Best Prospects for U.S. Exporters
The U.S. currently serves as Colombia’s premier commercial and agricultural partner. The abundance of high quality, competitively priced products affords U.S. exporters a distinct advantage over the country’s other major trading partners, including its South American neighbors. This advantage will be compounded by the US-CTPA as U.S. commercial interests gain greater market access and the overall investment climate improves.
In 2006, imports from the United States had expected growth figures of around 22 percent as a result of good positioning of equipment in the market. At the end of 2007, this figure is expected to be higher if U.S. manufacturers become active in an almost unexplored niche. Colombian processed food exports are showing a growth trend and, to some extent, this growth is the result of the governmental support programs for the technological advancement and export preparedness of small and medium companies, known in Colombia as PYMES (by their acronym in Spanish). These companies, with the support of the Colombian Government offer good opportunities for U.S. exports of equipment with small/medium production capacity. The most competitive sectors for U.S. exports include:
Food and Beverage Processing:
 | Vegetable processing machinery |
| Dairy processing equipment |
| Brewery equipment |
| Mixing and grading apparatus |
| Filtering apparatus |
| Heat exchangers |
Packaging machinery:
| Feeling, sealing, capping machinery |
| Mining Industry Equipment |
| Security/Safety Equipment |
| Airport/Group Support Equipment |
Agricultural Products
| Hard Red Wheat |
| Soybean Meal |
| Cotton |
| Yellow Corn |
| Pet Food |
As globalization and free trade agreements force companies to be more internationally competitive, the purchase of advanced technology and equipment becomes a priority.
The Colombian food and beverages processing and packaging sector is highly diversified. Market opportunities for U.S. manufacturers present a similar variety in terms of equipment production capacity. There is little competition from local producers of industrial food and beverage processing and packaging equipment. The quality of local technology has improved from basic equipment and spare parts manufacturing, but it still has to go a long way before comparing with the latest technologies and electronic/robotics based equipment and production/packaging lines.
Project financing is not a major problem because major market players generate project funding through their own successful operations and/or strategic alliances. During the last decade, in an effort to encourage higher technical and competitiveness levels, the medium and small companies known in Colombia as PYMEs (Spanish acronym for Small and Medium Enterprises) have been the target for special credit programs. The prospective free trade agreement with the United States will only re-enforce the importance of improving competitiveness of these firms and the sales opportunities for U.S. manufacturers of equipment for this sector. The revaluation of the Colombian peso is expected to favor growth in demand for imported products, including the U.S. agricultural processed products.
The United States is the principal foreign supplier of consumer-ready food products to Colombia. U.S. food products are highly regarded in the Colombian market for their quality and price as well as for their wide variety of products. U.S. food companies looking to break into the Colombian market for processed food should consider joint ventures with local companies and/or new investors. The business environment provided by a free trade agreement with the United States will expand opportunities in local and neighboring markets.
The expansion of Colombia’s textile industry triggered by duty free access to U.S. markets for garments and textiles under the Andean Trade Preference and Drug Enforcement Act (ATPDEA) has resulted in larger cotton demand. The high quality of Colombian products and the well-developed garment industry give Colombia a competitive advantage among other Central and South American countries. U.S. companies have also started direct investments in Colombia to take advantage of the expected market openings under the CTPA.
Colombia is a large producer of denim, which uses short-fiber cotton imported from the United States. Cotton from the United States has the additional advantage of lower freight costs to Colombia due to its geographical proximity.
There has been a restructuring of the wheat milling industry in Colombia since the early 1990’s after the dismantling of the Government of Colombia’s agency in charge of agricultural imports (IDEMA). The increase in wheat imports is the result of Colombia’s consolidation of milling activity and better-prepared millers. Some millers are opening operations near the ports of entry, which reduce transportation costs for wheat flour instead of transporting wheat to be milled in the interior. This focus on new wheat milling products could provide a venue for U.S. investors.
As part of the United States and Colombia Trade Promotion Agreement, a tariff-rate quota for U.S. yellow corn was negotiated at 2.1 million tons for the first year, and will increase over a 12-year period before being eliminated. Over the longer run, imports of corn, wheat and rice are expected to grow significantly under the CTPA. Preliminary estimates indicate that imports of corn could grow as much as 4 to 5 million tons over the next ten years under the CTPA. Similar to the Colombian wheat milling industry, corn processing could offer a set of investment opportunities to U.S. investors, especially if U.S. corn enters Colombia with a zero import duty under the CTPA.
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