cts of Free Trade Agreements in Colombia's Emerging Economy
It is well known that free trade agreements can cause a country, such as Colombia, to have an economic growth but they can also experience harmful benefits from them as well. In recent years, Colombia's economy has become known as an emerging market, part of the acronym CIVETS. It has become one of the most prosperous countries in Latin America with a "transformational growth." (The Idea's Economy) Colombia has become the" headquarters of many multinational companies", having a "vigorous amount of foreign investment."( Cheong, Plummer and Hamanaka) Many of the Colombia's direct foreign investment, and high level of export originates from its free trade agreements, FTA. This paper focuses on the U.S- Colombia free trade agreement and how Colombia has benefited and been impacted by it.
I. Introduction
During the decades that preceded Colombia's economic crisis of late mid to late 1990's, Colombia's economy was historically stable. It was traditionally known to be a profit- driven by its agricultural sector, coffee beans being its main export. With new resources, such as tourism, textile, copper, zinc, nickel and gold, being found to be profitable, Colombia's GDP grew on an average of 5% annually between 1970s-1980s (Colombia: Economy). However, during the late 1990s, it faced it first recession since the Great Depression (Economy of Colombia).
Colombia's financial crisis resulted from the implementation of a "financial liberalization'' program (Gomez, Kiefer3). Under this program banks and financial institutions increased their "ratio of intermediated assets " to "GDP from 41% in 1990 to 47% in 1996" (Gomez, Kiefer3). But as banks increased their level of intermedi...
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...2007
(U.S $ Billions) 2011
(U.S $ Billions)
Construction 0 2.10 4.31
Mining 6.27 1.100 2.546
Oil 2.78 3.333 5.083
Source: Colombia Reports, Colombia FDI statistics
Increase Competiveness
As a result of the increase inflow of FDI, I also concluded that Colombia's economy benefited from an increase in competiveness. As mention previously, FDI in Colombia has highly been concentrated in the mining and oil sector ( refer back to Table 1). As a result, Colombia's benefit of increase competiveness is seen in their mining sector: coal.
Before the growth of exports in Colombia's mining sector ( see Figure 6), Venezuela was the leading export in coal production. Venezuela Yet, after an increase in FDI in Colombia's mining sector, it has allowed for the productivity of coal production to increase.
Figure 6: Colombian Coal Exports
Source: Singapore Energy Week
report of the national commission on the causes of the financial and economic crisis in
After three years of debate NAFTA was established in 1994. Fears concerning NAFTA included job creation, loss and transfer, wages and infrastructure. (Ganster/Lorey 188-189) However, with the implementation of NAFTA the economy grew. Ganster and Lorey reveal that bilateral trade increased by $211.4 per year from 1989 to 2004. Commerce grew by 20 percent in the first six months of 1994. There were advantages and disadvantages of NAFTA, nevertheless, NAFTA “intensified the integration of the two economies rather than distancing them.” (Ganster/Lorey 190)
The meeting of minds between Chile and the United States has brought about a long awaited union pertaining to free trade. Chile responded enthusiastically when presented with the opportunity to become a part of 1994's North American Free Trade Agreement (NAFTA) but because of the issue of presidential fast-track trade negotiation authority, the merger did not come to fruition. Now, nearly a decade later -- after negotiations began in the year 2000 -- Chile and America have come to their own agreement with regard to free trade, one that is both historic and comprehensive in nature.
The United States has for over two centuries been involved in the growing world economy. While the U.S. post revolutionary war sought to protect itself from outside influences has since the great depression and world war two looked to break trade restrictions. The United States role in the global economy has grown throughout the 20th century and as a result of several historical events has adopted positions of both benefactor and dependent. The United States trade policy has over time shifted from isolationist protectionism to a commitment to establishing world-wide free trade. Free trade enterprise has developed and grown through organizations such as the WTO and NAFTA. The U.S. in order to obtain its free trade desires has implemented a number of policies that can be examined for both their benefits and flaws. Several trade policies exist as options to the United States, among these fair trade and free trade policies dominate the world economic market. In order to achieve economic growth the United States has a duty to maintain a global trade policy that benefits both domestic workers and industry. While free trade gives opportunities to large industries and wealthy corporate investors the American worker suffers job instability and lower wages. However fair trade policies that protect America’s workers do not help foster wide economic growth. The United States must then engage in economic trade policies that both protect the United States founding principles and secure for tomorrow greater economic stability.
The broad range of topographical elevations has encouraged agricultural expansion whose diverse production of food constitutes an important part of the Colombian economy. The agricultural sector contributed 14% of GDP, excluding coffee, with a production worth almost 11 billion US. In the hot lowlands of the Caribbean heartland, the inter-montages valleys, and the savannas of Orinoquia, there are immense plantations of bananas, sugar cane, rice, cotton, soybeans and sorghum, and large cattle farms that produce meat and dairy products. (Sited Dennis Hanratty)
In recent years, the Gross Domestic Product/capita (PPP) in Paraguay has increased significantly in the last decade, with $6,136/capita around $40.9 billion. Paraguay has been one of the fastest growing economies in Latin America, mostly due to an increase in exports of agricultural produce. According to Banco Central del Paraguay, reported “From 2008 until 2013, Paraguay GDP Growth Rate averaged 1.3 Percent reaching an all tim...
Colombia's consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to weather external shocks. Columbia is the fourth largest coal exporter, and Latin America’s fourth largest oil producer. Economic development is obstructed by inadequate infrastructure, inequality, poverty, narcotics trafficking and an uncertain security situation. A major economic issue that the country faces is the fact that Columbia is a known global supplier of cocaine, marijuana, and heroin. The narcotics trade is around five to ten percent of the GDP, and because of drug trafficking, it has a negative impact on the economy and security. Another major political issue that Columbia faces is
Roughly fifteen year ago the United States entered into an agreement with its neighboring countries Canada and Mexico. With the incarnation of this intercontinental free trade agreement; the United States acting as the conduit would not only increase trade productivity for itself but, allot its sister nations to the north and south the same advantages. The North American Free Trade Agreement (NAFTA) is beneficial to America because, it encourages the expansion of job opportunities, abolishes taxes and tariffs that can restrict the flow of imports and exports, and supplies the States with goods and services at lower costs causing profits to increase exponentially.
Cabral, R. (2013). A perspective on the symptoms and causes of the financial crisis. Journal of Banking & Finance, 37, 103-117
Colombia is one of the oldest democracies in Latin America with solid functioning institutions, progressive laws, an active civil society, and one of the most ecologically diverse countries in the world. Economically speaking, Colombia has had a surprisingly turnaround over the past decade due to the confidence and business opportunities that the investors have found in its emerging market. However, the improvements made in the economy are not sufficient to ensure sustainable economic development. On May 15, 2012, the U.S.-Colombia Free Trade Agreement (FTA) went into effect, and after almost two years its effects have had a negative impact in Colombia’s economy, mainly in its agricultural sector, which constitutes 11.5% of the country’s GDP (Cámara Colombo Coreana). The farmers complain that cheap imports from the United States are hurting their sector leaving some of them almost in bankruptcy. During August and September 2013, the country was in a nationwide strike against the Free Trade Agreement, which had different areas of the country paralyzed specially in Bogota, the capital city.
Globalization has become one of the most influential forces in the twentieth century. International integration of world views, products, trade and ideas has caused a variety of states to blur the lines of their borders and be open to an international perspective. The merger of the Europeans Union, the ASEAN group in the Pacific and NAFTA in North America is reflective of the notion of globalized trade. The North American Free Trade Agreement was the largest free trade zone in the world at its conception and set an example for the future of liberalized trade. The North American Free Trade Agreement is coming into it's twentieth anniversary on January 1st, 2014. 1 NAFTA not only sought to enhance the trade of goods and services across the borders of Canada, US and Mexico but it fostered shared interest in investment, transportation, communication, border relations, as well as environmental and labour issues. The North American Free Trade Agreement was groundbreaking because it included Mexico in the arrangement.2 Mexico was a much poorer, culturally different and protective country in comparison to the likes of Canada and the United States. Many members of the U.S Congress were against the agreement because they did not want to enter into an agreement with a country that had an authoritarian regime, human rights violations and a flawed electoral system.3 Both Canadians and Americans alike, feared that Mexico's lower wages and lax human rights laws would generate massive job losses in their respected economies. Issues of sovereignty came into play throughout discussions of the North American Free Trade Agreement in Canada. Many found issue with the fact that bureaucrats and politicians from alien countries would be making deci...
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