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Cablegate: Colombia Looks to Neighbors to Pick Up Slack In

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RR RUEHWEB

DE RUEHBO #0741/01 0591508
ZNR UUUUU ZZH
R 281508Z FEB 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 1574
INFO RUEHCV/AMEMBASSY CARACAS 0024
RUEHGT/AMEMBASSY GUATEMALA 2467
RUEHLP/AMEMBASSY LA PAZ FEB LIMA 5960
RUEHZP/AMEMBASSY PANAMA 1321
RUEHQT/AMEMBASSY QUITO 6602
RUEHSN/AMEMBASSY SAN SALVADOR 1915
RUEHSG/AMEMBASSY SANTIAGO 2377
RUEHTG/AMEMBASSY TEGUCIGALPA 1534
RHEHAAA/WHITE HOUSE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS BOGOTA 000741

SIPDIS

SIPDIS

PASS TO USTR; WHA/EPSC FOR JSALAZAR; EEB/TPP/BTA FOR
WMUNTEAN

E.O. 12958: N/A
TAGS: ETRD ECON CO
SUBJECT: COLOMBIA LOOKS TO NEIGHBORS TO PICK UP SLACK IN
FALLING VENEZUELA TRADE

REF: A. (A) BOGOTA 421
B. (B) BOGOTA 169

1. (U) SUMMARY: Colombian exports to Venezuela jumped 87% in
2007; however, increased diplomatic and economic tensions and
Venezuelan efforts to reduce Colombian trade have caused
Colombian exporters to look for alternative markets. Local
experts tell us Colombia's automobile and textile/apparel
industries are particularly vulnerable. While it remains
unclear exactly how much Colombia-Venezuela trade will fall
in 2008, local exporters hope to continue the trend of
increasing exports to Ecuador and Chile as well as explore
new export opportunities with Mexico, Central America, and
the Caribbean. Passage of the U.S.-Colombia Trade Promotion
Agreement (CTPA) would significantly help stabilize
Colombia's trade outlook. END SUMMARY

Rising Exposure Coming Back to Haunt
------------------------------------

2. (U) Venezuela has grown into one of Colombia's most
important markets for non-traditional goods, including
manufactured products and agricultural items, during the past
several years. As a result, the exposure of Colombia's
economy to a downturn in Venezuela or a political crisis has
increased. While sales to Venezuela -- estimated at $5
billion in 2007 -- still remain only 17 percent of Colombia's
total exports, a number of sectors have more acute exposure.
Santiago Pardo, the international business coordinator of the
Colombian national trade council (Consejo Gremial Nacional),
told EconOff that he was particularly concerned about BRV
moves to restrict Colombian automobile (ref B) and
textile/apparel sales. The Colombia/Venezuela Chamber of
Commerce forecasts automobile exports to the BRV will fall
59% in 2008.

3. (U) Guillermo Perry, associate director of economic
think-tank Fedesarollo and former chief economist for Latin
America and the Caribbean at the World Bank, told Econoff he
doubted Colombia would be able to sufficiently increase
exports to other countries in the region to offset falling
trade with Venezuela in the short term. He projects that
exporters of food and clothing will suffer the most. Norman
Correa, President of the Association of Micro, Small and
Medium Size Businesses (ACOPI), insisted that although the
BRV has focused more on inflammatory rhetoric than curbing
bilateral trade thus far, they were nonetheless bracing for a
significant fall. Luis Carlos Villegas, President of the
National Industrialist Association (ANDI), estimates that
Colombian exports will drop by 50% to $2.5 billion. However,
all interlocutors reiterate that Colombia's trade with the
United States remains far more important to the Colombian
economy and agree that approval of the CTPA is crucial to
stabilizing the country's long term trade expansion.

Alternatives to Venezuela?
--------------------------

4. (U) After the U.S. and Venezuela, Ecuador is Colombia's
third largest trading partner. In 2007 Colombian exports
increased 5 percent to $1.1 billion, representing 4.3 percent
of Colombia's total. While relatively small in overall
terms, Colombian exporters see significant growth
opportunities in that Ecuador's total imports reached $12.5
billion in 2007, or almost one-third of GDP. Colombian trade
with Ecuador in 2007 remained modest due to Ecuador's
uncertain political situation and rumors of increased market
interventions by the Correa administration. As Colombia's
trade relations with Venezuela have turned more complicated,
Colombian exporters have renewed their interest in Ecuador
and come to perceive the Correa government as more business
friendly. A cooling of diplomatic tensions, which flared in
2007 over alleged coca spraying on the Colombia-Ecuador
border, has also paved the way for increased trade. In
addition, Colombia and Ecuador are working to normalize
phytosanitary standards to assist exporters of agricultural
products. Colombia exported just over $1 billion worth of

agricultural products and processed foods to Venezuela in
2007; some of these exports could be shifted to Ecuador.

5. (U) Meanwhile, Colombia and Chile are working to finalize
a free trade agreement to bolster recent gains in their
trading relationship. In 2007, trade between the two
countries exceeded $1 billion, a 45% increase from 2006.
According to the Colombian Department of National Statistics
(DANE), exports to Chile rose 44% to $341 million between
January and November of 2007. Colombia plans to build on
recent gains in exporting services, agricultural products and
light manufacturing (textiles, footwear, clothing, leather
products, etc.) to Chile as well as tap into the booming
Chilean automobile market which consumed 250,000 vehicles
last year. Chile was also an important source of foreign
direct investment in Colombia last year, with several Chilean
firms entering the retail and commercial sectors.

6. (U) Looking beyond Colombia's immediate South American
neighbors, Correa noted that Colombia is strengthening
economic ties with Mexico, and said he foresees exports to
Mexico ($454 million in 2007) eventually exceeding exports to
Ecuador. He also predicts increased trade with Honduras, El
Salvador, and Guatemala following the July 2007 conclusion of
Colombia's trade agreement with the northern triangle of
Central America, as well as strong prospects for more sales
to Caribbean nations. Finally, he believes that Colombia's
growing economic and political ties to the European Union
(EU) bode well for trade diversification outside of the
region. Exports to the EU were $3.8 billion in 2007, a 14
percent increase from 2006.
Brownfield

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