12:01 AM
The 70 years of history and 600 jobs that the Colmotores factory left behind after the closure announced last week focused attention on the crisis that the national industry is going through. Although General Motors based the decision on a business transformation, the compelling reason is that the plant was operating at 9% of its installed capacity, selling just 11,000 units a year, few compared to the more than 40,000 it expected.
The closing bells had been ringing for a long time, but particularly in the last year they became more acute. And no wonder, the Colombian industry adjusts 12 consecutive months of declines in production and sales, the most recent were 2.2% and 2.7%, respectively. Although the strongest blow is for Companies dedicated to the manufacture of vehicles and their parts have also taken away those that produce cocoa, iron and steel, precious metals or textiles. (see infographic).
Among the experts consulted, the “greaves” that are holding the industrial sector in check are political and economic uncertainty, low demand, lack of competitiveness, smuggling, and at a macroeconomic level, high interest rates – despite recent cuts by the Bank. of the Republic.
Uncertainty
Eduardo Visbal, vice president of Foreign Trade at Fenalco, said that in the case of the automotive sector, where production and sales fell 32.5% and 41%, respectively, in the last year, the main explanation is that people do not have trust, is not buying and part of that decision is related to the negative messages that President Gustavo Petro transmits about the private sector.
In the specific case of Colmotores, he stated that the closure is due more to a global reorganization of General Motors. “The cars have a very low marketing margin and it is very important for them to lower costs and in that sense they will import from countries where they have greater capacity.”
For now, Visbal considered, the most important thing is that President Petro “stops attacking businessmen.” He also believed it was key to lower tariffs for the entry of hybrid vehicles into the country, which are finding an important market. Last year alone, 27,813 were sold, a growth of 13.3%.
The economic researcher Luis Fernando Ramírez analyzed that andThe problem lies in competitiveness, because while in the world there is talk of plants producing 200,000 vehicles per year and in mature markets such as Brazil, Mexico or the United States the figure may be even higher, in all of Colombia the figures are not even reached. 100,000.
“It is not very attractive to buy a vehicle in Colombia due to the restrictions and costs that exist, so demand shifts towards motorcycles. Furthermore, it must be said that export volumes are low. The future is not very promising for this industry in the country, and today we do not have the capacity to produce hybrid or electric vehicles, which is what is already being talked about in the world,” Ramírez continued.
The other pains
But as mentioned, not only the automotive industry suffers the consequences of an industry in the doldrums. Ramírez remembers that Due to the decrease in per capita spending on clothing and, especially due to smuggling, the textile and clothing sector has been falling. In the last year until February, production fell 8.7% and sales 7.8%.
According to statements to La República by Guillermo Criado, president of the Colombian Chamber of Clothing and Related Products, in recent decades this union has lost more than 600,000 jobs due to imports, and there is a special impact due to the dumpinga move in which products from China, Ethiopia or Egypt are introduced into the country at a price lower than their normal value, which affects local producers, who already struggle against high taxes and energy prices.
According to Dian, on average, 20% of the value of textiles that entered the country between 2018 and 2022 were smuggled. In 2022 alone, textiles worth US$2,788 million entered, of which US$672 million had irregularities in the process. Furthermore, last year textiles and clothing were the main products subject to precautionary measures by the entity in customs controls.
Despite the recent reduction in sales, for February the Inexmoda Observatory found that households made spending on fashion somewhat more flexible, taking advantage of trade promotions for returning to school and offices. Thus, the sector moved $2.75 billion in that period.
Export, the alternative
Daniel Mitchell, president of Acoplásticas, a union in the plastics sector, indicated that for that segment the figures were constantly recovering after the pandemic and it was expected that 2024 would be the year to affirm that path, but that has not been the case. “There has been an impact on orders, the domestic market has felt the slowdown. “Plastic is an intermediate good and supplier to many industries and sectors such as packaging and containers for food products, hygiene products, construction, pipes, tiles or auto parts.”
From Acoplastics A strong impact was described due to lower demand in construction and in the packaging and packaging segment, which is attributed to the drop in new housing projects and the decrease in consumption by Colombian households. Of course, he admits that employment has been maintained.
Given the panorama, the alternative for plastic manufacturers has been to export. “I note that sales abroad have increased to compensate for low domestic demand (…) We export plastic materials and plastic products,” said Mitchell, who appreciated that companies are looking with interest at mature markets such as Mexico and Brazil, and some Central Americans.
A vision that researcher Luis Fernando Ramírez supports in that Colombian entrepreneurs have found interesting opportunities, especially in Central America. “Some make deposits in Panama or Costa Rica, others are working with interesting ventures in Mexico; in the latter country nearshoring “It’s working very well.”
Petro proposes more credit
In this regard, President Gustavo Petro said this week that one of the reactivation strategies would be have more credit from private banks. “The economic measures, and I say it once and for all, are going to consist of bills that generate forced investment in the Colombian private financial system, aimed at credits to the small medium and large agriculture and tourism industries.”
For Mitchell, from Acoplásticas, although we must first look at Petro’s proposal with a magnifying glass, ultimately these “are intervention formulas that have already been tried decades ago and that in general do not work.”
Another who did not like the proposal was José Manuel Restrepo, rector of the EIA University, and former Minister of Finance. “Returning to this idea of “forced investments” that the country developed strongly in the 60s, is a way of imposing new taxes on the productive and financial sector and thereby hindering or limiting access to credit for the micro, small, medium and large. businessman”.
For the National Association of Businessmen of Colombia, Andi, The great challenge this year is “to have a favorable environment for investment where it is possible to manage unforeseen events and volatility in the markets but where we manage to reduce legal uncertainty and achieve clear messages from the government on public policy issues.”
The union considers that the Executive must begin to develop a growth strategy that includes investment projects, reindustrialization policy and public policy initiatives that give confidence to national and foreign investors. In their accounts, economic growth in 2024 will be between 1% and 1.5%.
For now, the industry is passing through the bitter pill, and there is little expectation among entrepreneurs. In March, Fedesarrollo’s Industrial Confidence Index (ICI) stood at -2.63, the lowest level so far in 2024. According to business leaders, the current volume of orders has fallen 26% compared to the same month of last year.
