IS ASIA COLOMBIA'S NEXT ECONOMIC FRONTIER?

UNCLAS SECTION 01 OF 02 BOGOTA 003359 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ETRD EINV ECON PREL ECIN APECO CO SUBJECT: IS ASIA COLOMBIA'S NEXT ECONOMIC FRONTIER? REF: BOGOTA 3309 ¶1. (SBU) SUMMARY. Colombia is making a concerted effort to increase exports to, and investment from, Asia. The GOC is actively negotiating and implementing bilateral economic agreements with several Asian countries. Likewise, Colombia is seeking membership in the Asia-Pacific Economic Cooperation (APEC) and the Trans-Pacific Strategic Economic Partnership Agreement (TPP),in part to help raise its profile in Asia. GOC officials recognize that bilateral and multilateral agreements alone are not enough to diversify Colombia's exports and have in place an aggressive program of trade missions and credit incentives to encourage Colombian businesses to explore Asian markets. While the strategy is laudable, it will likely be many years before Asia plays the same role in Colombia's economy that it does in Chile's or Peru's. END SUMMARY. ASIA: A LOGICAL NEXT STEP FOR BILATERAL AGREEMENTS -------------- -------------- ¶2. (U) Reftel reported on Colombia's goal of nine FTAs in place with 45 countries in the Western Hemisphere and Europe by 2010. With five of those agreements already in force and only one left to finish negotiating (with the EU),Colombia is looking to Asia for expanded export markets and greater sources of foreign direct investment. The GOC has a number of free trade agreements (FTAs), bilateral investment treaties (BITs) and double taxation treaties (DTTs) with Asian countries in various stages of negotiation and implementation. Colombia's BIT with China, signed in November 2008, is still pending before the Colombian Congress. Trade Minister Plata signed a BIT with India on November 10 of this year. Colombia and South Korea closed negotiations on a BIT in October of this year and plan to start FTA negotiations at the beginning of ¶2010. According to the GOC, Japan has insisted on negotiating a BIT (fourth negotiation round is in late November),followed by a DTT, before it will begin FTA negotiations with Colombia. ¶3. (SBU) Colombian Trade Ministry's Coordinator for Relations with Asia Rosana Prieto told us the potential for increased foreign direct investment (FDI) from Asia was enormous, given the size of the Asian economies in question and their relatively miniscule levels of investment currently. Prieto noted that China's FDI in Colombia amounted to a paltry $8 million between 2002 and 2008 (NOTE: This figure does not include investment in the petroleum sector, which the GOC does not disaggregate by country of origin. END NOTE.) Japan's FDI, the most of any Asian country in Colombia, amounted to only $71 million over the same period. CHILE AND PERU CAUSE TRADE ENVY -------------- ¶4. (SBU) Similarly, Colombia's exports to Asia are a small percentage of total exports, especially compared to Chile and Peru. In 2008, only five percent of Colombia's exports went to the 16 APEC members located outside of the Western Hemisphere. By comparison, 36 percent of Chile's exports and 23 percent of Peru's exports went to these countries. Colombian government and business leaders are acutely aware of how far they lag behind Chile and Peru when it comes to trade with Asia and raise the issue in virtually every conversation about Asia. In fact, two-thirds of a recent MFA-sponsored conference on Colombia's relations with Asia was devoted to the experiences of Chile and Peru. Luis Carlos Villegas, President of the National Association of Entrepreneurs (ANDI) noted that, given the internal security problems that plagued Colombia in the recent past, it was understandable that Colombia lags behind its neighbors vis-C -vis Asia, but pointed to BOGOTA 00003359 002 OF 002 growing interest in Asia by Colombian businesses as a positive sign. GOC SEEKING APEC AND TPP MEMBERSHIP -------------- ¶5. (SBU) The GOC seeks to join APEC if and when the membership moratorium is lifted in 2010 and has asked for USG support in this regard. While not currently an APEC member, Colombia participates in the Investment Experts' Group and the Energy Working Group. In 2008, APEC host Peru helped secure an invitation for President Uribe to address the APEC Business Advisory Council (ABAC). While Uribe was not invited to the APEC Summit in 2009, Foreign Minister Jaime Bermudez will be in Singapore during the Summit, for the purpose of raising Colombia's profile with regard to APEC membership. ¶6. (SBU) Colombia is also interested in joining the TPP (formerly P-4). Prieto noted that in 2008 Chile invited Colombia to become a member, but that the GOC has little clarity at this point on how the process for membership would work. RAISING COLOMBIAN BUSINESS AWARENESS OF ASIA -------------- ¶7. (SBU) Recognizing that government agreements alone will not diversify Colombia's export markets to the desired degree, the GOC has in place an ambitious agenda of trade delegations, including to Asian countries, coupled with credit incentives for small businesses looking to expand to new markets, such as Asia. According to Javier Diaz, President of the National Association of Exporters (ANALDEX),Colombian small and medium businesses tend to be conservative and focused on "easy" export markets, such as Venezuela and Ecuador, where customers speak the same language. He said recent trade difficulties with Venezuela will force Colombian exporters to search for other markets, including Asia, but acknowledged that it will take a long time for Colombia to realize its full economic potential with Asia. BROWNFIELD