Interview: Sergio Díaz-Granados Guida
To what extent will the free trade agreement (FTA) increase your exports to the US?
SERGIO DÍAZ-GRANADOS GUIDA: There are several ways in which the FTA with the US will generate benefits for Colombia, starting with permanent preferential access to our primary trading partner’s market. We now join the ranks of 20 countries with permanent commercial preferences and consequently obtain a relative advantage over other competitors. Quantifying an expected increase in exports is still limited to estimates made by technical studies that rely on assumptions. Exports will grow at levels ranging from 5% (according to a model that considers only the elimination of tariffs) to 40% (according to a gravity model of trade).
We are aware of the great potential the FTA can have for Colombia’s economy, but we also recognise that to take advantage of it effectively we need to enhance public-private works in several sectors and industries. In the short term, we are working on promoting products that are already present in international markets and can have access to the US. In the medium term, we aim to supply new products that need to incorporate health certificates and quality standards, while we work on overcoming logistics bottlenecks.
What steps are needed for Colombian industry to become internationally competitive?
DÍAZ-GRANADOS: Colombia applies various mechanisms to help improve the competitiveness of local industries, including productive transformation programmes (PTP). These are based on public-private partnership (PPP) schemes that aim to identify and remove bottlenecks that limit industrial growth.
PTPs currently exist in 16 sectors and are expected to extend to 20. The programmes touch upon a number of commercial areas of significance, and address factors such as human capital, infrastructure, sustainability, regulatory framework and policies, promotion and innovation. Some areas covered by the PTPs, such as promoting and encouraging bilingualism, benefit numerous sectors. PTPs also aim to eliminate market failures that affect the development of enterprises, especially the operations of small and medium-sized enterprises (SME). This initiative includes tools like financing (microfinance, guarantees schemes, private equity funds, angel investor networks and venture capital funds), encouraging investment through free zones, and promoting innovation and technology transfer through the iNNpulsa Programme (and soon through the allocation of royalties to innovation projects).
Another scheme is “buy Colombian”, which seeks to strengthen the domestic retail market and to establish business relationships between large buyers and SMEs.
We recently reduced costs affecting the economic performance of firms, as we did with the energy surcharge.
We have also simplified import and export procedures by reducing logistics costs for international traders, such as by keeping ports open 24/7.
How does the current state of Colombia’s infrastructure affect economic growth?
DÍAZ-GRANADOS: First, we need to recognise that our areas of production are concentrated around the major consumption centres thanks to a previous strategy that aimed to ensure local self-sufficiency. The gradual shift to an open economy model entails changes in the regional distribution of production, as illustrated by the case of Mexico. Consequently, some output will be relocating to regions near the coasts. This phenomenon is already noticeable in cities like Barranquilla, Cartagena and Santa Marta, which record high growth in investment and free zone occupancy.
Colombia is working to substantially improve its infrastructure network. International trade agreements have helped create an environment conducive to finally beginning development postponed for decades. We are now looking into projects and investment amounts never seen before and with big contributions from the private sector, thanks to the new framework provided by the recent law on PPP schemes (Act 1508 of 2012).
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