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, K. and Valdes, A., 2007[2]).
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[3]).
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, K. and Valdes, A., 2007[2]).
However, this liberalisation was too rapid for farmers to adjust, putting the sector in crisis. Then, towards the end of the 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[3]).
Since 2022, more emphasis has been put on land reform, sustainability productivity, rural and territorial development, as well as rural services such as digital coverage, rural roads, digital coverage, and housing.
