Cameron Werker and Bill Armbruster assess remaining obstacles for exporters
Datamyne blog anchor Bill Armbruster conducted an extensive e-mail interview in January regarding the new US-Colombia free trade agreement with Cameron Werker, senior commercial officer with the US Embassy in Colombia.
In Part 1, they discussed opportunities and resources for US exporters to Colombia. Here they turn their attention to the obstacles awaiting exporters.
Bill Armbruster: What are the biggest challenges for US exporters?
Cameron Werker: Interestingly, the biggest challenge many US exporters face is overcoming old perceptions of Colombia.
Today, Colombia is a vastly different country from what it was just 10 years ago due to the improvement in the national safety and security situation. Many US exporters are not evaluating Colombia as a potential market, even though it is the third biggest market and fourth largest economy in all of Latin America, due to their outdated image of Colombia from the 1980s and 1990s. It is certainly the job of the Colombian government to work to change its global image via aggressive public relations, but we are also active in promoting the Colombian market to US companies through trade promotion road shows in the US and by bringing large numbers of Colombian buyers to US trade shows. In fact, we escorted over 100 such buyers to the Consumer Electronics Show in January 2013.
However, once a US exporter has targeted Colombia as an export destination, there are challenges to be aware of, just as in any emerging market. At the top of the list is the high cost of inland transportation – the second highest in South America after only Brazil. Exporters shipping via ocean freight need to be aware of these high costs because, regardless of their shipping terms, they or their partners will have to assume the cost and pass them on to the ultimate customer, which could affect their price competitiveness.
Armbruster: The non-tariff barriers facing exporters in any market often include: bureaucratic red tape, finding agents and distributors, intellectual property theft, product standards and testing, port access, inland transportation, corruption, and language barriers. Can you comment on those challenges for US exporters seeking to do business in Colombia?
Werker: The judicial system in Colombia can be sluggish. We recommend that all US exporters add a provision to their contracts with customers and partners for mediation or arbitration as the first recourse for any dispute resolution. This is a way to avoid a court filing as the first attempt at dispute resolution.
As with any emerging market, patience is a virtue as bureaucratic red tape can weigh a company down, especially if it is trying to go it alone without the assistance of an in-country representative. Companies should also be aware that while the top levels of the Colombian government have engaged in a strong anti-corruption campaign, there are still significant transparency issues at the lower and mid-levels of government. US companies and their local representatives are bound by the Foreign Corrupt Practices Act.
I don’t see anywhere near the level of intellectual property right (IPR) infringement as I did in my four years in China. In fact, for the most part, relatively few US companies have approached us with such claims. Industries such as software, pharmaceuticals, spirits, apparel, music and movies encounter issues with their IPR in almost every market, foreign and domestic. Colombia is no different. However, Colombia does have strong IPR laws and places emphasis on protecting foreign companies’ IPR. Enforcement is usually the weak link.
It may be a surprise for many to learn that English proficiency rates in Latin America are quite low, and Colombia is near the bottom of the list. Companies should not assume that their potential partners and customers will speak English. While many top officials in government and industry do speak English, many of the working-level officials do not. Again, it is another reason why obtaining local in-country representation is so important.
Armbruster: To what extent has the FTA reduced non-tariff barriers?
Werker: The FTA does set forth requirements on issues of IPR protection and Customs processing: within four years, Colombian Customs will be required to process shipments at ports within 24 hours. The FTA also has caveats on environmental protection and labor rights (via the Labor Action Plan).
Armbruster: Colombia ranked 45th out of 185 economies evaluated in the Doing Business 2013 report produced by the World Bank and IFC. The composite ranking is based on assessments in 10 categories. But Colombia only ranked 91st in the “Trading Across Borders” category. Can you comment on those rankings?
Werker: Colombia betters the Latin America and Caribbean average for all factors in the “Trading Across Borders’ category related to time and costs except inland transportation, where Colombia’s average cost is almost double the Latin American average. As I mentioned previously, this is a crucial obstacle that the Colombian government must address to remain globally competitive.
The silver lining, of course, is the tremendous opportunities available to US companies supplying goods and services to the transportation infrastructure sector as Colombia allocates more money to such projects.
Next: the US-Colombia trading partnership
Cameron Werker is Senior Commercial Officer for the US Department of Commerce’s Foreign Commercial Service in Bogota, Colombia. Mr. Werker joined Commerce in 1998 as an International Trade Specialist administering US anti-dumping duty law. He joined the Commercial Service in 1999. His first assignment was to Boston’s US Export Assistance. He served as Commercial Officer in Beijing and in Belgrade before his current posting to Bogota.
Cameron Werker can be reached at [email protected] or 571-275-2519.
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.