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Colombia 2013 | ECONOMY | VIP INTERVIEW

TBY talks to Sergio Díaz Granados, Minister of Trade, Industry, and Tourism, on progress in FTA negotiations, and the bid to join the OECD.

What are the advantages of the recently signed free trade agreements (FTAs) with the US and EU for Colombia?

The signing of the FTA with the US, which took effect in May 2011, and the agreement with the EU, which we expect to enter into force in 2013, are both milestones in the history of our foreign trade. These are our main economic partners, and they are two of the most dynamic economies in the world. They represent great opportunities for our exporters of goods and services. As a result of the FTA with the US, expectations point to the creation of 500,000 new jobs and, based on quantitative studies, an increase in GDP of between 0.5% and 1%. It is also projected that in the five years following the implementation of the agreement, the economy will grow an extra percentage point and unemployment will be lowered by two points. As for the EU, we will be able to access 27 countries, with over 503 million inhabitants and an average consumption per capita of $34,000, which is four times that of Colombia. This gives an idea as to the EU's purchasing power. Trade, FDI, and tourism with the EU and the US have shown significant dynamics. Between January and September 2012, exports from Colombia to the US grew 6.7%, and the trade balance showed a surplus of $6.64 billion. Also in this period, 20.9% of the foreign visitors that entered Colombia came from there. And regarding FDI from the US to Colombia, it reached $268 million, excluding the oil sector, in the first half of 2012. As for the EU, Colombia's exports to this bloc grew 4.1% in the first nine months of 2012, which yielded a positive trade balance of over $1.19 billion. During this period, 16.9% (199,645) of the foreign visitors that entered the country came from the EU.

What are the prospects for FTAs with other nations, and in what areas does Colombia need to improve to make the FTA boom successful?

We have set the goal of having a total of 18 trade agreements negotiated by 2014. On this front, we have concluded negotiations with South Korea, and we are continuing negotiations with Israel, Turkey, Costa Rica, and Panama. We have also advanced contacts for the start of negotiations with Japan, the Dominican Republic, Australia, and China, among other countries. Moreover, we aim to advance further through agreements with the Pacific Alliance, the countries of the Northern Triangle of Central America, and Uruguay so as to improve the integration of Latin America. These agreements will open up great opportunities for the producers of goods and services in an expanded market of 1.5 billion inhabitants. We are also making great efforts to improve competitiveness in all of the areas that this concerns, such as in road infrastructure and the renovation of seaports and airports, among others. To this end, the Santos administration has announced significant investment over the short and medium term. Furthermore, another major challenge is to achieve real access for our products, especially those of agribusiness. Here, we have been working on an agenda to meet the eligibility requirements for sanitary and phytosanitary (SPS) standards, which has included the Agricultural Institute of Colombia and Invima. In respect to trade promotion and making the best use of our trade agreements, we have been strengthening the programs and initiatives that aim to manage and develop the best conditions of access. To this end, we have relied on the support of Proexport, which has been conducting outreach programs and facilitating export and investment activities.

“Today, Colombia has become one of the best countries in the protection of foreign investment."

What are Colombia's advantages as a destination for foreign investment?

Today, Colombia has become one of the best countries in the protection of foreign investment and herein is the reason for our boom in this indicator. According to reports from the Bank of the Republic, as of November 2, 2012, over $14.16 billion had entered the country. This is an increase of 12.9% when compared to the same period last year, which came in at over $11.52 billion. Other significant factors that have contributed to this good performance include the progress that we have made in our agenda of trade and investment agreements and the improvements that have been made in our business climate, as well as the excellent management that Proexport has shown in promoting the country as a destination that is well suited for the creation of companies. As for our investment goals, we seek to have 16 international agreements in force, which means 10 more than the six that this administration has already begun. These new countries include Canada, the European Free Trade Association (EFTA), India, the US, China, the UK, South Korea, Japan, Turkey, and the EU. During this administration, we aim to establish stable rules for investment with these countries.

In what sectors are you seeing increasing activity and from which markets?

So far over 2012 we have observed that the commerce, restaurant, and hotel sectors have been the most attractive to foreign investors. In the first half of 2012, they received $811 million in foreign investment, which is $202 million more than in the same period in 2011. Other sectors that have been gaining ground include oil, mining, and quarrying (including coal), agriculture, hunting, forestry and fishing, electricity, gas, and water, as well as financial and business services. By country of origin, during the first half of 2012, the top investors in Colombia (excluding the oil sector) were Chile ($386.9 million), Anguilla ($315.6 million), the US ($268 million), Panama ($233.9 million), Bermuda ($212.3 million), the UK ($171.9 million), Canada ($115.8 million), Brazil ($92.8 million), Peru ($83.9 million), and the Netherlands ($82.8 million).

What measures is the government taking to further boost investors' confidence in the country?

In terms of boosting investor confidence, we have been accepted into the Investment Committee of the OECD, adhered to the Declaration on Foreign Investment and Multinational Enterprises, and made important progress with the Trade Committee of that organization. Other advances include the signing of the Bilateral Investment Treaty (BIT) with Japan and the conclusion of BIT negotiations with Turkey in March 2012. We have also included an investment chapter in our negotiations for an FTA with South Korea, and we have opened negotiations for an instrument to promote and protect investments with Israel, Costa Rica, Singapore, and the countries of the Pacific Alliance. Moreover, we have seen the entry into force of four international investment agreements that have been previously negotiated with Canada, China, India, and the US, which brings the total number of international investment agreements in force to 11. And lastly, we are continuously working to improve our Doing Business indicators, in order to be among those countries with the best business climate.

When do you believe Colombia will be joining the OECD and why is this important for the country?

As an integration strategy into the world economy, we have been advancing a plan for Colombia to be accepted into the OECD. This will allow us to benefit from the work and experiences of leading countries in formulating public policy. It will also allow us to become part of a group of nations that seek development and progress for their peoples. Our goal is to be accepted into this organization in two years' time. Colombia's entry into the OECD will require compliance with all the social and economic commitments of the organization. We have officially formalized Colombia as a full member of the Investment Group of the OECD, and we currently participate in several committees. Additionally, various members of this group, such as the US, Italy, France, Poland, and South Korea have said that they will back Colombia's candidacy. OECD membership would help Colombia to become an even better country in which to do business, and it would help us to increase foreign investment, make a qualitative leap in our development policy, and improve the overall quality of our public policies, among other things.

What are the priorities of the government regarding Colombia's position on the continent and relations with its neighboring countries?

In Colombia, at the moment, we are in a process of catching up in respect to our trade agenda, and this initiative includes the countries of the region and our neighbors. We are consolidating the Pacific Alliance, a bloc that is initially comprised of Mexico, Chile, Peru, and Colombia. Through this, we aim to strengthen our relationships at all levels, such as in trade, investment, and tourism. And this goes not only for these four markets alone, but also for others that wish to join and who have their eyes on Asia. One of the recent results of this initiative, for example, was the decision to eliminate the visa that was required for Colombians to travel to Mexico. Furthermore, the Partial Scope Agreement (PSA) with our neighbor and natural partner, Venezuela, has just come into force, and we are also increasingly deepening our relations with Panama and Costa Rica, as well as evaluating our alliances with the Dominican Republic.

What is your outlook for the performance of the Colombian economy in 2013 and beyond?

The Colombian economy is on a solid track, and we aim to keep up this positive performance over the coming years. To this end, the Ministry of Trade, Industry, and Tourism has established clear goals, which include boosting the nation's non-mining/non-energy exports to roughly $20 billion, half of which will be from the 16 high-potential sectors that are currently enrolled in the Productive Transformation Program (PTP), as well as gaining preferential access to a market of over 1.3 billion consumers through our various trade agreements that are in place, signed, or under negotiation. And, of course, we aim to welcome over 3.6 million foreign visitors to the country.

© The Business Year - December 2012