UPDATE 1-Ailing Colombia flower farms eye relief in US pact
* Trade deal would provide duty-free access to U.S. market
* Will help Colombian flowers compete with Kenya, Ethiopia
* Industry struggling with strong peso, higher costs
By Diana Delgado
BOGOTA, Oct 11 (Reuters) - Colombian flower growers hurt by higher costs, a strong peso and competition from Africa may get relief from the U.S. Congress this week if it approves a long-delayed trade pact with the South American nation.
Under the deal Colombia, the world's second largest exporter of cut flowers after the Netherlands, would be able to export stems tariff-free to a market that represented three fourths of the country's $1.24 billion flower exports in 2010.
But an expected appreciation of the Colombian peso would put further pressure on Colombia's fifth most important legal export, wiping out most of the gains from selling cut flowers duty free in the United States.
"The free-trade agreement will give us oxygen but it does not compensate us yet," said Jose Mauricio Barrera, marketing manager for Flores Funza, a 350-hectare (865-acre) flower farm near Colombia's capital, Bogota.
"We need an increase of global demand for flowers, fewer supply of flowers and a competitive exchange rate," he said.
After signing the deal nearly five years ago, the U.S. House of Representatives and the Senate were expected to vote on Wednesday on trade pacts with Colombia, South Korea and Panama.
The deal would reduce or remove tariffs in an attempt to promote trade, and it appears to have overcome opposition from Democrats in the U.S. Congress concerned that it would result in job losses at a time of persistently high U.S. unemployment.
Besides flower growers, Colombian textile, clothing and leather goods makers are seen benefiting from wider access to the U.S. market, though many Colombian food producers could be vulnerable to increased U.S. imports.
Colombian flower exporters had preferential tariff access since the early 1990s under another agreement that expired in February. Since then Colombian flowers have been slapped with duties ranging from 3.2 percent to 7 percent, mostly at the high end of the range.
"Saying the free-trade agreement will save this industry is wrong. We had preferential tariffs until February. We will just return to the conditions we had until recently," said Andrea Gonzalez, economic director at Asocolflores, the Andean country's association of flower exporters.
CURRENCY APPRECIATION AND LABOR COMPETITION
Although Colombia's peso has weakened 9.5 percent since mid-July on global economic uncertainty, the currency has gained about 25 percent against the U.S. dollar since the end of 2004, a trend that experts expect to continue.
That has squeezed exporters' profit, forcing 3,000 hectares (7,400 acres) of flower farms near Bogota and Colombia's second most important city Medellin to close or nearly shut down.
Asocolflores has joined other exporters in asking the Colombian government to take measures to weaken the currency.
While exporters have benefited from the peso depreciation since July, economists expect the currency to continue on a strengthening path.
"For me the (peso's) appreciation is more worrisome than tariffs," Asocolflores President Augusto Solano told Reuters.
The economic slowdown in developed countries has also weighed on the industry. Solano said exports could fall 2 percent to 3 percent this year from 2010.
That will mostly affect smaller growers with larger producers picking up the slack.
Elite Flower, an exporter of roses, alstroemeria and carnations, sees exports growing 20 percent this year to $144 million because U.S. retail giant Wal-Mart Stores Inc began carrying its flowers after other suppliers could not deliver enough to meet Wal-Mart's needs, commercial manager Ana Rojas said.
Putting more pressure on flower farms are rising costs of labor and materials, which have increased 61 percent since 2005 since salaries went up in dollar terms and materials such as plastics also rose with crude oil prices.
"While the labor cost of a Kenyan and Ethiopian workers is $65 and $80 respectively, the same worker in Colombia costs $500 per month," Gonzalez of Asocolflores said.
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