Colombia's export activity is falling more than expected in the regional ranking. While the country's foreign trade recorded a 13% decline in 2023, according to DANE figures, Latin America and the Caribbean recorded an average decline of 2.2%, according to IDB data. A difference of more than ten percentage points, which provides a clear picture of one of the most critical phases in recent decades for an important part of the economy.
This is a problem that at some point is related to an over-reliance on international hydrocarbon prices. Of crude oil, but also of coal, engines of the economy in the first decade of the millennium, today questionable as a business and environmental impact due to their volatility. More and more voices are warning that dependence on raw materials and their price fluctuations is the only good argument for promoting trade with the rest of the world.
The total value of the collapse in 2023 was 7,400 million dollars, of which 3,000 million were due to the decline in coal related to the readjustment of global energy prices. In recent years, Colombia exported $4 billion, but there have been some signs of decline year after year, partly due to progress in implementing climate agreements. For example, demand for coal is decreasing in European markets and other developed countries. And other partners such as Turkey, Israel and India seem to be leaving today. Both face complex geopolitical obstacles.
Joaquín Montes, a foreign trade expert, emphasizes that the country managed to take advantage of Chinese trade retaliation against Australia in 2021 and 2022. “The Chinese have taken technical measures to prevent Australian imports because of their insistence on investigating the origin of Covid.” Colombia was able to exploit this front, exporting $12 million in 2022. “But in February 2023, China decided to import Australian coal again and the mini-coal boom ended,” Montes points out. In the case of the oil market, the story was different.
The roulette wheel of the international minimum price per barrel has always been decisive. Colombia has suffered, for better or for worse. Last year, oil exports also fell by $3 billion, as did coal exports. As a lifeline, Ecopetrol, the state-owned oil company, preferred to highlight that annual export volumes rose 3% last year. But fluctuations in the price of crude oil overshadowed the results.
Sergio Olarte, chief economist at ScotiaBank Colpatria, explains: “Export cycles are more pronounced because we are dependent on the international price. This is complicated because it prevents the expansion of exports or the creation of long-term plans.” According to Olarte, the country is still “pretty closed” in terms of foreign trade. For his part, the former Minister of Trade and Rector of the EIA University, José Manuel Restrepo, recalls that although the “international reality is complex and challenging”, the problem is also linked to the “significant deterioration of private investments in Colombia in recent years”. . “12 months with a decline of -33% in the third quarter of 2023.”
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Restrepo argues that the above affects the “import of capital goods and intermediate goods” necessary for the production and export process. In his opinion, government announcements to suspend oil and gas exploration contracts only lead to low expectations from the private sector. Javier Díaz, president of the National Foreign Trade Association (ANALDEX), adds that the slowdown in the economy between 2022 and 2023 also affected a large part of exports of agricultural products such as bananas or coffee.
In fact, the decline in exports of bags of coffee added another 1,000 million to the 7,400 million that led to the total collapse. A behavior that Joaquín Montes attributes to two factors that seem to be transversal in this story: the fall in international grain prices and the impact of the climate crisis on the harvest. “There is also a supply problem. Colombia is not capable of producing all of the world's coffee needs. In addition, we import to meet domestic consumption, which appears to be undersupplied.”
The export labyrinth is now celebrating 12 months of online decline, and Colombia only managed to avoid a major impact thanks to the surge in remittances. It has done little good that the U.S. economy, Colombia's largest trading economy, has improved its performance. Currently, José Manuel Restrepo believes that the Petro government's strategy and promotion of agreements, as well as trade and health diplomacy, are very weak. A factor that reminds us that not only prices but also export volumes have fallen.
In other sectors such as oils, sugar, flowers or food, Joaquín Montes shows a certain stability that could be maintained in the long term after the recent years in which there was a slight decline: “The sector is doing well at the moment. . Solid and stable growth is evident in the pharmaceutical, electrical machinery and cosmetics sectors.” And Javier Díaz concludes: “Colombia is a small economy that depends on international dynamics and since we rely so heavily on the export of Concentrating on mining and energy products, there is a big difference in dynamics compared to the other countries in the region. “Make better use of the international scene.”
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