Political Risk Latin America Blog @PolRiskLatam

Colombia-Brazil: where’s the trade, hombre?

Posted in News and Articles, Political Risk by politicalrisklatam on August 4, 2011

by Naomi Mapstone for Financial Times – Beyond Brics, August 4th, 2011

For all the talk of south-south investment flows, some of Latin America’s strongest economies are finding it easier to access Chinese, American or European consumers than Brazilians.

Colombia, which shares a 1,950km Amazon border with Brazil, is a case in point.

Bilateral trade between the two nations has quadrupled since 2004, off a low base, largely thanks to Brazilian exports.

According to a new study by the Inter-American Development Bank, out on Thursday:

Despite all the dynamism of the last decade, bilateral trade in 2010 accounted for only 0.7% of the total trade of both countries, well below the already modest 20% share intraregional trade in Latin America.

The study’s lead author, Mauricio Mesquita, told beyondbrics the slow progress was due in large part to Brazil’s reluctance to lower tariffs. This year, as part of a 15-year tariff reduction deal, the average preferential tariff on Colombian exports to Brazil was 5.8 per cent, while Brazil’s was 2.4 per cent. Other factors – including a significant infrastructure deficit in the Amazon region and high logistics costs – have also contributed to the low level of trade between the two countries.

Stiff competition from Chinese manufacturers should also strengthen the case for boosting internal markets, the report notes. (continue reading… )


Brazil’s misleading trade surplus

Posted in News and Articles, Political Risk by politicalrisklatam on May 3, 2011

by Samantha Pearson for Financial Times – Beyond Brics, May 3rd, 2011.

Take a look at Brazil’s trade balance and you might be surprised.

This is the country with one of the world’s most overvalued currencies, a currency which is now so strong that it is supposedly crippling exporters and flooding the country with cheap imports.

However, Brazil’s trade surplus actually widened for the third consecutive month in April and reached a record for the year, data showed on Monday.

Last month’s surplus hit $1.86bn, up from $1.55bn in March and $1.28bn a year earlier. It was almost a billion dollars higher than the median Bloomberg forecast.

The main reason for this, though, is the rapid rise in the price of commodities, the vast majority of those exports. (continue reading…. )

Trade disunion

Posted in News and Articles, Political Risk by politicalrisklatam on February 18, 2011

by The Economist, February 17th, 2011.

Sometimes the way the United States behaves in Latin America seems calculated to oblige its friends to seek other allies. Take Colombia, the most pro-American country in the region over the past decade. Not only has the United States Congress failed to ratify a free-trade agreement signed in 2006, but this month it failed to renew trade preferences dating from the 1990s under which more than half of Colombia’s exports enter tariff-free.

The failure to renew the Andean Trade Promotion and Drug Eradication Act (ATPDEA) was caused by a domestic political squabble, and may soon be rectified. But Colombia is getting fed up with American disdain. Its new president, Juan Manuel Santos, says that if the trade agreement is not ratified this year, “we will not keep insisting.” The United States is Colombia’s biggest trade partner. Mr Santos hopes the agreement will boost investment. But the ATPDEA, a tool in the American drug war, already helps Colombian exporters, so their American counterparts have more to gain from ratifying the trade agreement. (continue reading… )


G20 agrees on “indicative guidelines” for imbalances and hopes for the best

Posted in News and Articles, Political Risk by politicalrisklatam on November 12, 2010

by Merco Press News, November 12th, 2010.

Leaders of the Group of 20 (G20) member nations meeting in Korea reached a vague compromise Friday on currency and trade issues, calling for a workable resolution for the next G20 summit in France, slated for November next year.

In the Seoul Declaration released following the two-day G20 Seoul Summit, the participating heads of state agreed that “indicative guidelines” on current account balances will be initiated and undertaken in due course.

The declaration calls for an action plan under which they will call on their framework working group, with technical support from the IMF, to develop numerical guidelines, with the progress to be discussed by finance ministers in the first half of 2011, according to the communiqué. Although the agreement is seen as progress as they set imbalance guidelines, many still doubt the feasibility of the communiqué as it is too vague and unbinding with no numerical targets.

The U.S., supported by Korea, has called for a numerical limit ― but this move has met a strong backlash from countries such as China, Japan and Germany. U.S. Treasury Secretary Timothy Geithner had urged each country in the G20 to adopt numerical targets to limit excesses in trade surpluses or deficits. (continue reading… )


Guest post: Latin America must see China as a trade threat, as well as a partner

Posted in News and Articles, Political Risk by politicalrisklatam on November 11, 2010

by Kevin P. Gallagher for Financial Times – Beyond Brics, November 11th, 2010.

Major Chinese investment in Latin America is now a regular event: Sinopec’s $7.1bn investment in Repsol’s Brazilian unit is just the latest example. Such deals are rightly celebrated with fanfare in Latin America. However, the long-run effects are uncertain – especially given that Latin American exports are losing badly to their Chinese counterparts in world markets.

Latin America needs to diversify its exports – away from oil, iron, soya, meat and the like – if it is to grow sustainably. Unfortunately, as the region has focused on selling its commodities to China, Chinese firms have been outcompeting Latin American manufacturing exporters at a frightening pace.

In the 1980s and 1990s, Latin America looked to the US as a core economic partner, adopting the Washington Consensus in order to attract US investment and gain better access to US markets. Alas, in the twenty years up to 2002, Latin America grew by barely one per cent a year in per capita terms. (continue reading… )


Parliament puts parameters on Mercosur negotiations

Posted in News and Articles, Political Risk by politicalrisklatam on October 22, 2010

by Eric van Puyvelde for Europolitics, October 22nd, 2010.

Trade negotiations are once again under way with the Mercosur countries (Argentina, Brazil, Uruguay and Paraguay), which are major competitors with the EU in agricultural produce. In a resolution adopted on 21 October, the European Parliament said that the EU’s agricultural, food safety and environmental standards must be observed. Furthermore, the EP criticises Argentina over its recent protectionist measures. 

Latin America still represents a key area of interest concerning foreign trade with the EU, according to the resolution by Helmut Scholz (GUE-NGL, Germany), and it is for this reason that the EP was satisfied with the conclusion of the EU-Central America agreement, on 19 May. The agreement establishes a complete partnership covering political dialogue (on issues such as human rights, climate change, science and technology, governance and development cooperation) and a free trade agreement. It also includes Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica, with Panama granted observer status. 

In its resolution, the Parliament favours the resumption of negotiations on an agreement with Mercosur (Argentina, Brazil, Uruguay and Paraguay), but several member states fear the consequences for their agriculture of such a deal. According to estimates, imports coming mainly from Brazil and Argentina could increase by 70% for bovine meat and 25% for poultry “with the associated lower costs because of poorer sanitary, environmental and social standards,” MEPs stressed and, moreover, they said that imports should only be allowed if they are produced according to European consumer protection, environmental and animal well-being standards. (continue reading… )