The Foreign & Commonwealth Office is making a big push towards Latin America – how has that affected the Embassy’s work in Colombia?
The interesting thing about the ‘Canning House Agenda’ was that it was implemented in different ways in every Latin American country. Colombia, along with Brazil and Mexico, is a genuine priority. For example it is the emerging economy where UK exports have increased more than any other – albeit from a relatively low base. Britain has long had strong security relationships with Colombia, generally working on counter narcotics or with strengthening the state. However, now we are focusing on opportunities around the country’s increasing prosperity – and the Foreign Office has given us extra resources to work on that. One of the sectors is infrastructure, so we began working with the national and state governments, development banks and the National Infrastructure Agency (ANI) and bringing them together with British companies. That’s helped British firms like Atkins, Arup and McBains Cooper establish a presence here.
Another growth area is oil and gas. Colombia has transformed its production and there is a whole supply chain behind that. We are working to introduce Britain’s high-end service companies and niche manufacturers into that supply chain. We are keen to promote the UK brand but we also work closely with the private sector because there is no point promoting a brand if no companies are ready to take advantage.
So far British companies have been slow to get directly involved in Colombia’s infrastructure push – why is that?
That’s often the way in Latin America – British companies are not the ones pouring the concrete but are involved in the project management, design or finance. That matters because often the value added in the government projects comes from architectural work and project management, and that’s where the UK excels. Another important role is reinsurance. There are lots of complex technical issues involved with the new infrastructure plans as it involves traversing a very geologically unstable part of the Andes. British reinsurance firms play a major role in managing that risk.
Despite the government’s best efforts Britain’s exports to Latin America remain small. Why has UK plc been so slow to take advantage of the opportunities presented by the region’s fast-growing economies?
I think that these are markets that take a bit of getting used to. Here in Colombia there is quite complex regulatory landscape. There is a strong independent judiciary, which is a good thing, but one that creates overlapping areas of judicial accountability. There are significant areas of corruption, something the Colombian government would be the first to acknowledge. The fact is that these aren’t simple markets and it requires a careful assessment to get it right. I think that what’s changed over the last few years is that when you look at the heartland of the country, the major cities where the vast majority of population live, you see that they have normalised and that crime has fallen. Yet that doesn’t mean that the market is without complication. Small and medium-sized businesses in particular need government support or help from other private-sector actors. That’s why Lord Green has placed such focus on business-to-business support. The idea is for really business-focused chambers of commerce that can provide new entrants with useful advice. Take oil and gas for example. What UK suppliers need is to be able to talk to Amerisur or Shell about what business is like here. So it is reasonable that UK companies do need a bit of support in markets like this.
What is the biggest challenge for UK companies operating in Colombia?
It really depends on the business. If you are talking about a firm based in an urban centre – which is where you’ll find 85% of the population and 95% of economy – then you are talking about legal and linguistic challenges. British firms need to focus on due diligence and working with Colombian partners or British companies that are already established here. Of course if you are a mining company in rural Colombia then you have a different set of challenges and risks to deal with. There is a big difference between rural and urban Colombia.
How strong is the UK/Colombia relationship?
We have a good relationship. I work very closely with the Colombian government, with everyone from President Santos to minister of areas which affect British industry such as energy or agriculture.
But I think it’s more fundamental than just the government, Colombians at quite a deep level like the UK. They believe that if they work with British companies they will get reliable services, high quality goods and people that they can trust and work with. There is a cultural affinity that is quite strong and built on historical trade ties and links.Colombia is unique in many ways in Latin America. For example the Colombians fought in the Korean War and play an active role in peacekeeping in Sinai. They have taken a strategic decision to associate themselves with what we would see as global values. They adopt a sensible approach to regulation, open markets and good fiscal management. They have never defaulted on their external debt and they have long shown a strong commitment to liberal markets and free trade.
Yet Colombia’s image as an investor darling of Latin America was shaken by the recent protests. Do those disturbances prove that beneath the surface Colombia still has serious social issues to resolve?
Colombia’s economy is undergoing structural changes. A big driver of that is the loss of its traditional export markets of Ecuador and Venezuela. When you add that to a strong oil sector and the stronger value of peso it creates challenges for exporters in certain areas. Structural changes create winners and losers and although the fundamentals of economic growth are very strong, there are groups that are not doing well. For example agricultural producers have struggled from imports from other Andean countries such as Peru and Ecuador. Another factor is that transport costs are high in Colombia and markets are fragmented, which makes it expensive for producers to get their goods to or from markets. So clearly there are a set of Colombian challenges in Colombian industry and agriculture. However, the government has realised that the solution to those problems lies in internationalisation. For example one of the measures it has taken has been to reduce tariffs on incoming fertiliser – a perfectly sensible way to help those sectors without creating market distortions.
Structural changes create winners and losers and although the fundamentals of economic growth are very strong, there are groups that are not doing well. “
One encouraging thing about the recent disturbances is that people feel that they can protest and that there is the political space for them to do it. The protests were different depending on the area they took place but in some cases it was a case of people wanting and expecting more, which again, is a positive thing. What made it difficult for the government is that the protest groups were made up of lots of different movements and influences so it was hard to respond to all of them. But again, if you look at it in terms of the normalisation of Colombia, there was a set of protests that caused disruption to tourists and businesspeople but then died down – that is actually quite a healthy sign of a country that is normalising process. Many people said that five or ten years ago they wouldn’t have protested because they would have been worried about reprisals from, depending on the area, guerrillas or paramilitaries. They didn’t have that fear this time.