Por: Miguel Carrillo Naranjo - Hamkke Consulting
During the 20th century Colombia had a low level of economic openness; the policies were more protectionists with high tariffs, and of course in the early years the transportation costs were natural barriers for imports. For some scholars (Leonardo Villa, 2005) , the reason that explained the low grade of economic openness was due to the lack of foreign currency, and the fact that was very costly to let the adjustments to the foreign exchange rate. On the other hand (Coatsworth & Williamson, 2002) argue that the reason was due to the need of fiscal resources rather than the need of foreign currency.
For many years Colombia’s economy, it has been a strong dependency in commerce from the following countries in order of importance; United States of America, Venezuela and Ecuador. However only with the two South American Countries it has been an historically free trade agreement in force through a customs union, the CAN (Comunidad Andina de Naciones – Andean Community), conformed initially by Colombia, Venezuela, Ecuador, Peru, Bolivia and Chile. The agreement has been in force since 1969 with Ecuador, Peru, Chile and Bolivia, in 1973 with Venezuela. Nevertheless, Chile resigned in 1976, and Venezuela in 2006. In August 2011, a FTA with the United States was ratified and entered into force on May 2012.
In 2008 the diplomatic relations between Venezuela, Ecuador and Colombia were in the worst scenario. Colombia’s internal conflict surpasses the frontiers, Venezuela closes the border and the political crisis with Ecuador made that the commerce with these nations dropped dramatically. In addition the global financial crisis initiated in the United States, hit Colombia’s economy very hard. Hence, the Colombian government finally reacted from focusing the country’s international trade in a few nations, and begun a new policy of diversification to open the economy across the world, and Asia as a main market to an entrée. In 2009 the Council for foreign policy of Colombia suggested that the country’s strategy to access the Asia pacific market must be a state policy. Hence in Colombia’s national development plan 2011-2014 “Prosperity for all” by the presidency of Colombia, the international policy of the plan includes the development of an insertion policy into the Asian Pacific Region.
Colombia’s focus on the Asia-Pacific has increased in recent years. Colombia is now a full member of the Pacific Basin Economic Council (PBEC) and a member of two APEC working groups. It is seeking full membership of APEC and has expressed an interest in the Trans-Pacific Partnership Agreement (TPP). Colombia also participates in the Forum for East Asia-Latin America Cooperation (FEALAC). Colombia co-chairs FEALAC’s Political, Cultural and Education Working Group.
The negotiations of a FTA with the Republic of Korea since late 2009, is the first step from Colombia to achieve this diversification strategy and enter Asian markets, furthermore will be the first one with an Asian country. The Colombian government believes that through this agreement, out of the commercial benefits, the country will enforce relations to join the APEC moreover open talks for new FTAs with Singapore and Japan among others (Ministry of Commerce Industry and Tourism of Colombia, 2011) .
For Colombia, the Korean market is very attractive for its high purchasing power, which could absorb Colombia’s industrial and agricultural competitive products. Moreover to have Korea as a commercial partner will give access to the country to a world-class supplier. Foreign direct investment and cooperation from Korea to Colombia are highly expected because of the new business and economic environment that keep improving in Colombia, also the need to involve international players who can help to build the country’s infrastructure and explore in an environmental responsible way the natural resources.
In the 1960s and 1970s, the Korean government wielded a closed-door economic model that promoted select industries, pushed export growth, blunted imports, and foreign investments, while allowing near monopolies by selected Korean players. After the early 1970s in particular, officials prioritized heavy and chemical industries and limited entry to only a few firms. By the mid-1980s, economic liberalization began to replace the policies that had helped promote infant industries and shielded them from global competition. The coming loose of protectionism accelerated in 1988 when Seoul hosted the Summer Olympics, as a conductor of an economic transformation. In December 1996, the country joined the OECD as a result of improvements to liberalize imports, overseas travel and investment by foreigners among others; these shifted the country from a small economy to have a seat within the industrialized nations.
In April 2004 Korea concluded their first FTA negotiation with Chile. Since then the country has been implementing trade liberalization under FTAs with the purpose of securing export markets and economic advancement, making of international trade the main engine for economy growth. The Korean Government launched a FTAs promotion roadmap in 2003, which classifies short term promotion with Japan, Singapore and the ASEAN; in addition the mid and long term promotion (3-5 years) with big economies such as United States of America, China, and European Union. President Lee, Myung-bak who took office in 2008, has been promoting a “global FTA network” broadening the initial road map to countries such as Russia, and the Gulf Cooperation Council.
Latin America has been the latest consideration for Korea, given that about half of the trade in the country is done with Asian Countries, China is the principal commercial partner, followed by Europe, and North America. Nevertheless, in recent years Latin America is getting more attention from Korea, especially when China’s impressive emergence has strengthen commercial and diplomatic relation with Latin America, helping the region to improve its economic performance. Furthermore since the world financial crisis emerged, Europe and North America are struggling with their economies, in contrast the emerging markets in Latin America has been outperforming and attracting attention from all over the world.
For Korea, the Colombian market is very attractive, basically for the country’s richness in natural resources, moreover according to the (Interamerican Development Bank, 2011) , the complementarily between the two economies can extend to the manufacturing sector, where Korea has already upgraded beyond labor-intensive and basic capital-intensive sectors.
CEO Hamkke Consulting