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Free Trade Agreement reached

Signed this morning. It is interesting that if you buy a car in Colombia it was about 40% more expensive than in the USA. The prices are actually going to fall a lot instantly. I think the free trade agreement with the USA is a good thing. However I do think that it will cause short term weakness in the Peso. There are a lot more goods and services ready to be shipped to Colombia from the USA than vica versa. Longer term this will be great but shorter term expect weakness in the Peso.

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US says reaches free trade deal with Colombia
Mon Feb 27, 2006 10:55 AM ET

By Doug Palmer

WASHINGTON (Reuters) - The United States has reached a free trade deal with Colombia after nearly two years of talks, the U.S. Trade Representative said on Monday.

"An agreement with Colombia is an essential component of our regional strategy to advance free trade within our hemisphere, combat narco-trafficking, build democratic institutions, and promote economic development," U.S. Trade Representative Rob Portman said in a statement.

The United States started talks with Andean nations Colombia, Peru and Ecuador in May 2004 and wrapped up a deal with Peru in December. Talks continue with Ecuador while Bolivia, still an observer nation, could become part of the deal later, the USTR said.

USTR was expected to release details of the agreement later on Monday. The final negotiations focused mostly on agricultural issues, with Colombia seeking significantly more access to the U.S. sugar market and seeking continued protections for its own rice, poultry and potentially other agricultural producers.

Jorge Enrique Bedoya, executive president of Fenavi, a Colombian poultry trade association, said the agreement would open the Colombian market to flood of U.S. chicken leg quarters.

"The (Colombian) poultry industry could be wiped out in a couple of years," Bedoya told Reuters in an interview.

The agreement establishes a duty-free quota for 26,000 tonnes of U.S. chicken leg quarters, with about a 70 percent duty on imports about that level, he said.

Despite the steep out-of-quota duty, the agreement in effect means "immediate liberalization" of the Colombian poultry market because U.S. leg quarters are priced much cheaper than Colombian, Bedoya said.

The United States gave Colombia 50,000 tonnes of additional access to the U.S. sugar market, rather than the 1 million tonnes it initially requested and a subsequent scaled-back demand of 500,000 tonnes, Bedoya said.

Colombia had argued it need favorable agricultural terms to preserve and expand jobs in the rural sector, as it tries to stamp out drug trafficking and a 4-decade-old insurgency.

"It didn't work at all," Bedoya said. "It seems that we believe we are more important for the U.S. than we are."

Two-way trade between the United States and Colombia was $14.3 billion in 2005. The Andean nation of about 43 million people was the second largest U.S. agricultural market in Latin America last year.

Colombia already has duty-free access for much of its exports to the United States under legislation that expires at the end of this year. Bogota's desire to lock in those trade benefits was a driving force behind the trade talks

By Brians on Feb 27, 2006, 08:45 in Friendly Talkzone.

poco says on Feb 27, 2006, 11:28:

Nude college students! Whew,,, it is uplifting to know the disappointing turnout for Mardi Gras is being offset. Do they paint protest signs on their body?

"When you men get home and face an anti-war protester, look him in the eyes and shake his hand. Then, wink at his girlfriend, because she knows she's dating a pussy." Quote - General Tommy Franks

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caulfield2 says on Feb 27, 2006, 13:15:

Ummmm...what cars are made here? Sorry, I thought it was just the Willys, and they stopped making them a while ago.

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Brians says on Feb 27, 2006, 14:17:

Cars etc The only point I was trying to make is that this agreement was not being waited for by Corp. America. They will not invest in Colombia right away. The process is a long term one that will take years. The rest of the world still fears investment in Colombia although this has been changing over the last few years. The initial reaction will probably be negative to trade short term but longer term this is a great thing. Colombia has the labor force and the resources what it lacks is the foreign investment in the country. I think Colombia is postioned great for long term. However short term over the next 12 months Colombia will probably import more. These things will not change overnight.

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poco says on Feb 27, 2006, 14:28:

Let me be the first :) Ummmm...what cars are made here? Sorry, I thought it was just the Willys, and they stopped making them a while ago.

I made the SAME statement about a year ago,,, Ha,, and that was a BIG mistake,, yep,, not stupid mind you,, ignorant. I thought they were importing from Brazil.

Did you know Chevrolet has been assembling cars since,, the 50's? Oh,, did you know Toyota has assembly plants,,, I'd bet they are assembling Mercedes Busses somewhere,,,

Anyway,, Medellin and Bogota are HOT SPOTS of assembly. Ahhh, the things you learn on this board. Bring on the naked nude protesters !!!

"When you men get home and face an anti-war protester, look him in the eyes and shake his hand. Then, wink at his girlfriend, because she knows she's dating a pussy." Quote - General Tommy Franks

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poco says on Feb 27, 2006, 14:53:

In the nick of time Electronic items, etc will be shipped here cheaper

Today was my lucky day, I had just returned from Best Buy where I'd been looking at the thin chip memory iPod's. I'd bet they will finally be in significant supply in Colombia. Who knows,, a LG 42" LCD flat panel display from S. Korea, more "stuff" from China, CHEAPER Nokia and Erickson cell phones from the Scandanavian countries, xBox 360's, assembled in Asia, games developed in the U.S. (and copied in Colombia), Sony digital cameras from Japan (great for photos of nude protesters) talk about living in tall cotton,, why, it's hard to imagine seeing over the top.

"When you men get home and face an anti-war protester, look him in the eyes and shake his hand. Then, wink at his girlfriend, because she knows she's dating a pussy." Quote - General Tommy Franks

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poco says on Feb 27, 2006, 15:52:

Will it be 2550 at years end? I do think that it will cause short term weakness in the Peso

I think you are right. The U.S. can have a crappy balance of trade because the holders of the paper believe it “safe”.

What about Colombia? I think the trade balance is about equal today. I don’t see importers feeling safe holding “Pesos” so,, guess they will sell. Who knows but where are the people who THOUGHT the peso was going to 2,000?

"When you men get home and face an anti-war protester, look him in the eyes and shake his hand. Then, wink at his girlfriend, because she knows she's dating a pussy." Quote - General Tommy Franks

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juanalejo says on Feb 27, 2006, 18:00:

Cars produced in Colombia Colomotores (Chevrolet (really they are Opel, Suzuki and Daewoo), plus Volvo buses. Other Chevrolets also come from Ecuador and Venezuela. (Bogota)

Sofasa Renault Toyota 4x4 and Daihatsu trucks. (Medellin)

CCA Mazda, Ford mini pick ups and Mitsubishi 4x4 (Bogota)

Monoblock Mercedez Benz buses. (Pereira)

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Alti says on Feb 27, 2006, 18:06:

will this agreement have any effect on importation of used cars?

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Tinto (Moderator) (Trustee board) says on Mar 2, 2006, 01:16:

Vertical stripes on the flag There is either some meaning I am unaware of, or these Colombians are part of the dumbest protest group in the world. Source: El Tiempo

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Rubiazo says on Mar 2, 2006, 02:50:

Personally I think they should be taxing cars 1000%. The last thing a place like Bogota needs is more fucking cars!!!

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Gator says on Mar 2, 2006, 07:16:

Are You SURE... vehicle importation is covered under this agreement?? You may be jumping the gun.

"Cum catapultae proscriptae erunt tum soli proscripti catapults habebunt."

"Credidi pretio parvo emere et magno vendere tibi in animo fuisse!" .

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jh816 says on Mar 2, 2006, 12:08:

currency change O.k., just an amateur in currency knowledge so correct me if I'm wrong. If most colombian exports already were duty free into the U.S. then the net effect of the deal would mean more U.S. exports to Colombia. This would cause Colombia to sell pesos/buy dollars to pay for the stuff and would weaken the peso.

On the other hand, is this trade difference enough to offset Colombia's economic growth relative to the U.S.(again maybe I'm wrong, but it seems that Colombia is, and is better positioned to continue, growing at a faster pace given the strengthening security situation). I think this growth, combined with its debt being seen as more secure(was it moody's that just upgraded them) will strengthen the peso more than it is weakened by the trade balance.

A few posters hinted at a devaluation after Uribe is re-elected. This is interesting, but do you really think he'll do it? Now, I haven't seen the effects of the strong peso on the export economy since I still live up here(hoping to make the move soon), but wouldn't a devaluation be pretty dire for most Colombians? Not to mention what it would do to the country's foreign investors.

Anyway, whattya think? Long term, short term predictions?
joe.

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