Colombia Summary
The New President and Internal Conflict
Despite the civil war, economic prospects for Colombia in 2003 are guardedly
optimistic. The strong, popular but not populist government, successful
devaluation, which has made Colombia competitive without causing inflation, and other
indications, such as the recovery in the construction sector, are all good
signs for Colombia’s economy in 2003. In view of the current situation in
the country, the strengthening of democratic security is the most important
element in the new President’s, Alvaro Uribe Velez's, national
security-based strategy, which should reduce uncertainty and encourage
private investment.
Furthermore, the government is putting together a package of additional
reforms designed to stimulate growth, including the reduction of tariffs on
imports of machinery and reimbursement of the corresponding VAT, as well as
incentives for the building of houses and for exports.
Renewal of the Andean Trade Preference Act
The United States has traditionally been Colombia’s principal trading
partner, and was still the biggest by far in 2002. However, between January
and November 2002 the United
States, took in 42.5 percent of total Colombian exports, or
$ 4.62 billion, down 4.5 percent over the same period in 2001.
Exports to the US should begin rising now that
Washington has renewed and broadened market access for Colombia under the
renewed Andean Trade
Preferences Act. Greater access to the US market for Colombian exports,
together with enhanced currency exchange competitiveness, constitute a
concrete reason for optimism among many industries, such as the
clothes-manufacturing sector. Colombia’s non-traditional exports, products
other than coffee and oil, have increased considerably during the last few
years and, currently, account for 50 per cent of total exports. It is
expected that these exports will receive an additional boost from broadened
tax-free access to Colombian exports to the United States.
Other Multilateral Agreements
In early 2003, the European Union is due to confirm a
mandate for the European Commission to begin negotiations on an agreement on
political dialogue and co-operation with the five nation Andean Community,
covering a wide range of issues, from human rights to organized crime, and
sustainable development to investment promotion. One of the most important
issues between the EU and Colombia specifically is the elimination of tariff
preferences on Colombian flowers. Elimination of the special treatment,
which would be aimed at increasing competition, would hinder the Colombian
export of flowers, Colombia’s fourth largest export and an important source
of revenue and jobs within the country.
Regionalism and The FTAA
Born of a US-sponsored proposal at the First Summit of
the Americas in 1994, the Free Trade Area of the Americas (FTAA) is aimed at eliminating
trade barriers
across the Americas. If materialized, FTAA would become the world's largest
free trade zone
with 784 million potential consumers, stretching from Alaska to Argentina.
Colombia along with the other
Andean and Mercosur associate members would join the group.
The current circumstances, however, do not bode well for the negotiations.
US agricultural protectionism, South America's economic instability, changes
of government in Colombia, Bolivia, Brazil and Ecuador, and other
circumstances have shaken confidence in the establishment of FTAA
In the escalating anti-FTAA atmosphere, the South
American countries have begun to work together to strengthen their
collective negotiating position against the United States on FTAA. At the
23rd Mercosur
Summit in December 2002, the two Latin American trading blocks, Mercosur and the Andean
Community (Ancom), agreed on a clear timetable for reaching a free trade agreement between
them by Nov. 30, 2003. The expanded trade block will include
virtually all the South American countries.
The Andean Community has meanwhile agreed to create a
common market among themselves by 2005. Their previous meetings have focused
on proposals for common agricultural policies, allowing free circulation of
people and goods, and the development of a common foreign policy.
Falling Coffee Prices
The coffee market, the second largest Colombian export, is in turmoil.
Colombia produced close to 1.5 million dollars of coffee in 2002. However,
coffee sales during the first 11 months of 2002 decreased 1.8 percent in
value compared with the same period in 2001, although volume was up 2.5
percent.
World coffee supply exceeds demand and consequently, prices paid to growers
are in a slump and much lower than production costs. The Colombian coffee
growers are being paid meagerly and are forced to sell off assets to create
working capital. Coffee prices
are at a 30-year low and this is hitting hard the economy of Colombia, amongst other
countries.
Agriculture>
Colombia, and its agricultural exporting partners in the 17-member
Cairns Group, a group of agricultural exporting countries, has called
for an end to trade - distorting export subsidies, in a proposal
submitted in November 2002 to the WTO. The Cairns Group calls for
elimination and prohibition of subsidies within three years for developed
countries, and six years for developing countries. They protest that the
agricultural protectionism of the United States, which allows their food
producers to sell below the world market price, is unfair and hypocritical
considering the United States’ public stance on promoting free trade.
Intellectual Property
Colombia has made improvements in its intellectual property rights protection, but does not yet provide adequate, effective protection according to the standards of the WTO. Colombia has ratified, but not yet fully implemented, the provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
U.S. pharmaceutical firms are experiencing significant losses in the Colombian
market due to inadequate protection of confidential test data and the lack
of "second use" patents. There is also a need for stronger enforcement of
copyright and trademark laws. While the United States placed Colombia on
the Special Watch list for Intellectual Property[3]
in 2002, it continues to discuss IPR issues with Colombia and remains
interested in negotiating a bilateral agreement on intellectual property
protection.
Labor and Human Rights
The Colombian government has been in the international
spotlight recently, as human rights activists decry the government’s
inability to put a stop to violence against labor unionists. Forty-five
labor union
officials have been assassinated in Colombia in the last six
months, an International Labor
Organization (ILO) report said in November 2002. Possible links between the
right wing paramilitary groups that carry out the majority of these killings
and both US based corporations operating in Colombia and US military
assistance have been suggested. In response, American labor unions such as
the AFL-CIO and various human rights groups have launched campaigns aimed at
holding corporations accountable for their practices in Colombia and calling
for a moratorium on arms shipments until the country's human rights record
improves.
Conclusion
Colombia is looking for continued support from the
international community to boost economic and peace prospects, especially
from their largest trading partner, the US. One of Colombia's leading
exports, coffee, faces an uncertain future. Problems in public security are
a concern for Colombian business leaders, who are calling for progress in
the government's peace negotiations with insurgent groups. However, in 2003
President Uribe, will focus mainly on the civil war, drug trade,
unemployment, and the faltering economy in the coffee belt.
Last Updated January 2003
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