9. Colombia
Support to agriculture
Colombia’s level of support to producers expressed as a share of gross farm revenues (%PSE) averaged 11.5% over the period 2017-19, which is below the OECD average. Market price support (MPS) is the main component of the PSE, accounting for 90% over the period 2017-19. MPS is mostly driven by the use of border measures for several agricultural products including rice, maize, poultry, milk, sugar, and pig meat. Budgetary transfers to farmers accounted for 10% of the PSE, during the same period; these were mostly payments based on variable input use, notably seeds and fertilisers. Budgetary allocations to general services to the sector as a whole (GSSE) have been relatively small, accounting on average for only 2.7% of the agricultural value added. 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).
Main policy changes
In 2019, the government implemented a major new policy on contract farming. This programme seeks to promote a long-term linkage between small-scale producers and markets, through the execution of various policy instruments that promote inclusive business schemes between companies and smallholders. Specific policy instruments for this programme include sector-specific marketing strategies; alliances between the agricultural and the industrial sector; comprehensive technical assistance to farmers (e.g. entrepreneurial and marketing training); creation of produce fairs for farmers and processors for better linking supply and demand; development of rural supply by increasing agricultural production.
In 2019, sanitary and phyto-sanitary (SPS) measures were removed for accessing a number of export markets, including soursop fruit (Guatemala), in-vitro spread material of bananas (Egypt), avian flour (Peru), polished and split rice (Ecuador), salted leathers (Egypt), hass avocados (People’s Republic of China and Japan), orchid plants rooted bare without substrate (Mexico), live guinea pigs (Ecuador), Tahiti acid lime (Peru), and beef (Argentina). Furthermore, in 2019 the World Organisation for Animal Health (OIE) declared Colombia food and mouth disease (FMD) free with vaccination.
Total public expenditures in the agricultural sector were reduced from 2018 to 2019 and several programmes were dismantled. However, twenty-two new programmes were created directed to general services, mostly on land restructuring (land registration and rights) and extension services, but funding for these new programmes was limited.
Assessment and recommendations
Investments in general services to agriculture have been low during the last two decades, while the Colombian agricultural sector continues to face numerous structural challenges. Short-term responses to the problems faced by agricultural producers, mainly in the form of input subsidies, have diverted scarce economic resources from developing the enabling environment for the sustainable growth of the sector.
Policy efforts should focus on strategic investments such as off-farm irrigation works; transport infrastructure; R&D and innovation capacity of the sector; animal and plant health protection and control services; promotion of sustainable use of natural resources; investments in a national and functional extension/training and technical assistance system that fosters technology adoption. Adequate investment in these areas should contribute to further improve productivity and competitiveness, and to ensure the sustainable development of the sector. A re-orientation of support from input subsidies to general services would also help foster a more inclusive and sustainable agricultural growth.
An inclusive land access policy framework, while politically complex, is necessary to promote rural and sectoral development. Colombia faces the twin challenges of high concentration of land ownership and the under-exploitation of arable land, and 40% of land ownership continues to be informal. Upgrading the cadastre system and accelerating the registration of land rights are crucial for the sector. Improved land rights contribute to long-term growth in the agricultural sector as well as to promoting rural development.
A review and impact assessment of the wide array of policy instruments, and programmes to support agriculture would be important. The majority of current programmes cover very broad and different areas and are implemented through a bundle of policy instruments with unclear impact. The review should redefine and reorganise policy instruments based on evidence of costs and benefits.
On climate change, in its Nationally Determined Contributions (NDCs), Colombia committed to reduce its greenhouse gas (GHG) emissions by 20% with respect to the projected Business-as-Usual Scenario (BAU) by 2030. While agriculture is not targeted explicitly, this commitment will have many implications on the agricultural sector as major emissions contributor. Moreover, the country needs to keep addressing in a more systematic way sustainability aspects such as biodiversity, water use, and deforestation.
Policy responses in relation to the COVID-19 outbreak
Agricultural policies
Decree 486 of 2020 provides an economic incentive of COP 80 000 (USD 20) to rural and agricultural workers and producers who are older than 70 years. Preferential interest rates from the National Development Bank (FINDETER) are given to agricultural producers to ensure the continued functioning of agricultural products supply and food security throughout the national territory, within the State of Economic, Social and Ecological National Emergency.
Decree 523 of 2020 decreases tariffs to 0% for imports of yellow maize, sorghum, soybeans and soybean flour until 30 June 2020, with a possibility of renewal of three more months.
Agro-food supply chain policies
Decree 482 of 2020 provides measures on the provision of the public transport service and its infrastructure, within the State of Economic, Social and Ecological National Emergency. The Logistics and Transport Centre was created to facilitate the movement of agro-food products in the country. This Centre is composed by the Minister of Agriculture and Rural Development.
Decree 465 of 2020 empowers the Rural Development Agency (ADR) to allow cities to use water stored in the irrigation districts of Ranchería, Tolima Triangle, and Tesalia-Paicol.
Consumer policies
Decree 507 of 2020 creates, for the most vulnerable households, a price monitoring and inspection mechanism for the basic basket products, medicines and medical devices, within the framework of the State of Economic, Social and Ecological National Emergency.
Decree 470 of 2020 ensures the continuity of lunches for the families with children belonging to the Food School Programme (PAE), but who cannot attend school due to the lockdown.
Other
Colombia has been in a state of economic, social, ecological emergency since 25 March with restrictions on people’s mobility and isolation obligations, with a foreseen date for lifting the emergency on 27 April 2020.
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Support to producers (%PSE) has fallen significantly since the early 2000s. The PSE for 2017-19 was 11.5% of gross farm receipts. The share of potentially most distorting transfers has slightly decreased over time, but around 90% of transfers are still linked to market price support alone (Figure 9.1). Prices received by farmers, on average, are estimated to be 12% higher than those observed in the world markets. Expenditures for general services were equivalent to 2.7% of the agricultural value added in 2017-19, larger than the 1.9% previously seen in 2000-02 but well below the OECD average. Products with particularly high levels of Single Commodities Transfers (SCTs) included rice (45% of commodity gross farm receipts), maize (34.6%), milk (25.4%) and pig meat (21.5%) – virtually all of the SCTs were created through MPS. Colombia’s PSE fell significantly in 2019. This was mainly driven by a drop in the MPS, due to smaller price gap as reference prices rose more than domestic ones. (Figures 9.2 and 9.3).
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.
Contextual information
Colombia is the fifth largest country in Latin America, with 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% of employment and 6% of GDP in 2018. 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 17% of all exports in 2018 (Table 9.2).
Colombia has had a real GDP growth of 3.5%, on average, over the last decade (2009-19), and is a consistent net exporter of agricultural and food products with a net surplus of USD 1 billion in 2018. Colombia’s agro-food exports are almost equally split between those destined for final consumption (53%) and those that are sold as intermediate inputs (48%) for use in manufacturing sectors in foreign markets. In either case, these are dominated by primary products. In contrast, the majority of agro-food imports (64%) are in the form of intermediates for further processing in the country.
Sources: OECD statistical databases; World Bank, WDI and ILO estimates and projections.
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.
Note: Primary factors comprise labour, land, livestock and machinery.
Source: USDA Economic Research Service Agricultural Productivity database.
Description of policy developments
Main policy instruments
The policy objective of the Colombian agricultural policy is to promote the competitive, equitable and sustainable development of agricultural, forestry, fisheries and rural development activities, prioritising decentralisation, consultation and stakeholders’ participation that contribute to improving the level and quality of life of the population. The implementation of this objective continues under the auspices of the Ministry of Agriculture and Rural Development and its affiliated and linked agencies.
Colombia applies the Andean Price Band System (SAFP). The SAFP aims to stabilise import prices for 13 commodities and their related first-stage processed products: 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.
In addition, the commodity Price Stabilisation Funds (FEPs) financed and administered by producer associations, cover seven commodities: cotton, cocoa, palm oil, sugar, coffee (incorporated in 2019), beef and milk. FEPs make payments (originally financed by public funds and nowadays entirely financed by farmers’ contributions, without involving the public budget) 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 based on international prices for each product, while the transfers and compensations take into account a reference indicator at which the products reach the market. A committee, composed of representatives of the Ministry of Agriculture, the Ministry of Trade, producers’ associations, and sellers and exporters, determines the source of international prices, establishes the price range and reference prices to assure the necessary funding for the compensations without the use of public funding.
Several programmes provide different types of input support. Key measures include subsidies for the purchase of seeds and fertilisers, and investment subsidies for drainage and irrigation infrastructure, among others. The country also subsidises credit interest rates, debt rescheduling, sporadic write-offs and insurance programmes.
Colombia has gradually directed more public expenditures to key services to the sector overall. In particular, this includes investments in agricultural research and extension services, such as those directed to the agricultural innovation institution (former CORPOICA and now AGROSAVIA).
Domestic policy developments in 2019-20
In 2019, the government implemented a major new policy on contract farming. This programme seeks to promote a sustainable linkage between small-scale producers and markets, through the execution of various policy instruments that promote inclusive business schemes between companies and smallholders.
The contract farming policy has the following strategic objectives: 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.
Specific policy instruments for achieving these objectives include sector-specific marketing strategies; alliances between the agricultural and the industrial sector; comprehensive technical assistance to farmers (e.g. entrepreneurial and marketing training); creation of produce fairs for farmers and processors for better linking supply and demand; and development of rural supply by increasing agricultural production.
In 2019, the government implemented a strategy to increase market diversification. The strategy has two fronts: a Health Eligibility and Sanitary Eligibility for agricultural products. The initiative defines a short-and-medium-term roadmap focusing on the efficiency of sanitary and phyto-sanitary processes to access international markets for several agricultural products such as livestock. It tries to make better use of the several existing free trade agreements (FTA), and to enhance trade by improving the relationships with countries with which there has been an increase in trade flows outside of existing free trade agreements.
In 2019, SPS-related barriers were removed for accessing a number of export markets, including soursop fruit (Guatemala), in-vitro spread material of bananas (Egypt), avian flour (Peru), polished and split rice (Ecuador), salted leathers (Egypt), hass avocados (China and Japan), orchid plants rooted bare without substrate (Mexico), live guinea pigs (Ecuador), Tahiti acid lime (Peru), and beef (Argentina). Furthermore, in 2019 Colombia was declared FMD free with vaccination by the OIE.
Total public expenditures on agriculture were reduced from 2018 to 2019 and several programmes were dismantled. However, twenty-two new programmes were created directed to general services, mostly on land restructuring (land rights and access) and extension services, but funding for these new programmes was limited.
Trade policy developments in 2019-20
In the context of Brexit, in 2019 Colombia finished trade negotiations with the United Kingdom, which are expected to materialise once Brexit takes place in January 2021. Negotiations continue with Japan and Turkey for the establishment of new trade agreements. Negotiations also continue with Singapore, Canada, New Zealand and Australia, in order to deepen the current trade agreements with those countries; these negotiations involve deeper provisions in terms of market access, sanitary and phyto-sanitary measures, and trade facilitation.
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