October 13, 2011 / 4:51 PM / 7 years ago

Analysis: Colombia sees big gain from U.S. trade pact

BOGOTA (Reuters) - Relieved after five years of waiting, Colombia celebrated U.S. approval of a free trade agreement the government said should boost the Andean nation’s investment prospects, cut violence against union leaders and create jobs.

The pact — which was stuck in the U.S. Congress since 2006 before passage on Wednesday — may help triple Colombian exports to the United States to $50 billion over five years and create 300,000 jobs, Trade Minister Sergio Diaz-Granados said.

“It’s backing for what Colombia has done over the last 10 years to improve the country,” he told Reuters, referring to the South American nation’s economic stabilization and pushing back of left-wing rebels in recent times.

As well as financial gain, the pact is intended to help curb violence against union leaders as it may help boost leverage to enforce human rights.

The U.S. Congress also approved pacts with South Korea and Panama that are expected to lift American exports by about $13 billion a year.

Shipments to Colombia could increase $1.1 billion from $12 billion in 2010, according to the U.S. government.

Though some are concerned Colombian farmers could be overwhelmed by duty-free U.S. imports, analysts broadly view the deal as the latest sign of foreign confidence in Colombia in its efforts to fully quell five decades of guerrilla violence and tackle the illegal drugs trade.

“This is a huge deal for Colombia,” said Eric Farnsworth, vice president of the Council of the Americas in Washington.

“Unquestionably it’s another important step to raising Colombia in the global investor consciousness, in changing the narrative.”


The agreement would fix duty-free access for most of Colombia’s exports to the United States.

Colombia, which has received about $6 billion in U.S. anti-narcotics aid since 2000, will now offer more investor certainty by fixing trade privileges that had been subject to renewal by the U.S. Congress, said Farnsworth, a specialist in Latin American trade.

The pact, which may take more than a year to kick in, will serve as an “antidote” to shield Colombia from the impact of a global slowdown and help add as much as 1 percent to economic growth, already forecast to expand at least 5 percent in 2011, trade minister Granados-Diaz said.

His boss, President Juan Manuel Santos, described the approval as “historic” and marking a “new era” in U.S. ties.

“The free trade agreement ends the uncertainty that has been discouraging long-term investment and it now guarantees to all investors stability in the rules of the game,” he said.

While it’s a “win-win” for both countries in the long term, commodity-rich Colombia may not benefit for several years, said Javier Diaz, head of the exporters’ association Analdex.

Colombia received $10.77 billion in foreign direct investment through September, 84 percent of which came from oil, gas and mining. Now it is likely to benefit from investments in other goods and services.

“Of course there are sectors that are highly sensitive because they are going to have competition they didn’t have before, which is true of the rice and poultry sectors. But it’s not like they are going to be wiped away because it’s going to take 18 years to gradually remove an 80 percent duty,” Diaz said.

Tarsicio Mora, president of the Colombia United Workers Federation (CUT), rejected the accord and said it would hurt workers and some companies.

“This will impact small and medium-sized companies, the agriculture sector and many workers, it will assure in one way or another that multinationals are able to place their products,” he told Reuters.

For years U.S. Democratic lawmakers opposed the pact on grounds Colombia offered lax protection against violence for union leaders.

“Colombia’s at war. We don’t have the right conditions for a free trade accord,” said Colombian opposition lawmaker Ivan Cepeda, whose father, also a congressman, was killed by a paramilitary hit squad in 1994.

While 282 unionists were killed in Colombia between 2002 and 2010, the number of labor murders dropped steadily over that time.

“With the FTA in place you have more leverage to enforce human rights,” said Susan Aaronson, a professor of trade policy at George Washington University in Washington.

Additional reporting by Luis Jaime Acosta and Nelson Bocanegra; Editing by Daniel Trotta and Andrew Cawthorne

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