In an interview with The City Paper, Santiago Rojas Arroyo, Minister of Commerce, Industry and Tourism (MinCIT) talked about the progress of free trade agreements, and key areas where Colombia needs to improve in order to be more competitive in a global marketplace.
TCP: Where are we with the free trade agreements already signed into effect?
Rojas: Colombia adopted many years ago a successful economic model based on integration with the world. We count with a solid and stable macro-economic model, as well as an institutionalism, which is economically independent and very professional. This model has provided us with sustainable growth over time, by which we have reduced poverty, reduced inequality and improved the overall productivity apparatus of the nation.
Looking at this model where integration and commercial agreements are fundamental, it’s a model that has to be maintained, and we will maintain it. We have three phases to our integration: Firstly, with Latin American nations – the “natural marketplace” for Colombia – and where manufacturing is part of the value aggregate.
Then, a second phase with developed nations, such as the United States, Canada, the European Union and EFTA states. And now we’re in a third phase with Asia, negotiating trade agreements with both South Korea and Japan. This is a complete panaroma of Colombia’s integration during the last 20 years and which we have lived up to. We are also finalizing FTA’s with Costa Rica, Panama and Israel. The Pacific Alliance is also fundamental for growth and our commercial relationships as we think the same way and are keen to strengthen this alliance in a regional context.
TCP: Where do we go from here?
Rojas: We need to keep working on Colombian competitiveness. We need to take full advantage of that universe of consumers. There are 1,450 million potential consumers of our products across the globe. We also need to work on trans-national “value chains,” reducing costs within Colombia and with our infrastructure. A new phase of integration will arise where we will need a consensus at a national level, between Government, Congress, and the private sector to define the future course of action with our commercial agenda. We need to bring in business leaders as key “partners” in helping us define the trade agenda for the next 20 years.
TCP: As a predominately agricultural nation and one which has faced several agricultural strikes in the last 12 months, what can we say about the state of our agricultural independence agreements?
Rojas: Our commercial agreements are an opportunity for the countryside, our agriculture, and not a threat. Over the next decade the demand for food will increase significantly and we have land. We are one of seven nations which have agreements with the UN’s Food and Agriculture Organization to expand our agricultural frontier. We have water. Colombia has the potential to be a food basket for the world, therefore, we need to have very aggressive agricultural policies. We have to be competitive. We need to innovate and advance technologically with the agricultural sector. We also need to work with the farmers to improve their agricultural practices. It’s always easy to generate fear when mentioning the words “free trade.” Our commercial agreements have not affected the agricultural sector.
TCP: How about the potato-growing issue which is so rooted at the heart of these strikes?
Rojas: Only 0.7 percent of all the potatos consumed in Colombia are imported. Our free trade agreements have not affected our potato production. Look at other products such as rice. We currently import 80,000 tons, while we consume 2.5 million. When you look at specific areas you realise that in Colombia we are not receiving massive imports which affect our national production. We have to be very clear on this.
What we do have are very precise issues such as the contraband of food and the contraband of agricultural products which come from the Andean region and Venezuela. This is our biggest threat; not the legal imports of goods. Right now, we export more agricultural products than we import. The balance of trade with agriculture is much more favorable towards opportunities, than threats.
It’s very easy to blame the FTA with the U.S. We are however passing through a difficult moment with the countryside as prices are low, costs for materials are high and rural communities have had to bear the brunt of a conflict which has gone on for 50 years. Many regions across Colombia can’t count on access to public services and remain immersed in misery. This, of course, is unacceptable. This is what the government is trying to modify right now.
The fact that many farmers are disgruntled is understandable. They feel cornered. Colombia negotiated very well its FTA with the U.S. And we cannot loose our ‘north’ by shutting down borders and imports. That would hardly solve the problems of the Colombian countryside. Farmers would just be worse off, as the doors would close to opportunities overseas.
TCP: How much is our infrastructure affecting Colombia’s competitiveness?
Rojas: Clearly Colombia has suffered a significant delay in terms of improving its infrastructure. Fortunately, we are now advancing with 4th generation projects which will change the map of the nation in the next 4 to 5 years. But improving roads isn’t the only solution to being more competitive. We have to think about the challenges associated with logistics.
We need to be able to work 24/7 in facilitating the movement of goods in ports, for example. What good is it to save six hours on a road only to be held up at a port? We need to also improve the technology of our control processes when it comes to what is entering or leaving our borders. Our ports are in the hands of private companies and they are very efficient.
In five years, Buenaventura will count on 5 world-class ports. The projected investment in Buenaventura’s new ports is estimated at US$900 million. The challenge of Buenaventura, as one example, isn’t just about expanding logistics and operational centers, but working through the social conditions and realities. We are aiming for a city with a port, and a totally integrated social vision for the community.
TCP: What is happening with the U.S. dollar to Colombian peso exchange rate in terms of exports and imports?
Rojas: We need to have a competitive exchange rate. The Colombian economy is passing through a very good moment and one in which a lot of foreign capital is heading here.
As there are more U.S. dollars on the market, there is a tendency towards revaluation. The Central Bank has said that it will maintain this policy of buying U.S. dollars. The Central Bank should be more aggressive in trying to get the peso towards 2,000 pesos. Of course, much depends on the U.S. economy. This is normal.
We need to find that “real” exchange rate for the Colombian peso. One that is competitive, but not artificial or inflated, which could end up favouring exporters, but hurting other sides of the nation’s economy in general.