The devaluation of the peso has significantly affected Colombia’s foreign trade, with both imports and exports falling in the first 10 months of 2015, compared to the same period in the previous year. Despite the grim short-term outlook, recent development of new FTAs in the Pacific paints a bright long-term picture to boost the economy and trade on Colombia’s west coast.
The Pacific Rim region has seen remarkable progress in terms of trade and economic integration in recent years. In late 2015, 12 American and Asian countries signed the Trans-Pacific Partnership (TPP), an agreement that aims to lower trade barriers, which was only endorsed by Mexico and Peru as the sole Latin members. That agreement will consolidate one of the largest global trade blocs created in the recent years, and Colombian officials are still studying whether to join the club or not.
However, before taking part in that trade deal—which integrates about 40% of global economic capacity—Colombia wants to boost economic ties among the Pacific Alliance nations. Made up of Chile, Colombia, Mexico, and Peru, the Pacific Alliance is the most promising trade bloc in Latin America, as they represent nearly 36% of the regional GDP. The collective goal of these nations is to propel economic integration as well as to further free trade with a clear orientation toward Asia.
Pacific Alliance countries have made several treaties to integrate their stock markets, created joint diplomatic missions, and held several state meetings, and more. Nevertheless, in terms of commerce with Asia, Colombia is behind as compared to the other three members of the Pacific Alliance. Whereas nearly 40% of the Chilean and Peruvian exports are shipped to China, Japan, Korea, or India; only 20% of Colombian sales are sent to those countries.
In order to sell more products to Asia, the Santos administration started to negotiate a FTA with Japan and another one with Korea. In 2012, Colombia and Japan began a bilateral conversation on an FTA that is yet to be signed. The latter plans to increase its exports of iron, steel, industrial machinery, coffee, and flowers to the Asian country. According to the Colombian Ministry of Commerce, Industry, and Tourism the country’s sales to Japan surged by 42% between 2004 and 2014 and hit $200 million. The FTA could increase those figures dramatically, although it is not yet determined when the treaty will be closed.
On the other hand, the FTA with South Korea was already signed in 2013 and approved by Congress in 2014, despite the fact that it is awaiting the “final blessing“ by the Constitutional Court as President Santos put it in a press conference last year during the official visit of the South Korean President, Park Geun-hye, to Colombia. In 2013, bilateral trade reached $1.5 billion and it will likely grow as the Latin country increases its sales of agriculture products to South Korea and increases its high-technology imports from the Asian nation.
In addition to the FTAs, Colombia has made several attempts since 1989 to join the Asia-Pacific Economic Cooperation (APEC), a 21-economy forum that has taken several steps to boost trade among Asia, Oceania, and America. Colombia is the only nation in the Pacific Alliance that is not also a member in the APEC. Consequently, several Pacific Alliance Ministers have publicly supported the Colombian candidacy to join the forum.
Nonetheless, Santos, who was invited last year to the 23rd APEC Economic Leaders Summit in Manila, claimed that it was not just all the Pacific Alliance countries lobbying for Colombia’s membership to the forum, but APEC nations as well. “All the countries have told us they are very interested in Colombia’s membership,“ said Santos, who is looking forward to strengthening the country’s relevance in Asia before his second term in office finishes in 2018.