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Viewing cable 06BOGOTA5571, COLOMBIA ATPDEA-RELATED ACTIVITY 2005

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Reference ID Created Released Classification Origin
06BOGOTA5571 2006-06-21 14:34 2011-08-25 00:00 UNCLASSIFIED Embassy Bogota
VZCZCXYZ0007
RR RUEHWEB

DE RUEHBO #5571/01 1721434
ZNR UUUUU ZZH (508)
R 211434Z JUN 06
FM AMEMBASSY BOGOTA
TO SECSTATE WASHDC 6196
UNCLAS BOGOTA 005571 
 
SIPDIS 
 
SIPDIS 
PASS TO USITC - L. M. Schlit 
 
E.O. 12958: N/A 
TAGS: ETRD OTRA ASEC CO
 
SUBJECT: COLOMBIA ATPDEA-RELATED ACTIVITY 2005 
 
 
1.   Below is Post's response to the U.S. International 
Trade Commission's request for information regarding Andean 
Trade Preferences and Drug Eradication Act (ATPDEA) - 
related investment in Colombia during 2005. 
 
2.   Over the past decade, ATPDEA has provided significant 
economic benefits to Colombia.  It is estimated that over 
123,000 jobs were created by ATPA, and ATPDEA is expected to 
add another 150,000 new jobs by December 2006.  The 
expansion of ATPDEA made possible the duty-free entry of 
approximately 6,500 product categories including clothing 
(textiles), shoes (without SGP), crude oil and petroleum by- 
products, watches, leather products, and packed tuna. 
 
3.   In 2005, total Colombian exports to the U.S. market 
grew to a record USD 8.4 billion. Exports have grown by more 
than USD 3.3 billion since the ATPDEA went into effect in 
2002. During this same period, U.S. exports to Colombia 
increased by more than USD 2 billion to reach USD 5 billion, 
as reported by the U.S. Department of Commerce. 
 
4.   In 2005, 40 percent of Colombian exports were shipped 
to the U.S. Of these exports, approximately USD 4.7 billion 
benefited from ATPDEA preferences. Colombian exports to the 
U.S. increased 22 percent in 2005 over 2004.  In fact, 
Colombian exporters are estimated to save between USD 100 
million and USD 120 million annually because of ATPDEA. 
 
5.   Petroleum and its derivatives are the most important 
ATPDEA beneficiary, followed by the flower sector, apparel 
and textiles (including leather products), gold products, 
and fresh fruit. These sectors account for more than 90 
percent of Colombian ATPDEA exports to the U.S. by value. 
Petroleum and its derivatives currently account for 70 
percent of Colombian ATPDEA exports. 
 
----------------------------------------- 
Effect of ATPDEA on Drug-Crop Eradication 
----------------------------------------- 
 
6.   ATPDEA benefits provide an important complement to 
existing anti-narcotics programs. Colombia is currently the 
third largest recipient of U.S. assistance in the world. 
Sectors that receive ATPDEA benefits provide an important 
opportunity for legal employment for those who leave illegal 
coca production. The flower sector in particular has 
generated over 94,000 direct hires and approximately 80,000 
indirect hires, mostly in the areas immediately surrounding 
Colombia's two largest cities, Bogota and Medellin. 
 
7.   Access to the U.S. market for ATPDEA exports is also 
important for supporting alternative crop prices at 
economically viable levels. ATPDEA afforded preferences 
booster efforts by the Colombian private sector to press 
their Government on counter-narcotics reforms. The USG has 
enjoyed strong support from the private sector for important 
U.S. counter-narcotics goals, such as the passage of 
legislation on asset forfeitures and money laundering, 
increased penalties for narcotics offenses, increased 
eradication efforts and the passage of a strong extradition 
law. The Colombian government is committed to seeing 
narcotics traffickers jailed for their crimes, and Colombian 
law enforcement agencies are cooperation with the U.S. 
Department of Justice.  Since the start of the Uribe 
administration in 2002, Colombia has extradited more than 
340 criminals to the United States. 
 
8.   The USG, through USAID, has provided approximately USD 
586.6 million in aid between FY00 and FY05, and is expected 
to provide 126.6 million in 2006.  USG funding supports 
alternative development programs, democracy building, and 
internally displaced persons assistance.  The programs 
target the development of income generation options in areas 
affected by illicit crops and the strengthening of 
institutional linkages between the state and its citizens. 
 
9. According to the Colombian National Police (CNP), the 
country saw a 21 percent reduction in terrorist events. 
Kidnappings dropped by more than 51 percent, and homicides 
by 13.  Other major crimes were also substantially reduced. 
According to International Narcotics Control Strategy 
Report, the eradication program helped to bring a 15 percent 
reduction in cultivation in 2003 and in 2004 resulted in a 
reduction in mature crops of 6 percent.  In 2005, coca 
cultivation declined by 8 percent, from 114,100 to 105,400 
hectares. At the same time, an additional 144,000 hectares 
of coca were identified when the search area was expanded 81 
percent more than the area searched in 2004.   In 2005, the 
U.S.-supported Anti-Narcotics Police Directorate sprayed a 
record 138,775 hectares of coca and 1,624 hectares of opium 
poppies.  Manual eradication accounted for the destruction 
of an additional 31,285 hectares of coca and 497 hectares of 
 
 
opium poppy.  As of June 7, 2006 the Colombian authorities 
sprayed 75,091 hectares of coca and 231 hectares of poppy 
and manually eradicated 9,026 hectares of coca and 62 
hectares of poppy.  Interdiction efforts have also increased 
dramatically, with 223 metric tons of cocaine and coca base 
along with 718 kilos of heroin seized in 2005.  To date, 41 
metric tons of cocaine and coca base along with 177 kilos of 
heroine have been intercepted. 
 
-----------------------Q------- 
Performance of Investment in 2004 
--------------------------------- 
 
10.  According to National Statistics Directorate, total 
investment in the Colombian economy increased by 28.96 
percent in 2005. This increase is due to the quickening pace 
of the Colombian economy, increased physical security, an 
improved legal framework, and higher prices of Colombia's 
export commodities. The sector that registered the greatest 
growth in new investments was machinery and equipment (35.98 
percent), which is a change from last year where 
construction grew the most.  Other sectors that received 
significant investment dollars were construction (26.99 
percent), and transportation equipment (23.20 percent), both 
of which are not ATPDEA beneficiaries. Hydrocarbons received 
12.1 percent of FDI and mining received 19.4 percent.  Both 
sectors derive preferential treatment from ATPDEA. 
 
--------------------------------------------- ------------ 
Information on Specific ATDEA-Related Investment Projects 
--------------------------------------------- ------------ 
 
11.  A 2005 poll of manufacturers by the Colombia's National 
Industrial Association (ANDI), showed that nearly 66 percent 
of companies polled were developing strategies to improve 
their market position to take advantage of ATPDEA and the US- 
Colombia FTA.  Colombian textile manufacturers sell 70 
percent of their exports to the U.S.  Several textile 
companies have made significant capital investments in 
Colombia to take advantage of ATPDEA preferences.  Enka de 
Colombia invested USD 24.2 million during the last three 
years and will invest another USD 10.2 million in heavy 
machines and working capital in 2006.  According to Enka's 
president, Alvaro Hincapie, the company is seeking to 
increase its market share in the US and expects to continue 
growing.  Last year Enka exported USD 51 million worth of 
products world-wide, a 34 % increase over 2004 exports. 
Another Colombian company, Coltejer expects to invest USD 5 
million this year in export-expansion machinery.  Coltejer 
made USD 32 million worth of investments over the last three 
years to increase their use of ATPDEA benefits. 
 
12. The following 10 companies were selected from a list of 
more than 4,000 exporters with sales in the U.S. during 
2005.  These companies constitute a sample of some of the 
largest APTDEA beneficiaries in the most critical industry 
sectors. 
 
A. Company name: Coltejer 
B. Investment: over last three years USD 32 million. 
C. 2006 Projected investment: USD 5 million. 
D. New or expansion investment? Expansion. 
E. Product Exported to the U.S.: Textiles. 
F. Estimated Exports to the U.S.: n/a 
G Would investment occur without ATPDEA? Yes 
 
A. Company name: Enka de Colombia 
B. Investment: over last three years USD 24.2 million. 
C. 2006 Projected investment: USD 10.2 million. 
D. New or expansion investment? Expansion and working 
capital. 
E. Product Exported to the U.S.: Textiles. 
F. Estimated Exports to the U.S.: n/a 
G Would investment occur without ATPDEA? No 
 
A. Company name: Protela 
B. Investment: over last three years USD 11 million. 
C. 2006 Projected investment: USD 3.5 million. 
D. New or expansion investment? Expansion. 
E. Product Exported to the U.S.: Textiles. 
F. Estimated Exports to the U.S.: n/a 
G. Would investment occur without ATPDEA? Yes 
 
A. Company name: Ecopetrol 
B. Investment: 2005 USD 96 million. 
C. 2006 Projected investment: USD 300 million. 
D. New or expansion investment? Expansion. 
E. Product Exported to the U.S.: Oil and derivatives. 
F. Estimated Exports to the U.S.: USD 1.7 billion 
G. Would investment occur without ATPDEA? Yes 
 
A. Company name: C.I. Flor Nativa S.A. 
 
 
B. Investment: 2005 USD 0.0 
C. 2006 Projected investment: USD 22.000. 
D. New or expansion investment? Expansion. 
E. Product Exported to the U.S.: Flowers. 
F. Estimated Exports to the U.S.: USD 400.000 
G. Would investment occur without ATPDEA? Does not know 
 
A. Company name: Flores Santa Fe Ltda. 
B. Investment: 2005 USD 225.993 
C. 2006 Projected investment: USD 225.392. 
D. New or expansion investment? Expansion. 
E. Product Exported to the U.S.: Flowers. 
F. Estimated Exports to the U.S.: USD 388.394 
G. Would investment occur without ATPDEA? NO 
 
A. Company name: DHL Express Latin America. 
B. Investment: 2005 USD n/a 
C. 2006 Projected investment: USD 100 million in Latin 
America. 
D. New or expansion investment? Expansion. 
E. Product Exported to the U.S.: Courier Services. 
F. Estimated Exports to the U.S.: USD 38 million 
G. Would investment occur without ATPDEA? YES 
 
A. Company name: Comestibles Rica Fruta Ltda . 
B. Investment: 2005 USD 430.000 
C. 2006 Projected investment: USD 0.0 million 
D. New or expansion investment? Expansion in 2005. 
E. Product Exported to the U.S.: Bocadillo guava. 
F. Estimated Exports to the U.S.: USD 80.000 
G. Would investment occur without ATPDEA? NO 
 
A. Company name: CI Banacol SA. 
B. Investment: 2005 USD 4.2 million 
C. 2006 Projected investment: USD 4.5 million 
D. New or expansion investment? Expansion 
E. Product Exported to the U.S.: Bananas 
F. Estimated Exports to the U.S.: USD 46.9 million 
G. Would investment occur without ATPDEA? Not in the same 
proportion and growth 
 
A. Company name: Occidental de Colombia Inc. 
B. 2005  Investment: USD  42 million. 
C. 2006 Projected Investment: UDS 39 million 
C. New or expansion investment? Expansion. 
D. Located in Free-Trade Zone? No 
E. Product Exported to the U.S.: Oil 
F. Estimated Exports to the U.S.: USD  374 million 
G. Would investment occur without ATPDEA? Yes 
 
------------------------------------------ 
Foreign Direct Investment Activity in 2005 
------------------------------------------ 
 
13.  The Colombian Central Bank reported in at the beginning 
of 2006 that foreign direct investment (FDI) reached USD 
10.192 billion for the year.  This represents an increase of 
227% more than 2004; a year in which more than USD 3 billion 
entered via FDI. The Ministry of Commerce also announced 
that 2005's FDI equaled 8.3 percent of GDP.  Driving this 
increase in investor confidence is greater perceived 
security and new business-friendly legislation. According to 
the survey by the United Nations Conference on Trade and 
Development (UNCTAD) in 2005, Colombia ranked fifth in their 
list of most favored investment opportunities in Latin 
America, a list that included Brazil, Mexico, Argentina, and 
Chile. During the same period, the Doing Business 2005 
Report by the World Bank, classified Colombia as 2nd amQ 
145 economies evaluated for their business climate. 
 
14.  In 2005, the U.S. ranked second in FDI accounting for 
14 percent of all investment dollars.  In the cash-issuance 
category, the United States invested 1.3 billion USD which 
was a 60 percent increase over 2004.  The U.S. was second to 
the U.K. that provided 27 percent of investment dollars and 
was closely followed by Mexico, Spain and Holland with 10 
percent, 6 percent, and 3 percent respectively. 
 
--------------------------------------------- ---------- 
Effect of FTA Negotiations on ATPDEA-Related Investment 
--------------------------------------------- ---------- 
 
15.  ATPDEA expires at the end of 2006.  The American 
Chamber of Commerce in Bogota reports member companies have 
lost orders as a result of cost uncertainty related to the 
expiration of ATPDEA benefits.  A Free Trade Agreement (FTA) 
between the U.S. and Colombia has been negotiated, but it is 
unlikely the U.S. Congress will consider passage of the FTA 
until after expiration of the ATPDEA.  Barring a stopgap 
measure, Colombia will likely see a decline in ATPDEA- 
related trade until the FTA enters into force. 
 
 
WOOD