Colombia’s main asset to access the Asian market is its major hindrance. The Buenaventura port on the Pacific coast with its deficient infrastructure, together with corruption and violence, is not only affecting Colombia’s development but also benefiting neighboring countries’ economic growth.
Juan Manuel Santos’ Development Plan for the next four years calls for a closer integration with the Asia-Pacific region. This strategy was initiated during the last years of the previous government when the country faced dire economic hardships as a result of an economic stand off with Venezuela and the 2008 financial crisis. The strategy has shown some positive results and in 2010 China overtook Venezuela as Colombia’s second export market. Now, Santos is deepening this integration by joining (unsuccessfully) the Asia-Pacific Economic Cooperation forum and negotiating Free Trade Agreements with South Korea, Singapore and possibly Japan.
It is questionable, however, whether Colombia is ready to exploit the expanding Asian market. Colombia is the only South American nation facing the Pacific and Atlantic oceans. But, due to the over-reliance on the U.S. and Europe for trade, the relatively modern ports are located on the Atlantic coast (Cartagena, Santa Marta and Barranquilla). While the main Pacific coast port, Buenaventura, which handles half of all Colombian trade, is in a deplorable state. Increasingly exporters have no choice but to ship their goods to Asia from the Atlantic via the Panama Canal, thus incurring extra costs and losing competitiveness. Yet, Santos’ Development Plan failed to address the problem with the port infrastructure.
The problems with Buenaventura are a reflection of the endemic problems affecting Colombia’s economic development: obsolete infrastructure, violence and corruption. In 2006, the government announced the opening of a bid for deepening the port’s access channel from 8.9 meters to 12.5 meters — this despite the need for a 17 meter access channel to cater for post-Panamax vessels (large vessels unable to navigate the Panama Canal). Yet, no works have taken place and deep-draft commercial vessels need to use other ports. While in 2007, the port operator announced spending on new equipment, but the investment only replaced obsolete equipment adding virtually nothing to port capacity.
Although corruption and violence are rampant in other ports, Buenaventura’s own realities worsen these problems. For instance, 80 percent of the population lives in poverty, 25 percent is illiterate and 30 percent is unemployed. If this was not enough, armed group (guerrilla, emergent bands and drug gangs) fight for the control of a strategic port that is the exit point of approximately 40 percent of Colombia’s cocaine and entrance of arms and smuggled goods.
Colombia’s lack of political will towards Buenaventura contrasts with the aggressive competition between Ecuador, Peru and Chile to become the entrance point of Chinese products and the exit point of South American goods (mainly commodities) to the Far East.
Two weeks ago, Ecuador’s Rafael Correa announced that the port of Manta can become China’s “gateway to Latin America.” This grandiose statement is not far from reality if various infrastructure developments are completed. The most significant of which is the Manta-Manaus-Belem corridor that would link the Pacific with the Atlantic ocean and be beneficial to Sino-Brazilian trade. Manta’s port authority is also investing $373 in modernizing the port, which is the nearest natural deep-water facility to Asia on the South American Pacific coastline.
In Peru, President Alan Garcia stated two months ago that Callao, the country’s main port, “was, is and will be the port of South America.” This announcement took place at the culmination of approximately a $500 million expansion and modernization project that will enable the port to receive post-Panamax vessels and handle 3.5 million of containers a year.
While Chile with already strong links with the Asian market seeks to increase its ports’ capacity. Economists expect the capacity of the two main ports, Valparaiso and San Antonio, to reach maximum capacity by 2014. The government is therefore planning to open bids for concessions to construct and operate new terminals early next year. The new investments are on top of the $1 billion already spent improving the ports in recent years.
To capitalize on trade with Asia and specifically with China, Colombia needs a port infrastructure that is secure and modern. If these basic elements are not in place Colombia would be falling further behind neighboring countries in benefiting from trade with the booming Asian Market.