Japan’s planned investment treaty with Colombia could lead to an FTA, while China wants a Colombia FTA as well.
BY CHRONICLE STAFF
Asian companies are increasingly looking at Colombia, in large part due to the improved security under former president Alvaro Uribe.
“Colombia has long been perceived by Japanese companies as plagued by drug-fueled guerilla warfare, but its image improved during President Uribe’s administration,” says Ryoji Watanabe, a researcher in the Latin America Division of the Japan External Trade Organization (Jetro). ”President Uribe’s achievement in improving public security and diminishing foreign investors’ negative image of Colombia impressed us the most.”
Many Japanese businesses left after a Japanese executive was killed by FARC in 2003, but recently, due to the improvement of public security, rapid economic growth, and the country’s business potentials, Japanese companies have started moving back, he adds.
There are now approximately 40 Japanese companies in Colombia. Recent arrivals or returnees include trading companies Mitsui & Co., Sumitomo Corporation, Itochu Corporation and Marubeni Corporation and manufacturers Sony and Isuzu. Truck manufacturer Hino also selected Colombia as its production base targeting the Andean market. This May, major Japanese travel bureau JTB started sightseeing tours.
Meanwhile, trade has grown as well. Bilateral trade last year was 1.6 times more than it was in 2001. “Due to this increasing interest, the Japanese government has started Bilateral Investment Treaty negotiations, which could also lead to an FTA in the future,” Watanabe says.
CHINA WANTS FTA
Meanwhile, China has also boosted ties with Colombia and hopes to see an FTA one day, according to Jiang Shixue, a Professor at the Chinese Academy of Social Sciences and Vice President of the Chinese Association of Latin American Studies.
”China would be ready to negotiate a FTA with Colombia, but the South American country fears that it would lead to more inflow of Chinese products,” he wrote in a recent research paper he shared with Latin Business Chronicle. “Expanding exports to China, a market with 1.3 billion consumers, should be a better option for the two countries to adjust trade balance. The question is what Colombia can sell to China.”
BHP Billiton, Anglo American and Xstrata shipped coal to China from their Cerrejon mine in Colombia for the first time this year because of surging demand and rising prices in Asia, Jiang points out. Cerrejon, the world's largest open-pit mine of coal for export, started shipping fuel through the Panama Canal and on other routes to China after prices became “much better” than those in Europe. “Needless to say, however, 40 days of transportation covering the long distance of 10,000 miles across the Pacific are a deterrent factor hindering large amount of trade between China and Colombia,” he adds.
Jiang recommends that Colombia boost its promotion to Chinese partners, while also ensuring that Chinese companies are fairly treated in Colombia. He points to complaints from CHECC, a Chinese hydropower construction company, that it wasn’t treated equally in the bidding process for a large project in Colombia.
On the whole, China’s relations with Colombia have been developing steadily since the establishment of their diplomatic ties 30 years ago. “Bilateral trade is booming, investment is increasing, and cooperation in other areas is proceeding forward,” Jiang argues. “However, there are some issues that should be dealt with by both sides. The trade imbalance needs to be addressed so as to encourage Colombia not to apply anti-dumping taxes against Chinese exports. Efforts should also be made to increase two-way investment. Finally, mutual understanding must be strengthened.”
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