TRADING WITH LATIN AMERICA FRAMEWORK & CONSIDERATIONS

13 November 2015TXF Trade & Treasury

AGENDA

Brief intro on LATIN TRADE LINKS Overview of Mexican, Colombian and Peruvian

economies and trade sectors Trade Agreements of the EU-LATAM sector Opportunities for Trade in Colombia Opportunities for Trade in Peru Considerations when trading with LATAM Trade Industry Tools and Support Closing Remarks

INTRODUCTION

Founded in 2013 LATIN TRADE LINKS Aim is to build a bridge between Latin America and the EU

(predominantly UK) Provides specialized market entry support to companies in the

import/export sector looking to expand to Latin America. Cooperates with industry leaders in the financial, logistics,

and trade support services. Organizes seminars, industry expos and trade networking Collaborate with trade agencies and non-governmental

organizations Promote commercial relationships between the EU-LATAM

• International Bankers•Trade Lawyers•Tax Advisors•Fiduciary Services•Travel Companies•Translation Services•Market Research Services

•PR/Branding Companies

• Cargo Companies• Freight Forwarding• Custom Clearing Agents• Transport Companies• Packaging Companies• Transatlantic Logistics Services

• Business Associations

• Trade Certification Agencies

• Chambers of Commerce

• Government Trade Agencies

• Investment Promotion Agencies

• Non Governmental Organizations

• Exporters• Importers• Wholesellers• Wholesale Buyers• Distributors• Merchandisers• Industry Suppliers

AgriculturalFishingBeverages

TextilesManufactur

ed Goods

MineralsMiningEnergy

ElectronicsTechnologyMachinery

EU-LATAM TRADE SECTOR

TRADE CONSIDERATIONS

Chile Colombia Peru Mexico Panama Ecuador

Population 17.8 M 48.9 M 30.8 M 123.8 M 3.9 M 16 M

Trading Across Border Rank

63rd 110th 88th 59th 54th 120th

Time to Export 93 hrs 216 hrs 97 hrs 55.7 hrs 31 hrs 212 hrs

Time to Import 99 hrs 220 hrs 145 hrs 89.1 hrs 31 hrs 152 hrs

Ease of Doing Business Rank

84th 54th 50th 38th 69th 117th

MEXICO –SNAPSHOT

Mexico’s GDP has been growing at approx 3% per annum each year for the past five years.

Their exports are valued at just over $5.5 billion Mexico has the 11th largest by purchasing power parity. Mexico is the largest North American auto-producing

nation, recently surpassing Canada and the US. Mexico presents many opportunities for EU companies

over the next five years, especially in energy, education, financial services and telecommunications.

NAFTA has enabled Mexico to develop its regional integrated supply chain in North America.

MEXICO –SNAPSHOT

EU companies have investment opportunities in the solar, wind, nuclear, small hydro and biomass energy subsectors.

The Secretariat of Energy identified bioenergy as a high development potential sector – this includes opportunities for companies with expertise in producing bionenergy from municipal waste, cultural residues, forest residues, crops and industrial residues

Opportunities exist for building efficient local water utilities as due to Mexicos rapid development water availability is a significant challenge.

Recently IDB has closed a $117.5 million A/B loan to International Container Terminal Services Inc. (ICTSI) to help modernize and expand the port of Manzanillo, reducing transport costs.

COLOMBIA – SNAPSHOT

Colombia has had an average GDP growth of circa 3.5% to 4% over the past 4-5 years

Expanding energy sector, diversified from purely oil to RE sources

Colombia has more than doubled its spending on transportation infrastructure from $1.6 billion in 2010 to $3.3 billion in 2012, and just under $8-10 billion

Infrastructure development program offers opportunities for companies involved in the construction highways, ports, and airports.

Third Latin American country with the greatest annual precipitation rates making it a lucrative location for agricultural production

COLOMBIA –SNAPSHOT

SWOT analysis Strengths

Sound financial policiesOil exports

WeaknessesVulnerability to international commodity pricesUnemployment

OpportunitiesFree trade agreements

ThreatsInfrastructure in development

COLOMBIA – TENDERS

Investment Opportunities – Request for Tenders

The Colombian Civil Aviation Authority is requiring a company to carry out the expansion, the maintenance of the runway

The Colombian Civil Aviation Authority is requiring a provider of a MLAT system for the Camilo Daza and the Olaya Herrera

The National Roads Institute (Invias) is looking for a consulting firm to undertake the study and design of a major connection road in Colombia

. PERU – SNAPSHOT

EU imports 16% of Peruvian exports valued at EUR 5-6 billion.

Main EU imports are copper, zinc, food and live animals. Since ratification of agreement chemicals and fisheries trade increased (24.9% and 4% respectively).

The value of EU exports remained constant approx EUR 5.7 m.

The main products exported by the EU were machinery and transport equipment (55.5% of total). Exports of these products remained relatively stable (0.16% increase).

Limited trade with EU, due to fall in commodities prices trade with Peru has been falling (value of circa EUR 995 million).

TRADE AGREEMENTS & TRADE BLOCS

EU – COLOMBIA – PERU : TRADE AGREEMENT

EU signed trade agreement with Colombia and Peru in 2012, this was ratified in 2013.

In July 2014 Ecuador concluded negotiations for accession to the Trade Agreement with the EU and is in process for approval.

The EU is the second or the third largest bilateral trading partner and one of the principal investors for the Andean countries.

Total EU trade with Andean countries is estimated to be 28 - 30 billion euros.

Colombia and Peru, export predominantly primary products (agricultural products (29%), fuels and mining products (56%) to the EU.

EU exports consist of manufactured goods, notably machinery and transport equipment (48%), and chemical products (20%).

EU – COLOMBIA – PERU : TRADE AGREEMENT

Benefits of the Agreement: Opens markets for goods, services, government procurement

and investment Savings on import duties alone worth approximately half a

billion Euros at the end of transition periods Improved trade conditions through non-tariff barriers,

competition, transparency and intellectual property rights Stable trade framework with a mediation mechanism for non-

tariff barriers and a bilateral dispute settlement mechanism Provisions governing cooperation on competitiveness,

innovation, production modernisation, trade facilitation and technology transfer

Promotion of employment and environmental protection, including a transparent arbitration system.

The EU-CA Association Agreement provisionally applied since 1st August 2013 with Honduras, Nicaragua and Panama since 1st October 2013 with Costa Rica and El Salvador, and since 1 December with Guatemala.

Trade flow in goods between the EU and Central America has increase by 15% significantly in the past 5-7 years – up to approx EUR 15 billion

The EU's share in Central American trade has remained largely stable at 11.3%.

Historically trade was with USA and Latin America, only recently has it actively sought to increase its trade with Europe and Asia.

EU imports from Central America are dominated by office and machinery and transport equipment (59.6%) and agricultural products (30.1%).

The most important exports from the EU to Central America are machinery and transport equipment (47.2%) and chemicals (21.5%).

EU – CENTRAL AMERICA TRADE AGREEMENT

Agreement includes a Sustainable Trade Title – commitments to labour and environment related matters, implementation of the ILO conventions

Implementation of multilateral environmental agreements e.g. Convention on Biological Diversity, Convention on International Trade in Endangered Species of Wild (CITES).

Domestic legislation improve market conditions and promote investment in environmental technologies, RE and ethical/fair trade schemes.

Joint civil discussions related to trade in agricultural products, fair trade, respect for labour and environmental standards, sustainability considerations, Corporate Social Responsibility (CSR) and examples of best practices in this area.

EU CA ran workshop dedicated to fair trade and sustainability in agricultural value chains in the framework of the trade pillar of the EU-Central America Association Agreement

EU – CENTRAL AMERICA TRADE AGREEMENT

PACIFIC ALLIANCE

Pacific Alliance is an integrative trade and cooperation bloc created by Chile, Colombia, Peru and Mexico in 2011 to build on their existing free trade agreements and create an area of deeper commercial integration.

Its purpose is to promote the greater competitiveness and growth of the economies of its member countries, as well as to expand economic relations with the Asia-Pacific region.

Aims to drive further growth, development and competitiveness of the economies of its members, focused on achieving greater well-being, overcoming socioeconomic inequality and promote the social inclusion of its inhabitants.

Focus on promoting trade with the Asia-Pacific region.

TRANS PACIFIC PARTNERSHIP TPP

TPP Agreement is the most comprehensive and ambitious regional trade agreement in the Asia Pacific.

The TPP currently comprises 12 countries of which 3 key economies are in Latin America

Members include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam

Representing a combined market of nearly 800 million people and a GDP of $28.5 trillion.

Recently entered into in October 2015.

BARRIERS & OPPORTUNITIES

OPPORTUNITIES - AEROSPACE

AEROSPACE INDUSTRY

The Mexican aerospace production base has grown to become the eighth-largest supplier of aeronautical products to major airplane producers.

Mexico´s aerospace exports have increased 13.2 percent annually over the past nine years.

The Mexican aerospace industry has more than 280 companies. Many of the major aerospace MNEs have facilities in Mexico, including Bombardier Cobham EADS Embraer Eurocopter Goodrich Gulfstream Honeywell International Rolls Royce 

AEROSPACE INDUSTRY

EU companies can capitalize on Mexico’s fast growing aerospace sector through supply chains in areas such as Composites High precision machining Avionics Surface and heat treatments Design and engineering Machinery and equipment Military aircraft niches

OPPORTUNITIES - COCOA

COCOA INDUSTRY

World-class agribusiness sectors: Bovine meat; chocolate and confectionery products and related raw materials; palm, oils and fats; and shrimp cultivation.

Peru, Colombia, Ecuador & Venezuela produce 70% of worlds finer or flavoured cocoa.

Mars forecast by 2020 there will be a cocoa deficit of 1 million tons.

Successful companies have been those such as Casa Luker who has expanded into Europe and now caters to growing demand – established Belgian subsidiary for EU market

COCOA INDUSTRY

The main importer of confectionary products and cocoa derivatives are the US, with Germany, Netherlands, France and the UK.

The government provides tax incentives for investment in various plantations including cocoa sector by exempting them from income tax for 10 years from the date of production.

European companies have been investing in Peru and Colombia at different stages of the supply chain including1. Investing in chocolate production and their side products such as butter or

cocoa liquor2. Investing in industrial plants, technological developments and machinery for

the cocoa sector3. Investing in chocolate and confectionary products and selling these globally.

COCOA INDUSTRY

OPPORTUNITIES – MINING

MINING SECTOR

Colombia is one of the world’s largest coal exporters Cost-cutting measures by mine operators including Glencore

Plc, BHP Billiton Ltd. and Drummond Co. will curb output in 2016, according to the Colombian Mining Association. The association expects prices to remain low into 2018.

Cutbacks may shrink the supply of coal available to Europe’s electricity producers.

Nightime rail transport ban impact on coal industry

MINING SECTOR

Peru has a lucrative metals sector as it ranks:1. First silver producer2. Second largest copper producer3. Third largest zinc producer

Peru has received substantial investment from European companies in the mining sector – 2014 estimated at circa USD 8-9,000 millions1. 42% of foreign investment was in the copper sector2. 34% in the gold sector3. 6% in Zinc

Peru is the top gold producer in LATAM

TRADE BARRIERS

Cultural considerations and interpersonal relations

Bureacracy and import/export documentation

Transport infrastructure – Ports, road networks

Access to finance - SMES Consumer Awareness – Ethics, fair trade

and sustainability Political/Economic instability in the

region and reliance on price of oil and commodities.

Anti FTA Movements (e.g Colombia USA FTA – Campoalegre protests)

LATAM-EU TRADE TOOLS

CBI (Centre for the Promotion of Imports from developing countries) Founded as part of the Netherlands Enterprise Agency and

commissioned by the Ministry of Foreign Affairs of the Netherlands.

Established in 1971 in order to support producers / exporters to get a foothold on the market in the Netherlands, support to Business Support Organisations in improving their capabilities and to act as a Matchmaker between suppliers and buyers.

In 1991 the activities were expanded to EU. Currently offers exporters/importers market information on 25

developing countries including Colombia and Peru. Audits suppliers and provides access to EU businesses

https://www.cbi.eu/Company%20database/  

LATAM-EU TRADE TOOLS

CBI - Integrated Country Programme CBI and local public and private sector partners provide an Export Coaching Programme from July 2014 until 2018. CBI collaborates with local government to undertake extensive Value Chain Analyses.Sufficient potential SME participants were identified in each of the sectors and none of the sectors constitute unacceptable CSR-related image risks for CBI. Trade sectors involved include:1. Natural Ingredients for Food, Cosmetics and Pharmaceuticals & Grains,

Pulses and Nuts & Processed Food2. Specialty Coffee and Cocoa3. Garments4. Aquaculture 

LATAM-EU TRADE TOOLS

Trademap.OrgTrade Map - indicators on export performance, international demand, alternative markets and competitive markets, as well as a directory of importing and exporting companies. Trade Map covers 220 countries and territories and 5300 products of the Harmonized System. Customs – HMRC UKThe Importers Details database offers access to over 130,000 names and addresses of businesses importing from outside the European Union. The enabling legislation only allows for the publication of import details relevant to non-EU trade.

 

LATAM-EU TRADE TOOLS

PROCOLOMBIAProcolombia has a presence in London, Paris, Madrid and Frankfurt which offers on the ground support to EU companies seeking business partners in Colombia. Its directory is available in English and they provide networking events, lead business introductions and trade tariff advisory services. PROMEXICOPromexico offers businesses in the EU with support in sourcing local business partners, producers, and market intelligence and it offers Mexican businesses market viability studies for trade with EU companies. Promexico has offices in Berlin, London, Frankfurt, Madrid, Munich, Paris amongst others.

LATAM-EU BUSINESS EXPERTISE

LOCAL EXPERTS

Our Trade Directory will be launchedin 2016 and include key players in theLATAM-EU Trade Sector:

1. Trade Agencies/Chambers2. Trade Sector Service Providers3. Producers/Exporters

Get in touch with us to register before31st December 2015

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