Colombia’s Path to Global Integration Depends on Effective Security and Trade Policies

Francisco A. Laguna & Jaime Ignacio Torres

 As many other countries, Colombia was severely affected by the 1998 Asian Financial Crisis. A 4.2% contraction of the economy in 1999 halted the economic development achieved during the past two decades. Economic turmoil in the country led to protectionist trade measures, such as tariff increases and the imposition of dumping duties. Simultaneously, national security was declining with FARC [Fuerzas Armadas Revolucionarias de Colombia] attacks increasing exponentially. This combination resulted in an isolated economy with no credibility for foreign investors.

gfhfgdsf The administration of Alvaro Uribe (2002-2010) implemented the impetus of change not only by following a pragmatic economic policy but also by enacting the Democratic Security and Defense Policy, which focused on improving public safety and restoring investor confidence. Government successes in isolating FARC and continued peace discussions between the parties have, among other things, improved overall security. These policies are making Colombia an increasingly attractive country for foreign direct investment (FDI), reaching record levels of FDI in 2012.

Despite these advances, certain security and trade issues should be addressed to allow continued globalization and economic growth.

Disrupt FARC’s Exportation of Conflict Minerals

FARC controls territory used to carry out the illegal mining and exportation of conflict minerals, defined as minerals mined in conditions of armed conflict and human right abuses, including, among other things, forced and dangerous labor. This is now the group’s main source of financing. Disrupting this revenue source would allow the local population to engage in the mining and exportation of conflict-free minerals, ultimately stimulating growth and stability.

A means of achieving this goal would be for the US Securities and Exchange Commission to include Colombia in Section 1502 of the Dodd-Frank Wall Street Financial Reform Act, which requires multinationals to disclose the sources of conflict minerals in an attempt to diminish the link between exploitation of conflict minerals and the financing of armed conflict. Currently, the Democratic Republic of Congo is the only country included in Section 1502.

Target Trade with Asia

Colombia recognizes that Asian trade is an important component of economic growth. As a member of the Pacific Alliance, Colombia is actively seeking to establish regional and bilateral trade opportunities with potential Asian partners. The other members of the Alliance are Chile, Mexico and Peru.

China is the key Asian player and already has a strong presence in the region, both in terms of FDI and the financing of public projects. Colombia should increase efforts to develop bilateral relations with China by negotiating a Free Trade Agreement. In and of itself, the ever-increasing Chinese food market represents a lucrative target for Colombian agricultural products.

Liberalize Agricultural Policy

UntitledColombia still lacks the strong agricultural policy that would allow it to leverage opportunities in global markets. Agricultural policy remains protectionist and generates an anti-export bias.

Currently, Colombia farms less than half of its arable land, and as such, it is one of the few countries in the region that can still expand agricultural production. Liberalizing agricultural policy would allow Colombian farmers to take advantage of future trade agreements and to diversify their exports. Diversification would diminish negative economic effects arising from the country’s currently economic dependence on the oil and mining sectors.

TransLegal assists clients in Colombia in such sectors as agriculture and animal feed, biotechnology, biofuels, cosmetics, foods and pharmaceuticals. Call us with your questions.

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