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COLOMBIA SIGNS FREE-TRADE AGREEMENT WITH CHILE.

The governments of Chile and Colombia negotiated and signed a free trade agreement (FTA) on Nov. 27, less than two months after the two countries had begun negotiations. Colombian President Alvaro Uribe and Chilean President Michele Bachelet presided over a signing ceremony at La Moneda presidential palace in Santiago, Chile, after the deal was negotiated in record time. This brings Chile's total number of FTAs to 54. In Colombia's case, it complements the deal the government negotiated with the US and is hoping the US Congress will ratify. November's agreement sought to expand and deepen the Acuerdo de Complementacion Economica (ACE-24) that has been in force between the two countries since 1994, which includes measures to remove tariffs on 95% of products traded between them until 2011.

Record negotiation time

"It has been very pleasant making this treaty with the government of President Bachelet because of her executive ability," said Uribe. "Little speech-making, much decision-making. Little time for deliberation and much decision, much speed. It is a great example for Latin America."

Uribe said the deal would be important in integration efforts among the continent's countries and for treaty negotiations with other regional blocs, now that Chile is part of the Comunidad Andina de Naciones (CAN). "The entry of Chile as an associate member of the Andean Community is fundamental, Madam President, in the integration of the Americas. And I am going to recognize here that it constitutes a great support for an agreement between the CAN and the European Union (EU)."

Bachelet also highlighted the speed and importance of the process, saying, "It seems to us that this work scenario that we have carried forward and that we are going to continue allows us to reach a maturity in our relations and is of great relevance for our countries."

Bachelet said there was a progressive maturation to bilateral relations between Colombia and Chile, shown by an increase in economic relations. "On one side, our commercial exchange increased from US$430 million in 2001 to US$690 million in 2005. On the other, Chilean investments in Colombia have increased, reaching a total of US$3.6 billion between 1990 and 2005," said Bachelet. She said the agreement had the greatest coverage of any signed between two Latin American countries.

The agreement was negotiated in only two rounds: one in Santiago on Oct. 9-14 and a second in Barranquilla, Colombia, on Oct. 23-27. The negotiators also made important advances in the process through virtual contact between the two rounds. The two presidents announced plans for bilateral negotiations on Aug. 7 when Uribe was being sworn-in for his second term as president.

For the negotiations, 12 negotiation tables were set up: investment, labor issues, public contracting, trade defense, phytosanitary measures, rules of origin, environment, institutional matters and conflict resolution, cooperation, trade facilitation, services, and technical trade barriers.

"We did have some differences with respect to the issue of sugar," said Bachelet. "We managed to resolve that, and in the month of November we invited President Uribe to Chile...to an official visit where we wish to culminate with the signing of this accord."

On Aug. 7, the two chiefs of state approved a pact to eliminate trade barriers on several products as the first step in the FTA-negotiation process. It allowed Colombia to export 6,000 tons of sugar and 15,000 tons of "sugar mixes" to Chile in exchange for the elimination of tariffs on Chilean exports to Colombia of wine, fruit, automobiles, cigarettes, and juice mixes.

Bachelet wants more integration with Asia Pacific

Chile has signed FTAs with Mexico, Central American countries, and the US and is negotiating with Peru and Ecuador. It also has a deal with Asian giant China and is moving ahead on talks with other important Asian economic powers like Japan (see NotiSur, 2006-03-17). Chile is particularly interested in getting access to energy and petroleum resources from countries like Ecuador and Colombia, having no substantial domestic production of natural gas.

Bachelet said the Colombia-Chile agreement signaled the clear strengthening of Latin American economies that look to the Pacific, economies that benefit from the Asian boom. "The Asia-Pacific zone is almost the most dynamic zone of today's economy," said Bachelet. "Every one of us, and Chile in particular, has made very good treaties with the Asian Pacific....All our countries that look toward the Pacific are certainly able to make individual treaties, but also we can join collectively and contribute by offering a broader market."

Uribe tries to lure investment

Before the signing ceremony, Uribe called on Latin American businesspeople to invest in Colombia, where, he claimed, the government was winning the "war on terrorism," and there was much to be done. "In Colombia everything is left to be done. Help us do it with you," Uribe said to 200 businesspeople gathered for the Primer Encuentro Empresarial Latinoamericano (ELA) meeting, where he was one of the main presenters.

"The problems persist, but the great guarantee that you can have...is that Colombia is improving. The total political will exists from the government and the national majorities to defeat terrorism in its different wellsprings. This determination is the great guarantee that the entire world can have when looking at Colombia," he said.

Uribe added that in Colombia there was great popular receptiveness toward foreign investment along with a "very favorable" tax framework for developing business. His government has been privatizing a number of state possessions, and lawmakers are preparing to cut corporate tax rates to 33% from 38.5% by 2008.

Uribe detailed areas that his government has worked on so business can exploit his region, like exploration of petroleum wells and coal deposits. Colombia hopes to become the world's top coal producer. He also mentioned hydroelectric exploitation and production of biocombustibles.

Andean Community potentially split

Uribe's statements about the CAN making an agreement with the EU notwithstanding, the CAN looks like it is on the verge of a serious ideological split. While Uribe and Peruvian President Alan Garcia are eager free-traders, both with pending FTAs before the US Congress, the two other full members of the bloc are not. Bolivia's President Evo Morales has strained relations with the US and favors a socialist model of integration while the left-wing President-elect of Ecuador Rafael Correa says he will not renew FTA talks with the US (see NotiSur, 2006-12-08).

This means the four plenary members of the CAN are split in half--two socialists and two neoliberals. The likelihood that this would lead to successful, coherent negotiations with the EU appears slim at best. Negotiations in recent years between the EU and the Southern Cone Common Market (MERCOSUR) repeatedly failed over the issue of the EU's subsidized agriculture (see NotiSur, 2004-10-15, 2005-09-09, and 2006-06-02). [Sources: Notimex, Spanish news service EFE, 08/07/06; El Comercio (Ecuador), 08/29/06; Los Tiempos (Bolivia), 10/10/06; El Nuevo Herald (Miami), 09/21/06, 10/10/06, 10/23/06; El Universo (Ecuador), 10/23/06; El Mercurio (Chile), 08/04/06, 08/07/06, 08/29/06, 11/27/06; El Tiempo (Colombia), 08/07/06, 10/23/06, 10/24/06, 11/26/06, 11/27/06, 12/13/06; Bloomberg, 12/13/06]
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Publication:NotiSur - South American Political and Economic Affairs
Date:Dec 15, 2006
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