The Trade Numerologist: Colombia’s Dependence on Commodities
As Colombia recovers from bloody civil strife, contains a resurgent cocaine trade, and firms up its economy under a new president, it will need to rely even more on exports.
And the country has a mighty export economy. The challenge: it's dependent on commodity prices set by forces outside its control.
With abundant oil reserves, the nation of 48 million is poised to grab market share from a flailing Venezuela. Colombia is Latin America's fourth biggest oil producer. It's also the world's fourth-largest coal exporter, the second biggest cut flower exporter, and the third biggest coffee exporter.
Colombia top exports, 2017
- Crude oil $10.9 billion (+24%)
- Coal $6.8 billion (+55%)
- Coffee $2.6 billion (+5%)
- Pearls, emeralds, precious stones $2 billion (+13%)
- Live trees, cut flowers $1.4 billion (+7%)
- Plastics $1.3 billion (+6%)
- Edible fruits and nuts $1.1 billion (+4%)
- Sugars $569.1 million (+7%)
- Animals and vegetable fats $539.3 million (+47%)
- Cars, trucks and parts $539.3 million (-2.4%)
- Electric machinery $469.6 million (+5%)
Despite those rich resources, the country maintains a trade deficit. Colombia's GDP slowed to 1.8% last year from 4.7% during the last decade. It's been hurt by sluggish oil prices and attacks on pipelines by rebel groups.
Colombia does have a strong relationship with the US and signed a free-trade agreement with Washington in 2012. That year, Colombia exported $18.8 billion worth of goods to the US over the first 9 months, over two-thirds of that oil. However, in 2018, over the same time period, exports to the US dropped to $10.5 billion. Oil exports fell to 93 billion barrels from 115.3 billion barrels. And fuel prices have been sluggish.
Ivan Duque the 42-year-old president elected this summer, was educated at Georgetown and has worked in Washington, at the Inter-American Development Bank, for much of his life. He calls himself an extreme moderate.
Colombia top export destinations, 2017
- US $10.5 billion (+3.2%)
- Panama $2.7 billion (+33.2%)
- China $2 billion (+71.5%)
- Netherlands $1.5 billion (+27.8%)
- Mexico $1.5 billion (+64%)
- Ecuador $1.5 billion (+22%)
- Turkey $1.4 billion (+85%)
- Brazil $1.4 billion (+37%)
- Peru $1.1 billion (+6%)
- Chile $1 billion (+55%)
As the pro-business Mr. Duque tries to help his domestic firms increase their shares in markets outside the US, he'll need to expand in Asia, and in Europe, where Colombia underperforms. The EU even announced last week that it would take Bogota to the World Trade Organization to protest new import tariffs on frozen French fries.
Increasing exports is not Mr. Duque's only challenge. Colombia is attempting to bring thousands of anti-government rebels back into everyday commerce and culture while cracking down on the drug trade that fuelled the insurgents. Colombian officials would like to increase exports of another crop, coffee. However, it's been losing market share, partly because of nasty beetle and fungus attacks, and replacement of the crop by coca plants.
Top destinations, Colombian coffee, 2017
- US 318.6 million kg (+4%)
- Japan 70.3 million kg (-2.6%)
- Canada 53.8 million kg (-3.6%)
- Germany 52.7 million kg (-24%)
- Belgium 34.6 million kg (-20%)
- South Korea 25.8 million kg (-7%)
- UK 21.9 million kg (+9.6%)
- Italy 20.4 million kg (-10.5%)
- Spain 17.4 million kg (-6.3%)
- Finland 15.6 million kg (-13%)
Like other countries in the region, including Brazil and the US, Colombia's leaders face voters disgruntled over rising crime, health care, and job losses due to automation and Chinese imports. It also still runs a trade deficit with the rest of the world. Imports from China have been increasing. The biggest source of foreign imports is still the US, which ships it essential commodities like oil, corn, and plastics.
Colombia's top sources of foreign imports, 2017
- US $12 billion (+1.1%)
- China $8.7 billion (+1.4%)
- Mexico $3.4 billion (+1%)
- Brazil $2.3 billion (+8%)
- Germany $1.9 billion (+9.7%)
- Japan $1.2 billion (+10%)
- India $1 billion (+10%)
- Spain $967.4 million (+5%)
- France $948.5 million (+14%)
- South Korea $791.5 million (-11%)
The UN estimates that the total amount of coca acreage has increased over 250% since 2012. The problem with the increase in cocaine production has been that it's triggered aggressive US-funded herbicide spraying, often with drones that have damaged other, legal crops, angering farmers and rural leaders.
One solution: mining more coal. As environmentalists lead a crackdown against coal mining in the US and Europe, power plants still need the black rock, especially in second-tier industrialized countries such as Turkey, Chile, and Mexico. Exports to Europe have been booming.
Top destinations, Colombian coal, 2017
- Turkey 18.5 billion kg (+19%)
- Netherlands 17.5 billion kg (+29%)
- Chile 7.6 billion kg (+76%)
- Mexico 6.9 billion kg (NA)
- Spain 6 billion kg (+24%)
- Portugal 5.6 billion kg (+33%)
- Brazil 5.2 billion kg (-5%)
- US 5.1 billion kg (-15%)
- Israel 4.1 billion kg (-14%)
- South Korea 3.7 billion kg (+13.6%)
For both buyer and seller, however, coal has a shelf life. Colombia might do well instead to seek its long-term prosperity in a higher-margin rock. It's one of the world's top producers and exporters of precious stones, especially emeralds. And it's planning to petition the UN's World Intellectual Property Organization to have its green rock protected as an appellation of origin, like Scotch Whiskey or Parma ham. Those, after all, are not commodities.
The Trade Numerologist is IHS Markit's unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit's Global Trade Atlas database, the world's most complete and accurate set of trade numbers.
What topic would you like the Trade Numerologist to cover? Email email@example.com with comments and questions.
Sign up to start receiving 'The Trade Numerologist'.
- The Trade Numerologist: Africa’s Promise Relies on Inter-Continental Trade
- Crude Oil Trade: Russia seaborne exports, no rush in proceeding with OPEC cuts so far
- Crude Oil Trade: UK output to decline, loadings remain below 800k bpd
- Crude Oil Trade: Venezuela set to collapse, opportunity for Brazil and Mexico
- Crude Oil Trade: Libya's Sharara close to normal production by end of March
- Liquid Bulk Analysis: US loading more on VLCCs
- The Trade Numerologist: After Strong 2018, German Exports Threatened by Global Trade War
- Saudi Arabian Crude Oil Exports: Focusing on China, as flows to the US decline