The Free Trade challenge

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Cargo Ship
Cargo ship

With 45 million consumers and the perception that the country is inching its way forward in terms of security and a possible positive outcome for peace talks with the country’s largest guerilla organization in the making, Colombia boasts the third-largest economy in Latin America.

The perception – and reality – of better security conditions for Colombians and foreign visitors, has put cities such as Cartagena, Bogotá and Medellín on the top listings of many international news organizations. CNN ranked San Andrés Island as a “must see” destination for 2013. This week, the Colombian capital hosts Anato, the nation’s most important travel fair, with representatives of domestic and international travel agencies and airlines on hand.  The tourism boost echoes this nation’s economic growth and a growing opportunity for U.S exporters to send more than 10 billions in goods to this country every year.

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Colombian Day held in September at the New York Stock Exchange (NYSE) opens the door for many blue chip Colombian companies to showcase their holdings and capital portfolios. Companies such as cement giant Argos, Davivienda, Grupo Exito, Banco Caja Social and Pacific Rubiales have participated in Colombia Day and this year will mark the third time the floor opens up to everything Colombia. The official coffee for Colombia Day is Juan Valdez. Currently, there are two Colombia-based companies listed on the NYSE: BanColombia and oil giant Ecopetrol. “Colombia Day in New York is an important step, “ claims Diego Jimenez, General Manager of Colombian brokers Correval S.A.  “What this means is that companies here are having very good results so that they have become a good choice for foreign investors.”

According to this country’s central bank, Colombia’s gross domestic product is set to grow in 2013 between two and four percent.  Furthermore, unemployment continues to fall and a good chunk of foreign investment is firmly in the hands of the oil and mining sectors.

Having eliminated 80 percent of all duties on trade exports from the U.S. to Colombia with the FTA, duty-free agreements will benefit U.S. exports of agricultural products, such as beef, cotton and wheat. Non-agricultural exports such as auto parts, construction and mining equipment have also benefited since the May 2012 signing.

Colombia has already signed other free trade agreements with Canada, the European Union and more recently, this month, with South Korea. The South Korean FTA will eliminate tariffs on 96 percent of Colombian goods exported to the Asian country and the same figure of South Korean goods coming to the South American nation over the course of 10 years. The agreement will strengthen the already strong imports of Korea assembled goods, such as electronics, technology parts and cars.

The offensive to sign free trade agreements has its share of skeptics in Colombia as the country must do more to promote and sell its manufactured goods to be able to compete in a global market place. With many currencies devalued to drive exports, Colombian goods come embedded with high labor costs and a strong peso in comparison with other countries in the hemisphere. “Having a strong mining sector does not reflect the work potential of the Colombian people,” believes Ricardo Sanchéz, a leather goods manufacturer who is witnessing the rebirth of his industry.  Fierce competition from China and Turkey pushed aside demand for Colombian leather goods during much of the last decade.

As Colombia opens up to challenging global opportunities and investor confidence, Jiménez is cautious that free trade guarantees success in capital markets. “Our leaders think about the short-term and solving urgent issues instead of the important issues that would give us benefits in terms of 10 and 15 years.” Many of the benefits require investing in the nation’s workforce by providing education to millions, creating new language opportunities to enhance competitiveness and getting youngsters involved with technology at an early age.

U.S.-Colombia free trade is as much about strengthening opportunities for businesses as it is a way of reaffirming the geo-political alliance between the two nations, which dates back centuries given Colombia’s strategic position close to Panama, its canal, and oil-rich Venezuela. But unlike the citizens of many other Latin American nations, Colombians are still restricted in their movements due to visa restrictions with key trading partners such as Canada, and the United States and the European Union’s Schengen Pact.

“Even though goods may move more freely now than ever before, there are still important psychological obstacles Colombians must overcome when wanting to conduct business overseas,” believes emerald trader Jairo Mendez. “Our goods are always welcome, but we are not.”

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