As exports plunge, companies call for new FTAs ​​- Sectors – Economy

Colombian exports have been declining for six consecutive months. In May, 4,531 million dollars were sold, a decrease of 2.8 percent compared to the figures reported a year ago.

What the balance sheet is showing the most since December of last year are the lower sales of coffee and oilwhich weighed approximately 5.3 and 27 percent, respectively, in total Colombian exports during May.

(Also read: Colombia lost record mineral exports in the first quarter of 2023)

The lower demand that international markets are registering is due to the high interest rates, higher inflation and to the deceleration of the economy, as explained by the executive president of the National Association of Exports (Analdex), Javier Díaz.

“This, in the end, ends up hitting people’s consumption, but additionally, the lower activity in China is hitting the mining-energy sector, because this country is a great consumer of oil, coal, iron, steel and other minerals”, he adds.

This negative trend could persist during the second half of this year, as the Federal Reserve has said that there may be an economic recession in the United States at the end of 2023 or beginning of next year.

Added to the above is the fact that inflation in that country does not fall as expected and, therefore, new increases in interest rates could come, which would prevent the Bank of the Republic lower yours.

“One wants the Banco de la República to start lowering interest rates now, but I don’t see the bank in that vein because they want to see how inflation will behave. The decreases in interest rates would take place at the end of the year or the beginning of 2024,” says Díaz.

The union hopes that when rates start to drop, consumption will be dynamic again. In the meantime, the way for companies will be to review how they can reduce costs and be more efficient in order not to transfer the increases to the prices of final goods.

Basic products are sold mainly to the United States, Europe and Asia, and manufactures to the United States and Latin America.

Although in May exports to the United States fell 13.9 percentthat country continues as Colombia’s main trading partner, with more than 27 percent of the total export basket.

(Also read: Sales of Colombian products to the world fell 2.8% in May)

And, according to the Colombian American Chamber of Commerce (AmCham Colombia)Opportunities have been identified for the agro-industrial sector to export more to that destination by up to 250 percent in the next four years.

“Although the demand from the United States is showing a slowdown, processed or intermediate products continue to rise. It is time to have a policy that stimulates the non-mining-energy exports“, affirms María Claudia Lacouture, executive president of AmCham Colombia.

Analdex agrees with AmCham when pointing out that there is great potential to increase exports from the agricultural or industrial sector because the world continues to demand food; however, it is not easy to grow in this sector if you do not have real access to these markets in phytosanitary terms.

“Health admissibility is fundamental, we are concerned about the politics of green Europe because products that use agrochemicals or that come from regions with deforestation are going to be punished,” says Díaz.

In addition, it ensures that meet the new demands raise costsTherefore, the great unknown and concern that arises is whether Europe will be willing to pay more.

The Analdex president also sees opportunities for more sales of non-mining-energy products to countries in the region, but the effects of the slowdown are reducing revenues and causing less purchasing power for Colombian products.

Another alternative will always be to look at new Free Trade Agreements (FTA)but the government of President Gustavo Petro is not a friend of them and has said several times that they will be reviewed.

For example, Colombia does not have an FTA with China, a country that has been working one with Ecuador for two months and is in negotiations with Peru and Chile. The union leader considers that the decision made by the Government should be reconsidered taking into account that an Invamer survey reveals that 71 percent of people welcome trade deals. “The government cannot be indifferent to what the people are thinking,” she adds.

(Also read: Will China get out of an economic slump with exports? This is what experts say)

Reservations about selling to Venezuela

The Government is also seeing opportunities in Venezuela; however, this country is very different from 2008, the year in which more than 6,000 million dollars were exported. Between 2013 and 2021, Venezuela’s domestic product fell by 75 percent, that is, it is currently a quarter of what it was in the past.

But aside from the reduced ability you have to buy, There are also security problems at the border.the lack of clarity in the rules of the game and transportation issues are regularly needed because the automotive fleet in Venezuela is very obsolete.

“The potential and possibilities of having a market with Venezuela again are there, but that is neither as fast nor as voluminous as initially proposed,” says the president of Analdex, while ensuring that exports to the country can reach 1,000 or 1,200 million dollars this year. Seeing “much more interesting” figures could take about five years.

At the end of June, the Ministry of Commerce, Industry and Tourism presented its Foreign Trade Policy through which it seeks to “encourage the reduction of the trade balance deficit and reduce vulnerabilities to external shocks.”

For Diaz, this is a very defensive policy to the extent that he talks about tariffs and protection measures, but it should also be noted that he makes a commitment to internationalization, multilateralism, fair and balanced trade and aims to attract foreign investment.

However, a greater emphasis on the offensive part is considered necessary rather than the defensive part. “I think that Colombia needs to play much more offensively at this moment to penetrate markets and having product admissibility, and not so much in new defense instruments, which we already have, I believe that Colombia has some defense instruments against unfair competition,” he says.

The union’s fear is that the implementation of a defensive policy will end imports and, therefore, the production of goods, in addition to harming the competitiveness of exports.