10. Colombia
Agricultural producer support in Colombia averaged 6.1% of gross farm receipts during 2020-22, well below the OECD average, and 25% lower than in the early 2000s. Producer support experienced a sharp decrease over the past two years due to the temporary suspension of the Andean Price Band System (SAFP) for some agricultural commodities and the reduction on import tariffs of key agricultural products.
Despite this reduction, Market Price Support (MPS) continues to be the dominant type of support, accounting for 83.5% of the Producer Support Estimate (PSE) in 2020-22. MPS for a range of agricultural products is driven by border measures, such as tariffs, and represents the only form of Single Commodity Transfers (SCT). SCT are particularly high for rice, but still sizable for eggs, maize, sugar, and pig meat. Prices received by farmers were an average 5% higher in 2020-22 than those observed in world markets.
Budgetary transfers to farmers accounted for the remaining 16.5% of PSE in 2020-22. This type of support is mostly based on input use. It includes measures such as preferential interest rates for credit, subsidised agricultural insurance premiums, and subsidies for the acquisition of inputs like fertiliser and seeds. Subsidies are also provided for on-farm services and for on-farm fixed capital formation such as machinery and equipment.
Budgetary allocations to general services for the sector (General Service Support Estimate, GSSE) were relatively small. Their average share in the value of agricultural production was 1.1%, a decrease from 1.5% in 2000-02 and less than one-third of the OECD average. Support for general services focuses on agricultural research and knowledge transfer; infrastructure, particularly for irrigation; and farm restructuring (e.g. land formalisation, rights, and access). Overall, total support to the sector (Total Support Estimate, TSE) corresponded to 0.6% of GDP.
The administration that took office in August 2022 introduced an agricultural development plan for 2022-26, called “Towards Agriculture for Life” (“Hacia Una Agricultura Para La Vida”). The plan focuses on five strategies: (1) comprehensive land reform; (2) addressing inequalities facing indigenous, black, women, and young people in the sector; (3) environmental protection and sustainability; (4) market inclusion in agricultural value chains; and (5) a territorial approach considering the social, economic, and environmental characteristics of rural areas. Adjustments to policies will be reflected during 2023.
To mitigate domestic price increases caused by the COVID-19 pandemic and exacerbated by the war in Ukraine, Colombia set the tariffs on agricultural inputs at 0%, and prolonged the suspension of the SAFP for some products and the decrease of import tariffs such as the established fixed tariffs for rice (80%), milk powder (98%), white corn (40%), whey (94%), and wheat (0%) until December 2023. The March 2022 reduction to 0% of import tariffs on 163 products that are part of the basic household basket was also extended until December 2023. A new programme within the Fund for Access to Agricultural Inputs (FAIA) approved in 2022 provides a partial refund of producers’ agricultural input expenditures.
Colombia’s efforts in climate-change adaptation concentrate on emergency relief, planning, and strategies. However, these are insufficient for the sector to become more climate resilient. The government must define more specific actions for climate-change adaptation as part of existing policy frameworks and guidelines, with the objective of fostering long-term sector resilience.
Colombia’s Nationally Determined Contribution (NDC) commits to reducing total greenhouse gas (GHG) emissions by 51% with respect to the baseline scenario by 2030, and black-carbon emissions by 40% compared to 2014 levels in 2030, with the long-term objective of carbon neutrality by 2050. Given agriculture’s role as a major contributor to the country’s GHG emissions, it will need to reduce its emissions significantly. Setting specific emission-reduction targets and a mitigation plan for the sector would help progress. Furthermore, the government should promote the adoption of low-emission production systems.
More broadly, the environmental-sustainability performance of the sector, including biodiversity, water use, and deforestation, are challenges to consider more systematically in policy design. This includes the environmental effects of agricultural policy instruments and the provision of public goods and services. Agriculture sustainability is particularly important because Colombia is one of the most biodiverse countries in the world. Additionally, even though efforts of focalisation and territorial targeting have taken place, the government could consider using land-management instruments like zoning to define which products can be grown, depending on the soil, water, and agroclimatic conditions, which is crucial for ongoing efforts at land reform.
Colombia’s agricultural sector faces structural challenges and could increase support to key general services to overcome these challenges. Public investment should focus on strategic areas that improve productivity and competitiveness, and ensure the sector’s sustainable development. They include land-tenure rights, improved hydrological infrastructure for irrigation; transport infrastructure; digital infrastructure, research, development, and innovation capacity; animal and plant health protection and control services; promotion of the sustainable use of natural resources; and national and functional extension, training, and technical assistance systems that foster technology adoption and promote farmer co-operatives.
Under the framework of the Peace Agreement, Colombia made progress in the provision of rural public goods. However, short-term responses to problems faced by agricultural producers (mainly in the form of input subsidies) divert scarce resources from developing an enabling environment to facilitate the sector’s sustainable growth. Further re-orientation of support from input subsidies to general services is needed to foster more inclusive and sustainable agricultural growth.
Efforts in land reform must be accompanied by broader provision of public goods. As more than 50% of land ownership is informal, an inclusive land-access policy framework would promote rural and sectoral development. Implementation of the multi-purpose cadastre policy should accelerate. Upgrading the cadastre system and speeding the registration and allocation of land rights are crucial for the sector. Land rights contribute to long-term growth in the agricultural sector by stimulating private investment, and help promote the development of rural areas.
The government should assess the impact of policy instruments and agricultural-support programmes. Current programmes have broad scope and are implemented through a bundle of policy instruments with unclear combined impact. A review could redefine and re-organise policy instruments based on evidence of the costs and benefits of individual measures and policy packages. Such a revision could consider equity, social and environmental outcomes.
Overview of policy trends
The agricultural sector has played an important role in Colombia’s economic growth. Commercial agriculture began a phase of rapid expansion in the 1960s. Growth, especially in the 1960s and 1970s, was partly a response to policy 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. Until the beginning of the 1990s, agriculture was the largest productive sector of Colombia. Over this period, 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 experimented with more open trade. The government monopoly on agricultural marketing was eliminated and private banks were encouraged to lend to farmers and agricultural exporters. To diversify the markets for Colombian agro-food products, the government negotiated trade agreements with Mercosur, the United States, Central America, Chile, Canada, and the European Union (OECD, 2015[2]).
This economy-wide programme of trade liberalisation was combined with deregulated 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 its operation limited to poor areas with less access to markets. Minimum guaranteed prices were established for some staple commodities, with international prices used as a benchmark (Anderson and Valdés, 2008[1]).
However, this liberalisation was too rapid for farmers to adjust, putting the sector in crisis. Then, towards the end 1990s, and under pressure from farmers, the government implemented policies to protect the sector and stabilise producer incomes in the face of price fluctuations in world markets. A price band system for six agricultural commodities, along with their substitutes and derivatives was introduced, covering 112 products in total. This eventually evolved into the Andean Price Band System (Sistema Andino de Franjas de Precios - SAFP) and incorporated more products. The construction of the price bands, which fixed the floor and ceiling prices, raised the protection of domestic goods against imports.
Moreover, the Price Stabilisation Funds (Fondos de Estabilización de precios, FEPs) originally created for cocoa and cotton, were expanded to also cover palm oil, sugar cane, beef, and milk. The FEPs make payments to producers when the selling price of a product falls below a minimum (floor) price. When the sales price of a product is higher than an established maximum (ceiling) price, producers contribute to the FEPs. While these funds currently do not represent government outlays, the government provided the initial capital for their set-up.
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 peace negotiations resulted in an agreement with a common vision for rural development. It sets out a long-term plan 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 since 2014. Market price support is the predominant category. 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 10.4).
Colombia’s support to agricultural producers relative to gross farm receipts changed little during 1992-2013 but trended downwards since 2014. Support is predominantly provided through market price support; however this support has sharply been reduced in 2021 and 2022 due to reduction of key import tariffs and the suspension of the Andean Price Band System for agricultural products as consequence of COVID-19 and the war. In terms of budget, since 2016 budgetary allocations have fallen considerably in both absolute and relative terms (Figure 10.4).
Main policy instruments
Agricultural policy in Colombia is shaped by both the National Development Plan (PND) and the agricultural plan, where each new administration defines the emphasis. However, two key agricultural policy instruments have been used over the past two decades and focus on import cost and income stabilisation, contributing to market price support. One is the Andean Price Band System (SAFP) stabilises import costs for 13 commodities: rice, barley, yellow maize, white maize, soybeans, wheat, unrefined soybean oil, unrefined palm oil, unrefined sugar, refined sugar, milk, chicken cuts, and pig meat. The system also applies to first stage processed products derived from these commodities. However, over the past two years, due to COVID-19 Colombia has suspended the use the Andean Price Band System for rice, milk, white maize, and wheat.
The other instrument is the Price Stabilisation Funds (FEPs) which are designed for income stabilisation. Seven products use the FEPs, which are financed and administered by producer associations: cotton, cocoa, palm oil, sugar, beef, milk, and coffee. FEPs make payments to producers when the selling price of a product falls below a minimum (floor price). When the sales price of a product is higher than an established maximum (ceiling price), producers contribute to the FEPs. The ceiling and floor prices are established by a Council formed by stakeholders and government, this price use based on selected international prices for each product. FEPs are funded through producer levies and function as price-setting mechanisms that make domestic producer prices higher than international prices. The ceiling and floor prices are established based on selected international prices for each product, while the transfers and compensations take into account a reference price indicator at which the products reach the market.
In addition to these two measures, the country also provides preferential interest rates for agricultural credit, through the Financing Fund for the Agricultural Sector (FINAGRO), a second-tier bank, and provides credit for working capital, marketing, and investment. Agricultural risk management instruments include agricultural insurance, where the government subsidises up to 80% of the cost of insurance premiums; farmers pay the remaining 20% and the VAT.
Many agricultural programmes provide input subsidies. For example, subsidies for farm improvements are provided through the programme Competitive Improvements, these subsidies are given mostly for fixed capital formation such as investments related to drainage and on-farm irrigation infrastructure, among others. The Fund for Agricultural Promotion (Fondo de Fomento Agropecuario-FFA) gives subsidies for the purchase different inputs including variable (e.g. seeds and fertilisers), as well as services and farm equipment and fixed capital formation. Productive Alliances programme also provides all kinds of input subsidies but are only directed to small-scale farmers. Lastly, subsidies for the services of animal and plant control health are given to farmers.
Public expenditures for investments on general services are mostly destined to farm restructuring and agricultural research and extension services, as well as inspection and control. Moreover, efforts under the framework of the Peace Agreement on the provision of rural public goods and services have increased the amount of land with formal tenure, improved irrigation-drainage, and provided technical assistance.
In terms of climate change on Colombia’s NDC aims to reduce GHG emissions by 51% in 2030, as well as to reduce black carbon by 40% compared to 2014 levels. Colombia’s long-term objective is to achieve carbon neutrality by 2050. The country also is a participant in the Global Methane Pledge, which reaffirms its commitments to mitigation measures. Furthermore, the country created a National Appropriate Mitigation Action (NAMA) for coffee 2016, for livestock in 2017 and for panela (raw sugar) in 2018.
Climate change adaptation policies in agriculture
Policy efforts in Colombia aim to simultaneously address adaptation, mitigation, environmental protection, and conservation. Climate Action Law 2169 passed in December 2021 establishes goals to achieve carbon neutrality, climate resilience, and low-carbon development in the country in the short, medium, and long terms within the framework of Colombia’s international commitments on climate issues. In agriculture, the law calls for considering climate change adaptation and mitigation in planning instruments for the agricultural sector (PIGCCS) by 2030, and for implementing adaptation actions under the National Plan for Adaptation to Climate Change.
Colombia’s NDCs commit to actions on adaptation related to agriculture, such as improving technical capacities or production methods related to main crops (e.g. rice, maize, potato, livestock, dairy, sugar cane, cocoa, bananas, and coffee) to adapt to climate change. Improved availability of agroclimatic information is meant to aid farmers’ decision making. These actions rely on international co-operation funds.
The Green Climate Fund was created in November 2022 with the Development Bank of Latin America (CAF). The Fund implements the project “Climate-smart initiatives for climate change adaptation and sustainability in prioritised agricultural production systems” (CSICAP), with the objectives to:
implement digital agriculture systems and climate services to modernise agricultural extension services and provide adaptation and mitigation recommendations that support the reduction of agroclimatic risks and crop loss while stimulating a low-emission sector
develop, validate, and scale technologies such as genetic improvements or crop management to increase resilience and low-carbon agriculture
strengthen the capacity of producers, technicians, and institutions to adopt new technology and business models that take into account environmental, social, and gender considerations.
The Law “Immediate climate crisis on floods” signed in 2022 aims to provide better and more efficient relief assistance during flooding in rural areas. Colombia also introduced GANABOSQUES, a digital platform that monitors GHG emissions from deforestation and forest degradation. This platform measures risk associated with deforestation in specific regions such as natural national parks, and verifies cattle movements in deforested areas and strategic ecosystems.
The Integral Program for the Productive Reconversion of Livestock (PIRPAG) was created in 2022. This programme aims to improve the efficiency and sustainability of livestock production in regions associated with deforestation, based on agricultural zoning that defines appropriate areas for beef and milk cattle ranching. Moreover, the sustainable cattle policy guidelines published in 2022 propose short-, medium-, and long-term actions to ensure the growth and competitiveness of cattle ranching. The cattle guidelines have three areas: (1) sustainability, productivity, and markets; (2) governance and institutions; and (3) finance and incentives. The guidelines encourage farmers to adopt sustainable practices to shift extensive cattle production systems to semi-intensive and sustainable models that are economically viable and do not involve deforestation.
The Comprehensive Agricultural Sector Climate Change Management Plan (PIGCCS) passed in 2021 includes adaptation activities organised along three axes: (1) strengthening the country's capacity to manage agro-climatic information; (2) adapting the productive systems of the agricultural, fishing, and forestry sectors to climate change; and (3) strengthening the institutions of the agricultural sector in their actions related to adaptation to climate change.
Lastly, guidelines were developed and passed in 2021 for low-impact agricultural activities and the conservation of natural resources in paramos land. The guidelines have conservation measures such as protecting underground and superficial water sources, promoting the use of green and living fences, and protecting wild plant species located on paramos, as well as sustainable measures such as the use of bio-inputs or bio-fertilisers, and no-till or minimum-till practices.
Domestic policy developments in 2022-23
The new administration, which took office in August 2022, introduced a new agricultural development plan for 2022-26 called Towards Agriculture for Life (Hacia Una Agricultura Para La Vida). This plan focuses on five key strategies:
2. addressing inequalities facing indigenous, black, women, and young people in the sector
5. territorial approach considering the social, economic, and environmental characteristics of rural areas
Adjustments to current policies, as well as new policies and their implementation, will be reflected during 2023. However, as part of the new development plan, the agrarian reform started to be implemented with the identification of 20 million hectares of fertile land that can be acquired by the government at market prices, with the plan for the next four years is to distribute 3 million hectares to farmers.
Domestic policy responses to Russia’s war of aggression in Ukraine
A new programme within the framework of the Fund for Access to Agricultural Inputs (FAIA), approved in 2022, provides a partial refund of producers’ agricultural input expenditures. The programme benefits small-scale farmers producing poultry, livestock, banana, potato, rice, pig, corn, sheep, cassava, sugar cane for panela production, mango, orange, onion, lemon, banana, tomato, pineapple, carrot, beans, strawberry, and blackberry. Twenty percent of expenditures for variable inputs such as fertilisers, seeds are refunded to mitigate the impacts of higher input prices due to the war and the COVID-19 pandemic.
Trade policy developments in 2022-23
Trade policy responses to Russia’s war of aggression in Ukraine
Several measures have been applied to mitigate the impact of high food prices due to COVID-19 and exacerbated by the war. In 2023, the Andean Price Band System continues to be suspended and is replaced by fixed tariffs for rice (80%), milk powder (98%), white corn (40%), and whey (94%). In addition, import tariffs of wheat and peanut were reduced to zero for two years, until July 2024.
Tariffs for other agricultural commodities are applied at reduced levels, for example for crude soybean oil, soybean and crude palm oil up to a maximum level of 40%, wheat up to a maximum level of 35%, white and raw sugar up to a maximum level of 70%, roosters and chickens fresh or refrigerated, frozen without cutting up to a maximum level of 92%. Seasoned and frozen pieces of turkey, preparations and preserves of meat, offal or blood, of rooster or hen, in seasoned and frozen pieces, and other seasoned and frozen pieces of poultry up to a maximum level of 70 %.
In March 2022, Colombia set to zero import tariffs for 163 products1 that are part of the basic household basket, this measure is in force until December 2023. Lastly, import tariffs on all agricultural inputs, including fertilisers were reduced to zero to mitigate domestic price increases, this measure remains in force until May 2024.
Colombia 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 7.4% of employment and 15.3% of GDP in 2021. Colombia has a dualistic distribution of land ownership where traditional subsistence smallholders co-exist with large-scale commercial farms. Even if the relative weight of agro-food exports in total exports has declined over the years, the sector continues to make a significant contribution to the country’s exports, with agro-food exports accounting for a quarter of all exports in 2021 (Table 10.3).
In 2022, Colombia saw its real GDP growth decrease to 8% after its significant recovery from the recession in 2020, caused by the COVID-19 pandemic. Still, growth in 2022 remained well above the rates seen in the first two decades of the 21st century. Employment, which had suffered from the pandemic, experienced a small recovery with unemployment falling to 13.8% from the 15.4% rate observed in 2020. However, inflation rose to 10% in 2022, up from 3.5% in 2021, which is related to the COVID-19 pandemic and the economic impacts of the war in Ukraine (Figure 10.5).
The country has been a net exporter of agricultural and food products with a net surplus of USD 1 billion in 2021. Colombia’s agro-food exports are almost equally split between those destined for final consumption (52%) and those that are sold as intermediate inputs (48%) for use in manufacturing sectors in foreign markets. In contrast, the majority of agro-food imports (68%) are in the form of intermediates for further processing in the country (Figure 10.6).
Colombia has witnessed an output growth of 2.24% p.a. for the period 2011-2020. This growth is mostly due to Total Factor Productivity (TFP) growth, which was 1.49% over the same period, far above the world average. Primary production factors use growth (0.63%) and, to a lesser extent rising use of intermediary inputs (0.13%), contributed to output growth. Agriculture is the main water user with a share of 59.4% total water use, above the OECD average. Furthermore, agriculture contributed with 31.4% of GHG emissions. In contrast, nitrogen balance (10.8) is much lower than the OECD average (30.4). (Figure 10.7 and Table 10.4).
References
[1] Anderson, K. and A. Valdés (2008), Distortions to Agricultural Incentives in Latin America, World Bank, Washington DC, https://openknowledge.worldbank.org/handle/10986/6604.
[2] OECD (2015), OECD Review of Agricultural Policies: Colombia 2015, OECD Review of Agricultural Policies, OECD Publishing, Paris, https://doi.org/10.1787/9789264227644-en.