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IDB study examines potential for Brazil-Colombia integration

Beyond a boom that has pushed bilateral trade between Colombia and Brazil to $3 billion a year, both countries could tap enormous potential for growth if they addressed bottlenecks such as logistical costs and tariff barriers, according to a new study released by the Inter-American Development Bank’s Integration Department.

The study, "Toppling the Wall: Trade and Integration between Brazil and Colombia," will be presented at the First Colombia-Brazil Investment Forum on August 4 in Bogota. The event seeks to strengthen ties between the governments, the private sectors, and public opinion in both countries. Colombian President Juan Manuel Santos, former Brazilian president Luiz Inacio Lula Da Silva, and IDB President Luis Alberto Moreno will open the meeting, which will bring together 500 business leaders and senior officials from both countries.

The combined population of Brazil and Colombia stands at nearly 230 million—more than 60 percent of South America’s population or theequivalent to the sum of the populations of Spain, France, Germany and Italy. Brazil and Colombia have Atlantic coastlines and their economies are based on abundant natural resources. At the same time, they are separated by language and the Amazon basin, where a 1,950-km border presents a challenge to the promotion of integration and trade.

Despite its recent surge, trade between Brazil and Colombia in 2010 represented only 0.7 percent of their total trade, according to the IDB study. Lack of physical infrastructure linking both countries is a major factor in preventing greater integration. Brazil and Colombia usually resort to maritime transport to ship goods to each other.In contrast, Brazil and Argentina rely far more on land transport.

Colombian firms exporting to Brazil pay shipping costs equivalent to those required for sending goods to Canada, according to the study. Freight costs from Brazil to Colombia are also very high.

Trade is not the only key for bringing Brazil and Colombia closer together. The IDB is also aware of the need for transportation, infrastructure, energy and research projects and private sector participation to seize the moment. "An analysis of trade integration between Brazil and Colombia in recent decades suggests that the time is ripe for transforming official enthusiasm into concrete measures to deepen the relationship," the study says.