Free Trade Agreements Colombia - Essay Example

?Colombia Our company is looking forward to expanding our chocolate products in the foreign markets in Latin America. Colombia is one of the most favorable location targets because of its less volatility; especially during the times of present unexpected flows in the global economy it is enjoying a very moderate inflation. Colombia is already the 21st largest market for the export activities for the U.S. And now since the approval of U.S.-Colombia Trade Promotion Agreement by the President of United States Of America, Barack Obama, it is most certain that the existing trading opportunities will increase even more significantly. This agreement ensures that the U.S. interests will be protected while upholding the rule of law in Colombia. Colombia is a very risk adverse country, thus while it will feel no threat to its legal structure and culture, it will help reduce the trade barriers, creating a more stable environment that will lead to cheaper and easier export of products and services for the U.S. traders. According to the statistics stated by export.gov, the U.S. international Trade Commission is forecasting an increase of U.S. GDP by nearly $2.5 billion and U.S. merchandise exports by almost $1.1 billion, because of the probable elimination of tariffs and related encumbrances in Colombia. According to an estimate almost 80% of the export of consumer and industrial products will become duty free and the remaining tariffs will be distributed over a period of 10 years. Especially after the estimated cost of duties of $70 million, from 2008 to 2010, these reductions of charges will significantly lower our costs of trading thus guaranteeing that our products will be distributed on a more cost effective basis and in this way we can focus on a larger distribution plan for our chocolate products in Colombia’s market base. Colombia has signed agreements with EU in 2008 along with many other countries, some of which include Canada, Chile, El Salvador, Mexico and Guatemala. So after the implementation of its agreement, the exporters of EU are expected to enjoy a benefit of 4.1% average tariff over the U.S. exporters, but if the U.S. Colombia TPA is brought into action at the same time it will give us an advantage of 1.7% tariff over the EU. So it’s clear that as soon as these policies are implemented, we will have an advantage over other potential global competitors in the form of cost effectiveness, this way we will be able to focus on our distribution and marketing plans rather than fretting over our unavoidable costs relating to our export. Custom procedures have also been simplified except the fact that the imports are kept in holding for sometime before released, consequentially we will have to make sure that our products are able to survive without refrigerators for a few days Colombia has a population of 45 million. Its largest cities are Bogota D.C. Medellin, Cali, Barranquilla and Cartagena. So we will be focusing on them initially. It has two legislative houses: Senate and the House of Representatives. The president, who is elected only for a single term of four years, is both the chief of state and the head of government. So while we are there we will have to follow the policies accordingly so as to not jeopardize our relations with the government. The main language of the country is Spanish. Many business people have the understanding of English language but as it is not that widely understood or spoken so we will have to make sure that the labels of our chocolate products read in Spanish. 95% of the population is Roman Catholic but freedom of religion is guaranteed. The people are highly ambitious and status oriented. But the culture as a whole is yet collectivist rather than individualistic. People are very loyal to their own communities or groups and highly competitive towards other social classes. And the more they are tied to highly stabilized and influential corporative groups, as a reward to their performance, the more favors and benefits they can derive from the community. Socially, conservatism is enjoyed and respected, which is also reflected in their religion. This means that to have a strong foot hold in Colombia we must have good ties with the powerful groups of the community. The people of Colombia prefer personal relations even when it comes to businesses but that does not mean that they do not follow proper etiquette when it comes to their professional lives. When visiting for a business meeting, it is considered respectful if the visiting card has a side translated in Spanish along with the other side in English. While presenting that card, it is courteous to hand over with the Spanish side up. The women of the community are to be respected and a distance has to be maintained. And a proper conduct is to be followed when in public. They are very particular about things that can be taken offensively by the local crowd like yawning and discussions about drugs, politics and religion. For business meetings, hand shakes are customary but they are not to be rushed or they can be interpreted as disrespectful. Lunch is considered to be the main meal of the day so even for business purposes lunch is preferred. Formalities like bill payment and toasting is to be upheld. While at a business lunch it is considered proper to let the host make the toast first. Gifts are expected as a gesture of good faith. Colombia is a nation where even business is personal. Here the business deals are made on the strength of your personal contacts with the community. So our mission will be to make deals in person with the dealers, suppliers, transporters and the government officials. It is easy to make deals with the dealers in the community but once the deals have been made its compulsory to legalize the agreement so that future legal losses can be minimized. This will help us secure our future. If we want our operations and our chocolate products to be realized in the Colombian community it is very important for us to follow their cultural etiquettes, maintain good relations with the local groups and for our business meetings follow the proper etiquette. Because, unless or until we are not able to establish good contacts, our operations will not be able to have a strong foothold. Colombia has very low tolerance for any kind of uncertainty. Every step and policy it makes is to minimize the improbabilities for its future. Such consistency in its economic and financial policies will ensure lower drastic changes in the inflows and outflows. Another factor that is to be considered is the currency of the foreign market. Colombian currency is Pesos. So we will have to hedge our funds for any kind of exchange rates fluctuations. So in the light of above mentioned reasons and aspects of the local culture, we believe that it will be beneficial to enter the local markets of Colombia for the expansion of the product base for our chocolate products. Sources: http://www.cyborlink.com/besite/colombia.htm http://geert-hofstede.com/colombia.html http://export.gov/colombiapanamamission/ http://export.gov/colombia/doingbusinessincolombia/index.asp http://export.gov/FTA/colombia/index.asp http://www.trade.gov/fta/colombia/ Read More