A Sweeter Colombia
Colombia’s new Free Trade Agreement with the United States is the latest in a string of steps the country’s taking to change its economy.
It’s not that Colombians are trying to pretend their country doesn’t have an infamous past, riddled with kidnappings and murders related to the drug trade. Locals aren’t shy about referencing the violence, and even the tourism slogan — “The only risk is wanting to stay” — is a play on the concept.
But, it’s been nearly two decades since Pablo Escobar, the country’s most well-known drug lord, was killed Dec. 2, 1993, and they’re anxious to move forward.
Everyone you meet in Colombia will tell you the same things — the country has radically improved over the last 10 years, the violence is down, the economy is changing focus and they’re finally transforming from “a country in transition” to a viable world economy.
New construction and renovation projects line the streets in the capital city of Bogotá, including a new airport and a new transit system for buses. The country is hoping to host the world, and they want to be ready.
The efforts seem to working — Colombia exported $815 million worth of bananas, $602.6 million worth of sugar and honey, and $315.5 million worth of confectionery goods in 2011.
In addition, overall exports to the United States increased. In 2011, Colombia exported $21.7 million worth of goods to the U.S., a 28.4% increase from the $16.9 million in 2010. And that was before the country signed a new Free Trade Agreement with America.
Now that the FTA is in place, everyone involved is excited about the potential that comes with tapping the U.S. market.
A big part of Colombia’s progress is due to the government’s Proexport agency, which recently funded a trip for Candy Industry to the country. The agency focuses on three main areas: tourism, investment and of course, exports.
It’s clear from their efforts that they understand how much work goes into changing a country.
One of their recent events, held in country’s capital city, Bogotá, was a Proexport Agribusiness Matchmaking Forum featuring 158 international buyers, from 40 countries as well as 238 Colombian exporters.
Set up to run like business speed dating, the buyers sit at one of hundreds of tables in a large room, while the manufacturers move from meeting to meeting to pitch their products. In the end, about 2,200 business meetings were held.
The fact that the event was hosted in Colombia gave buyers a chance to experience the country and find out first hand that it’s ready to play on the international stage.
Adonis Paseiro, a category manager with the Winn Dixie grocery store chains, described Bogotá as a “mini New York City.”
“The people you speak to, they’re very proud of their country,” Paseiro says. “Which is something you don’t get in the United States.”
The week after the forum in Bogotá, Proexport held a similar event in New York, which featured 250 buyers, and 400 Colombian companies. It was just one more way for the country to promote its new FTA with the U.S.
The Free Trade Agreement
The FTA didn’t come easy for Colombia though, not that they expected it to.
“We started with Mexico, then we went to Chile, getting experience on how to export,” says Alberto Lora, Agribusiness director for Proexport. “The States was always our main objective, because that’s our main market.”
Before the FTA, Colombia had an agreement with the United States called the Andean Trade Preferences Act and Drug Eradication Act (ATPDeA), which allowed Colombia to export some raw goods to the United States without taxes. However, it was a one-way agreement, and it didn’t do much to help Colombia with heavily regulated raw goods such as sugar, which the U.S. has quotas on to protect its own farmers.
Now, though, the Free Trade Agreement has increased some raw goods quotas; for example, the quota for sugar was increased 50,000 tons and from now on, each year will increase 750 tons indefinitely. More importantly though, it also allows Colombia to export added-value products, or processed goods, tax free — a conscious effort on the part of Proexport.
“Our mission is to support added-value products,” says Lora. “So, for example, we don’t promote just coffee because these type of things don’t need any type of help because they can be easily sold. And the prices of these goods are not as high as they could be if you were exporting added-value products.”
Aside from the the short-term economic benefits related to selling new items, exporting added-value goods also has another advantage for Colombia.
“That’s something that makes a huge difference when you talk about a developed country or an underdeveloped country,” Lora explains. “So basically Colombia is turning into a different supplier and a completely different platform.”
Moving beyond commodities
Jorge Alonso Castano O isn’t so much interested in the big picture as he is in what the new FTA means for his company specifically.
Now, he can export freely his Big Chips brand fried plantains, a value-added good that used to carry a 30% tax. Before, only his raw plantains could be exported.
He explained that his goal is not to compete with the major players, but just to diversify his own company. Big Chips already are in the Miami market, but he’s hoping the new agreement will help him enter the New York and Los Angeles market as well.
Meanwhile, Sergio Ivan Morales P., with el Paraguitas, a confectionery company, also speaking through a translator, says he hopes the new agreement will help him infiltrate the U.S. market even more than he already has.
His company has been exporting candy to the United States for 12 years, but the FTA could help them conquer new territory. Specifically, he’s looking to export a type of fruit energy bar that provides natural calories year-round.
Meanwhile, Martha Lucia Restrepo R., general director for Erba Dolce, a sugar and stevia company, said her company is looking forward to freely exporting its new Sugar Light product that’s a mix of stevia and sugar and is classified as a value-added product.
It also means she might get to export more raw sugar tax free now that the quotas are increasing.
“The taxes were absolutely crazy,” she says speaking through a translator.
However, even with the FTA, there are still hurdles to exporting to the U.S.
Restrepo says the distribution chain in America is incredibly complicated because of the abundance of middle men, and that ends up making products more expensive for the consumer.
Eduardo Jaramillo Acosta, general manager for AmeriCandy, a confectionery company in Bogotá, says they don’t currently export their hard candies, lollipops and gums to the United States, although they are looking into it because of the new FTA.
“The U.S. is the center of the world and prices are very competitive there,” Acosta says, speaking through a translator. He added that currency conversion rates could also be an issue.
His company does plan to benefit on the opposite end of the agreement though, by importing less expensive machinery for their manufacturing facilities.
A conduit for others
Regardless of the obstacles though, the U.S. market is a huge goal not only for Colombian companies, but for international players around the world, and Colombia is hoping to benefit from that as well.
Lora says Colombia is working to create alliances with nearby countries who don’t have an FTA with the United States, so that the goods can go through Colombia to the United States completely tax free. This is a good opportunity for a lot of countries because, besides Colombia, only Mexico, Chile and Peru and all of Central America have FTAs with the United States.
“The Colombian perception abroad is changing a lot because now we are being seen as a platform, as an opportunity to export with better conditions to the States,” Lora says.
Specifically, he said they’re looking at Brazil, China and India, as well as some European countries.
“All these free trade exports open doors for Colombia,” says Ricardo Vallejo, vice president of trade for Proexport Colombia. “The international demand is very important.”
A free trade agreement and alliances alone do not an international economy make though, which is why Colombia is also working hard to encourage farmers to go above and beyond with their crops. In addition to organic produce, the country also is promoting Fair Trade, HACCP, Globalgap, and Ecocert certifications, specifically in an effort to target American and European customers.
“We are working very hard to conquer markets,” says Moreno.
Of course, all of that starts with the farmers, who have to be educated in how to grow their crops organically and maintain a Fair Trade supply chain. Vallejo says the U.S. Food and Drug Administration and well as the United States Department of Agriculture are helping Colombian farmers by providing information and coordinating seminars on the topics.
Still, no matter what the government does to change Colombia and its image abroad, none of it will matter if the country’s people don’t believe in it. There though, Colombia probably won’t have any problems.
“It is really important look at the development in [Colombia],” says Restrepo. “We are really high quality. We have everything to compete with the rest of the world.”
Indeed, they do.