Colombian exports continue in free fall

The collapse in Colombian exports once again exposes an old and underutilized segment of the economy. The volume of foreign trade, in dollars, fell 13% in the first half of 2023. And in June, compared to the same period last year, the country exported 27.5% less than in 2022, according to data from the Administrative Department National Statistics (DANE). Colombia has never really been a great exporting country, nor has it looked decisively towards foreign markets, the economists repeat. It is enough to remember that the two large cities, Bogotá and Medellín, where the bulk of the economic activity is concentrated, are embedded between mountain ranges and even today are poorly connected to the ports.

For their part, the items of raw materials that have boosted foreign trade, such as hydrocarbons or coffee, depend on the unstable prices set on the New York Stock Exchange. The current weight of exports has a modest 13.68% within the GDP, and in its best years it has not exceeded 20%. A matter that worries the former Minister of Finance of this Government, José Antonio Ocampo: “This could delay the adjustment in the current account deficit, an indicator that all risk rating agencies have said must be reduced.”

It refers to the net difference between the value of exports and imports of merchandise, services and income. A mess in the flow of capital that worries the thermometer of the international agencies in charge of evaluating the health of each economy to, among others, give a catalog of guarantees to creditors. According to figures from the DIAN, imports for May had a decrease of 20.4% compared to the same month in 2022. But Ocampo maintains that, if exports do not rise in parallel, “the adjustment is delayed or is incomplete ”. A complicated game of balances, additions and subtractions, so that the country’s accounts follow manageable patterns.

Among the factors that Minister Ocampo lists to explain the recent fall in exports, used to a rather timid performance, the fluctuations in the price of a barrel of oil stand out, which together with gas and coal comprise half of total exports ; and coffee, which today does not represent more than 1% of GDP. In the case of the price of crude oil, from April to mid-July it had a pronounced decrease and, despite the fact that prices have rebounded in recent days, the price of Brent, the world benchmark crude, has fallen by 14.5% in the last 12 months.

By mid-July, for its part, the price of a bag of coffee on the New York Stock Exchange registered a fall of 23% in three months. The former Minister of Commerce and today rector of the EIA University of Medellín, José Manuel Restrepo, adds another front of complexity: “We have the fall in international prices, on the one hand. On the other, a phenomenon that I call the ‘quantity’ effect, which is seen in the hydrocarbons sector, but also in industry and agro-industry”. Restrepo, who directed the Treasury portfolio during the Government of Iván Duque, expresses his concern about the lack of “export diversification, something that had already been planned for some time and in which progress had been made.”

The country, after the boom in raw materials experienced at the beginning of the millennium, included in its pending list the task of exporting other goods and services, so as not to depend on prices and to sell items with more added value. For many, however, the problem has not been tackled enthusiastically enough and what little progress has not been sustained. It is an issue whose roots go back to the liberalization of imports in the 1990s, and even further back: “We continue to import too many things because what we produce is not enough to supply the local market,” notes Sergio Olarte, chief economist at ScotiaBank Colpatria. , “but we don’t export either because we don’t have anything to export, unless coffee, oil or ferronickel rise in price.”

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Another factor that former Minister Ocampo puts on the table is the commercial panorama between Colombia and Venezuela, which after six years of interruption was restored with the arrival of Gustavo Petro to the government. A border of more than 2,000 kilometers and a long common history made the neighboring country Colombia’s main trading partner at the end of the 1990s.

But after the political and economic turmoil in Venezuela, the new chapter in trade integration has turned out to be slower than expected. According to figures from the National Association of Foreign Trade of Colombia, by the end of this year it is estimated that Colombia will sell some 1,000 million dollars to Venezuela, still far from the 6,000 million that were exported on average for 2013. He is also a former Minister of Finance Juan Camilo Restrepo sees this factor as unlikely to help: “Trade with Venezuela last year was not very significant. It hasn’t been for many years.”

That is why he returns to the “fall in basic prices, due to a recession in consumption, exchange rates, or relative prices.” However, macroeconomic figures, like Swiss knives, have several compartments and functions, and Ocampo recalls that in the area of ​​”exports of services things have improved.” He underlines tourism in particular: “The air traffic data indicates that, while the national air market has fallen, the international market has increased a lot and this is reflected in tourism revenues.”

Mauricio Cárdenas, economist and former Minister of Finance during the Administration of Juan Manuel Santos, draws attention to the scant impact of the drop in exports on the exchange rate: “It has not led to the devaluation of the peso,” he explains. Because? He argues that imports have also fallen due to the slowdown in the economy. “Foreign investment has also been responsible for maintaining a high flow of foreign currency,” continues Cárdenas, “but above all the confidence of the markets that the government’s reform agenda will not come to fruition.”

It remains to be seen, in any case, what impact the slowdown in exports will have on economic growth that, according to some projections, would have stagnated by the second quarter of this year. Awaited news from the board of the Banco de la República, which has been fighting inflation for months to cool the economy. “Today all the variables are in difficulty: consumption, private investment and exports falling”, argues José Manuel Restrepo, who concludes that there is a great dependence on public spending: “but since there has been little execution, there will not be a positive impact either” .

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