[Versión en Español]
Food Export Helpline: Colombia Trade Agreement (FTA) with Colombia? Where does it rank as market within the region? And what are the current market conditions for U.S. exports of food and agricultural products?
A: This agreement, known as the U.S. –Colombia Trade Promotion Agreement, or CTPA, entered into force on May 15 2012. Many of the newer agreements are referred to as TPAs and not FTAs, although they are essentially the same. The platform with the most coverage and links to many individual sites for CTPA is located at www.rxport.gov .
Once you investigate the CTPA section on www.export.gov , you will find links to the rules of origin, tariff elimination schedule for agricultural products (located in the Legal Text) as well as documenting origin. Note that the tariff is in Spanish, like many of the more recent trade agreements, you will see that there is no official certificate of origin requirement as the importer is the one responsible for declaring the products qualify for declaring the products qualify for preferential tariff treatment under the agreement. However, there is a basic template for creating a certificate on your own letterhead if the buyer requests it to present to Colombia customs.
U.S. Export to South America
U.S. exports of food and agricultural products to South America increase 24%in 2011, to a total of $ 5.2 billion, up from $4.2 billion in 2010. Markets in South America include the Mercosur Countries of Argentina., Brazil, Paraguay, and Uruguay, as well as Chile and Colombia. U.S. exports of food and agricultural products to the Mercosur countries amounted to just over $1 billion in 2011, an increase of 34% over of 2010, and 20% overall value to South America. U.S. exports of food and agricultural products to Chile totaled $569.2 million in 2011, which was some 54.4% of the Mercosur total and nearly 11% of the South America total. U.S. export of food and agricultural products to Colombia totaled $1.1 billion in 2011, which represented an increase of 35% from that of 2010.This amount was still some 7% higher than that of the Mercosur total, and over 21% of the South American total. Colombia is almost even whit Venezuela as South America’s largest market for U.S. food and agricultural products. It may come as a surprise to many that it is already such a strong market, especially without the CPTA having been entered into force.
The Colombia Food Market
Euromonitor reports that’s Colombia economy is gaining strength as a result of a surge in spending on infrastructure and record levels of foreign direct investment. Real Gross Domestic Products grew by 5.6% in 2011 and gains of 3.9% are expected in 2012. The economy, third largest is South America, is gaining strength as a result of a surge in spending on infrastructure and record levels of foreign direct investment. The government claims that heavy oil deposits could hold up to 20 billion barrels of recoverable resources. Officials expect up to $50 billion in investment in mining and oil during the next decade. The U.S. food industry has solid opportunities for export growth in Colombia.
Imports of consumer food products are growing, fostered by the rapid expansion of supermarket chains. Colombia is a rapidly developing market for consumer-oriented products. Domestic demand and household consumption have grown steadily over the last few years. The last youthful population living in urban areas has developed new tastes and preferences, becoming more health-conscious and selective. An increased percentage of women in the workforce have increased the use of fast food restaurants and the demand for new value-added products.
Colombia is also a promising market for food ingredients as it has a sophisticated industry in the production of dairy products, cold cuts, confectionery, crackers, pastas, bakery mixes, breakfast, cereal, sauces, soft drinks, snacks, and oil margarines. The Colombian food-processing sectors depends heavily on imports of ingredients like spices, dry mixes for sauces, modifiers, preservatives, enhancers, flavorings, and thickeners. The food industry is one of the largest and most vital sectors in the economy, at last report accounting for 28% of industrial production and 22% of total source of employment. The U.S. is the largest supplier food and agricultural products to Colombia and it is the fourth largest market for U.S. agricultural products in Latin American after Mexico, Venezuela, and the Dominican Republic. Of the 2011 U.S. export total of $1.1 billion, $225.9 million were consumer oriented, a new record high and a increase of 24%. The top categories of U.S. consumer food exports include fresh fruit, red meats, and snacks foods, poultry meat, processed fruit and vegetables, dairy products, and pet foods. Colombia now ranks the 24th largest market for U.S. food and agricultural products. This ranks them higher than other key markets such as United Arab Emirates, India, Malaysia, and Singapore.
Euromonitor reports that retail sales value of the packaged food marked in Colombia reached $15.6 billion in 2011. That ranks Colombia as the 5th largest packaged food market in Latin American after Brazil, Mexico, Argentina and Venezuela. It is also the 26th largest retail food market in the world. The 2011 figure also represents an increase of 29% from the 2007 value, or $3.5 billion. They also forecast the value of retail sales in packaged food to increase to $18 billion by 2016, an increase 16% or $2.5 billion from the 2011amount. High growth products in the forecast include ice cream, ready meals, and dairy products, chilled and frozen processed food, sweet and savory snacks, and soups. There are also double digit growth forecast for sauces, dressing’s condiments, pasta, noodles, canned and preserved foods, oils and fats, as well as spreads.
Foreign Competition in Colombia Market
The CTPA has been anticipated for many years now, and its entry onto force starts at a critical point. Colombia has agreed to or entered into a number of other trade agreements while the U.S. has been negotiating the CTPA. In 2010 and 2011, Colombia finalized Free Trade Association, Canada, and the European Union. In addition, Colombia currently has FTAs in place with Chile, El Salvador, Guatemala, Honduras, Mexico, and Uruguay. Colombia is also a member of Andean Community Customs Union (Bolivia, Ecuador and Peru) and is a part of the Mercosur-Andean community agreement, under which it has implemented bilateral agreements whit Brazil, Argentina, and Paraguay and Uruguay. There countries, currently secondary suppliers in to the Colombia food market, already enjoy preferential tariff treatment and should be considered viable competitors in the market.
The U.S. has been disadvantaged as a result of Colombia’s prevailing third-country arrangements, as the US. Share of Colombia’s total agricultural imports fell from nearly 44% in 2007 to 24% in 2011 was another record year for U.S. exports of food and agricultural products, the total share has diminished which means the overall import market is growing faster than U.S. export of some bulk commodities such as coarse grains and rice are mirrored in the increased export for many of these countries with preferential duty rates on the products.
Now that the CPTA has been enforced, there is an opportunity to increase competition. As nearly 70% of U.S. farm products became free from duty immediately, recovery is expected to begin by the end of the year. It also appears that so far in 2012 after a robust January, U.S. exports of food and agricultural products dropped lower in a number of categories, perhaps in anticipation of the savings on waiting for the CTPA to begin. This also happened whit the KORUS agreement, where importers decided to suspend their non-essential supply chain in hopes of saving thousands of dollars in duties. At the moment, only April export data is available, so it will take a few months of monitoring it to see the post CTPA import trends.