In the eye of the hurricane is the decision of President Gustavo Petro to increase tariffs, with the intention of “counter” the high interest rates that the Bank of the Republic has imposed to reduce Colombian inflation, which in April reached 12.82% in its annual data.
(Clothing sales are in trouble due to increased tariffs).
Although the country’s monetary policy was raised to 13.25% to curb high prices, the measure in article 210 of the National Development Plan (PND) is already touching the fibers of the commercial sector due to the risks of its execution.
The article details that the “National Government will promote the commercial defense of the Nation through a policy of commercial remedies and intelligent tariffs”in order to achieve a balance in the conditions of competition for national production, compared to imports.
Industry experts consider that the decision, in principle, is inconvenient, since it could cause additional inflationary pressures and limit the development of Colombia.
According to José Manuel Restrepo, former Minister of Finance, in a scenario in which inflation is more persistent than initially expected, the tariff policy goes against the welfare that is sought economically. He explained that this would introduce taxes on some products, specifically, food that consumers can have access to, but at a lower price.
(Colombia removed tariffs for imports of 39 agricultural inputs).
“In some products, with the current state of the exchange rate, what this generates is a double impact on prices; on the one hand in the exchange rate and on the other hand in tariff matters. So, in that way, the result in the end can be an additional pressure so that inflation does not subside so quickly”, Restrepo explained.
Along the same lines, even though the World Trade Organization (WTO) allows for protections for reasons of national security, “The Government is drawing a gray line that adds interpretations that could lead to non-compliance with international agreements in the future”Javier Diaz, president of the National Association of Foreign Trade (Analdex), told Portafolio.
According to the manager, since it is not specified to which products the tariff would be applied or in what context it would occur, it is possible to affirm that one of the sectors that would be most affected is food.
According to data from the National Administrative Department of Statistics (Dane) as of February, imports of the agricultural sector, food and beverages, add up to a total of US$11.370 million.
“What this policy will achieve is that prices will skyrocket again. For now it has been an announcement that does not have specific sectors and compared to what there will be is to be very attentive to define affected sectors ”, Diaz assured.
On the other hand, Analdex remains in that “It is not a good idea of President Petro”as the final consumer would be punished.
(Tariffs on 165 imported goods are lowered to 0% to alleviate inflation).
In the same way, Juan Camilo Restrepo, former Minister of Finance, thinks, who told Portafolio that any increase in tariffs ends up being paid by consumers, since they are nothing more than a tax on imports.
“At this time of high inflation and the possibility of a strong summer ahead, more tariffs would further push prices up,” he pointed.
However, another factor that would affect trade with smart tariffs is the increase in local products. According to Andrés Valencia, former Minister of Agriculture, if this event occurred, it is likely that national players would take advantage of the tariff increase to increase their prices.
“If the tariff that rises is that of an input for the preparation of its final product (wheat for bread, or corn to produce chicken meat or eggs), automatically that higher cost will have to be passed on to the consumer. And secondly, if the highest tariff is on a finished product, the national producer that competes against the imported one will raise its prices by a percentage (not necessarily the same)”, said.
investment problems
Another factor that would be affected is international confidence for investment. According to the president of Analdex, Javier Diaz, if an investor knows that he must pay for high tariffs in the country “automatically that investor takes out his investment possibilities”. Likewise, Andrés Valencia, former Minister of Agriculture considered that part of the exercise of investing “It is that there is legal stability and that the rule of law governs. It would be putting Colombia’s credibility at risk.” he pointed.
retaliation, side effect
One of the benefits of Free Trade Agreements (FTA) is the reduction and/or elimination of tariffs on products that come from abroad.
Along the same lines, due to the policy decision of the Government of Gustavo Petro, the president of the Colombian American Chamber of Commerce (AmCham), María Claudia Lacouture, pointed out that 70% of imports from the United States are of products that are not produce in the country. “That is why the call that we from AmCham made that we have to be supremely skilled in the process of what we are going to put more tariffs on and what not. If the tariffs are increased, that means greater pressure on inflation in the country. We have to determine the variables and the products.” said.
It should be noted that according to Amcham figures, in the event that there was no FTA with the United States, the tariff payment for roasted coffee would be 20%, the same as that of tilapia, textiles and belts, which would be for each of 20%. In addition, avocado 15%, banana also 15%, among others.
According to Andrés Valencia, violating an FTA with a country like the US would expose Colombia to “commercial retaliation that would affect our exports to that country,” Indian.
DIANA K. RODRIGUEZ T.
