Building a Market Opportunity in Pacific Alliance

Sabed Montenegro

Presented to
Lorena Palacio

International Integration
Universidad del Norte
Barranquilla - Colombia
Mayo 2019
 Building a market opportunity
Exporting vehicles to Colombia

This applied project consists on the possibilities of trade between Colombia and
Pacific Alliance, specifically Mexico. During 2016, Colombia imported US$4.814
million from the other PA’s countries. Today, 92% of the goods commercialized
between the Pacific Alliance are with no tariff and the remaining 8% have a period of
time between three to 17 years to get the same benefit.
In 2017, Colombia imported US$2.321 million of vehicles: US$1.974 million of cars
and light trucks, $334 million of cargo trucks and $13 millions of others vehicles. The
main vehicles importer companies were: General Motors Colmotores S.A (14%),
Mazda de Colombia S.A.S (12%) and Distribuidora Nissan S.A (12%).
The Pacific Alliance has a population of 225 million of people and all have a GDP per
capita of US$18.000 and it forms the eighth economy and exporter power in the
world.

COLOMBIA
Colombia is a country located in Northern South America, with borders with Panama,
Venezuela, Ecuador, Brazil and Peru, and with the Caribbean Sea and the North
Pacific Ocean. Its official language is Spanish and its capital is Bogotá. It is divided
by 32 departments. Its climate is tropical along coast and eastern plains, and cooler
in the highlands. It has a population of 44.380.000 people with a GDP of
US$355.163 billion in 2018 and US$7.049 of GDP per capita (1,43% of rate).
Colombia is Latin America’s fourth largest economy and the second in Middle
America.

MEXICO
Mexico is a country located in Middle America, with borders with United States,
Guatemala and Belize, and with the Caribbean Sea and the Gulf of Mexico, and the
North Pacific Ocean. Its official language is Spanish and its capital is Mexico City. It
is divided by 31 states. Its climate varies from tropical to desert. It has a population
of 123.982.528 people with a GDP of US$2.575 trillion and US$9.614 of GDP per
 th
capita (1,2% of rate). Mexico is the 15​ largest economy in the world. Mexico in

2017 exported US$406.5 billion and the most exported good was automobiles.

In the graph above, we can see that in 2016, Colombia imported vehicles mostly
from United States and secondly from Mexico which represents 14,62% of the total
of imports of vehicles.
Light vehicle production in Colombia includes the operation of three OEM´s: General
Motors, Renault and Mazda. In 2011, the national production was 131,510 units and
total sales reached 324,570 units. In the case of commercial cargo vehicles,
domestic production is lead by General Motors and Hino (Toyota). The country only
produces light duty trucks (less than 10 tons), and imports most of the heavy duty
trucks from Mexico. (Proexport Colombia, 2012).
In the graph above we can see that the demand for vehicles in Colombia increased
30% by 2011.

The graph above shows us the vehicle sold in Colombia by 2011. These sales
represented the 64% of the local market with 209.022 units sold in 2011. Most of
these cars come from Mexico.

The automotive industry in Mexico

The automotive industry is the fastest growing industry manufacturing in Mexico
today, bigger than Bazil’s. After Mazda, Honda, Nissan, Audi and Volkswagen
announced they were expanding manufacturing in Mexico in 2014, greater
opportunities emerged for automotive manufacturing suppliers in Mexico, especially
in the central region of the country.
Mexico’s automotive industry has gained recognition as an opportunity for higher
profit margins, price competitiveness, good infrastructure and close proximity to the
United States.
● Mexico’s automotive producing economy is the world’s fastest growing
manufacturing group. This industry also contributed to Mexico’s economy.
● In 2017, more than 3,7 million units were manufactured, representing the
9% of increases in production.
 ● Mexico is the fourth largest global exporter of light vehicles.
● Big companies such as Volkswagen, Nissan and General Motors are
looking forward to invest to expand their factories in Mexico.
● The geographical placement of Mexico and its extensive network of
airports, ports and land infrastructure with borders with United States and
connected with countries in South America, Mexico is perfectly situated
and equipped to distribute its cars and parts.
● Mexico’s production costs are lower than North America and Europe,
being attractive place for companies to invest there.
● Mexico has so many trading agreements which means that they have
access to 46 different markets via 10 free trade agreements.

Cars such as Chevrolet Sail, Chevrolet Tracker, Chevrolet Beat, Chevrolet Onix,
Chevrolet Spark, Mazda CX-5, Mazda 3, Mazda 2, Nissan NP 300 and Nissan
March are on the top 20 of the most sold cars in Colombia. Those cars belong to the
main importers companies mentioned before (General Motors Colmotores S.A,
Mazda de Colombia S.A.S and Distribuidora Nissan S.A)
But the question here is ​why export to Colombia?
The Republic of Colombia is the fourth largest economy in Latin America, after
Brazil, Mexico, and Argentina. With the help of security improvements and steady
economic growth in recent years, Colombia continues to increase its commercial and
investment ties to the United States, Europe, Asia, and the rest of Latin America.
● Colombia’s economy has grown 3,8% in the past 10 years.
● Colombia has over 16 trading agreements that allow the country to have
access to more than 60 countries and at least 1500 million costumers in
the US, EU, Brazil, the Pacific Alliance trade bloc, Costa Rica and Korea.
● Thanks to Colombia’s geographic location and its developed logistics
infrastructure, the country has easy access to global markets.
● Colombia is the country with the most free trade zones in the region which
have various tax benefits (income tax 20% instead of 33% and VAT 0%).
 ● Colombia has a national development plan that addresses the country’s
primary needs and designs and executes an action plan to achieve
continuous growth and competitiveness.
Relationship between Colombia and Mexico has been ​strengthening, not only
politically but also commercially. Their foreign trade grew stronger in the last decade
that today there are many opportunities for companies invest in both countries.
th​
● In 2012, Colombia ranked 11​ in the total trade of Mexico (imports and

exports).
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● Colombia is Mexico’s sixth buyer and it rank 30​ as a supplier.

● Trade between Mexico has grown 540%, from US$1010 millions in 2002
to US$6470 millions in 2012.

Colombia and the Pacific Alliance

In 2016, the Commercial Protocol entered into forces within the Pacific Alliance. The
CP is a mechanism, that among other things, supports regional accumulation so that
each country takes advantage of export tariff preferences for raw materials and
manufactured goods ​between its four members.
With the arrival of free trade agreements and the Pacific Alliance, the Foreign Trade
Single Windows (Ventanillas unicas de comercio exterior, vuce) were created in
Colombia to reduce the times and costs in the ports of the country when importing or
exporting merchandise.
Vuce also has the capacity to exchange information among all national ports, such
as phytosanitary certificates for importing and exporting agricultural and
agroindustrial goods such as chocolate, coffee and their varieties, among others. It
has already exchanges 2676 certificates.
For the Ministry of Commerce, the 3 trade agreements in force with 49 countries
have Colombia ready to face a free trade zone.
According to the IDM competitiveness index, Colombia ranks 57 out of 63 countries
and Dane revealed that exports fell by 4% in the first quarter of 2017, due to lower
external sales of oils, fats, cocoa and others food products and crude oil, natural gas.
Conclusions
● Colombia’s economy growth makes the country a great target to export.
● Also is very crucial to notice the automotive industry in Mexico, knowing its
growth through the years, makes Mexico an excellent country to import
from.
● Mexico and Colombia’s relationship have been strengthening through the
years.
● The Pacific Alliance trade agreements let the two countries do business
easily, with all the free trade agreements both countries have.
● Both countries’ economy have grown through the years making them great
target to trade not only between them but also with all the countries in
Latin America and others continents.
References
Comercio. (2017). Alianza del pacífico: acuerdo de libre comercio en Colombia.
Revista DINERO. Retrieved from:
https://www.dinero.com/economia/articulo/alianza-del-pacifico-acuerdo-de-libre-com
ercio-en-colombia/246555
Latin America. (n.d). Basic Facts: Mexico. Retrieved from:
https://www.latinamericacollection.com/mexico/about/basic_facts.html
Maquila Reference. (n.d). Manufacturing in Mexico. Retrieved from:
http://www.maquilareference.com/category/industries/automotive-manufacturing-in-
mexico/
Feldman, T. (2018). Business opportunities in the Mexican Automotive Industry.
BIZLATINHUB. Retrieved from:
https://www.bizlatinhub.com/business-mexican-automotive-industry/
Latin America. (n.d). Basic Facts: Colombia: Retrieved from:
https://www.latinamericacollection.com/colombia/about/basic_facts.html
Procolombia. (n.d). ¿Por qué Colombia? Retrieved from:
https://www.inviertaencolombia.com.co/por-que-colombia.html
Proexport Colombia. (2012). Automotive Industry in Colombia. Retrieved from:
https://www.investincolombia.com.co/attachments/Automotive%20Industry%20in%2
0Colombia%20-%20April%202012.pdf