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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.


Cross-Border Trade Grows [Latin America]

Monday, September 15, 2008 > 16:43:44

(Latin Business Chronicle via I.E. Canada)

More countries in Latin America are turning to their neighbors for trade and business

According to a new report by ALADI, the Latin American Integration Association – an organization that comprises 12 Latin American countries, including Mexico and Cuba – there has been a significant increase in the volume of intraregional trade. “Exports have increased by 31.5% and imports have grown by 28.1%” during the first quarter of 2008 alone, when intraregional trade grew to about $6 billion.

Several factors are responsible for this new trade dynamic, says the report, which uses data supplied by the trade and investment agencies in each country. On the one hand, the devaluation of the dollar has pushed up most Latin American currencies, inspiring companies to look for new alternatives when it comes to pricing and logistics. Add to this the increase in the global price of petroleum and many basic commodities produced in the region. This trend has provided an opportunity for producers of those commodities to boost their revenues, and it has raised the region’s Gross Domestic Product. During the first quarter of 2008, the average GDP growth rate in Latin America was 5.2%, according to ALADI.

Javier Díaz Molina, president of the National Association of Foreign Trade in Colombia, says that Latin America has become a very attractive market for the region’s own importers and exporters. “Traditionally, Colombia’s foreign trade has been focused on the United States and Venezuela, two countries that collectively represent about 50% of our total sales today. But beyond those destinations, other nations in South America, Central America and the Caribbean now offer a range of business possibilities.”

Most Latin American countries have more purchasing power and that is turning into a good opportunity for trade. In Colombia, business people, unions and some state-owned institutions have begun to look more thoroughly at their neighboring markets to identify new sales opportunities in the region. “In the case of Colombia, two key factors are the dynamics of international demand and foreign exchange rates. When it comes to exchange rates, things are not going well: The Colombian peso has been significantly revalued. However, demand is positive, and it is always good to have buyers in your own neighborhood,” notes Díaz Molina.

Great Waste

Jorge Alberto Velásquez, professor of international trade at the Bolivarian Pontifical University of Medellín (Colombia) believes that the slow pace at which countries like Colombia have forged links with their neighbors can be described as an “enormous waste” of an opportunity. Velásquez notes that Colombia’s failure to participate in Latin American markets “demonstrates, to some extent, insufficient action and energy when it comes to [doing business with] the rest of the neighborhood before jumping into other markets further away.”

When it comes to the seven leading countries of the region, Colombia’s share of intraregional trade varies from 12.4% of Venezuela’s bilateral trade, to a mere 0.2% in the case of Mexico. In 2007, trade with Colombia represented 10.3% of Ecuador’s entire imports. In Peru, that figure was 4%; in Chile, 0.9%; in Brazil, 0.4%, and in Argentina, only 0.2%. Velásquez believes these figures are very low if you take into account the fact that these countries have trade agreements that lower tariff duties and reduce non-tariff barriers to market access.

“Chile provides a striking case; we [Colombians] have a treaty [with Chile] that permits 97% of all Colombian products to enter duty free. And yet, our share of that country’s total imports isn’t even one percent,” explains Velásquez. He believes that the best opportunities for Latin American companies are in other markets in the region, where cultural and linguistic affinities as well as geographical proximity can make it easier to sell.

Velásquez says that this opportunity has been wasted, however, because “there is a shortage of trade intelligence, confidence and knowledge of neighboring markets.” In addition, the mass media in Latin America have focused on the region’s trade agreements with the United States and Europe, drawing the attention of local business people away from neighboring markets.

Read the complete article at http://www.latinbusinesschronicle.com/app/article.aspx?id=2721.

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