Source: http://worldcityweb.com/home/MIA/publications/magazine/53/877/

(2) Cover Story: Colombia FTA - Deal or No Deal?

by WC

The timing could not be worse for President Bushs final push to get congressional approval for a bilateral free trade deal with Colombia. But, in spite of the high-pitched, anti-trade rhetoric fueled by the U.S. presidential campaigns, theres still a chance a deal can be struck.

In late January at the invitation of the Council of the Americas, Colombian Vice President Francisco Santos Calderon paid a visit to Miami as part of a last-ditch public relations offensive to garner support for the U.S.-Colombia free trade agreement. The FTA, signed in 2006, has come under attack since the Democratic party regained control of Congress that same year.

The Bush administration is working hard to persuade reluctant Democrats of the merits of the Colombia agreement. In mid-January, U.S. Secretary of State Condoleeza Rice led a delegation of 10 Democratic lawmakers to Colombia. Commerce secretary Carlos Gutierrez and other administration officials have accompanied more than a half dozen similar missions since mid-2007 to give skeptical Democrats an up-close look at what the administration claims to be an unmitigated Colombian success story.

We will soon see if these efforts pay off. The White House is expected to introduce the Colombia FTA for congressional consideration in April or May.

Given the mounting hysteria over the twin plagues of the U.S. middle class free trade and illegal immigrants that has gripped the national discourse in the run-up to the presidential elections, the chances of any free trade deals prevailing in the final yearof the lame-duck Bush administration would appear to be slim. (Note: FTAs with Panama and South Korea are also still in play this year.) But free-trade advocates argue that, if there was ever a clear and convincing argument in favor of free trade, Colombia is it.

With a population of 45 million, Colombia is the third largest market in Latin America, after Brazil and Mexico. Since 2002, President Alvaro Uribe has made significant progress in reducing violence and restoring a sense of stability and security across the country. Uribe has proven to be a staunch U.S. ally in the war on drugs. His country has also become a beacon of democracy, in a region where democracy is often under siege.

Most importantly, Colombia has become a poster child for open markets. The Uribe government has bet the farm on globalization, encouraging foreign investment and touting its competitive advantages as an export platform. As a result of increased security and a welcome mat for foreign investment, Colombias economy grew by over 5 percent each of the past three years. In 2007, GDP growth is estimated at close to 7 percent. And since 2003, the Colombian peso has strengthened more than 30 percent against the dollar. Vice President Santos Calderon speaks proudly and enthusiastically about the Chileanization of Colombia, a process that, no doubt, would be propelled by U.S. congressional endorsement of the FTA.

By the same token, Colombias embrace of globalization and open markets could suffer a staggering setback were the U.S. Congress to reject the agreement. A no vote, says Santos Calderon, would send a negative message that would not only thwart Colombias modernization efforts but also reverberate throughout Latin America, further emboldening the regions anti-American, left-wing populist leaders.

Santos Calderon has served as Colombias vice president since the beginning of Uribes first term in August 2002. Before entering the political area, he was editor-in-chief of El Tiempo, Colombias largest daily newspaper, where he often railed against the countrys culture of violence, with which he has firsthand experience. In 1990, he was kidnapped, along with 10 other journalists, by drug kingpin Pablo Escobar and held captive for more than seven months. After his release, Santos Calderon spent a year at Harvard University. When he returned to Colombia in 1992, he founded Pais Libre, an organization that assists the victims of kidnapping and their families. At his presentation in Miami, Santos Calderon spoke about the three pillars of the governments strategy the reduction of violence, the embrace of globalization and the promotion of social cohesion through direct assistance to the poor. WORLDCITY spoke with Santos Calderon following his presentation in Miami. The following are excerpts from that conversation and from his earlier public statements.

Deal or No Deal?

Theres no question its going to be a nail-biter. The political setting [of the U.S. presidential election] adds to the confusion. Its a difficult political climate. Unfortunately, we find ourselves in the middle of a cross-fire between the globalized elements of the Democratic party, on the one hand, and others in the party who are radically opposed to free trade. Colombia runs the risk of becoming collateral damage. That would be very sad. But I think that, in the end, we will get [an agreement].

Impact of a Free-Trade Deal

Approval of the FTA would send a positive message. Colombia is a country that is doing its homework. We are a model of responsible fiscal, social and economic policy. The FTA is important for [continued] economic growth in Colombia. Colombia is a foreign policy success story for the United States. And it is a strategic bet for the long-term future of the region. But, its important to remember that this is a win win situation. When you look at bilateral trade and exclude energy products the U.S. has a positive trade balance with Colombia. [Colombia is the U.S.s fifth most important trading partner in the Americas and 33rd overall. Last year, bilateral trade grew by 10 percent, between January and November, according to the latest Department of Commerce statistics. U.S. exports increased 28 percent, while imports from Colombia fell 2.6 percent.]

Fallout from a Rejection of FTA

A negative vote would send a message that it doesnt pay to be a friend of the United States. The larger geopolitical impact would be to undermine U.S. relations with the region.

Colombia: Open for Investment

As a percentage of GDP, Colombia is the second biggest recipient of foreign investment in Latin America, after Chile. Last year, we received $8 billion. In Colombia, we have no phobia against foreign investment. [To illustrate his point, Santos Calderon referred to SAB Millers acquisition of a controlling stake in Colombian brewery Bavaria in 2005, and the take-over last year of El Tiempo by Spains Grupo Planeta.] There was no outcry over these deals, as there would have been in other countries.

Healthy Private Sector

Colombia has a good environment for investment. And a healthy private sector is the key to that. If the private sector does well, Colombia does better. It is critical to create the right conditions for the private sector to thrive. We are working to reduce government bureaucracy. We have reduced corporate taxes from an average of 38.5 percent to 33 percent and we plan to lower taxes to 31 percent within three years.

Export Platform

We are betting on the growth of export industries. All new exporting companies will pay taxes of only 15 percent. Investors from all over the world are coming to Colombia. We want to become a hub for exports. What we are seeing is the Chileanization of Colombia. Over the next 10 years, Colombia is going to be the biggest economic power player in the region.

Competing Globally

We have signed free trade agreements with Chile and the U.S. We are currently negotiating FTAs with Canada and the European Union. We want to have trade agreements with as many countries as possible. If you open your economy to the world, you will generate better possibilities for employment.

Infrastructure Development

[In its 2007-2008 Global Competitiveness Report, the World Economic Forum ranks Colombia 69th out of 131 countries, ahead of Brazil, Argentina and Venezuela. But one of Colombias weaknesses emphasized in the report is inadequate infrastructure.] Modernizing our infrastructure is a key element for making Colombia competitive. At the moment, we have infrastructure bottlenecks. But we are making huge investments in ports, in roads, airports and railroads. And we are encouraging private investment. Over the next five-ten years, you will see a transformation of Colombias infrastructure.

Security

Homicides are down by 50 percent and kidnapping is down by 85 percent since President Uribe took office. But levels of violence are still too high. Reduction in violence is a priority.

The FARC

The FARC used to be a cancer spread all over the country. Now they have been reduced to marginal areas. We need to keep working over the next three-five-ten years to make them an irrelevant organization.

Fight Against Poverty

Social cohesion is the third pillar of our governments strategy. To achieve that, you need to help the poorest. In 2002, 55 percent of Colombians were below the poverty level. By 2006, the number had been reduced to 45 percent. The goal is to bring it down to 35 percent by 2010.

Democracy and Democratic Institutions

Colombias democracy dates back 180 years. Colombia has a strong Congress, a strong judiciary and a tradition of upholding the separation of powers. You dont construct institutions out of the blue.