Sunday, March 27, 2011

Latest Colombia FTA threat

Throughout the Bush administration the primary public rationale for a U.S.-Colombia free trade agreement was security.  This reached absurd extremes, as in 2008 when President Bush said that without the FTA, we would all lose to the FARC and Hugo Chávez would "win" (whatever that meant).

This argument does keep popping up from time to time, but it has lost its luster as its apocalyptic visions have never come to pass.  So supporters are now looking to find another apocalypse.  The answer: China!  From the Financial Times:


China has meanwhile risen to become Colombia’s second biggest trade partner after the US, and by some estimates will overtake the US in the next decade if the trade deal is not approved.

I've been doing my best to debunk the breathless China threat meme, which is now coming fast and furious, but it has everything: foreigners we don't really understand, questionable statistics, and scenarios of "losing."

I just keep coming back to the same point: FTA supporters should argue its concrete merits rather than playing on fear.

2 comments:

Vicente Duque 11:36 AM  
This comment has been removed by the author.
Vicente Duque 3:41 AM  

http://www.businesslive.co.za/Feeds/businessday/2011/03/18/colombia-gets-boost-from-rating-upgrade



18 March, 2011

PATRICK MARKEY and JACK KIMBALL
Reuters


Colombia gets boost from rating upgrade

Colombia regained its investment grade rating from Standard & Poor’s on Wednesday, joining regional heavyweights Brazil and Mexico with the coveted status after nearly a decade of crawling back from years of guerrilla violence.

The rating agency’s decision will help attract a new class of investor to Colombia, lowering government borrowing costs, spurring investment and supporting growth for the country, now Latin America’s number four oil producer.

Standard & Poor’s said it raised Colombia’s foreign currency sovereign rating one notch to its lowest investment-grade status of BBB-/A-3. It cited the economy’s resilience to external shocks, its performance weathering the global crisis and favourable growth prospects as reasons for the upgrade.

Once written off as a failing state choked by rebel war and cocaine trafficking, Colombia is enjoying a resurgence in investment, especially in its booming oil and mining sectors, as bombings, kidnappings and attacks have dropped sharply.

The upgrade makes investing in Colombia more attractive, but the influx of foreign investment could put pressure on the country’s peso currency, which is already a worry for the government of President Juan Manuel Santos.

"We have baseball bats at the ready for whatever’s needed but we hope we don’t have to use them," Finance Minister Juan Carlos Echeverry said, referring to the measures that the government has prepared to deal with appreciation.

Many analysts had expected the upgrade and had priced in the decision. But Colombia’s peso, benchmark TES bonds and stock market were expected to rise in trading yesterday. The peso rose 1,2% to 1870 pesos to the dollar in trading the day after the announcement.

Colombia’s classification as an investment grade debt issuer means its bonds are judged likely to meet obligations. The decision allows large financial institutions, which have internal rules stating they can only buy investment grade assets, to now purchase Colombian debt.
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