When it comes to Canadian exports, the Andean region – Bolivia, Colombia, Ecuador, Peru and Venezuela – is not likely top-of-mind. But Canadian exporters and investors have been very active in the region in recent years, and there is much potential for growth well into the future.
Last year, Canada exported $2.1 billion worth of goods to the region. What is more, 2008 growth was about double Canada’s average, at an impressive 19 per cent. This was no flash in the pan, either – growth has maintained a solid, double-digit pace in each of the last four years. Not only that, but over the same period, Canada also saw consistently strong growth in each of the five markets.
Agri-food exports dominate all other industry categories, at about 40 per cent of total regional shipments, yet growth is below the regional average. Machinery and equipment exports together account for a sizable 16 per cent of Canadian exports to the region, and as a group, grew at a 22 per cent pace over the past four years. Other top exports are paper products, minerals and refined petroleum products.
Canada’s activity in the region is not confined to exporting. Canadian firms have undertaken direct investments in the region of over $4.4 billion, over half of which is in Peru. Colombia makes up an additional $1 billion, a tally that is growing by 28 per cent annually.
Venezuelan holdings are at $850 million, and rising 15.5 per cent annually. Canada is also importing from the region. Growth in the past three years has been well below export growth, but with inbound shipments of $4.4 billion, is about 2.5 times as large. Crude and refined petroleum account for one third of imports, while precious metals make up an additional 27 per cent. Imports of fruits, nuts and coal are also significant.
Strong recent growth in the Andean region has powered Canada’s regional trade and investment success. Economy-wide growth averaged 5.8 per cent annually in the 2003-07 period for the region, well ahead of global growth, although shy of the emerging market average. The worldwide recession is affecting the region, where the economy is expected to fall back by 0.7 per cent this year, and see little growth in 2010. A solid recovery is forecast beyond the near term, although average growth will not likely reach the heights seen in 2003-07.
Future Andean trade and investment opportunities are manifold. Oil and gas and mining activities are promising, and will gain new lift as the world economy recovers. The free trade agreements signed with Peru and Colombia in 2008, once ratified, set the stage for enhanced bilateral activity. There are also new areas of opportunity.
Significant infrastructure deficits exist in each country, and so far Peru and Bolivia are addressing this with multi-billion dollar programs. These are expected to begin in the near-term, but will extend far beyond the global economic recovery.
Over the years, EDC has been very active in the Andean economies, and have just stepped up our market presence. With the significant regional opportunities in mind, EDC last week opened up a representation in Lima, Peru aimed at facilitating greater trade and investment in the region.
The bottom line? Global recession is affecting the Andean region, but it has a new dynamism that bodes well for future trade and investment – a future that Canada has every reason to share in.