Gulf-South America trade surges as economies grow

Sonja Novak/Alamy via Reuters Connect

• UAE-Argentina trade up 70%
• Emirates’ Bogotá route ‘made history’
• Cepas and agreements increase

When Dubai’s Emirates airline started flying from Dubai to Bogotá in Colombia last summer, it not only provided a vital link between the two cities but also highlighted growing trade and investment links between the Gulf and South America.

UAE-Argentina non-oil trade surged more than 70 percent last year to $537 million, according to the UAE’s national news agency, Wam.

The year before, Saudi trade with Argentina stood at $1.7 billion, and Chile sold Saudi Arabia about $570 million of goods. That same year, UAE non-oil trade with Colombia jumped more than 43 percent to a record $53 million. Saudi-Colombian trade was almost double that.

The new Emirates airline route to Bogotá via Miami made “history,” says Boris Daniel Lancheros, a venture capital investor who focuses on emerging markets, including the Middle East and Latin America.

“There is a new need to diversify globally and not depend on just one country,” he says. “This is what the Middle East is doing pretty well, welcoming people with lower taxation, ease of obtaining visas, creating companies and investing.”

Long hampered by geographical distance and cultural differences, and dominated by Brazil, trade and investment flows between the Gulf and the rest of South America is picking up.

US President Donald Trump’s increasingly protectionist stance may accelerate the trend, Lancheros says.

Government officials from Argentina, Chile and Columbia are working with counterparts in Saudi Arabia, the UAE and Qatar to deepen exchanges through lower tariffs and more supportive investment frameworks.

Amr Alfiky/Reuters

Gustavo Petro, Colombia’s president, paid an official visit to Qatar earlier this month to discuss economic exchanges and oversee the signing of a new strategic agreement between Invest Qatar and ProColombia.

In July last year, the investment promotion agencies of Saudi Arabia and Chile, Saudi EXIM bank and InvestChile, signed a memorandum of understanding to boost non-oil trade.

The UAE also signed its own comprehensive economic partnership agreements (Cepa) with Chile that same month and with Colombia and Costa Rica in April.

“They [Cepas] are intended to cover some 90 percent of trade and they are potentially significant moves,” says Kevin Funk, a political economist at Columbia University who studies relationships between Latin America and the Middle East.

• Coffee fuels growth plans for UAE-Colombia trade
• Emirates in trade talks with South American quartet
• From fertiliser to minerals, GCC-Brazil ties move beyond oil

The UAE is expected this year to sign another such deal with Mercosur, a free-trade area comprising Argentina, Brazil, Paraguay, Uruguay and Bolivia.

Still, says Luis Fernando Lopes – partner and chief economist at alternative investment company Patria – Gulf investors need to remember that Latin America is “not good at everything,” and that there are some “no-fly zones”, like Venezuela and Cuba. 

Otherwise, it has very sophisticated, “globally competitive” industries, like agriculture, financial intermediation and healthcare, he says.“Some sectors are very, very high tech.”

In addition to its Bogotá flight, Emirates flies to Buenos Aires, Rio de Janeiro and Sao Paulo, and to Mexico City via Barcelona. Last month, Qatar Airways announced that this summer it will fly twice weekly from Doha to Bogotá and onward to Caracas, Venezuela.

“Having just that physical connection now is really going to start opening doors and opportunities,” says Hannah Savage, a VC investor with experience in Latin America and the Middle East.