The Canada-Colombia Free Trade Agreement (CCoFTA) has been in force since August 2011. It is Colombia’s second free trade agreement with a developed country. The negotiated items in this agreement are comparable to the commercial terms found in Canada’s other bilateral agreements with Chile, Costa Rica, and Peru.
Since the establishment of the agreement, trade between both countries has developed tremendously. In this article, we’ll describe the principal goals, results, and opportunities of the Canada-Colombia Free Trade Agreement.
Goals of the Canada-Colombia Free Trade Agreement
The goals of the agreement include:
- Developing a secure market for goods and services.
- Creating new employment opportunities and improved working conditions.
- Reducing trade distortions.
- Ensuring a predictable commercial framework for business planning and investment.
- Enhancing the competitiveness of firms in global markets.
- Strengthening regulations regarding environmental impact.
- Respect internationally recognized corporate social responsibility standards.
- Promoting economic development to reduce poverty.
Results for Canadian and Colombian business
The Canada-Colombia Free Trade Agreement has successfully eliminated tariffs on 98% of the goods and services traded. Additionally, it ensures equitable treatment for Canadian and Colombian investments in each country.
As a result, bilateral trade has grown by over 50% since the enforcement of the agreement. In 2019, bilateral trade reached CA$1.77 billion (approximately US$1.3 billion). According to the Trade Commissioner Service of Canada, this growth is 10 times greater than Canada’s two-way trade with the rest of the world.
Colombia has become the 5th largest recipient of Canadian investment in Latin America and the Caribbean. With the Canada-Colombia Free Trade Agreement, companies gain a competitive edge allowing them to better protect their intellectual property and investments. Today, there are over 100 Canadian businesses operating in Colombia.
This bilateral agreement has certainly boosted the ease of doing business within these countries. According to the World Bank, Colombia ranks second in South America in ease of doing business and investor protection. Likewise, Export Development Canada (EDC) categorizes Colombia as an open economy, as opposed to closed, limited, or open on a highly restricted basis.
Opportunities emerging from the trade deal
Colombia has a history of political instability. For this reason, it’s common for Canadian companies to underestimate the potential for investment in Colombia. However, what companies usually don’t realize is that Colombia is one of the most stable emerging markets globally, with a very friendly business environment for foreign investors.
Thanks to the Canada-Colombia Free Trade Agreement, Canadians are particularly finding success in Colombia’s infrastructure, extractives, and financial services sectors. Areas of opportunity include cleantech, infrastructure, information communications technologies (ICT), agri-food, oil, and gas.
Additional governmental efforts
In addition to the bilateral agreement, Colombia officially became the 37th member of the Organisation for Economic Cooperation and Development (OECD) in April 2020. This makes it the third country in Latin America to join, after Mexico and Chile. Given that Canada is also a member of the OECD, this further aligns both countries’ governance, education, health, and trade practices making them more suitable for foreign direct investment (FDI).
Colombia’s economy is expected to grow at an annual average of 3% over the next 5 years. As one of the fastest-growing economies in Latin America, investors should take advantage of the Canada-Colombia Free Trade Agreement.
Take advantage of the Canada-Colombia Free Trade Agreement
Although investment opportunities in Colombia are plentiful, note that Colombia’s short-term business risk rating is “medium”. For the success of your business in Colombia, it is best to engage with local experts who can help you take full advantage of the Canada-Colombia Free Trade Agreement.
At Biz Latin Hub, we provide you with professional and personalized market entry and back-office services. We are a market leader for supporting businesses from over the world start their business in Colombia and Latin America.