Colombia’s level of support to producers expressed as a share of gross farm revenues (%PSE) averaged 12.8% over the period 2016-18, below the OECD average. Market price support (MPS) is the main component of the PSE – accounting for more than 87% of the PSE over the period 2016-18. MPS is mostly determined by the use of border measures in the form of flexible tariffs within the Andean Price Band System. These are implemented for several agricultural products including rice, maize, poultry, milk, sugar, and pig meat. Budgetary transfers accounted for the remaining 13% of the producer support estimate during 2016-18 and have been dominated by payments based on variable input use. Budgetary payments to general services directed at the sector as a whole (GSSE), have been relatively small, accounting on average for only 13% of the total support estimate (TSE) and 2.8% of agricultural value added. Expenditures on general services include mainly agricultural research and knowledge transfer; infrastructure, particularly in irrigation; and farm restructuring.
Agricultural Policy Monitoring and Evaluation 2019
Chapter 9. Colombia
Support to agriculture
Main policy changes
Budgetary allocations remained mostly unchanged from 2017 to 2018. Eight minor programmes for input subsidies received no financial resources in 2018. At the beginning of 2018, twelve programmes were created directed on general services to the sector (GSSE), mostly on land restructuring and extension services. Expenditures for these new programmes were limited and did not significantly change the overall GSSE allocation.
In 2018, a new national government took office, which has defined the new National Development Plan 2018-22. This Plan contains the initiative “Pact for the Agricultural Productivity 2018-22” (El Pacto por la Productividad del Campo 2018-22). The objective of this new policy direction is to promote agricultural competitiveness and rural development by creating conditions that encourage the provision of public goods and services, investment, innovation, entrepreneurship and agro-industrial development, to generate opportunities for growth and well-being of the rural population.
The Pact has three action plans: 1) promoting a comprehensive rural development through land rights and land management improvements; a better provision of public goods and services; and non-agricultural income generation by promoting entrepreneurship creating employment; 2) improving the sector’s competitiveness (productivity and profitability), through the transformation of agricultural production and improved farm management; better management of sanitary, phyto-sanitary and food safety risks; and investment, access to financing and integral risk management; 3) modernisation, digitalisation and consolidation of sectoral institutions, by restructuring the institutional architecture to strengthen the governance and co-ordination of policies.
Assessment and recommendations
Underinvestment in public goods and services, unsuccessful land tenure reforms (more than 40% of land ownership continues to be informal) and a long-running internal conflict closely linked to drug trafficking, have deeply affected the performance of the Colombian agricultural sector. These structural and institutional challenges hinder the sector’s competitiveness.
Investments in general services to agriculture have been low during the last two decades, while the Colombian agricultural sector continues to faces numerous structural challenges. Short-term responses to the problems faced by agricultural producers, including the use of input subsidies, have diverted scarce economic resources from developing the enabling environment for the sector to grow. Policy efforts should focus on strategic investments like investments in irrigation and improvement of regulatory oversight on water supply, usage and storage; investments in transport infrastructure, strong research and development (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. Without adequate investment in these areas it will be very difficult to improve productivity, competitiveness and ensure the sustainable development of the sector. A re-orientation of support from input subsidies to general services would help foster a more inclusive and sustainable agricultural growth.
As new programmes are being created more clarity is needed. Currently, the majority of programmes cover very broad and different areas and thus, are implemented through a bundle of policy instruments, the impact of which can be difficult to measure and evaluate. For example, programmes that cover variable inputs subsidies can partly deal with funding of general services. The efficiency of allocating budgetary resources is therefore also hard to assess. A systematic review and impact assessment of the wide array of policy instruments, and programmes to support agriculture would be important. This review would allow the redefinition and reorganisation of policy instruments based on evidence of costs and benefits.
A comprehensive policy framework on land ownership and access to resources is necessary to stabilise the country and to promote rural development. Provide property rights on land will contribute to long-term growth in the agriculture sector and contribute as well to promote rural development. Colombia faces the twin challenges of high concentration of land ownership and the under-exploitation of arable land. Upgrading of the cadastre system and accelerating the registration of land rights are crucial for the sector.
Improving strategic information collection on the agricultural sector is crucial for the good design of policies. Institutional co-ordination should be improved and information better disseminated to farmers.
Figure 9.1. Colombia: Development of support to agriculture
Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.
Source: OECD (2019[1]), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
Support to producers (%PSE) has fallen significantly since the early 2000s. The PSE for 2016-18 was 12.8% of gross farm receipts. The share of potentially most distorting transfers has slightly decreased over time, but around 87% of transfers are still linked to market price support alone (Figure 9.1). Prices received by farmers, on average, are estimated to be 9% higher than those observed in the world markets. Expenditures for general services were equivalent to 2.8% of the agricultural value added in 2016-18, larger than the 1.9% previously seen in 2000-02. Products with particularly high levels of Single Commodities Transfers (SCTs) included rice (54% of commodity gross farm receipts), maize (43%), milk (28%) and pig meat (23%). Main drivers of the change in PSE from 21017 to 2018 were observed in the MPS, more particularly in the price gap. (Figures 9.2 and 9.3).
Figure 9.2. Colombia: Drivers of the change in PSE, 2017 to 2018
Source: OECD (2019[1]), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
Figure 9.3. Colombia: Transfer to specific commodities (SCT), 2016-18
Source: OECD (2019[1]), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
Table 9.1. Colombia: Estimates of support to agriculture
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. The country has become an upper-middle-income country with an average income per-capita of USD 14 552, however, inequality continues to be high. Agriculture continues to be an important sector for the economy – accounting for 16.1% of employment and 6.5% of GDP in 2017. Colombia has a dualistic distribution of land ownership where traditional subsistence smallholders co-exist with large-scale commercial farms. The sector makes a significant contribution to national exports, with agro-food exports accounting for 19% of all exports in 2017 (Table 9.2).
Table 9.2. Colombia: Contextual indicators
Note: *or closest available year. 1. Average of all countries covered in this report. EU treated as one.
Source: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.
Colombia has had a real GDP growth of 3.5% over the last decade (2008-18) with a declining unemployment trend. Colombia is consistently a net exporter of agricultural and food products with a net surplus of USD 1.5 billion in 2017. 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 either case, these are dominated by primary products. In contrast, 61% of agro-food imports are in the form of intermediates for further processing in the country.
Figure 9.4. Colombia: Main economic indicators, 1995 to 2018
Sources: OECD statistical databases; World Bank, WDI and ILO estimates and projections.
Figure 9.5. Colombia: Agro-food trade
Note: Numbers may not add up to 100 due to rounding.
Source: UN Comtrade Database.
Colombia has, in agriculture, low levels of Total Factor Productivity (TFP) which was only 0.7% over the period 2006-15, half the world average (1.5%), this situation undermines the sector’s competitiveness, largely driven by infrastructure deficiencies, unequal access to land and land use conflicts, as well as weak supply chains. Agriculture is the main water user with a share of almost 60% of total national water use, and responsible for close to 30% of all greenhouse gas (GHG) emissions – both well above the OECD averages.
Figure 9.6. Colombia: Composition of agricultural output growth, 2006-15
Note: Primary factors comprise labour, land, livestock and machinery.
Source: USDA Economic Research Service Agricultural Productivity database.
Table 9.3. Colombia: Productivity and environmental indicators
Note: * or closest available year. 1. For Emerging Economies, nitrogen and phosphorus balance data are preliminary. 2. For Agriculture share of total energy use (%), data are not directly comparable between time periods due to change in methodology in 2013.
Source: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.
Description of policy developments
Main policy instruments
Market price support (MPS) continues to be the dominant form of support in the sector. MPS is provided through border protection with the use of 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. The system establishes a floor price (lower band) and a ceiling price (higher band). When the international price is below the floor price, an additional import duty is imposed, and when the international price exceeds the ceiling price, a tariff reduction is granted.
Producer associations finance and administer the commodity Price Stabilisation Funds (FEPs). Six commodities are covered by a fund: cotton, cocoa, palm oil, sugar, beef and milk. FEPs make payments (covered by farmers’ contribution, there is no government component) 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, 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.
Input subsidies are another important policy measure, and dominate the budgetary transfers to producers. Several programmes provide different types of input support. Key measures include subsidies for the purchase of variable inputs such as of seed or fertilisers to investment subsidies for drainage and irrigation infrastructure, the renovation of crop plantations and subsidies for individual technical assistance.
Colombia also has some financing instruments related to the access to credit (including subsidised credit interest rates), debt rescheduling and insurance programmes. The Financing Fund for the Agricultural Sector (FINAGRO) is a second-tier bank. Specific credit lines are available for: i) working capital and marketing; ii) investment; and iii) the debt rescheduling as well as sporadic write-offs (OECD, 2015[2]).
Expenditures on general services include investments in agricultural research and transfer and extension services, such as investments in Colombia’s agricultural innovation institution (former CORPOICA and now called AGROSAVIA), educational rural centres, and extension services, around 52% of total GSSE was spent in these items in 2016-18. Infrastructure (including off-farm irrigation works, rural roads and farm restructuring) is another GSSE area with large investments, around 36% of total GSSE goes here. Inspection and control accounted for 8% of total expenditures on GSSE in the same period.
Domestic policy developments in 2018-19
Budgetary allocations mostly remained unchanged from 2017 to 2018. Eight minor programmes for input subsidies received no financial resources in 2018. At the beginning of 2018, twelve programmes were created directed on general services, mostly on land restructuring and extension services. Expenditures for these new programmes were limited, however.
In 2018, a new national government took office, which has defined the new “National Development Plan 2018-22”. Within this Plan, there is the initiative “Pact for the Agricultural Productivity 2018-22” (El Pacto por la Productividad del Campo 2018-22). The objective of this new policy is to promote agricultural competitiveness and rural development by creating conditions that encourage the provision of public goods and services, investment, innovation, entrepreneurship and agro-industrial development, to generate opportunities for growth and well-being of the rural population.
The Pact has three action plans: 1) Promoting a comprehensive rural development through land rights and land management improvements; a better provision of public goods and services; and non-agricultural income generation by employment and entrepreneurship. 2) Improving the sector’s competitiveness (productivity and profitability), through the transformation and management of agricultural production; better management of sanitary, phyto-sanitary and food safety risks; and investment, financing and integral risk management. 3) Modernisation, digitalisation and consolidation of sectoral institutions, by restructuring the institutional architecture to strengthen the governance and coordination of policies (MARD, 2019[3]).
Trade policy developments in 2018-19
There have been no important developments on agricultural trade in 2018. Colombia is considered a relatively open economy and one of the most open markets in Latin America. The country has 13 free trade agreements (FTAs) in force worldwide. These FTAs are quite important for the country, as around 72% (average 2015-17) of total exports were shipped to FTA’s partners. This number increased up to 87% for total agro-food exports during the same period (UN Comtrade, 2019[4]).
Negotiations continue with Japan and Turkey for the establishment of new trade agreements. Negotiations also continue between the bloc of the Pacific Alliance (Mexico, Chile, Peru and Colombia) and Singapore, Canada, New Zealand and Australia, in order to deepen the current conditions, these negotiations comprise deeper provisions on terms of market access, sanitary and phytosanitary measures, and trade facilitation, among others (WTO, 2019[5]).
References
[3] MARD (2019), “Annual Report of Agricultural Policies to OECD”, Ministry of Agriculture and Rural Development. Bogotá, Colombia.
[1] OECD (2019), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.
[2] OECD (2015), OECD Review of Agricultural Policies: Colombia 2015, OECD Review of Agricultural Policies, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264227644-en.
[4] UN Comtrade (2019), UN Comtrade Database, https://comtrade.un.org/.
[5] WTO (2019), “Colombia news archive”, World Trade Organization, https://www.wto.org/english/news_e/archive_e/country_arc_e.htm?country1=COL.