Andres Schipani – FT.com
Ahead of Christmas, some people in the Andes and Europe are already cheering – probably with whisky. And they believe they have good reasons to do so after the European Parliament finally approved free trade deals with Colombia, Peru (and six Central American nations) on Tuesday.
“The already growing market for Scotch Whisky in Latin America receives a further boost today with the signing of two agreements to create fairer market conditions,” said the Scotch Whisky Association in a note.
Fair enough, as direct Scotch whisky exports to Peru increased by 97 per cent to $29m in 2011 and to Colombia they were up by 74 per cent to $38.6m, stressing there is great potential for more growth. The whisky example highlights the belief of many that the free trade agreement could be mutually beneficial.
As Catherine Bearder, a British liberal lawmaker who voted in favour of the agreements, was quoted by Reuters saying : “At a time when our economy is struggling, it is vital that the EU forges stronger links with emerging economies.”
Indeed, the free trade agreement could boost European car, luxury goods and chemical exports to the Andes, while lifting food and mineral exports from Colombia and Peru to Europe.
“The trade agreement opens the doors for Colombian exporters to be providers of goods and services to a market of over 500 million people. The potential is huge,” María Claudia Lacouture, who heads Colombia’s trade promotion body, Proexport, told beyondbrics.
Colombia and Peru currently have arrangement in place in which the EU imposes low or zero tariffs on imports from, however, that is due to expire next year. The new free trade pacts puts Colombia and Peru further away from some of its neighbours, such as Argentina, Brazil and Venezuela, which are more protectionist when it comes to trade and capital flows.
Voting in favour of the accords, the European Parliament left aside some initial concerns raised by some members, activists, and NGOs about Colombia’s human rights record and labour laws – particularly after a stream of murders on trade unionists in recent years.
Some also raised concerns about a potential entrance of dirty money from drug trafficking coming from Colombia and Peru, two of the world’s largest producers of cocaine.
But, despite certain serious afflictions still in place – such as poverty, internal armed conflicts, and cocaine production – both countries experienced an impressive turnaround in the last decade.
Colombia’s economy grew 6 per cent last year and 4.9 per cent in the second quarter from a year earlier. The central banks, forecasts an expansion 4.3 per cent in 2012, while the country awaits to attract about $17bn in foreign investment this year.
Peru has been one of the Latin America’s fastest growing economies, expanding 8.8 per cent in 2010 and 6.9 per cent last year, as is expected to easily top 6 per cent in 2012.
Much of that growth has been boosted by commodity exports and consumer spending on the back of consumer credit thanks to people being lifted out of extreme poverty and an expanding middle-class.
The Andean countries’ trade ties with the EU were worth €21bn, or $27bn, last year. The European Commission sees EU exports to Colombia and Peru saving at least €250m, or $325m, in duties a year within a decade. This could help push up both countries’ economies by around a digit.