Following years of trade surpluses, Colombia ended the year 2014 with a record trade deficit due to decreased revenue of exports and growing imports.
The drop in exports was no surprise for the oil-producing country that has seen the global price of crude oil drop to approximately half its price in June.
The drop in oil prices consequently lowered the price of the Colombian peso against leading currencies like the dollar, making the import of products more expensive and the import of gasoline more expensive.
Because of this, Colombia’s 2013 trade surplus of $2.2 billion dropped $7 billion to become a $4.8 billion deficit in 2014.
The South American country hasn’t had a trade deficit since 2007. Its previous record was registered in 1998 when the country exported $2.9 billion less than it imported.
Trade balance
It’s not just oil exports that drop
Dropping oil export numbers had been expected in spite of the country’s ability to maintain its output. The price of crude oil ended 2014 around $50 a barrel, less than half the price it registered in June.
Consequently, the country’s oil exports contracted 10.6% from $32.5 billion to $28 billion.
Colombia’s total exports were $54.8 billion, $5.1 billion less than last year.
The drop throws the value of Colombia’s exports back to before 2010 when an oil and mining boom significantly expanded the national export numbers.The significant drop in oil income — a sector that’s good for half of Colombia’s export — pushed the total exports for 2014 down 6.8% compared to last year.
Exports
However, oil export wasn’t the only one to contract; mining exports — dragged down by gold — also dropped $1.1 billion, as well as the exports of metal and cars.
However, while the extractive sector slows down, other sectors have been able to push a somewhat more diversified export offer.
The export of coffee, traditionally Colombia’s most iconic export product, went up a staggering 31%.
Export to US hurting the most
Exports to the United States, Colombia’s biggest trading partner and one of the country’s largest oil buyers, dropped for the third consecutive year, this time with 23.6%, according to the DANE.
The US Census Bureau measured a 15.6% increase in imports from the South American country.
Exports to US
Exports to Colombia’s largest trading partner have dropped consistently following the signing of a free trade agreement with that country in 2011.
At the same time, Colombia’s imports have gone up, completely turning the trade balance for both countries.
Colombia-US trade balance
The decrease in exports to the United States is slowly pushing increasing economic dominance to the European Union and China.
The US now is good for 25.7% of Colombian exports. Europe buys 15.7% of Colombia’s exports, followed by China with 10.5%
While exports to the United States dropped almost a quarter, exports to China went up 12.8% to $5.8 billion.
Exports to US vs. China
Imports: Gasoline and manufactured goods
Colombia’s imports grew 7.8% to $64 billion between 2013 and 2014, according to the DANE.
Imports
Also here, oil and the expensive dollar are among the main reasons for the increase in imports.
The expensive dollars in the last quarter of 2014 pushed prices of manufactured goods — good for 76% of all Colombia’s imports– up with 6.8%.
The import of oil products like gasoline is the second largest import sector. These imports when up 16.4%.
Because Colombia doesn’t have adequate facilities to refine crude oil to gasoline, it has to buy its imported gasoline in dollars. This has become less cheap for Colombia because of the depreciation of the peso.
US oil companies gained $1.2 billion extra, almost the entire increase in Colombian imports from the US.
Colombia’s most important countries in terms of import were the US (28.4%), China (18,4%) and Mexico (8,2%).
China saw a major increase in the import of electronic products. Colombian spending on Chinese electronics went from $6.4 billion to $7.6 billion. Mexico benefited from an increase in car sales.
2015 estimates
There was no consensus among experts consulted by Colombian media about how the countries imports, exports and trade balance will behave in 2015.
Export association Analdex told newspaper El Colombiano that exports are likely to drop further. However, a consulted economist at Colombia’s largest private bank, Bancolombia, expect exports to recover and increase 4.3% in 2015.