COLOMBIA AND CANADA CELEBRATE TODAY AS THE FTA GOES INTO EFFECT

The Canada-Colombia Free Trade Agreement (CCOFTA) comes into force on August 15, 2011, significantly liberalizing trade between Canada and Colombia, and opening up markets for businesses in both countries.

Canada and Colombia signed the bilateral free trade agreement on November 21, 2008, but the CCOFTA could not enter into force until the provisions of the CCOFTA were incorporated into Canada’s domestic law through implementing legislation. The CCOFTA’s implementing legislation is Bill C-2, the Canada-Colombia Free Trade Agreement Implementation Act, which was introduced on March 10, 2010 and received Royal Assent on June 29, 2010. It is scheduled to come into force on August 15, 2011.

By implementing the bilateral trade agreement, the parties will begin to enact market access reforms, trade in services liberalization and a strengthened international investment regime. These trade and investment liberalization measures, among others, will provide Canadian and Colombian investors, importers and exporters with increased and enhanced economic opportunities.

Tariff Reductions

Upon implementation, the CCOFTA will immediately eliminate tariffs on the vast majority of Colombian imports to Canada, including textiles, industrial goods and most agricultural products. The balance will have their duties eliminated over various staged tariff phase‑out periods of three, seven or 17 years, with the exception of Tariff Rate Quota items, including certain dairy, poultry and refined sugar products, which are exempt from tariff elimination.

Reciprocally, Colombia will reduce its barriers to Canadian imports. Colombia will immediately eliminate tariffs on many non-agricultural imports, with the balance to be eliminated over various staged phase-out periods, lasting either five, seven or 10 years. This will dramatically open up the Colombian market to Canadian manufacturers, as the average pre-CCOFTA tariff rate for Canadian industrial products was 11.8%. Not all agricultural tariffs will be eliminated. That said, a range of staged tariff phase-out periods, from three to 22 years in duration, will apply such that most Canadian agricultural products will eventually be duty-free. This will be a boon to Canadian agricultural exporters who face a current average tariff rate of 16.6%. Wheat, barley, peas, lentils and, within specified volume limits, beans and beef (among other products) will become duty-free immediately. Over time, the tariffs on other products will be gradually eliminated, including those on pork, canola oil, other oilseeds, animal fat, frozen french fries and whiskey.

In addition, Colombia will eliminate the use of the Price Band System in relation to certain products immediately. It is worth noting that if theTrade Promotion Agreement between the United States and Colombia, signed on November 22, 2006, comes into force within two years of the CCOFTA coming into force, a variety of the CCOFTA tariff elimination periods will be altered.

Liberalized Trade in Services

The CCOFTA also offers benefits to those involved in the cross-border supply of services. Upon implementation, Canadian service providers will be able to rely on a rules-based, transparent, secure and predictable environment for exporting services to Colombian markets, and will be protected by the principles of fair and equitable treatment. Canadian service exporters, such as technicians, contract workers and independent professionals, will further benefit from provisions that facilitate temporary entry to Colombia. The CCOFTA also provides a framework for the countries to negotiate mutual recognition agreements respecting the licensing and qualification requirements that apply to various professionals.

Improved International Investment Regime

The implementation of the CCOFTA will strengthen the investment ties between the two countries. It markedly advances the rights of, and protections available to, Canadians and Canadian businesses that currently have or are contemplating investments in Colombia. The CCOFTA facilitates the free flow of capital to foreign investments, establishes minimum standards of treatment for foreign investors, provides protection against expropriation without compensation, and ensures access to binding international arbitration where disputes arise between investors and the host state.

Canada-Colombia Trade and Investment Context

Canada and Colombia are important trading partners. As of 2010, Colombia is Canada’s second largest South American export market, after Brazil. At present, hundreds of Canadian companies do business with or in Colombia. The total value of Canadian exports of merchandise to Colombia in 2010 was C$644.3‑million, consisting largely of agricultural goods including wheat, barley and lentils, as well as industrial products, paper products and heavy machinery. Canadian services exported to Colombia in 2010 were valued at C$102‑million. Canadian merchandise imports from Colombia in 2010 totalled C$717.2-million including, among other things, coffee, bananas, coal, fuel and flowers.

Colombia, partly because of its significant natural resources, is also an important investment destination for Canadian companies involved in mining and oil exploration. As of 2007, the accumulated value of Canadian investment in Colombia was C$739-million, consisting primarily of investments in the oil and gas and mining sectors. Canadian investment in the printing sector is also sizeable. In 2010, Canadians made C$824-million of stock investments in Colombia.

Concurrent with their efforts to open up markets and liberalize their trade relationship, Canada and Colombia have attempted to address some of the social dimensions of economic integration. In addition to the CCOFTA, the two countries signed two side agreements: the Agreement on the Environment between Canada and the Republic of Colombia and the Agreement on Labour Cooperation between Canada and the Republic of Colombia. The Agreement on Labour Cooperation is targeted at: improving working conditions; encouraging a commitment to internationally recognized labour principles and rights; promoting compliance with and effective enforcement of labour laws; promoting social dialogue on labour matters among workers, employers, labour organizations, business organizations and governments; and fostering co‑operation and exchange of information with regard to the countries’ labour laws. 

The Agreement on the Environment obligates both countries to pursue high levels of environmental protection in the context of their trading relationship, prohibits the relaxation of domestic environmental standards for the sake of trade, promotes the development of effectively enforced environmental laws, encourages conservation and sustainable use of resources, seeks to protect biological diversity, and encourages co-operation and transparency on environmental matters.

EX-IM BANK CHAIRMAN LEADS BUSINESS-DEVELOPMENT MISSION TO COLOMBIA

BOGOTÁ, COLOMBIA: Fred P. Hochberg, chairman and president of the Export-Import Bank of the United States (Ex-Im Bank), is leading a business-development mission in Colombia on August 9 - 11, 2011, to promote Ex-Im Bank financing available to support the purchase of U.S. goods and services by Colombian buyers to meet the country's growing infrastructure needs.

In Bogotá on August 9, Chairman Hochberg met with Colombian President Juan Manuel Santos, other government officials and business leaders in a variety of sectors.

"In Latin America, Colombia is one of Ex-Im Bank's strongest markets, second only to Mexico. The Bank has authorized almost $3.8 billion to support U.S. exports to Colombia in fiscal year 2011 to date," said Chairman Hochberg. "We provide an array of innovative financing tools and resources for Colombian buyers to purchase U.S. goods and services."

Commenting on the pending U.S.-Colombian Free Trade Agreement, Hochberg noted, "Ex-Im Bank is supporting Colombian companies as productive partners with U.S. exporters for the mutual benefit of our countries. The free trade agreement with Colombia will allow the Bank to harness additional opportunities on behalf of American exporters in infrastructure and other key sectors."

Hochberg and senior Ex-Im Bank staff held a discussion in Bogotá with the board of directors of the Colombian Petroleum Services Chamber (CAMPETROL). They also met with representatives from Colombia's national oil company, Ecopetrol S.A., and Refinería de Cartagena S.A. (Reficar), a majority-owned independent subsidiary of Ecopetrol.

At an American Chamber of Commerce breakfast in Bogotá on Tuesday, August 9, Hochberg spoke with Colombian business leaders about Ex-Im Bank financing available to encourage companies to purchase U.S. goods and services. He is focused on expanding use of the Bank's products for infrastructure development, energy production, medical and transportation equipment, construction and other sectors.

Hochberg will participate in an AmCham breakfast in Medellín on Wednesday, August 10. He is also scheduled to speak with Colombian companies in the transportation sector in Medellín. A meeting with officials from Avianca Airlines in Bogotá is planned for Thursday, August 11.

Colombia is one of nine key markets (others are Brazil, Mexico, Turkey, South Africa, Nigeria, India, Indonesia and Vietnam) where Ex-Im Bank is focusing its business-development efforts. The Bank has authorized nearly $3.8 billion in support of U.S. exports to Colombia in FY 2011 to date. This level of financing represents a sharp increase from the Bank's total portfolio of $127 million in Colombia in FY 2008.

Ecopetrol is a significant customer of Ex-Im Bank financing. In February 2011, the Bank authorized nearly $1 billion for two financing facilities that will support Ecopetrol's purchases of goods and services from a wide range of U.S. exporters.

In May 2011, the Bank approved $2.84 billion in financing to support Reficar's purchases of equipment and services from more than 150 large and small U.S. engineering/design, equipment supply, contracting and process-license companies.

Colombian buyers interested in learning more about Ex-Im Bank financing may contact Commercial Service Office Julio Carbo (Julio.Carbo@trade.gov) at the U.S. embassy in Bogotá, (571) 315-0811.

About Ex-Im Bank:

Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing at no cost to American taxpayers. The Bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance and financing to help foreign buyers purchase U.S. goods and services.

In FY 2011 through August 4, 2011, Ex-Im Bank has approved more than $24.5 billion in total authorizations - an all-time Ex-Im record. This total included 2,548 U.S. small-business transactions. The Bank's FY 2011 authorizations to date represent a 70 percent increase over its FY 2008 total of $14.4 billion.

Ex-Im Bank's authorizations through August 4 will support $31.5 billion in U.S. export sales and approximately 213,000 American jobs in communities across the country. For more information, visit the Bank's Web site at www.exim.gov

COLOMBIA CONTINUES TO IMPRESS AND ATTRACT FOREIGN INVESTORS

Foreign direct investment in Colombia increased by 79.6% in the first half of 2011 compared to the same period last year totaling $7.3 billion, economic magazine Portfalio reported.

From January to June Colombia received $7.3 billion in foreign investment up from $4.1 billion for the same period last year. This puts Colombia on track of meeting its goal of $9.7 billion in 2011.

Most of the growth occured in Colombia's mining sector, which received $6.3 billion up 59.3% from the same period last year. Colombia's other sectors received less money but grew at a much greater rate, up 88% from last year.

The increase in investment coincides with an upgrade in Colombia's debt rating and is thought to be fueling the rise in the Nations currency. 

According to Colombia's finance minister, from January to April Colombia had record levels of investment, with $3.7 billion invested, 57% of which was invested in the mining and oil sector.

FITCH UPGRADES COLOMBIA RATING TO INVESTMENT GRADE

(Reuters) - Fitch Ratings on Wednesday raised its sovereign foreign currency credit rating for Colombia by one notch to BBB-minus, citing prudent economic policies and increased resiliency to internal and external shocks.

The investment-grade rating's outlook was revised down to stable from positive following the upgrade.

"Increased macroeconomic policy credibility, a flexible exchange rate regime, strengthened external liquidity position and moderate external debt have steadily improved the economy's capacity to absorb external shocks," Erich Arispe, sovereign credit analyst at Fitch said in a statement.

Both Standard & Poor's and Moody's Investors Service rateD Colombia investment grade earlier this year. Fitch's rating is now equal to S&P's BBB-minus and Moody's Baa3. 

COLOMBIAN ECONOMY WILL EXPAND BY 5.5% IN 2011

Colombia’s economy may expand as much as 5.5 percent in 2011, more than policy makers had been projecting, as strong expansion in credit and consumer confidence create “perfect” conditions for growth, central bank President Jose Dario Uribe said.

Latin America’s fourth-largest economy will be running close to full capacity in the second half of 2011, after expanding 4.3 percent in 2010, Uribe said in an interview in Washington yesterday.

“Consumer confidence is increasing again, credit growth is very dynamic,” said Uribe, 52, in an interview in Washington yesterday during the semi-annual meetings of the International Monetary Fund. “There are a lot of signals that the economy is strong, and is growing fast.”

The central bank’s 2011 economic growth projection is 4.5 percent, though this could be revised in the bank’s next quarterly inflation report to be published in roughly three weeks, Uribe said. Policy makers raised Colombia’s benchmark interest rate by a quarter point for a second straight month in March to 3.5 percent, noting the rise in consumer confidence, bank lending and retail sales.

As Colombia’s economic expansion gains momentum, inflation has been accelerating. Annual inflation was 3.19 percent in March, up from a five-decade low of 1.84 percent a year earlier. The central bank forecasts inflation near the 3 percent midpoint of its target range at the end of 2011 and 2012, Uribe said.

‘Stable, Sustained Path’

Economists cut their forecasts for year-end inflation to 3.31 percent in a central bank survey published last week, from 3.48 percent in the March survey.

“I see the Colombian economy in a perfect situation, on a very stable and very sustainable path,” said Uribe, who has a doctorate in economics from the University of Illinois at Urbana-Champaign, where he studied alongside Alexandre Tombini, the president of Brazil’s central bank.

The peso appreciated 1.1 percent last week to 1798.43 per dollar, its strongest level since October. The currency has gained 6.1 percent against the dollar this year, the best performer of seven Latin American currencies tracked by Bloomberg.

Recent gains in the peso are a result of companies bringing in funds from overseas to pay local taxes, Finance Minister Juan Carlos Echeverry said in an interview in Washington. Companies are slated to pay taxes between April 8 and April 25.

The currency’s strength has not prevented the “tradeables” sector of the economy from growing as fast as non-tradeables, Uribe said. Tradeables are goods that can be exported or substituted by imports, and so are sensitive to changes in the exchange rate.

Controls, Vigilance

Uribe said he sees no need for the sort of capital controls used in Brazil to stem gains by the peso. Such capital controls create distortions and should not be implemented without “clear evidence” that the benefits would outweigh the costs, Uribe said.

Colombia’s credit rating was raised one-level to BBB- by Standard & Poor’s last month, restoring the investment grade status lost in September 1999.

The yields on Colombia’s peso bonds fell to their lowest level in three months last week, as economists cut inflation forecasts and as bets mounted that funds from government securities maturing next month will be reinvested in debt.

The central bank needs to watch for signs that optimism about the Colombia’s economy could lead consumers and companies to take on too much debt, Uribe said.

“I’m not worried, but you have to always be alert that we don’t go mad and spend in excess,” Uribe said.

Gross credit expanded 19 percent to 183 trillion pesos ($102 billion) in the year through February, the fastest pace since October 2008, according to the financial regulator.

Asset price bubbles inflated by capital inflows could be dealt with by regulation of financial markets, Uribe said.

--Editors: Robert Jameson, Joshua Goodman

http://www.businessweek.com/news/2011-04-17/colombia-may-grow-faster-than-expected-5-5-in-2010-uribe-says.html

COLOMBIA OIL OUTLOOK IMPROVES WITH NEW FIND, HIGHER OUTPUT.

BOGOTA, April 26 (UPI) -- Colombia is seeing the outlook for its energy sector improve with progress on two fronts -- new oil finds and higher production from existing wells.

Ecopetrol President Javier Gutierrez said the company, the largest integrated hydrocarbons company in the country, would aim to be producing at least 1.45 million barrels per day of oil equivalent by 2013.

Rising oil prices have given fresh incentives to petroleum prospecting worldwide despite warnings that more expensive oil and oil gas could spell further trouble for global economic recovery.

Last year Colombia embarked on an aggressive campaign to attract more investment and industry expertise into its unexplored and under-exploited oil resources.

With economic growth set to continue through this year the government expects domestic oil demand to continue rising and also wants to reduce dependence on refining abroad.

Colombia depends on Mexican Gulf Coast refiners to buy and refine most of its heavy, sulfur-laden crude and it ranks 10th among the exporters of oil to the United States. It shipped an average of 365,000 barrels per day to the United States last year.

Ecopetrol said results of tests on a new oil well in the south of the country showed encouraging assessments.

The 7,371-foot deep Nunda-1 well in the Tello municipality of the department of Huila was first drilled on Jan. 27. Initial tests had a flow of 318 barrels of fluid a day, 71 percent of which was water, corresponding to an average of 92 barrels per day of crude oil, the company said in a news release.

The well was drilled as part of an exploration and exploitation agreement signed between Ecopetrol and the National Hydrocarbons Agency dating to 2006. Ecopetrol has 100 percent participation in the project.

Ecopetrol will begin evaluating the discovery to determine its commercial viability. Company officials quoted in Colombian news media said they were confident about the outcome of the tests.

Colombia already producing a little less than 1 million barrels a day so the goal of producing 1.45 million barrels a day in two years is not overoptimistic, industry analysts said.

Colombian oil production in March reached 884,000 barrels per day, up 15 percent from the same month in 2010.

Ecopetrol and its associates extracted 786,000 barrels per day, while the contracts administered by the National Hydrocarbon Agency ANH exceeded 98,000 barrels per day, Ecopetrol said in a news release. On average Colombia has produced 860,000 barrels of crude oil daily so far in the first quarter of 2011.

"The discovery opens up a new era for Ecopetrol by branching out to new types of exploration activities involving stratigraphic traps (those in which hydrocarbons accumulate due to variations in the deposit environment) in the Valle Superior del Magdalena and helps increase reserve inventories in this area of the country," the company said in a statement.

Ecopetrol, Colombia´s largest integrated oil and natural gas company responsible for 60 percent of total production, is one of the top 40 oil companies in the world and the fourth largest oil company in Latin America.

Ecopetrol is also involved in exploration and production activities in Brazil, Peru and the U.S. Gulf Coast, and owns the main refineries in Colombia. The company also owns most of the network of oil and multiple purpose pipelines in the country, petrochemical plants, and is entering into the biofuels business.

Read more: http://www.upi.com/Science_News/Resource-Wars/2011/04/26/Colombia-oil-outlook-improves-with-new-find-higher-output/UPI-81971303840263/#ixzz1KjTPtX4b

PETRI-DISH ECONOMIES: COLOMBIA INFLOWS, OUTPERFORMING

“I WAS here ten years ago when the economy was in crisis and every day’s news was worse than the day before. Now all the news is better than expected.” Juan Carlos Echeverry was a top official in Colombia’s finance ministry when the country, then violence-ridden, went through a messy mortgage bust and budget crunch in the late 1990s. Now, as finance minister, he is in charge of an economy on the rise.

Foreign investment is up, drawn by an improved security situation, the lure of minerals and a bouncy regional market. Public coffers are swelling, thanks to rising commodity prices and oil output. Standard & Poor’s hiked Colombia’s sovereign-debt rating to investment grade last month.

It is Mr Echeverry’s task to manage the consequences of this good news. High oil prices could encourage outsize demands for government spending. A flood of foreign capital could send the peso soaring and cause credit bubbles, while threatening the viability of industries from cut flowers to food processing. The decision to create an integrated regional bourse with Peru and Chile will attract more money.

Colombia is not the only emerging economy to face these issues. Countries from Brazil to South Korea have introduced a plethora of taxes and restrictions to deter foreign inflows. But Colombia is one to watch. Along with Chile, it pioneered the use of capital-inflow controls in the 1990s. Yet its strategy today is subtly different from many others, with more weight on fiscal reforms and less on controls.

The country’s technocrats do worry about the impact of inflows but they see the exchange rate as the most important shock absorber. And with Colombia’s long-term prospects improving, they believe a gradually stronger currency is inevitable. José Darío Uribe, governor of the central bank, puts a lot of weight on using prudential rules to stop inflows causing financial instability. The central bank does not allow banks to borrow in foreign currency and then lend in pesos, for instance. It guards against maturity mismatches in foreign currency and it has long limited banks’ foreign-exchange derivative bets.

Mr Uribe is less convinced that capital controls can do much to affect the exchange rate. Though no one rules them out, such controls are clearly not Colombia’s first line of defence. And when the central bank does intervene to try to stem excessive strength in the peso, the tactics are different from, say, Brazil’s.

On September 15th 2010 the central bank announced that it would buy $20m of foreign exchange every day for four months. That policy has been extended to mid-June. Mr Uribe is convinced that this kind of transparent, small, predictable intervention is much more effective than the large-scale but unpredictable accumulation of foreign-exchange reserves that other emerging markets have gone for. Colombia’s currency has depreciated slightly over the past six months, in contrast to most others in the region (see chart). How much this owes to the intervention strategy is debatable. Roberto Steiner of Fedesarrollo, a think-tank, says the goal is to insulate the central bank from pressure to intervene more fiercely.

The big question is whether Colombia’s government will be able to resist political pressures to spend. The budget deficit is likely to be well over 3% of GDP in 2011. Colombia urgently needs better infrastructure. Despite the government’s military gains against the FARC guerrillas, plenty of money still needs to be spent on security and reparations. As Alejandro Gaviria at the Universidad de los Andes says: “Colombia faces the demands of conflict and post-conflict spending at the same time.” And painfully high income inequality means pressure for social spending, too.

Mr Echeverry is trying hard to hold firm. A recent tax reform slashed tax breaks on investment. A Chilean-style fiscal rule, designed to limit the deficit and force the prudent use of commodity receipts, is working its way through Congress. But in a country whose constitutional court can force public spending (by, say, declaring that people have a right to expensive health care), that may not be enough. So the government is also pushing for a German-style constitutional amendment to enshrine the notion of fiscal sustainability. Mr Echeverry is confident. “The whole economic plan of our government is tailor-made to manage a boom,” he boasts.

http://www.economist.com/node/18560513