Perspective on international trade in Colombia after the pandemic

Perspective on international trade in Colombia after the pandemic

The arrival of the pandemic was a hard blow to international trade and the world in general.  It was accompanied by the trade war between two powers: United States and China, along with the fall in oil prices due to war caused by Russia, Saudi Arabia and the United States. At the beginning of the pandemic, all this had a strong impact in the Colombian nation; for instance, focusing specifically on the commercialization of agricultural, cleaning, and pharmaceutical products, caused a 52%, 40% and 26% drop of total exports in the months of April, May, and June of 2020, respectively (Molina, 2020).

When it comes to foreign trade, the reactivation of the economy brought many opportunities and challenges for Colombia. One opportunity was the return of the use of all the Free Trade Agreements (FTA) and the attraction of foreign investment, that allowed the participation of foreign trade in the national Gross Domestic Product (GDP) to reach 34% during 2021. It was achieved with the progress of productivity and internationalization of factories of different industries, which helped to improve between 35% and 38% the production efficiency of approximately 3500 companies (Pastran, 2021).

A key sector during the pandemic and the economic reactivation was the knowledge-based services sector. Such sector was prioritized within the economic reactivation plan led by the Colombian Ministry of Commerce, Industry and Tourism. It was a positive action for the Colombian country, since helped national companies to be included in the dynamics of the 4.0 industries, which consists of more technological and information aspects. Besides, the consumption of services in the world is growing. In 2020 the main exports destination markets of Colombia´s knowledge-based services sector were made to the USA with a share of 55%, followed by Argentina, Uruguay, and Spain all with a share of 5% and lastly Chile with a share of 3% (Ministerio de Comercio, Industria y Turismo, 2021).

On the other hand, there are also the challenges that can be taken into account. The most obvious one is Colombia’s export basket. Such basket is still focused on low complexity goods and traditional exports, that have remained close to 60% in the last three decades  (Gutierrez, 2021). Thus, one of the biggest challenges for Colombia is to export products with higher added value, not simply remaining in raw materials or commodities.

In the last month, a new government was elected in the South American country, and there is uncertainty about the impact it will have on foreign trade, political and economic variables. The key concept in the new government’s trade policy is “smart tariffs” that consist of increasing the tariff to several products. The decision is based on the fact that it will generate greater added value, competitiveness of the national industry and will help to create employment in the country. What happens is that when tariffs are increased on imported products, what the other nations do is to compensate for the increase in tariffs on national products, such as coffee and bananas, to name a few examples. This could have a noticeable impact to Colombia’s trade and exports in the upcoming years (Prieto, 2022).

Despite the pros and cons, the goal of most Colombian companies, is to internationalize, which will cause the Colombian economy to globalize even more and have a better foreign trade. Although Colombia focuses a lot of its exports on raw materials, there are opportunities where it can expand, grow, and add value to their products. Every day, small, medium, and large companies want to achieve the goal of being present in another market. There is where Broggini comes in, offering various services to achieve the internationalization of different companies in a wide range of sectors, helping them to get to new markets around the world and contributing economies to have a stronger foreign trade.

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