Unidad

Unit 4 /1Learning
/ Escenario
environment
2 7
Lectura Fundamental
Essential reading

Challenges,
Etapas de unopportunities
plan de comunicación
estratégica
and strategies in the colombian
and european relations

Index

1 The European Union as a block in international business

2 Trade, rural development and peace in the colombian and EU cooperation

3 European direct foreign investment in Colombia

4 Opportunities and challenges for the strengthening of colombian-european relations

5 Leonisa in the european market

Key words: Colombia, bilateral relationships, sustainable investments, european cooperation in Colombia,
multinational European companies.
Figure 1: European Union and Colombia at the negotiations
Source: Flickr. (2018).

1. The European Union as a block in international business

Europe has a dominant position in the international market, it has been the world’s leading exporter
and investor in the recent years and the main trading partner of more than 100 countries worldwide.
Thus, the EU has a high level of integration into the global economy market.

65% of trade is carried out by EU countries with other member states, and while the 28 countries
are home to only 7% of the world’s population, their exports and imports to the world represent
approximately 15.6%.

One of the objectives of the EU is to contribute to sustainable development by integrating more

countries in the world trade. The trade policy of the EU is based on three dimensions:

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 Dimensions
for sustainable
development Multilateral

Bilateral

Unilateral

Figure 2. Dimensions for sustainable development.

Source: Own elaboration.

The EU applies unilateral measures as an instrument of trade policy in the interests of development
and political stability, according to the key policy priorities of the EU. The multilateral dimension
takes place essentially in the framework of the World Trade Organization, with the aim of promoting
a regulated market access in the context of effective global governance. And the EU enter into a
bilateral agreement and elaborates specific trade policies with third countries and regional areas.

More than 120 countries are potentially linked to the EU by regional trade agreements. Within
bilateral agreements the ones that already have been implemented are the ones with such as Chile,
Mexico, countries of Central America, Peru, Colombia, and South Korea; agreements with the
European Free Trade Association (EFTA) countries; customs unions with Turkey, Andorra and San
Marino; stabilization and association agreements with Albania, Montenegro, Bosnia and Herzegovina;
partnership agreements with Mediterranean countries; and economic partnership agreements with
African, Caribbean and Pacific (ACP) (European Parliament, 2019).

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 1.1. Mechanisms to promote trade

The EU uses the Generalized System of Preferences (GSP) which is the classic instrument to
promote development and the administration of tariff preferences. The EU’s GSP grants products
imported from countries to benefit from the duty-free access or a tariff reduction, according to the
nature of the product and the type of GSP granted to the country.

The EU uses the strategies above to help countries, for example, providing through the GSP
regulations. This is the sliding scale of preferences affording the needs of developing countries:

Sliding scale for Generalized

System of Preferences

Standard for low and lower-middle

GPS income countries

for vulnerable low and

GPS+ lower-middle income countries

(Everything But Arms)

EBA for least developed countries

Figure 3. Sliding Scale for Generalized System of Preferences.

Source: own elaboration.

In the case of Colombia, the GSP was replaced by the Free Trade Agreement (FTA) in 2013, which
grants benefits in tariffs to products in both ways.

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2. Trade, rural development and peace in the colombian and EU
cooperation
The importance of bilateral cooperation between Colombia and the EU has been working
for more than 20 years. Its main objective has been to support Colombia in more inclusive
economic and social development, in order to reduce poverty and iniquity, increase access to
social services, social cohesion and strengthen governance and institutions. The complexity of
the issue has meant that more prolonged efforts are needed to help reduce the development
gap in the regions and in urban areas (Delegación de la Unión Europea en Colombia, 2016).

Some of the efforts made in terms of bilateral cooperation in which the EU has contributed in
Colombia are:

• Promote sustainable local development.

• Strengthening institutional capacity to increase integrity and transparency.

• Budget support for rural development policy.

• Support for the national competitiveness and productivity policy of the dairy sector.

• Institutional support to the Colombian penal system.

• Support for the regional competitiveness strategy.

• Strengthening local capacities for the construction of development and peace in

Colombia.

Currently there are different instruments and cooperation programs that help to obtain better
trade, rural development and peace in Colombia and to facilitate that the above aspects are
carried out. Those instruments are:

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 Instruments and cooperation programs
between the EU and Colombia

Support for the The European Regional

Thematic Governmet’s Trust Fund for Humanitarian
and global
instruments Rapid Response Peace in aid
programs
Strategy Colombia

Figure 4: Instruments and cooperation programs between the EU and Colombia.

Source: Politécnico Grancolombiano adapted from Delegación de la Unión Europea en Colombia (2016).

Some of these instruments have had an impact on the commercial agreement between the EU
and Colombia, reflected in the commercial relationship between both parties. However, exports in
Colombia are mainly related to the agro-industry, while European exports range from textiles to
products with greater technological development.

2.1. The FTA between the EU and Colombia and Peru

The agreement between the Eu and Peru came into force on the March 1st 2013. It opened markets
for both EU and Peruvian exporters, and it was expected to bring annual savings for more than €500
million through reduced customs duties alone. But the improved, more stable conditions for trade
and investment are expected to be the ones to bring the biggest benefits.

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Market access has substantially improved for EU, Colombian and Peruvian exporters of goods and
services, as well as for investors. In the long run, exporters of industrial and fish products will no longer
have to pay customs duties and markets for agricultural products will be opened considerably.

The main benefit of the new regime, however, will be the improved trading and investment conditions
established by the FTA, providing for a stable, transparent, predictable and enforceable business
environment. This is expected to create significant new opportunities for businesses and consumers
on all sides.

The agreement includes far reaching provisions on the protection of human rights and the rule of
law, as well as commitments to effectively implement international conventions on labor rights and
environmental protection. Civil society organizations will be systematically involved in the work to
monitor the implementation of these commitments.

The FTA also aims to preserve regional integration among the Andean countries. It keeps alive the
hope on all sides for an association between the two regions by leaving the door open for the other
Andean countries.

This agreement is expected to grant to Colombia and Peru several benefits:

• Improve the quality of life. Trade liberalization is not an end, but an effective tool to stimulate
growth and create jobs. This agreement will help the signatory countries to address many of
the most pressing socio-economic problems, such as poverty or social inequality, by enabling
countries to improve living conditions of their populations and sustainable growth.

• Strengthen the ties that bind Colombia and Peru with the European Union, helping the
country to integrate with a stable and reliable partner in world trade.

• Increase the interest of foreign investors. Foreign direct investment is an important catalyst
for development.

2.2. Trade balance between Colombia and Europe

In 2018 exports from Colombia to the EU countries totaled 4,984,405 thousand FOBs. A decrease
of 8% compared to the 5,439,413 thousand FOB in the previous year (DANE, 2019). Exports of
agricultural products grew 4%, the products that had the greatest influence on this increase were
coffee and bananas with a 32% share each on total exports, and palm oil that represented 10.5% of
total exports (Minagricultura, 2018).

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An advantage that Colombia has is the export of fresh fruits, in addition; long risk analysis or prior
eligibility to enter avocado, pineapple, lime, gulupa, gooseberry and granadilla to the EU is not
required. Which works as an ideal instrument for the development of the countryside and rural areas
in the post-conflict context.

Fresh bananas and sugar are some of the products that have benefited most from the trade
agreement with the EU, because before these products did not have preferential access to the EU
market, which leads to the conclusion that commercial opportunities are being seized with the EU,
that has 508 million consumers. This makes the EU the main importer of agricultural goods in the
world (Portafolio, 2016).

Hass avocado stood out in 2018 for being one of the most exported items to Europe, mainly Holland,
where almost half of the external sales of that product are shipped, followed by the United Kingdom,
Spain and Belgium. On the other hand, products such as cape gooseberry are mainly received by
Germany and the Netherlands.

Colombia, in turn, has great potential in terms of organic production. Recently, it has been sought to
negotiate a bilateral agreement to promote the trade of organic products, which also helps generate
added value to agricultural production, as it gives an intellectual property to the field. For example,
Colombian coffee has been an exemplary geographical indication and the aspects negotiated in the
agreement have favored exports.

2.3. Successes and challenges of the FTA between the EU and Colombia

Since the entry into force of the FTA between Colombia and the EU in 2013 there have been several
contributions and challenges in terms of cooperation, investment and trade. Regarding investment, it
has been evident that more European companies from different sectors have invested in the country,
as well as more Colombian companies have managed to export their products to European countries.

Regarding trade it can be said that the EU represents the second destination of Colombian
agricultural exports. Since the agreement, domestic producers have benefited from opening new
markets, increasing exports to this destination by an average of 6.3% annually and adding in sales
abroad around the 10 billion USD in 1,826 days (Minagricultura, 2018).

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On the other hand, some experts say that after more than five years of the FTA, the benefits for
Colombia have been limited due to factors associated with labor, energy and transport cost overruns.
According to Sergio Clavijo (2018) president of Asociación Nacional de Instituciones Financieras
(ANIF), the trade balance went from having surpluses of 2 billion USD (0.5% of GDP) in the pre-
FTA period to a deficit of -1.400 billion USD annually (-0, 4% of GDP) after five years of operation
of the agreement.

This situation is explained when considering that since the first years of the FTA the end of the
super-cycle of commodities such as oil and the weakness of demand in the eurozone dominated. In
fact, the mining-energy imbalance of 2014-2015 showed the excessive concentration of exports in
commodities (bordering 75% of the total export basket of the country), which resulted in a loss of
about half of Colombian exports to the European market (Clavijo, 2018).

It should be taken into account that the EU had been experiencing serious difficulties in its real and
financial sectors, which have had an impact on its foreign trade. Seeking a solution to the recession
through the fiscal austerity required to control the exaggerated public debt of almost all its members
except Germany.

Colombia’s exports to the EU have represented 1.7% of GDP, after five years of operation of the
FTA, versus 2.4% of GDP before the agreement. This contrasts with the successful experience of
Chile, where after five years of its FTA with the EU, export penetration reached 10% of GDP versus
6.2% of GDP in the pre-FTA, driven by the favorable copper prices, but also because of the greater
diversity of its exports (Clavijo, 2018).

To face this, Colombia has sought to support the growth shown in the exports of non-traditional
products (agro-industry). While it is true that this item expanded by 33% in the first five years of
the agreement, thanks to the sales of agricultural products, the country still has a long way to go to
consolidate non-traditional sales in the European market.

Many of the challenges are related to logistics costs, customs processes, technological limitations and
training of human capital, as well as some complexities associated with smuggling and drug trafficking.
However, these are issues in which Colombia is working with the support of other countries, to
consolidate an international cooperation that allows it to obtain better results.

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3. European direct foreign investment in Colombia
Since 2010, more than 620 European companies have generated new investments and reinvestments
in Colombia, according to reports from FDI Markets and Procolombia calculations. In this case more
than 90% of the businesses (2010-2017) were directed to investment in sectors other than mining. For
example, BPO leads the reception of European investment capital with 19%, followed by infrastructure
and logistics with 13% and investment funds with 12%. The remaining percentage is occupied by activities
and businesses related to the software and IT industry, tourism, agro-industry, energy and other related
industries (Procolombia, 2018).

The main countries that have been generating investment in Colombia are Spain, Switzerland, the United
Kingdom, the Netherlands, France and Germany, facilitating the entry of 192 investment projects with
businesses for more than 6 billion USD, estimating the generation of approximately 110,502 jobs.

4. Opportunities and challenges for the strengthening of colombian-

european relations
In 2017 the president of the Cámara de Comercio de Bogotá, Mónica de Greiff, said that “the private sector
has an important responsibility in the process of peace building in Colombia and is called to take the lead
when it comes to taking advantage of new opportunities to achieve greater development, sustainability
and competitiveness in Colombia”. On the other hand, the ambassador of the EU in Colombia, Ana Paula
Zacarías, said that the EU is the main investor in Colombia and that the peace of the country gradually
leads to more European companies to be interested in investing and acquire Colombian products.
Therefore, it is crucial to promote decent employment, fair trade and rural development in the regions of
Colombia (CCB, 2017).

In summary…
Although there are many challenges, the FTA is a tool of obtaining a
greater economic development in favor of businessmen, workers and
consumers. Furthermore, encourages sustainable investments of the
private sector in Colombia, both originated by European investment
companies as well as support to local companies, fostering the generation
of employment, transfer of technology and knowledge and promoting the
development of the country.

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5. Leonisa in the european market
A successful export and business case with the European Union from the cultural and economic
aspects is represented by Leonisa.

Leonisa specializes in women’s lingerie and swimwear and it sells its products in more than 20
countries, with direct presence in 11 of them through its own distributors. The company operates from
a logistics center in its headquarters in Medellín (Colombia) and four clothing plants, one of them in
Costa Rica, from which it also exports.

Thanks to the former Generalized System of Preferences and trade agreements, garments do not
have a tariff to enter the EU. However, Leonisa has only been able to take advantage of this in
Spain and to a lesser extent in Portugal, because the sale and creation of a brand in Europe is very
expensive. It serves the other European markets such as Belgium and France through Barcelona. On
the other hand, the company has carried out market research to develop fashion concepts that has
allow participation in intimate apparel fairs as important as the one held in Lyon, France.

Leonisa has established its headquarters in Barcelona for the European market. In 2014, according to
the latest available data, the sales of the Spanish subsidiary of Leonisa grew by 7% to 6.6 million USD
(Procomer, 2019).

According to Luis Alberto Gómez, national manager of sales and exports:

In European countries, the assessment of a consumer [of a brand] depends on the experience he has
with the product, a person does not value something for comments from others, they value only what
they experience for themselves. Therefore, in developed countries such as the Europeans, the scales of
valuation that consumers have are very high, [so] it is not easy for direct sales to develop so strongly in a
country of those (Ramírez, 2005, p.43).

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References
Clavijo, S. (June 28 2018). ¿Qué ha pasado en cinco años del TLC Colombia-Unión Europea? La
República. Retrieved from https://www.larepublica.co/analisis/sergio-clavijo-500041/que-ha-pasado-
en-cinco-anos-del-tlc-colombia-union-europea-2743681

CCB. (February 2017). Colombia y la Unión Europea promueven oportunidades comerciales y de inversión
en el marco de la paz. Cámara de Comercio de Bogotá. Retrieved from https://www.ccb.org.co/Sala-
de-prensa/Noticias-CCB/2017/Febrero/Colombia-y-la-Union-Europea-promueven-oportunidades-
comerciales-y-de-inversion-en-el-marco-de-la-paz

DANE. (February 16 2019). Exportaciones. Dane. Retrieved from https://www.dane.gov.co/index.php/

estadisticas-por-tema/comercio-internacional/exportaciones

European Parliament. (2019). The European Union and the World Trade Organization. Retrieved from:
http://www.europarl.europa.eu/ftu/pdf/en/FTU_5.2.2.pdf

Minagricultura. (August 1 2018). Las exportaciones agropecuarias de Colombia a la Unión Europea

sumaron alrededor de US$10.000 millones gracias a los cinco años de TLC. Minagricultura Retrieved from
https://www.minagricultura.gov.co/noticias/Paginas/Las-exportaciones-agropecuarias-de-Colombia-a-
la-Uni%C3%B3n-Europea-sumaron-alrededor-de-US$10-000-millones-gracias-a-los-cinco-.aspx

Portafolio. (September 19 2018). Acuerdo Comercial UE Colombia: más diversificación y desarrollo mutuo.
Portafolio Retrieved from https://www.portafolio.co/opinion/otros-columnistas-1/acuerdo-comercial-
ue-colombia-mas-diversificacion-y-desarrollo-mutuo-500448

Procolombia. (November 4 2014). Catálogo de la oferta exportable de Colombia. Procolombia Retrieved

from http://catalogo.procolombia.co/?q=es/agroindustria/agroindustrial/biocate.aspx

Procolombia. (June 22 2018). La inversión de Europa en Colombia sigue creciendo. Procolombia Retrieved
from https://www.inviertaencolombia.com.co/noticias/1156-la-inversion-de-europa-en-colombia-
sigue-creciendo.html

Procomer. (2019). Aumentaron las exportaciones lationamericanas de moda a Europa. Legiscomex.

Retrieved from https://www.legiscomex.com/Documentos/exportacion-moda-latinoamerica-
comercio-abr-22-16-15not

Ramírez, C. (2005). Internacionalización de Leonisa: una empresa colombiana de ropa interior. Estudios
Gerenciales, 22(98), 25-55. Retrieved from https://www.icesi.edu.co/revistas/index.php/estudios_
gerenciales/article/view/183/html

POLITÉCNICO GRANCOLOMBIANO 12
Figure references
Delegación de la Unión Europea en Colombia. (May 11 2016). Instruments and Cooperation
Programs Between the EU and Colombia. Retrieved from https://eeas.europa.eu/delegations/
colombia/1077/cooperacion-de-la-union-europea-en-colombia_es

Flickr. (2018). European Union and Colombia at the Negotiations [Photography]. Retrieved from
https://live.staticflickr.com/412/18497062298_165a21ebb8_z.jpg

POLITÉCNICO GRANCOLOMBIANO 13
 TECHNICAL INFORMATION

Module: Cultura y Economía Regional de Europa

Unit 4: Latin America, Colombia and the European
continent
Learning environment 7: Challenges, opportunities and
strategies in the relation between Colombia and the
Europe

Author: Andrea Carolina Ramírez Ruiz

Pedagogical Advisor: Alexandra Bolaños

Graphic Designer Andrés Felipe Figueroa
Assistant: Laura Delgado

This material belongs to Politécnico Grancolombiano

Its partial or total reproduction is prohibited

POLITÉCNICO GRANCOLOMBIANO 14