BOLIVIA

  142.  British trading interests with Bolivia are small (main products: scientific equipment; misc manufactured goods; industrial machinery; power generation machinery; chemicals and beverages). Bolivian exports to the UK are higher with the main products exported being furnishings; fruit and vegetables. (NB, some official statistics for Bolivian exports suggest much greater figures, largely because they are distorted by the fact that a large number of minerals exported by Bolivia are traded via the London Metals Exchange.)

  143.  Inward investment is limited almost exclusively to the hydrocarbons sector with BG the biggest player, followed at some distance by BP and Shell. Their interests, and those of possible future investors, are arguably much more important than the trade dimension. After the traumas of the renationalisation of the hydrocarbons sector this year, UK investors in the energy sector are united in their demand for real and permanent legal security and guaranteed contractual stability over the sort of time-scale necessary for their investments (20-30 years). The only other major UK investor in Bolivia is Unilever, which is manufacturing shampoo and detergents and has a large share of the domestic market (mostly from acquisitions, a policy which they are looking to continue).

Trade barriers

  144.  The main problem that British companies face is the legal security of their investments. The "nationalisation" of the hydrocarbon companies, allied to calls by the President for the nationalisation of some of the mining interests have added to the sense of uncertainty amongst foreign investors. There is also the potential difficulty that the Bolivians insist any disputes arising from such contracts or nationalisations should be resolved in Bolivian courts, not international ones (despite the existence of a bilateral IPPA with the UK and with other partners).

  145.  The Morales government is very strong on the policy that the Bolivian State should control the natural resources of the country, rather than foreign companies—this has also fed into the idea that electricity and water should not be allowed to be controlled by foreign investors, which has led recently to the French company Suez giving up their contract to run the La Paz water company Aguas de Illimani.

CHILE

  146.  Having implemented very successful free trade agreements—most importantly with the EU and USA—Chile has, up until now, paid mere "lip service" to Mercosur. However, since October 2006 the trading bloc will benefit from an immediate 40% cut in Chile/Mercosur trade tariffs, plus the agreement aims to eliminate almost all intra-bloc trade tariffs within the next eight years. Mercosur members will also gain important trade access to the Pacific rim through Chilean ports.

  147.  The UK is considered an important trading and investment partner with Chile.   Whilst the UK is fourth largest foreign investor in Chile, UK exports are not as successful as they could be. Whilst UK goods are expensive, value added products and services can be sold successfully if companies are prepared to build up relationships over the medium-term and find the right local partner—eg BG Group and ENAP (US$400 million investment). General knowledge and perceptions of Chile are weak in the UK—the country is perceived similarly to other South American markets and it is difficult to convince business interlocutors of the benefits of getting set up in this stable (political and economic) market and "work" the rest of the region from a secure, modern Chilean base.

 COLOMBIA

  148.  One problem Colombia faces is their perceived bad image abroad. Media tends to concentrate on news on guerrilla, narco-traffickers and violence, leaving aside any good stories. Currently, security has improved to the extent that it is a manageable risk and travelling around the country is less problematic. This is evident from an increase of 12.3% during 2005-06 of foreign personal and business travellers to Colombia. Similarly, companies that are established in the market operate profitably.

  149.  Although a good number of business people speak English, it is always recommended to have commercial information in Spanish and a basic command of the language when planning to do business in Colombia. British expertise is highly regarded in the Colombian market. There are many opportunities for British companies in consultancy, advisory and knowledge transfer in many sectors.

  150.  Most goods may be freely imported without the approval of an official foreign trade institution, except as required by customs regulations. However trade barriers are present in the form of sanitary permits/licenses for live animals, genetic material, food, medicines, and cosmetics. Sanitary protocols are lengthy and a complex processes that require a significant amount of lobbying capacity and dedication.

  151.  A difficulty for investors involves the instability of the legal and tax frameworks. The frequent changes make medium to long term planning difficult for companies looking to do business with Colombia. A clear example is the high number of tax reforms in the country; in the last 12 years, there have been 10 consecutive tax reforms. Also, for established companies in which the nature of their business involves intellectual property, there is a problem with the high level of piracy, which is very common in books, CDs, textiles, cosmetics and spare parts. While the government has made some progress on intellectual property rights legislation and implementation, mainly as a result of the Free Trade Agreement signed with the USA, there is certainly room for improvement.

ECUADOR

  152.  Ecuador is a founder member of the Andean Community (CAN), which is formed by Bolivia, Colombia, Perú and Ecuador. CAN members are associated members of the South Cone common market MERCOSUR. The Andean countries benefit from the EU's Generalised System of Preferences and regime. With a view to strengthening EU-CAN relations following the Guadalajara and Vienna Summits, the EU is currently preparing for the start of negotiations for a comprehensive EU-CAN Association Agreement.

  153.  The Andean Countries have also benefited from the Andean Trade Promotion and Drug Eradication Act (ATPDEA) with the US. The ATPDEA gives free access to the US for almost all products produced in the Andean region. The US also initiated bilateral Free Trade Agreements (FTA) with each Andean country, but negotiations with Ecuador were terminated by the Americans when Occidental Petroleum were expelled from the country for alleged breach of contract.

  154.  The future of the CAN is uncertain due to several factors affecting relations between its member states and the lack of a unified strategy to discuss commercial issues as a block with other states. APTDEA will expire on 31 December 2006. The implications of losing these preferences for the beneficiary countries—Bolivia, Colombia, Ecuador and Peru—could go well beyond the economic impact on certain sectors of their economies in a region that is fragile economically and vulnerable to the consequences of a renewed pharmaceutical war. As Colombia and Peru are well advanced in the process leading to the ratification of FTA's with the United States, the extension of the ATPDEA is important only as an interim measure to cover the transition period between its expiration and the entry into force of the FTA. For Ecuador and Bolivia however, the extension of the ATPDEA preferences is critical because of the absence of a new trade agreement with the United States; their preferential access to the US market will be seriously curtailed at the end of 2006.

  155.  EU-CAN talks might also be jeopardised due to the fact that Ecuador launched an attack on the European Union's banana import regime at the World Trade Organisation in November, complaining it was unfair to Latin American producers.

  156.  In April 2006 Venezuela left the CAN and joined MERCOSUR. The newly elected President of Ecuador Rafael Correa who takes office in January 2007 might follow in the footsteps of Venezuelan President Hugo Chavez and downgrade Ecuador's membership in the CAN or, instead, join MERCOSUR.

  157.  Currently the most important trade barriers affecting Ecuador's trade with the world are corruption at customs, intellectual property and sanitary and phytosanitary regulations. There are however no specific trade barriers that affect trade with the UK.

PERU

  158.  There is co-operation with Argentina to produce a regional mining newsletter (Global Miner) to inform UK companies of the opportunities in the market.

  159.  There is little contact between other Mercosur markets unless there are issues affecting them. In the last two years this has in effect only been exchange of information on oil and gas matters.