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Support to agricultureAgricultural producer support in Colombia expressed as a share of gross farm receipts averaged 13.1% during 2018-20, down from 24% in the early 2000s. Around 90% of transfers to producers are still in the form of market price support (MPS), which continues to dominate the producer support estimate (PSE). MPS for a range of agricultural products is driven by border measures. In consequence, support to individual commodities (SCT) is particularly high for rice, maize, milk and pig meat. On average, prices received by farmers were 14% higher in 2018-20 than those observed in world markets. Budgetary transfers to farmers accounted for around 10% of the PSE in 2018-20, mostly based on variable input use such as implicit credit, and subsidies for purchases of machinery and equipment, fertiliser and seeds. Budgetary allocations to general services to the sector as a whole (GSSE) were relatively small, accounting for only 2.3% of agricultural value-added on average. Support for general services focuses on agricultural research and knowledge transfer; infrastructure, particularly in irrigation; and farm restructuring (e.g. land formalisation, rights and access). Overall, total support to the sector (TSE) corresponded to 1.2% of Colombia’s GDP, pointing to the comparatively high cost of agricultural policies to the economy. Recent policy changesIn 2020, the Ministry of Agriculture launched a policy framework called “Together for the Countryside” (Juntos por el campo). It establishes policy programmes such as subsidies to compensate for high domestic transportation costs, subsidies for machinery and equipment, and subsidies for the purchase of variable agro-inputs (e.g. seeds, fertilisers, agricultural machinery, etc.). Underlying this framework, the contract farming programme created in 2019 seeks to connect 300 000 producers to markets by linking farmers directly to commercial partners. In 2020, around 120 000 smallholders benefited from the programme by selling their product directly to 757 buyers. Total public expenditures fell from 2019 to 2020 and several programmes were replaced by eleven programmes launched in 2020 focused on production management, improving the sanitary quality of agricultural products, initiatives for adaptation to climate change, institutional modernisation, and innovation and development. To offset the effects of COVID-19, Colombia implemented measures such as the creation of special credit lines, of which 82% were used by small and medium-scale farmers; the distribution of food by creating a transport centre in Bogota for the commercialisation of agriculture production; and the provision of basic food products to poor and vulnerable households. Assessment and recommendations
Description of policy developmentsOverview of policy trendsThe agricultural sector has played an important role in Colombia’s economic growth. Until the beginning of the 1990s, agriculture was the main productive sector of Colombia. By the 1960s, Colombia had entered a period of fast expansion in commercial agriculture. Growth, especially in the 1960s and 1970s, was partly a response to incentives to mechanise and intensify the use of modern inputs, and partly a consequence of the sector’s protection from imports. The coffee booms of the 1970s and the 1980s coincided with strong growth in agricultural and total GDP. During this time, import substitution policies were used, including tariffs, quantitative restrictions, state marketing enterprise, subsided credit and minimum prices (Anderson and Valdés, 2008[1]). At the beginning of the 1990s, Colombia entered a decade of trade opening. The Colombian government eliminated its monopoly in agricultural marketing and encouraged private banks to lend to farmers and agricultural exporters. To diversify the markets for Colombian agro-food products, the government negotiated a large number of trade agreements including with Mercosur, the United States, Central America, Chile, Canada, and the European Union (OECD, 2015[2]). This economy-wide programme of trade liberalisation accompanied deregulation of foreign exchange rates and labour markets. Quantitative trade restrictions were abolished, and import tariffs reduced and replaced by ad valorem tariffs. The role of IDEMA (Instituto de Mercadeo Agropecuario), the agricultural marketing institute that had a monopoly over grain imports, was reduced and limited to poor, isolated areas. Minimum guaranteed prices were established for some staple commodities, with international prices used as a benchmark (Anderson and Valdés, 2008[1]). However, this rapid liberalisation did not allow for necessary adjustments, putting the sector in crisis. Pressured by famers, the government implemented policies to protect the sector and stabilised producer incomes in the face of price fluctuations in world markets. To stabilise producer prices, the government introduced a price band system for six agricultural commodities, and their substitutes and derivatives, and ended up covering 112 products. This eventually evolved into the Andean Price Band System (SAFP). Despite the stated purpose of this policy, the way price bands were constructed to fix the floor and ceiling prices served as a protective device. Price stabilisation funds (FEP) were also expanded (OECD, 2015[2]). After 56 years of conflict between the government, paramilitary groups and guerrilla groups, a peace agreement was signed in 2016 by the government and the Revolutionary Armed Forces of Colombia (FARC). The negotiations resulted in an agreement with a common vision for rural development. It sets out a long-term vision for the sector focusing on the use of land and water resources, increased productivity and competitiveness, improved infrastructure and other public goods for the agricultural sector, and a redefined institutional architecture to design and implement policy (OECD, 2015[2]). Colombia’s support to agricultural producers relative to gross farm receipts changed little during 1992-2013, but trended downwards before stabilising again in the last few years. Support is predominantly provided through market price support. Since 2007, there was a clear trend towards increasing budgetary support to the sector, particularly in 2013 when outlays more than doubled. This trend reversed since 2016, and budgetary allocations have fallen considerably in both absolute and relative terms (Figure 9.4).
Figure 9.4. Colombia: Level and PSE composition by support categories, 1992 to 2020 As a percentage of gross farm receipts Note: A/An/R/I:Area planted/Animal numbers/Receipts/Income. Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments. Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en. Main policy instrumentsAgricultural policy aims for competitive, equitable and sustainable development of agricultural, forestry, fisheries and rural development that contributes to improving quality of life for the rural population. Implementation of this objective falls under the Ministry of Agriculture and Rural Development and its affiliated agencies. Colombia has the Andean Price Band System, which aims to stabilise import prices for 13 commodities including rice, barley, yellow maize, white maize, soya beans, wheat, unrefined soya bean oil, unrefined palm oil, unrefined sugar, refined sugar, milk, chicken cuts and pig meat, as well as for their respective related first-stage processed products. Several programmes provide input support. Main measures include preferential interest rates for agricultural credit, debt rescheduling, sporadic write-offs and insurance programmes. Subsidies are also provided for the purchase of seeds and fertilisers, and for investment related to drainage and on-farm irrigation infrastructure, among others. Colombia has gradually directed more public expenditures to general services for the sector. This includes investments in agricultural research and extension services, such as those for financing the agricultural innovation institution (former CORPOICA and now AGROSAVIA). The commodity Price Stabilisation Funds (FEP), financed and administered by producer associations,1 cover seven commodities, including cotton, cocoa, palm oil, sugar, beef, milk and (since 2019) coffee. FEPs make payments to producers when the selling price of a product falls below a minimum. When the sales price of a product is higher than an established maximum, producers contribute to the FEPs. The ceiling and floor prices are based on international prices for each product, while transfers and compensations take into account a reference indicator at which the products reach the market. Domestic policy developments in 2020-21In 2020, a new policy framework strategy was launched by the Ministry of Agriculture called “Together for the Countryside” (“Juntos por el campo”). The policy has six pillars: 1) the organisation of the agricultural production for ten priority products: cocoa, avocado, potato, dairy, forestry, rice, corn, onion, sugarcane, fishing, and aquaculture, and five strategic crops such as flowers, palm, coffee, bananas, and sugar. Within this pillar, there are two components: the phytosanitary protection and planning according to the suitability of the soil. 2) Agricultural extension that aims at 550 000 producers. 3) Extending credit and better credit conditions (i.e. more preferential rates) to farmers. 4) Financing rural public goods such as infrastructure, transformation plants, storage and cold chains, and irrigation districts. 5) Technology and innovation. 6) Support for productivity through subsidies for the acquisition of agricultural inputs. In 2020, several programmes were created such as subsidies for domestic transportation costs that benefited 35 382 farmers, subsidies for machinery and equipment that reached 15 000 producers, subsidies for the purchase of variable agro-inputs (e.g. seeds, fertilisers, etc.) that benefited 34 779 producers, Pacific Opportunities (a programme for rural women's associations that carry out agricultural productive projects in the Pacific region), which registered 349 smallholders organisations, commercialisation subsidies for potatoes, rice and maize. The framework strategy has as transversal axis, the contract farming programme created in 2019 and seeks to connect 300 000 producers to markets by linking farmers to commercial partners. In 2020, around 120 000 smallholders benefited from the programme, by selling their products directly to 757 buyers. The value chains with the greatest participation in this programme were: fruits and vegetables (28%), coffee (19%), fishing (15%), cocoa (13%), and milk and milk products (8%). The contract farming has the objectives of: 1) reduce uncertainty and risks in agricultural marketing by the advance selling of products to industry and final markets or consumers; 2) generate a stable supply of raw materials and agricultural products, with the characteristics and conditions required by industry and final markets or consumers; 3) promote more efficient, cost-effective agricultural production processes and products with higher quality and safety for the consumer; 4) encourage the formalisation of trade relations between agricultural buyers and sellers, by reducing the volatility of agricultural prices; and 5) contribute to the better use of land (zoning) for agricultural production, and thus to greater sectoral competitiveness. Lastly, total public expenditures were reduced from 2019 to 2020 and several programmes were replaced by eleven new programmes launched in 2020 focused on production management, strengthening sanitary status, climate initiatives, institutional capacity, and innovation and development. Domestic policy responses to the COVID-19 pandemicIn 2020, special credit lines of more than COP 1.5 billion (USD 406 million) were granted to farmers to offset the effects of COVID-19, of which 82% were used by small and medium-scale farmers. To assure the distribution of food, decree 482 of 2020 was adopted that facilitated transport logistics by creating a transport centre in Bogota for the commercialisation of agriculture production. As a response to COVID-19, the decree 507 was adopted in 2020, which main purpose was to help most vulnerable households by providing basic food products, medicines and medical devices. Trade policy developments in 2020-21Some border measures were removed to mitigate the effects of COVID-19, and the decree 523 of 2020 was adopted that applied 0% import tariff of commodities like yellow maize, sorghum, soybeans and soybean cake during the months of April, May and June 2020. In August 2020, the Free Trade Agreement (FTA) with Israel came into force, which grants duty free quotas to both countries. This is the first FTA that Colombia has signed with a Middle Eastern country. In 2020, Colombia had sanitary and phyto sanitary access to 18 new products in 10 markets such as pineapples in Uruguay, pork meat in Ghana, live bovine in Brazil, coffee beans in Ecuador, and papayas in Peru. In 2019, Colombia concluded the free trade agreement negotiations with the United Kingdom that entered into force in January 2021. Negotiations continue with Japan, Turkey, Singapore, Canada, New Zealand and Australia, in order to deepen the current trade agreements with those countries. Contextual informationColombia has a surface of 1.1 million km2; it is the only South American country that borders both the Atlantic and Pacific Oceans. Colombia has abundant agricultural land and fresh water, is very biodiverse and is rich in natural minerals and fossil fuels. Agriculture continues to be an important sector for the economy – accounting for more than 16.6% of employment and 6.7% of GDP in 2019. Colombia has a dualistic distribution of land ownership where traditional subsistence smallholders co-exist with large-scale commercial farms. Even when the relative weight of agro-food exports in total exports have declined over the years, the sector continues to make a significant contribution to the country’s exports, with agro-food exports accounting for 18% of all exports in 2019 (Table 9.3). Colombia saw its real GDP growth declined due to the global pandemic, while its unemployment rate experienced a small increased and the inflation rate remained about the same as the previous year. The country has been a net exporter of agricultural and food products with a net surplus of almost USD 650 million in 2019. Colombia’s agro-food exports are almost equally split between those destined for final consumption (54%) and those that are sold as intermediate inputs (46%) for use in manufacturing sectors in foreign markets. In contrast, the majority of agro-food imports (64%) are in the form of intermediates for further processing in the country.
Figure 9.5. Colombia: Main economic indicators, 2000 to 2020 Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections. Figure 9.6. Colombia: Agro-food trade Note: Numbers may not add up to 100 due to rounding. Source: UN Comtrade Database. Low productivity undermines the sector’s competitiveness, largely driven by infrastructure deficiencies, unequal access to land and land use conflicts. The growth rate of the Total Factor Productivity (TFP) was -0.3% over the period 2007-16, far below the world average. Agriculture is the main water user with a share of 59.6% total water use, above the OECD average. Furthermore, in 2016 agriculture contributed with 28.7% of greenhouse gas (GHG) emissions. In contrast, nutrient balances are comparatively low and have slightly fallen since the early 2000s. Figure 9.7. Colombia: Composition of agricultural output growth, 2007-16 Note: Primary factors comprise labour, land, livestock and machinery. Source: USDA Economic Research Service Agricultural Productivity database.
What is the main agricultural crop of Colombia?The primary agricultural products of Colombia are coffee (the country is the fourth-largest producer of coffee in the world), cut flowers, bananas, rice, tobacco, corn, sugarcane, cocoa beans, oilseed, vegetables, fique, panela, forest products; and shrimp.
What are the challenges in crop production?However, agricultural sector has been beset with persistent challenges resulting in low farm incomes, low rural employment, lack of food security, and meager agricultural competitiveness.
What challenges do farmers face in developing countries?These three challenges – feeding a growing population, providing a livelihood for farmers, and protecting the environment – must be tackled together if we are to make sustainable progress in any of them.
Is agriculture possible in Colombia?Colombia offers great farming opportunities thanks to its soil, climate and geographical location. But unfortunately, we are not harnessing its full potential, and the nation is yet to reach agricultural export levels of other countries in the region.
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