10. Colombia
Agricultural producer support in Colombia averaged 10% of gross farm receipts during 2019-21, down from 24% in the early 2000s. The producer support estimate (PSE) continues to be dominated by market price support (MPS), which accounts for almost 90% of these transfers. MPS for a range of agricultural products is driven by border measures, such as tariffs. Consequently, support to individual commodities (SCT) is particularly high for rice, maize, milk, pig meat and poultry. On average, prices received by farmers were 10% higher in 2019-21 than those observed in world markets.
Budgetary transfers to farmers accounted for the remaining 10% of PSE in 2019-21, mostly based on variable input use such as credit support through preferential interest rates, and subsidies for purchases of machinery and equipment, fertiliser and seeds.
Budgetary allocations to general services for the sector (GSSE) were small, corresponding to 1.4% of the value of agricultural production 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 1.1% of GDP.
Total public expenditures allocated to the agricultural sector increased substantially in 2021 (66% relative to 2020). Programmes with increased funding focused on production management, improving sanitary status, climate initiatives, institutional capacity, and innovation and development. During 2018-22, about 50 000 land titles have been issued, formalising around 1 319 000 hectares, benefitting 58 987 families. During this period, 3 567 land properties, or 62 089 hectares, were returned to their rightful owners.
To mitigate domestic price increases caused by the pandemic, the agriculture input law was approved in December 2021, setting tariffs on agriculture inputs at 0%. Moreover, Colombia suspended the Andean Price Band System (SAFP) for some products, and established a fixed tariff for rice (80%), milk powder (98%), white corn (40%), whey (94%), wheat (0%) until June 2022. In March 2022, with the 307 Decree, Colombia reduced to 0% for six months the import tariffs on 163 products that are part of the basic household basket, and for malt and roasted malt, thereby suspending the application SAFP for those products those products during the same period. Moreover, in April 2022, a new Decree (No. 504) reduced to 0% for twelve months the import tariffs on 39 additional agricultural input products, and for six months on another 36 products.
Colombia’s Nationally Determined Contribution (NDC) committed to reduce its greenhouse gas (GHG) emissions 51% with respect to the baseline scenario by 2030, and black carbon emissions 40% compared to 2014 levels in 2030, with the long-term objective of being carbon-neutral by 2050. Colombia is also a participant to the Global Methane Pledge. Given agriculture’s role as a major contributor to the country’s GHG emissions, it is likely to be significantly impacted by this commitment even though specific emission reduction targets for the sector have not been set. Moreover, the sustainability performance of the sector, including biodiversity, water use, and deforestation, is a key concern the country needs to address more systematically.
Colombia’s agricultural sector continues to face structural challenges, and support to general services that would help overcome these challenges is limited. 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.
Emphasis should be on strategic investments such as improved hydrological infrastructure for irrigation; transport infrastructure; research, development, and innovation capacity; animal and plant health protection and control services; promotion of sustainable use of natural resources; and national and functional extension, training and technical assistance systems that foster technology adoption. Public investment in these areas should contribute to improving productivity and competitiveness, and ensure the sector’s sustainable development. The country has made some efforts under the framework of the Peace Agreement on the provision of rural public goods and services, such as irrigation-drainage plan and the technical assistance plan. However, further re-orientation of support from input subsidies to general services can foster more inclusive and sustainable agricultural growth.
Colombia faces highly concentrated land ownership and under-exploitation of arable land, while 52.7% of land ownership continues to be informal. An inclusive land-access policy framework would promote rural and sectoral development. Ongoing efforts in implementing the multi-purpose cadastre policy should continue and speed up. Upgrading the cadastre system and accelerating registration and assignation 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 existing policy instruments and agricultural support programmes. Current programmes cover broad and varied areas, implemented through a bundle of policy instruments with unclear combined impact. A revision could redefine and re-organise policy instruments based on evidence of costs and benefits of individual measures and policy packages. Such a revision would also help to consider equity, social and environmental outcomes.
Overview of policy trends
The 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 openness. The Colombian government eliminated its monopoly on 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 operate in poor areas with limited 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 rapid liberalisation did not allow for economic adjustments, putting the sector in crisis. Under pressure from farmers, 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, covering 112 products in total. This eventually evolved into the Andean Price Band System (SAFP). Despite the stated purpose of this policy, the construction of the price bands, which fixed 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 since 2014. 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 10.4).
Main policy instruments
Agricultural policy in Colombia aims for a 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.
Two mechanisms focus on import cost and income stabilisation. One is the Andean Price Band System, which aims to stabilise import costs 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.
A second mechanism consists of the Price Stabilisation Funds (FEPs). There are seven FEPs, which are financed and administered by producer associations and cover seven commodities, including 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. 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.
Several agricultural 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 increased its public expenditures for investments in agricultural research and extension services, such as those for financing the agricultural innovation institution (AGROSAVIA), and other services for the sector. Moreover, the country has made some efforts under the framework of the Peace Agreement on the provision of rural public goods and services, such as irrigation-drainage plan and the technical assistance plan, but more can be done to achieve a sustainable agricultural growth.
Climate change mitigation policies in agriculture
In 2016, agriculture, forestry and other land use (AFOLU) in Colombia contributed 58.5% of total GHG emissions, and agriculture alone contributed 28.7%. Colombia’s NDC aims to reduce GHG emissions by 51% compared to a baseline scenario in 2030. Colombia also committed to reducing black carbon by 40% compared to 2014 levels. Colombia’s long-term objective is to achieve carbon neutrality by 2050.
The Climate Action Law 2169 was passed on 22 December 2021. It establishes goals and minimum measures 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. The law’s purpose is to lay out a roadmap to the country’s environmental goals, including: carbon neutrality by 2050; reducing black carbon emissions 40%; reducing GHG emissions by 51% with respect to the 2030 emissions reference scenario in Colombia’s NDC (up to 169.44 MtC02eq) by 2030; and reaching zero net deforestation of natural forest by 2030, based on the implementation of both policy tools and market measures. On agriculture, the law also stipulates adopting climate change considerations (mitigation and adaptation) in planning instruments for the agricultural sector (PIGCCS) by 2030, and implementing adaptation actions. Lastly, Colombia is a participant in the Global Methane Pledge, which reaffirms its commitments to mitigation measures.
Colombia created a National Appropriate Mitigation Action (NAMA) for livestock in 2017. In 2021, it implemented four actions targeting the farming sector to reduce GHG emissions: (1) the sustainable Colombian livestock project led by the Colombian Federation of Cattle Breeders (FEDEGAN), CIPAV, Fondo Acción and The Nature Conservancy (TNC); (2) the Joint Declaration of Intent (JIU) between Norway, Germany, the United Kingdom and Colombia, which aims to reduce GHG emissions from deforestation, mitigate forest degradation (REDD+) and promote sustainable development; (3) an IADB technical co-operation project called the Comprehensive Programme for the Reconversion of Livestock in Colombia (PIRPAG) in order to contribute to closing the agricultural land use frontier and promote sustainable bovine production activities in accordance with land use; and (4) the Round Table on Sustainable Livestock (MGS-Col), an inter-agency public-private technical consulting body on sustainable livestock that will design a benchmark for the policy design of processes, programmes and projects around sustainable livestock production.
In 2016, a NAMA for Colombian coffee was created. This NAMA seeks to develop and implement strategies for mitigating GHG emissions along the coffee value chain, from production, processing, marketing and transportation of coffee. This NAMA focuses on: (1) reducing on-farm emissions, including through more efficient use of fertilisers, improved cultivation practices and handling of chemical products, and improved post-harvesting processes; (2) increasing energy efficiency in the coffee transformation process; (3) reducing emissions in the transportation of coffee. In 2018, a NAMA for the panela sector (production of raw sugar) was put in place. This NAMA contains the objectives, baseline, measures, barriers, measuring, reporting and verification (MRV) system, governance structure and financial resources necessary for the development of the Colombian panela sector towards a low-emission development strategy. This NAMA has similar measures as the coffee NAMA, which includes efficient use of fertilisers, improved cultivations practices, and others.
Domestic policy developments in 2021-22
In 2021 the policy framework strategy “Together for the Countryside” (Juntos por el campo) continued its implementation. The framework has six pillars: 1) the organisation (i.e. the use of zoning for a better use of land) of the agricultural production for 11 priority products, including cocoa, avocado, potato, dairy, forestry, rice, corn, onion, sugarcane, fishing, and aquaculture; and for 5 strategic crops including flowers, palm, coffee, bananas, and sugar. This pillar has two focus areas: the phytosanitary protection, and planning based on soil suitability. 2) Agricultural extension that aims to reach 550 000 producers. 3) Extending credit access and better credit conditions (i.e. more preferential rates) to farmers. 4) Financing rural public goods such as infrastructure, processing agroindustry, storage and cold chains, and irrigation districts. 5) Supporting technology and innovation. 6) Support for productivity through subsidies for agricultural inputs.
Total public expenditures allocated to the agricultural sector increased substantially in 2021 (66% relative to 2020). Several programmes focused on production management, improving sanitary status, climate initiatives, institutional capacity, and innovation and development increased their funding. In January 2022, the Fund for Access to Agricultural Inputs was created to finance production, transportation, storage and other activities necessary for the efficient, competitive, and sustainable use of agricultural inputs. It also centralises purchases of agricultural inputs, grants guarantees for agricultural input imports, and supports financial instruments or coverage policies for foreign exchange differential. From 2018 to 2022, about 50 000 land titles have been issued, formalising around 1 319 000 hectares, benefitting 58 987 families. During this period, 3 567 land properties, or 62 089 hectares, were returned to their rightful owners.
The Climate Action Law of 2021, will incorporate by 2030 criteria related to climate adaptation and resilience in the plans, programmes and projects of the institutions linked to the Ministry of Agriculture and Rural Development (MARD). The law proposes implementing by 2030, in at least 11 agricultural subsectors (rice, corn, potato, beef cattle, dairy cattle, panela cane, cocoa, banana, coffee, sugar cane and oil palm), models that improve their capacities to adapt to climate variability and change, through research, technological development and the adoption of productive transformation practices for agricultural and livestock activities to make them more resilient. Also to incorporate by 2030, in the sectoral competitiveness agreements, measures for productive transformation through the implementation of state-of-the-art technologies (genetics, biotechnology, Agriculture 4.0, metabolomics and other technological tools) necessary to meet national goals, for adaptation to climate change, by all agricultural value chains by MARD. Lastly, the law also proposes expanding to 2030 the coverage and participation in the agro-climatic technical roundtables to five natural regions of the country (Andean, Caribbean, Amazon, Pacific and Orinoquía), in co-ordination with the national agro-climatic roundtables, and provide agro-climatic information to all farmers in the country.
Domestic policy responses to the COVID-19 pandemic
As a response to COVID-19 crisis, income support measures such as the Formal Employment Support Program (PAEF), the Support Program of the Prime service (PAP) and the Solidarity revenue programme were created. These programmes also benefit agricultural workers. Other programmes supporting the special credit lines (LEC), subsidies for purchases of agricultural inputs, transportation, storage, and marketing of agricultural products were strengthened.
The emergency mitigation fund FOME, created by Decree 486 in 2020 and implemented during 2020 and 2021, provided economic transfers to agricultural producers in order to avoid market disruptions in the agro-food value chains due to the pandemic.
Trade policy developments in 2021-22
In 2021, negotiations for a free trade agreement (FTA) with Curacao were resumed after being interrupted due to the COVID-19 pandemic. Negotiations for an FTA with the United Arab Emirates started in the first months of 2022.
Trade policy responses to the COVID-19 pandemic
To mitigate domestic price increases as a consequence of the pandemic, the agriculture input Law was approved in December 2021, this Law has set to 0% tariffs on agriculture inputs. This Law also allocates resources to support small and medium scale farmers that use environmentally friendly fertilisers and inputs.
Moreover, Colombia has suspended the Andean Price Band System for the following products and established a fixed tariff of rice (80%), milk powder (98%), white corn (40%), whey (94%), wheat (0% temporarily until June 2022). Additionally, Colombia has limited the application of some tariffs up to the following maximum levels: 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, other seasoned and frozen pieces of poultry up to a maximum level of 70%.
To reduce the impact of high food prices, in March 2022, Colombia passed the 307 Decree, which establishes a tariff of 0% for six months for 163 products1 that are part of the basic household basket. The Decree also establishes a 0% tariff and suspends for six months the application of the Andean Price Band System for the following products: malt (from barley or other cereals), unroasted, classified under subheading 1107100000; and roasted malt (from barley or other cereals), classified under subheading 1107200000. Moreover, in April 2022, under the 504 Decree2, the country reduced to 0% import tariff 39 additional agricultural input products for twelve months, and another 36 agricultural products for six months.
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 16.5% of employment and 7.6% of GDP in 2020. 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 2020 (Table 10.3).
In 2021, Colombia saw its real GDP growth increase to 9.5% after an economic contraction of almost 7% in 2020, caused by the COVID-19 pandemic. Employment experienced a small recovery with unemployment falling to 13.8% from the 15.4% rate observed in 2020. The inflation rate remained relatively stable at 3.5% in 2021. The country has been a net exporter of agricultural and food products with a net surplus of USD 1.2 billion in 2020. 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 contrast, the majority of agro-food imports (66%) are in the form of intermediates for further processing in the country (Figures 10.5 and 10.6).
Colombia has witnessed rapid output growth of 5.6% p.a. for the period 2010-2019. This growth is mostly due to Total Factor Productivity (TFP) growth, which was 3.9% over the same period, far above the world average. Rising use of intermediary inputs and, to a lesser extent, of primary production factors also contributed to output growth. 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 GHG emissions. In contrast, nitrogen balance is comparatively low and has slightly fallen since the early 2000s, while phosphorous balance is higher than world average (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.