“Government takes the right steps for the recovery of the automotive industry” Camilo Llinas

On July 17, the Ministry of Commerce, Industry and Tourism notified Brazil of its decision not to renew the bilateral tariff preference agreement for the automotive industry, which expires on October 13 of this year.

This agreement established quotas for both Brazil and Colombia in the exchange of vehicles with zero tariffs. From 2018 to date, Brazil has taken up the entire quota, selling more than 200 thousand vehicles in that time, while Colombian vehicle sales to Brazil are zero.

Economic Complementation Agreements (ECAs) and Free Trade Agreements (FTAs) share the objective of facilitating trade between countries. However, ECAs are more limited in scope, tend to be more flexible and are associated with regional integration processes, such as the Latin American Integration Association (LAIA).

This shows that this understanding was detrimental to Colombia, demonstrating how Brazil took advantage of the agreement, while Colombia failed to capitalize on it.

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But what happened?

For Camilo Llinás, this agreement hurt the Colombian automotive industry. General Motors has already withdrawn from the country, Sofasa has reduced its production, Hino has also reduced its production, and the sale of auto parts has been affected. The automotive industry is in a critical state.

For this reason, the decision of Minister Luis Carlos Reyes and Vice Minister Felipe Quintero, who took the initiative to send this communiqué to Brazil in response to the request of the Colombian automotive industry that such unbalanced treaties cannot be maintained, is decisive.

It is inconceivable that 218,000 vehicles have been sold to us and not a single one has been purchased. The figures show that this measure should have been taken long ago.

So a thank you to the minister and the vice minister, and we hope they will maintain this position. We know that there will be some complaints from importers, but the most important thing is the country, employment, industry and the interest of traders.

Who benefits from this measure?

Sofasa and Hino, the assemblers, benefit, as well as a project under development to assemble electric vehicles. The auto parts manufacturers also benefit, since with the increase in production we can become more competitive and efficient, allowing the Colombian automotive industry to offer competitive prices in the international market.

The main beneficiary is Colombia: employment, industry, and the need to defend this industry, as they do in other countries. This industry is fundamental for the transition to cleaner energies, such as electric vehicles. We cannot allow a key industry to disappear just for the interest of a few importers.

Country first, jobs first, and secondly, the energy transition to cleaner energies.

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How can prices be affected and will the consumer be affected?

No, because prior to this agreement, vehicles were imported from Mexico and other sources, and prices were not reduced with the entry into force of this agreement. If importers want to continue to participate in the market, they can bring vehicles from other sources such as Mexico, Korea or Japan.

What we are doing is returning to the previous situation, but with the possibility of starting to recover the domestic automotive industry.

To a certain extent, this modification implies that it is proof that treaties can be modified if the political will exists.

Of course, everything can be undone as it is done. How were the free trade agreements made? With a political decision. It was a decision of some governments to open this, to sign, and I was not given the consequences for the automotive industry, nor was the country prepared to organize ports, roads, airports, railroads, security, and what it did was practically to hand over the market to the countries with which the treaties were signed.

This government has political decision and just as it had political decision to sign the treaties, it can also take political decision to renegotiate them and to end the treaties that have not been balanced in the almost 40 years we have had a wild opening.

How will these measures influence the reactivation of the automotive industry?

The impact will be both in the short and medium term. Because the assemblers that exist now, the ones that are coming to assemble vehicles, especially electric buses, become more competitive and begin to have much more feasible prices to reach international markets. So, by being more competitive internally, we can be more competitive externally.

We reach foreign markets, Mexico, Brazil, Argentina, Chile, Peru, and what this does is to increase the production of vehicles, the production of auto parts, it generates formal labor, well paid, very well prepared, and they are Colombians who contribute to the economic development of the country because they pay taxes, consume goods and services, and they are people who continue transmitting their knowledge to the new workers who will arrive at the plants due to this measure taken by the State.

Remittances to Colombia continue to grow: over USD $6 billion entered the country between January and July