MEDELLIN, Colombia – Industry representatives and at least one politician in Colombia warn the country’s automotive industry is at risk following the signing of a free-trade agreement with South Korea.

The agreement, signed in February and expected to take effect at year’s end, eventually will allow South Korea-made vehicles to enter the South American country free of the current 35% tariff. Colombia’s commerce minister, Sergio Diaz-Granados, notes tariffs will be reduced gradually over 10 years, giving the country’s auto industry time to adjust to the new competition.

Opponents of the deal, including Sen. Jorge Enrique Robledo, counter the only way to protect Colombia’s auto sector is to withdraw from the agreement. He fears domestic makes simply are not competitive against the inexpensive, reliable South Korean exports that have seized market share in Europe since that country signed a free-trade agreement with the European Union.

“If the tariffs are removed, which is the aim of the FTA, imports are going to increase relentlessly and the Colombian automotive industry could disappear,” Robledo tells

The lawmaker’s views are shared by Guillermo Rodriguez, director of Proindustria, a Colombian trade-union coalition including auto workers unions, and Enrique Travecedo, president of the ACOLFA auto-parts makers’ association, which predicts the domestic auto industry will survive only eight to 10 years under the FTA.

Colombia’s auto industry, Latin America’s fourth-largest, produced 131,510 units in 2011. Imports are popular, with 52.3% of the 324,570 vehicles sold in the last three months of 2012 coming from such countries as South Korea, Mexico and India, according to a report by Colombian export-promotion agency Proexport.

According to global trade data, in 2011 South Korean automobile sales in Colombia amounted to $658 million. In 2012, 48,100 South Korean autos were exported to the country, according to Oliverio Garcia, president of Andemos, the Colombian automotive manufacturers association, which also represents some dealers.

Despite concerns within the domestic industry, there may be room in the market for imports because Colombia has many potential new-vehicle owners. Car ownership in the country is low at 78 per 1,000 inhabitants, compared with 147 in Venezuela and 314 in Argentina.

Deliveries of cars, SUVs, pickups, taxis, vans and light-commercial vehicles jumped 37% between 2009 and 2010, and 28% between 2010 and 2011. Only a 1.7% uptick between 2011 and 2012 is predicted, with last year’s sales expected to reach just 330,000 vehicles.

Tulio Zuloaga of the national auto-parts association Asopartes warns Colombia’s three car assemblers – Renault-Sofasa, GM Colmotores and CCA Mazda  – might move their operations to other Latin American countries if they are priced out of the local market by South Korean imports. He predicts a bleak future for the local industry unless government intervenes.

“Without the FTA, (South) Korea (already) is extremely competitive because the vehicles and auto parts are arriving at the same price or cheaper” as Colombia-made autos, he says. “What’s going to happen when they don’t have to pay tariffs for their goods to enter the country?”

Zuloaga has called on the government to help the local industry by reducing taxes and utility bills 50% and not charging it for worker benefits. This, he claims, would level the playing field because it would create “the same conditions that Korea provides to its industry.”

Without government assistance, he says, local production “could drop to zero. This could happen in two or three years.”

This gloomy scenario is being ruled out by Luis Fernando Pelaez, director general of Renault-Sofasa, Colombia’s second-largest auto maker. “Renault will not cease to exist in Colombia,” he says, although he adds the situation is very worrying.

“We are betting that what we lose in the local market, we will make up in the export market. The concern is that the local industry does not have the support to be competitive,” Pelaez tells WardsAuto, citing the high cost of energy and parts, as well as the difficulty and cost of shipping goods across Colombia’s mountainous terrain as obstacles to lowering production costs.

GM Colmotores also appears likely to stay, as it plans to invest $250 million over the next five years in its assembly plant in the capital, Bogota.

Juan Manuel Garcia, automotive consultant for the Bogota-based consulting firm Econometria also is more optimistic: “Maybe there will be a need for the vehicle assemblers to adjust their vehicles a little bit to make them somewhat more competitive, but I don’t believe production would have to decrease.”