Maersk Group. Trade Report. 2016, a year of opportunities for Colombian exporters

Transcription

1 Maersk Group Trade Report Q COLOMBIA 2016, a year of opportunities for Colombian exporters Due to the complex global economic situation, we predict that 2016 will be a complex year for Colombian foreign trade. However, following a transitional 2015, Colombia shows signs of being ready to act with greater determination, open new markets, and diversify income in 2016, within a context that favors exporters. In the short term, the best opportunities are in growth markets in the region with low trade barriers, such as the United States and the Pacific Alliance countries. In addition, Europe and Japan have emerged as interesting markets, especially for agricultural goods and refrigerated containers in review: 2015 was a year of adjustment for Colombian foreign trade, marked by the fall of international oil prices and the rapid devaluation of the peso. The oil and mining sector accounts for more than half of the country s exports and 30% of Foreign Direct Investment. As such, the fall in oil prices led the peso to lose over 50% of its value relative to the U.S. dollar throughout the year, causing it to reach its lowest level in 11 years. This sharp turn in the country s economic outlook was difficult to absorb for both importers and exporters. As expected, the loss in purchasing power had a greater impact on purchases from abroad, such that the total volume of containerized imports in 2015 fell 5% relative to On the other hand, PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 1 24/02/

2 the rapid devaluation of the local currency did not allow Colombian exporters to make the necessary adjustments to take advantage of the situation until the last quarter of 2015, causing the total volume of containerized exports in 2015 to drop by 2% in comparison to the previous year. Given that international oil prices are expected to remain low throughout 2016, we can expect a more stable exchange rate this year. Despite some volatility in the first few weeks of this year, Colombia gives the impression of being ready to take advantage of the new exchange rate reality. Throughout the past year, Colombian producers have been adjusting their business strategies to benefit from the competitiveness that stems from the peso s devaluation. In addition, the country s broad portfolio of free trade agreements and large infrastructure investments currently underway reflect a commitment to opening new markets and diversifying income. Considering the above, in 2016 we expect a rebound in the volume of the country s containerized exports. Due to the uncertain state of the global economy and weak demand from Asia, we expect much of the export sector s growth to occur in the intra-americas market, which contains 5 of the 6 principal trading partners of Colombia, including the United States and Pacific Alliance countries: Mexico, Peru, and Chile. These destinations, in particular, offer attractive opportunities for domestic producers due to the size of their economies and expected sustained growth levels, as well as the existence of relatively low trade barriers and business culture similarities. Containerized foreign trade, an alternative benchmark indicator: When measuring Colombia s foreign trade in U.S. dollars, in 2015 total exports fell 35% compared to 2014, primarily due to reduced earnings in the oil and mining sector, which accounts for 50% of the country s sales abroad. However, when examining containerized exports, which are mainly composed of products other than hydrocarbons, we can see that trade volumes only fell 2% compared to With this in mind, containerized foreign trade figures represent an important economic indicator for understanding trends in consumption and production in the Colombian economy, to the extent that they allow one to see trends in trade that are not apparent when studying the flows in terms of international currencies. Note: All containerized volume figures in this report correspond with the standard shipping measurement of TEU, which stands for Twenty-foot Equivalent Unit. PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 2 24/02/

3 Exporters are adjusting to the new economic reality: In the last quarter of 2015 (October, November and December), containerized exports grew 2% relative to the same period in As context, it should be noted that in each of the first three quarters of 2015 this indicator had fallen relative to the same period in 2014; indeed, it fell 4.5% in Q1, 4.6% in Q2, and 2% in Q3. This trend shows that Colombian exporters are beginning to take advantage of a new context with a devalued peso. Upon disaggregating the figures by region, we can see that the last quarter of 2015 saved the year in terms of exports. For example, containerized shipments from Colombia to Europe during 2015 increased 5% relative to 2014, but if we compare the last quarter of 2015 with the same period in 2014, we see an increase of 11%. Similarly, although intra-americas exports fell 2% in inter-annual terms, in the fourth quarter they increased 3% compared to the same period in 2014, explains Juan Camilo Vásquez, Colombia Sales Manager for Maersk Line. Fruit exports grew 14% thanks to new projects in the sector, including citrus and gooseberries. In eastern Antioquia, a new enterprise to grow Hass avocados is now yielding fruits and is beginning to conquer European markets thanks to reefer containers, an innovative technology that controls the atmosphere and temperature during intercontinental travel to keep the cargo fresh. Juan Camilo Vásquez The exception to this trend was the volume of exports to Asia, which in 2015 fell by 17% compared to 2014, and by 22% when comparing only the last quarters. In large part, this corresponds to the reduction in demand for inputs generated by the economic slowdown in China. Although, in general terms, we are seeing a clear trend towards a rise in exports, throughout 2015 we saw declines in some sectors due to weakness in Asian demand and some isolated issues in Colombia. For example, scrap metal exports fell 35%, partly due to reduced demand from China as well as ongoing investigations into the industry in Colombia. Moreover, nickel exports fell 10% due to the slump in demand from Korea, says Vásquez. Upon examining the growth by sector, Vásquez notes that the increase in exports is largely due to new enterprises and investments throughout the year: Fruit exports grew 14% thanks to new projects in the sector, including citrus and gooseberries. In eastern Antioquia, a new enterprise to grow Hass avocados is now yielding fruits and is beginning to conquer European markets thanks to reefer containers, an innovative technology that controls the atmosphere and temperature during intercontinental travel to keep the cargo fresh. In addition, exports of beverages grew 23% due to investments and new products from Bavaria, and coffee exports rose 13% after a series of massive investments in plantations, which allowed for the best harvest in 23 years. All this indicates that export sectors are reacting to take advantage of a new context that suit them, adds Vásquez. Japan: a unique example In the midst of a slowing environment in Asia, Japan represents an interesting opportunity for Colombian exports. After China, Japan is now Colombia s second largest trading partner in the region: In fact, during 2015 it received 29% of total containers shipped from Colombia to Asia. With an 8% increase in exports relative to 2014, Japan stands out as a success case in a program launched by ProColombia last year to boost exports within the small and medium business sector. In addition, at the end of 2015, Colombian coffee exports to Japan grew by 33% compared to To help Colombian exporters reach Japanese markets, Maersk Line recently launched a direct service between Buenaventura and Yokohama. The service considerably shortens transit times, opening up doors for new commodities, such as flowers, proteins and hinds to be exported, alongside traditional exports like coffee, bananas and metals, explains Juan Camilo Vasquez. PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 3 24/02/

4 The Americas represent the best opportunity for Colombian exports The increase in containerized exports at the end of 2015 was driven by shipments to destinations within the Americas, which increased by 3% during the last quarter of the year relative to the same period in Based on this fact, Maersk believes that the intra-americas market represents one of the best growth opportunities for Colombian exporters in Of the six major trading partners for Colombia China, the United States, Mexico, Brazil, Peru, and Chile five of them they are located in the Americas. Among our main trading partners, the United States and countries of the Pacific Alliance Peru, Chile, and Mexico stand out as important markets for Colombian exporters due to three shared conditions: standing free trade agreements, economic stability, and sustained levels of growth. In terms of exports, the United States accounts for 18% of the containers shipped from Colombia, while the Pacific Alliance accounts for 23%, divided in the following way: Peru 12%, Chile 6%, and Mexico 4%, Abadía explains. Reviewing the total container shipment data for 2015 and comparing to 2014, we can see that containerized exports to Peru grew by 11%, to Mexico by 7%, and to the United States by 3%. In addition, if we compare the last quarter of 2015 with that same period in 2014, a clear upward trend becomes evident. In fact, during the last quarter of the year, exports to these markets grew way above the annual average: Peru 30%, Mexico 10%, and United States 8%. The only exception was Chile, due to isolated, local issues that affected Colombia s sugar production and exports, adds Abadía. From a macroeconomic point of view, according to the International Monetary Fund and the World Bank, slow economic growth is expected in the Americas in Forecasts indicate that the United States will grow between 2-3%, the region of Central America and the Caribbean will grow about 3%, and Latin America will PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 4 24/02/

5 Maersk Group Trade Report / Q / COLOMBIA grow less than 1%. Among the medium-sized economies of Latin America, the greatest growth is expected in Peru (3.3%), Colombia ( %), Mexico (2,6-2.8%), and Chile ( %), respectively 1. Given the economic growth forecasts for 2016 and the upward trend in the export sector during the last quarter of 2015, the best immediate opportunities are in the United States, Mexico, Peru and Chile. The economy of the United States is the world s largest and continues to recover, while our partners in the Pacific Alliance will continue to grow and expand their middle classes and access to banking services. All of these factors offer significant opportunities to Colombian exporters, observes Abadía. However, prospects for Colombian exporters in the region are not limited to these markets. In Central America and the Caribbean other interesting markets stand out, including Panama 1 and the Dominican Republic, countries that, respectively, represent the sixth and the eighth largest commercial destinations within the Americas for containerized shipments from Colombia. In 2015, Colombian containerized exports to Panama grew by 2% compared to 2014, while shipments to the Dominican Republic soared, growing by 22%. After completing the first year of operations with SeaLand, a new specialized intra-americas containerized transport service, our experience indicates that technology will be a key factor in driving trade in the agricultural sector. Refrigerated containers are opening doors for Colombian Reviewing the total container producers to take their products shipment data for 2015 and to new markets. We are already comparing to 2014, we can see seeing very positive results for that containerized exports to new pineapple exports to Chile Peru grew by 11%, to Mexico by 7%, and to the United States and the United States, thanks to by 3%. reefer technology, says Abadía. Yenia Abadía Forecasts from International Monetary Fund y World Bank, January 2016 The recession in various Mercosur countries impacted foreign trade In 2015, Latin America was not exempt from global economic difficulties. In fact, several of its economies went into recession, including Venezuela, Brazil, and Argentina. Although for Colombia the year ended with an upward trend in terms of exports to the Americas, the slowdown in Mercosur countries affected foreign trade. Between 2015 and 2014, containerized exports to Brazil fell by 36%, marked by a 47% reduction in glass exports. Exports to Ecuador declined by 12%, largely due to tariffs placed on Colombian products to offset the dollarized economy s loss of competitiveness in light of the peso s devaluation. Meanwhile, exports to Venezuela fell by 2%, and now represent only 2% of Colombia s total containerized exports, a noteworthy low for Colombia s once largest trading partner. PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 5 24/02/

6 Rising import costs have not stopped Colombian consumption In 2015, containerized imports fell 5% compared to For 2016, we expect that the devaluation of the Colombian peso will remain a challenge for Colombian importers. It is important to consider that Colombia is a country that imports more than it exports (in 2015 it imported approximately 826,000 containers and exported about 440,000 containers), and that it must import many raw materials as inputs for domestic production. However, in terms of consumption, the data indicates that in the coming year Colombia s growing middle class will continue to consume imported products despite the loss in purchasing power. In 2016, we expect continued demand for new brands, decorative items and home improvement products, and expect domestic appliance and electronics sales to grow 5% by the end of year compared to In 2015, we saw an increase in imports of food, vehicles, and department store products. This indicates that consumption is still being driven by the In 2016, we expect continued demand for new brands, decorative items and home improvement products, and expect domestic appliance and electronics sales to grow 5% by the end of year compared to Juan Camilo Vásquez growth of the middle class and the expansion of access to credit, says Vásquez. Additionally, in 2015 purchases of imported capital goods and raw materials continued as the productive apparatus prepared to seize the new economic context. When comparing 2015 and 2014, the growth of fertilizer imports by 18%, and the increase in imports of chemicals by 8% shows a commitment by the agricultural sector to modernize, become more efficient, and take advantage of current exchange rate conditions, adds Vásquez. If Colombian exporters continue to import raw materials seeking to boost production levels, betting on new markets and taking advantage of the competitiveness of the devalued peso, by the end of 2016 containerized imports of production inputs could grow up to 2% compared to 2015, says Vásquez. PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 6 24/02/

7 Conclusions: Colombian exports will continue to grow Despite the complexity of the current global economic environment and the challenges it poses to Colombian foreign trade, 2016 is shaping up to be a year of opportunity for Colombian exporters. Figures for 2015 indicate that late last year the Colombian export sector began to react to the favorable context stemming from a competitive exchange rate. To the extent that Colombian exporters are able to focus on accessing markets with sustained economic growth, especially in the Americas, we expect the upward trend identified in the last quarter of 2015 to continue throughout If Colombia continues to engage key partners in the Americas to drive growth and diversify its export sector, we believe that the country will be in a position to recover more quickly from losses in its trade balance generated by its dependence on oil. In addition, markets in the region whose economies continue to grow, such as Mexico, Chile, and Peru, represent the best opportunity for domestic producers looking to reach new markets, given that they have fewer structural barriers due to free trade agreements, a shared business culture, and common language. Taking the aforementioned into account, at Maersk we believe that in 2016 Colombian containerized exports will grow 2-3% relative to In addition, considering the important role of the intra- Americas market expected in in 2016, we forecast that at the end of the year Colombian containerized exports to the Americas will have grown 3-4% compared to the levels recorded in However, the expected increase in exports will be offset by a reduction in imports as the peso s devaluation will begin to lead Colombian consumers to substitute a percentage of foreign good purchases for domestically produced goods. In this regard, by the end of 2016 we expect a reduction of between % in the level of containerized imports relative to Since Colombia traditionally imports more containers than it exports, for 2016 we expect a net result that represents a slight growth of between 0-1% in the volume of containerized foreign trade relative to PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 7 24/02/

8 Maersk Group Trade Report / Q / COLOMBIA About Maersk Group About Maersk Line Maersk Group employs about 6,800 people in Latin Maersk Line is the world s largest container shipping company. Maersk Line employs 7,100 seafarers and 23,000 land-based employees and operates 608 container vessels. Maersk Line serves customers through 374 offices in 116 countries. Latin America represents around 10% of Maersk Line s global volumes. America and more than 89,000 around the world. The Group has offices in more than 130 countries. Maersk Group is a global conglomerate operating in transportation, shipping, and energy. The Group places great emphasis on the training and wellbeing of its collaborators, as well as long-term sustainability. For more information or to request an interview, please contact: About SeaLand SeaLand is a regional, ocean transportation company dedicated to the Intra-Americas market and is a division of the Maersk Group. SeaLand commenced operations on January 1, 2015 with local, knowledgeable sales and support staff positioned in Colombia and throughout the Americas to serve the unique requirements of shippers in this market. With a strong tradition of customer-centric service in this trade region, the company s infrastructure provides greater service flexibility and enables the company to act quickly to respond to market dynamics. Over 240 dedicated personnel make up the SeaLand organization. Camilo De Guzmán Tel: +57 (300) / cdeguzman@2waycomm.com María Olga Corredor Tel: +57 (312) / mcorredor@2waycomm.com Daniela Caballero Tel: +57 (300) dcaballero@2waycomm.com PAGE _Maersk_Line_Tradereport_Colombia_UK_Feb_2016_01.indd 8 24/02/