diplomatic talks without preconditions. Bolivia, which lost access to the Pacific Ocean in the War of the Pacific of 1879–83, has been pressing Chile for access to the sea.