Columbia Coffee Sales Can't Save Economy

Posted on: 2017-02-09 4:36 PM

Colombia’s exports dropped 13% in 2016 in spite of a minor increase in exports to its biggest trade partner, the United States, for the first time since the two countries signed a free trade agreement.
 
According to the country’s statistics agency DANE, exports dropped from $35.6 billion to $31 billion between 2015 and last year, mainly because of a 21.7% drop in oil exports, the country’s primary export product, that has suffered low oil prices since 2014.
 
Colombia’s total exports
 
The broken engine of Colombia’s economy
 
While the price of oil has increased drastically since its initial 2014 fall, Colombia’s oil industry has not been able to recover and could have difficulty recovering as investors have moved away.
 
In the first three-quarters of 2016, foreign direct investment in the oil sector was $1.5 billion, just 53.8% of the investments made in the same period the year before.
 
Colombia’s FDI | Fact sheet
 
When assuming office in 2010, President Juan Manuel Santos declared oil and mining exports as the country’s engines of the economy. With the revenue of selling fossil fuel reserves, housing, agriculture, and innovation could be stimulated.
 
However, because the increase in oil export inflated the value of the peso, other export sectors of the Colombian economy saw their merchandise under pressure. They still seem unable to make up for the losses in the oil sector, but they do make the general figures less negative.
 
Manufacturing and farming
 
Manufacturing exports did drop 10% and agriculture exports dropped 1%.
 
Manufacturing sectors that suffered the most from the drop in export were leather (-28%), machinery (-27.5%), paper (-23.8%) and scientific equipment (-22.1)
 
Sectors within the manufacturing industry that did well were optical and photographic products (+33.7), transport equipment (+16.6%) and office equipment (+12.2%).
 
The agriculture sector did least bad, but still had to accept a 1% contraction of exports.
 
The country’s iconic coffee industry made 4% less exporting compared to 2015.
 
Partly due to the governmental push on oil and mining and the effect it had on the peso, Colombia’s agricultural economy all but degenerated in revolt in 2013.
 
After major social revolts partly because of a free trade agreement with the United States and significant stimulus funds in 2013, agriculture exports have still not recovered and contracted exports a further percent to $5 billion. Imports of agricultural products until November were on its way to also be tenfold of the country’s agricultural export.
 
Palm oil, an industry pushed as the motor of the economy of the two administrations of former Presidents Andres Pastrana and Alvaro Uribe slumped further. The country imported in between January and November 10 times more palm oil than it exported in the entire year.
 
Tragically, the development of these mega-agriculture projects proved only possible after the forced displacement of hundreds of thousands of Colombians, particularly in the impoverished west of the country.
 
What about “legal” and illegal exports?
 
The export of gold, along with drug trafficking one of the main fuels of armed conflict in Colombia, went up 40.5% to $1.5 billion, possibly pushed by increased interest in mining for precious metal by both multinationals, guerrillas and paramilitary successor groups.
 
80% of Colombia’s gold production either informal or illegal: mining association
 
This would imply that gold has overtaken cocaine as the country’s illegal economy’s main export product, with cocaine having an estimated export value of $1.1 billion annually.
 
How Colombia’s trade partners are doing
 
Trade to all Colombia’s trade partners dropped or remained the same with the exception of Argentina (+17%), Mexico (+2.5%) and the United States (+0.42).
 
While minuscule, the growth to the United States is remarkable as exports to Colombia’s largest trading partner have been dropping drastically after the signing of a free trade agreement between the two countries’ in 2011, the 2014 drop of oil prices and the subsequent drop of the peso.
 
Exports to the Unites States
 
Trade to neighboring Venezuela, once good for an annual $4 billion, slumped to $600 million amid major economic and political turmoil in that country.
 
Other neighboring countries, equally hit by the bursting of the commodity bubble, also imported less Colombian products.
 
Brazil, Colombia’s largest neighbor, imported $995 million last year, 16.5% less than in 2015.
 
Exports to Panama dropped 20.1% to $1.9 billion, while exports to Ecuador dropped 16.3% to 1.2 billion and to Peru 8.5% to $1 billion.
 
Exports to the European Union that in 2015 were good for $6 billion last year dropped 17.3% to $4.9 last year.
 
Exports to China made one of the most impressive falls, dropping 50.2% to $1.1 billion