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WHEN A ROSE ISN’T JUST A ROSE: HOW TRADE POLICY WAS USED TO FIGHT DRUGS FROM COLOMBIA

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WHEN A ROSE ISN’T JUST A ROSE: HOW TRADE POLICY WAS USED TO FIGHT DRUGS FROM COLOMBIA

A Grand Gesture

As evidence that Valentine’s Day is here, roses are everywhere – grocery and drug stores, gas stations, and sidewalk vendors offering a bunch for the last-minute Romeo. Until the late 1980s, most roses sold in the United States came from California. A dozen roses would have set you back around $150, which is why the tradition was a grand gesture and a symbol of the seriousness of your relationship. Not really so much today – a dozen roses can be purchased for less than $20.

Why are roses so affordable? The explanation is years of U.S. Government trade, development, and drug eradication policies designed to move South American growers away from cultivating the coca plant used to make cocaine, by substituting commercially profitable production of cut flowers.

Flower Power

Americans will give each other 200 million roses over the Valentine season. The majority were grown in Colombia. Over the course of a year, Colombia exports around 4 billion roses to the United States and supplies 60 percent of U.S. imports of fresh cut flowers overall. Production and shipping are so efficient and cost-effective that roses from Colombia can reach the U.S. East Coast ahead of a similar shipment from California.

The competition from South American suppliers, particularly Colombia, has caused California production to plummet by 95 percent since 1991. The year 1991 is significant. It was the year Congress passed the Andean Trade Preference Act (ATPA, later expanded and renamed the Andean Trade Promotion and Drug Eradication Act).

ATPA represented a tool in the U.S. policy toolkit to disrupt the drug trade and cartels in Bolivia, Colombia, Ecuador and Peru, and slow the flow of drugs into the United States. Reducing or eliminating tariffs on imports from the region was intended to incentivize farmers to replace illicit coca production with legitimate (and safer) alternatives.

Thorny Issues

The reduction in tariffs gave Colombian growers a boost, but the seeds to grow the Latin American rose industry were really planted back in the 1960s under President Kennedy through economic development programs implemented by the U.S. Agency for International Development (USAID) to combat the spread of Communism in Latin America. Over decades, U.S. funding supported the infrastructure critical to developing an industry that could offer employment, education and empowerment to hundreds of thousands – predominantly female – workers.

The program’s successes came at the expense of U.S. growers. The U.S. florist industry petitioned for a series of anti-dumping investigations that resulted in negligible penalties on importers, and little tangible relief for U.S. industry. As imports grew, the number of U.S. rose farms dwindled from several hundred to fewer than 20 large-scale rose producers today.

Not Everything is Coming Up Roses

The savanna near Bogotá, Colombia’s capital city, is ideal for flower cultivation. It sits 8,700 feet above sea level about 320 miles north of the equator and possess clay-rich soil. Since the 2016 peace accords between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC) rebels, many of the coca farms in this area have been replaced with flower production.

But Colombia’s blessings are also a curse. FARC offshoots and other guerrilla groups have been able to move coca production from central highlands to the country’s coastal deltas and frontier areas where it is thriving.

Aerial fumigation to wipe out coca plots was discontinued due to concerns about the effects on human health and damage to local soil and water systems. As well, crop substitution programs have lapsed, leaving a lack of economic alternatives for poor communities where cocaine traffickers have moved in ( though the government has announced plans to replace around 50,000 hectares of illegal crops with the growing of cacao and fruit trees).

As a result, coca production is on the rise. With somewhere between 150,000 and 180,000 hectares of coca under cultivation, according to United Nations and U.S. estimates, Colombia produced its largest crop of coca in 2016 in nearly two decades.

A Rose by Any Other Name

Trade preference programs played some role in helping to provide a safer livelihood for hundreds of thousands of South Americans while making roses accessible to most everyone and for all occasions. Walmart buys so many roses that its purchases are actively monitored by the industry as an economic indicator.

Back in California, the remaining growers still produce around 30 million roses each year. Rather than cultivate mass-produced roses (the red, long stemmed, no scent, durable variety), these growers are working with universities and research centers to create new and specialty cut rose varieties to serve niche segments of the markets such as weddings and other high-end celebrations.

More reading: Archived reports by the Office of the U.S. Trade Representative on the operation and impact of the Andean Trade Preferences Act can be accessed here.

Sarah Smiley

Sarah Smiley is a strategic communications and policy expert with over 20 years in international trade and government affairs, working in the U.S. Government, private sector and international organizations.

This article originally appeared on TradeVistas.org. Republished with permission.

Colombia: South America’s Under the Radar Emerging Global Market?

In June 2018, Colombian voters made Ivan Duque, an ambitious populist conservative, their next president, garnering 54 percent of the vote. The country’s future—and its attractiveness for global business investment—will be impacted by Mr. Duque’s administration as the country approaches a critical opportunity to grow as a South American and global economic leader.

With the majority victory, Mr. Duque is charting a pro-business and pro-trade path. On the heels of Mr. Duque’s predecessor’s peace agreement with FARC and now with Mr. Duque’s business friendly platform, Colombia enjoys an optimistic economic outlook and is drawing attention globally for high potential business investment in the country.

At the inauguration, Mr. Duque promised to “govern Columbia with a spirit of construction, never destruction.”

As South America’s second-most populous nation, third-largest economy and first member of the OECD, Colombia holds potential as a country ripe with opportunity for global business investment and expansion, if Mr. Duque can overcome a host of domestic challenges.

The result to that “if” is paramount for Colombia and determining future business expansion into the country.

Colombia’s Path Forward—Pro-Business Policies, Technology, Industrialization

Mr. Duque promised to transform the country’s economic model and tackle social and economic inequality. The president’s business-friendly policies include tax cuts, reducing bureaucratic red tape, support for the coal and oil industries and promises to bolster the $324 billion economy via science and technology investment.

Specific fiscal reforms include a reduction of the tax burden for businesses and the simplification of administrative processes, which are intended to provoke private business growth and global businesses to invest and expand to the country.

A former technocrat, Mr. Duque views technology and science as key elements in economic growth. Specifically, an income tax exemption has been implemented for five years for emerging science and technological companies.

A third component is attracting foreign investment to industrialize Colombia’s resource-rich geography—from agriculture to oil.

Altogether, central bank board member Carolina Soto predicted Colombia will reach its growth potential of 3.5 percent next year.

“I think we’ll grow a minimum of 3.5 percent, if not more, pushed by mining, energy and construction,” Soto said to Reuters.

Five Months After Inauguration: Challenges Surface

As politicians quickly realize—winning is easy, but governing is harder.

Mr. Duque has faced formidable obstacles: lack of political support for his economic reforms, reemerging domestic guerrilla forces, welcoming massive influx of immigrants fleeing Venezuela, continued drug trafficking and declining public opinion in the polls.

Tax reform has met stiff resistance in Congress as the president’s conservative Democratic Center (DC) party holds only one-fifth of the seats and must rally other political parties for support.

Mr. Duque and his DC party was forced to dilute its ambitious tax plan that would cut value added tax from 19 to 17 percent. According to the Financial Times, this plan was welcomed by economists to reduce the fiscal deficit and raise extra revenue, as much as 1.1 percent of gross domestic product.

Further complicating economic reform efforts is the fluctuation in oil prices, as Colombia is one of the world’s key oil exporters. Approximately 45% of Colombia’s exports are oil.

Future Outlook

Despite challenges, less than a half year into his presidency, Mr. Duque has time to realize the optimism espoused for his administration’s victory.

Eliminating and containing Colombia’s aforementioned challenges will be key in realizing the country’s high potential for growth.

Already in 2018, TMF Group, a global business expansion advisory firm, has seen increased business investment and interest in Colombia.

If Mr. Duque can actualize his administration’s economic, social and political visions, it could mark a new renaissance for Colombia.

It won’t be easy, but given Colombia’s membership in the OECD and NATO, in addition to successfully implementing pro-growth economic reforms there is still reason for optimism and significant business investment and global expansion opportunity despite these early hurdles.

As he said in his inauguration speech, Mr. Duque needs to start soon in fostering a spirit of construction over destruction. His success will shape Colombia, South America and the world’s businesses into the future, and he best start sooner than later.

 

About the author: Daniela is a Public Certified Accountant from the Universidad de la República, Argentina. She also holds a Master’s in Business Administration (MBA), from Universidad Antonio de Nebrija y EALDE Business School, and has more than 30 years of experience.