Good Times/Bad Times

FTAs and industrial competition

FTAs are threatening established manufacturing in the country; however, other regions are pointing the way forward by playing to Colombia's competitive advantages.

Many segments of Colombia’s industry are in a bitter struggle for survival. Free Trade Agreements (FTAs) with the rest of the Americas, Asia, and Europe have put Colombian industry in peril, and are raising questions about how beneficial certain FTAs will be for Colombia in the medium-long term.

The departure of the US-based multinational Mondelez in May 2015, in favor of relocation to Mexico from Colombia’s manufacturing stronghold of Jumbo, an adjacent industrial municipality to Calí­ where the group closed its office of 480 employees, hit the country’s industrial community like a ton of bricks. The group was a manufacturer of various household names such as Chiclets, Adams, Trident, Sparkies, Certs, and Bubbaloo, among others.

The departure is a disconcerting challenge to Colombia’s competitive edge, due to free trade agreements with the rest of the continent and the pacific alliance trade arrangements, namely with the US and Mexico.
Four other large manufacturing factories have elected to discontinue production in Colombia in favor of relocation to other countries over the past two years. In mid-2013 the French multinational Michelin ceased industrial activity in Chusacá, in the region of Cundinamarca, and Cali. The two plants had provided employment to 460 workers. The company said it would continue to service the Colombian market from its base in Mexico, and that it made logical sense for Colombia to import rather than produce.
Bayer pharmaceutical group, followed suit, and decided to shutter its factory in Cali, where traditional pharmaceuticals such as Aspirin, Alka-Seltzer and creams such as Canesten we produced. Production was relocated to Mexico and Guatemala, leaving another 100 people redundant in the Valle de Cauca.
The industrial crunch due to the FTA with Mexico has even affected the automobile industry, including Colombia’s flagship assembly company Compañia Colombiana Automatriz (CCA), which had assembled Mazda cars locally, again leading to the closure of a 500-worker plant.

The exodus of multinational manufacturing operations from Colombia has understandably left its industrial sector concerned, raising questions of whether or not it can be supported and maintained in the face of free trade. A balance must be struck between attracting international investment and ensuring that international manufacturing operations that have been in the Colombian market for years are looked after.
The Caribbean and Atlantic coast are seeing a boom due to FTAs with the U.S, both in volumes and product diversity. The regions have seen a booming of aluminium and other materials important for the construction industry, clothing and textiles, glass, plastic, pharmaceutical products, and confectionary—all sectors that have proved vital in generating employment.

According to ProExport three years on from the signing of the FTA with the US, exports from the Caribbean region have increased by over $50 million, from $411 million in 2011 to $451.5 million in 2014. The Caribbean regions of Bolivar, Atlántico, and Magdalena have led the export boom, while other peripheral coastal departments such as Sucre and Córdoba have seen a boom in free trade zone activity indicating a likelihood of becoming greater and more competitive exporters in the coming years.

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