Agricultural Policy Monitoring and Evaluation 2021

9. Colombia

Support to agriculture

Agricultural 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 changes

In 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

• While Colombia’s agricultural sector continues to face structural challenges, 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 economic resources from developing an enabling environment for sustainable growth of the sector.

• Emphasis should be given to strategic investments such as off-farm irrigation systems; 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 all these areas should contribute to improving productivity and competitiveness, and ensure the sector’s sustainable development. A re-orientation of support from input subsidies to general services would also help foster more inclusive and sustainable agricultural growth.

• An inclusive land-access policy framework would promote rural and sectoral development. Colombia faces a high concentration of land ownership and under-exploitation of arable land, while 40% of land ownership continues to be informal. 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 systematically assess the impact of 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 review could redefine and re-organise policy instruments based on evidence of costs and benefits of individual measures and policy packages. Such a review should also consider equity, social and environmental outcomes.

• Colombia’s Intended Nationally Determined Contribution (INDC) committed to reduce its greenhouse gas (GHG) emissions by 20% with respect to the projected Business-as-Usual (BAU) scenario by 2030. 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.

Figure 9.1. Colombia: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 9.2. Colombia: Drivers of the change in PSE, 2019 to 2020

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 9.3. Colombia: Transfer to specific commodities (SCT), 2018-20

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Table 9.1. Colombia: Estimates of support to agriculture

Million USD

	2000-02	2018-20	2018	2019	2020p
Total value of production (at farm gate)	10 565	25 859	28 975	25 494	23 108
of which: share of MPS commodities (%)	80.7	73.4	66.8	73.3	80.2
Total value of consumption (at farm gate)	7 938	20 737	21 814	20 883	19 513
Producer Support Estimate (PSE)	2 546	3 439	3 977	3 232	3 108
Support based on commodity output	2 460	3 143	3 639	2 912	2 877
Market Price Support1	2 460	3 133	3 610	2 912	2 877
Positive Market Price Support	2 466	3 134	3 610	2 912	2 879
Negative Market Price Support	-6	-1	0	0	-2
Payments based on output	0	10	29	0	0
Payments based on input use	86	296	338	320	231
Based on variable input use	53	173	185	187	146
with input constraints	36	142	138	153	136
Based on fixed capital formation	16	73	110	67	43
with input constraints	3	41	63	31	30
Based on on-farm services	17	50	43	66	42
with input constraints	5	24	8	29	33
Payments based on current A/An/R/I, production required	0	0	0	0	0
Based on Receipts / Income	0	0	0	0	0
Based on Area planted / Animal numbers	0	0	0	0	0
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	0	0	0	0	0
Based on long-term resource retirement	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0
Percentage PSE (%)	24.1	13.1	13.6	12.5	13.3
Producer NPC (coeff.)	1.31	1.14	1.15	1.13	1.14
Producer NAC (coeff.)	1.32	1.15	1.16	1.14	1.15
General Services Support Estimate (GSSE)	154	458	566	431	377
Agricultural knowledge and innovation system	49	198	262	183	150
Inspection and control	9	41	52	36	35
Development and maintenance of infrastructure	95	197	230	189	174
Marketing and promotion	0	21	22	23	18
Cost of public stockholding	0	0	0	0	0
Miscellaneous	1	0	0	0	0
Percentage GSSE (% of TSE)	5.7	11.7	12.5	11.8	10.8
Consumer Support Estimate (CSE)	-2 234	-3 819	-4 027	-3 852	-3 579
Transfers to producers from consumers	-2 003	-2 793	-2 771	-2 815	-2 792
Other transfers from consumers	-248	-1 055	-1 294	-1 065	-806
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	16	28	39	28	18
Percentage CSE (%)	-28.3	-18.4	-18.5	-18.4	-18.3
Consumer NPC (coeff.)	1.40	1.23	1.23	1.23	1.23
Consumer NAC (coeff.)	1.39	1.23	1.23	1.23	1.22
Total Support Estimate (TSE)	2 700	3 897	4 542	3 663	3 485
Transfers from consumers	2 251	3 848	4 065	3 880	3 598
Transfers from taxpayers	697	1 104	1 771	849	693
Budget revenues	-248	-1 055	-1 294	-1 065	-806
Percentage TSE (% of GDP)	2.8	1.3	1.4	1.1	1.3
Total Budgetary Support Estimate (TBSE)	240	764	932	751	608
Percentage TBSE (% of GDP)	0.2	0.2	0.3	0.2	0.2
GDP deflator (2000-02=100)	100	246	238	248	251
Exchange rate (national currency per USD)	2 297.17	3 311.19	2 956.90	3 281.07	3 695.61

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Colombia are: maize, rice, sugar, milk, beef and veal, pig meat, poultry, eggs, bananas, plantains, coffee, palm oil and flowers.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

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 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).

Table 9.2. Colombia: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to 1990s	Import substitution policies	Agricultural input and output tariffs Other border measures establish import rate quotas Minimum prices Export promotions and subsidies for traditional crops (coffee, sugar) State marketing agency (government purchases of agricultural products) Subsided agricultural credit Export taxes
1990-2013	Back and forth changes to trade liberalisation and measures to offset economic crisis Changes to trade liberalisation and some protection measures	Role of the state marketing company reduced and then increased for marketing cereals and oilseeds Reduction of agricultural tariffs for both outputs and inputs Export subsidies Several FTA signed The price band system extend and becomes the Andean Price Band System covering in total 154 products and by-products Quantitative import restrictions created Direct payments introduced Import quotas for some products Expansion of price stabilisation funds to other crops
2013-present	Peace negotiations and agreement	Focus on agricultural innovation and public goods Rural development Efforts to improve the land tenure system Reduction in budgetary allocations

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 instruments

Agricultural 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 2020-21

In 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 pandemic

In 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 2020-21

Some 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 information

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 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.

Table 9.3. Colombia: Contextual indicators

	Colombia		International comparison
	2000*	2019*	2000*	2019*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	265	787	0.7%	0.7%
Population (million)	39	49	0.9%	0.9%
Land area (thousand km2)	1 110	1 110	1.3%	1.3%
Agricultural area (AA) (thousand ha)	44 859	49 492	1.5%	1.6%
			All countries1
Population density (inhabitants/km2)	36	45	53	63
GDP per capita (USD in PPPs)	6 690	15 644	9 265	21 975
Trade as % of GDP	12	14	12.3	14.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	8.3	6.7	2.9	3.5
Agriculture share in employment (%)	22.3	16.6	-	-
Agro-food exports (% of total exports)	22.3	18.2	6.2	7.3
Agro-food imports (% of total imports)	12.8	12.5	5.5	6.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	59	61	-	-
Livestock in total agricultural production (%)	41	39	-	-
Share of arable land in AA (%)	..	12	32	34

Notes: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

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.

Table 9.4. Colombia: Productivity and environmental indicators

	Colombia		International comparison
	1991-2000	2007-2016	1991-2000	2007-2016
			World
TFP annual growth rate (%)	1.6%	-0.3%	1.6%	1.6%
			OECD average
Environmental indicators	2000*	2019*	2000*	2019*
Nitrogen balance, kg/ha	14.1	11.6	33.2	28.9
Phosphorus balance, kg/ha	5.8	6.0	3.4	2.6
Agriculture share of total energy use (%)¹	6.0	0.9	1.7	2.0
Agriculture share of GHG emissions (%)	34.1	28.7	8.4	9.5
Share of irrigated land in AA (%)	..	2.6	-	-
Share of agriculture in water abstractions (%)	..	14.4	46.0	43.4
Water stress indicator	..	..	9.3	8.5

Notes: * or closest available year.

1. Data are not directly comparable between time periods due to change in methodology in 2013.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

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 Publishing, http://dx.doi.org/10.1787/9789264227644-en.

Note

← 1.  Government provided the initial (seed) capital for the funds.