THE CROP CIRCLE

Colombia 2013 | AGRICULTURE | VIP INTERVIEW

TBY talks to Juan Camilo Restrepo, Minister of Agriculture and Rural Development in Colombia, on the impact of FTAs, boosting crop production, and rural development.

Colombian flowers and coffee are well recognized worldwide. What other main export products and markets are being targeted?

The internationalization of Colombian agricultural goods began long ago. The country has signed trade agreements with several countries and blocs: Mercosur (Argentina, Brazil, Paraguay, and Uruguay), Mexico, the Northern Triangle (El Salvador, Guatemala, and Honduras), CAN (Bolivia, Peru, and Ecuador), Chile, Canada, Cuba, Venezuela, the European Free Trade Association (EFTA), and others. However, the free trade agreement (FTA) with the US, signed in May 2012, is perhaps the most significant commercial step for us. Colombia increased export volumes to the US by more than 20% in the first 11 months of the year from 460,000 tons in 2011 to 553,000 tons in 2012, mainly due to sugar and confectionery exports, (+154%), banana (+17%), and coffee (+30%). The main agricultural trade partners of Colombia are Belgium, the UK, Germany, the US, Brazil, Ecuador, and Venezuela. Traditional products—banana, coffee, flowers, sugar, and snuff—represent on average about 77% of our total exports, and in the last five years we reported an average annual growth of 8%. Henceforth, our future goals are to create the right conditions for the modernization and specialization of agricultural production, strengthen Colombian agricultural institutions, and expand the supply of exportable products for which the country has great potential: beef, fruit, palm oil, cocoa, rubber, forestry products, and biofuels.

What are your export expectations for 2013 and beyond?

Colombian agricultural and agribusiness exports have been relatively concentrated in supplying the markets of developed economies, notably the US and the EU. In terms of volume these two markets accounted for 60% of our exports between 2006 and 2011. To a lesser extent, exports also went to neighboring Venezuela, Peru, Ecuador, and Chile, with our traditional agricultural goods—coffee, sugar, bananas, and flowers—being the main products. Given the need to expand exports, Colombia has diversified its agricultural production and its trading partners, promoting investments to meet the capitalization requirements and the modernization of production activities through financial instruments, technical assistance, research, and opening international markets via FTA negotiations. Colombia is currently holding talks with South Korea, Panama, Japan, Turkey, and more. The appreciation of the Colombian peso against the US dollar—from 2007 to November 2012 the Colombian peso has appreciated by 280 pesos—significantly affects the export sector, so it is safe to predict export trends for 2013 under these conditions. The current favorable economic situation of Latin America, where the estimated growth forecast is 4% for 2013, means that the export of agricultural goods to neighboring countries is likely to increase in 2013.

What is your Ministry's strategy to encourage international investment in the Colombian agricultural sector?

We have strengthened investment in the sector through financial resources from the national budget, which allocated 20% more in 2012 as compared to 2010. The country offers great opportunities in agribusiness, such as the availability of land for large projects (cocoa, forestry, and corn), the expansion of promising crops such as palm oil, significant growth in the production and consumption of biofuels, tax benefits and incentives for forest plantations, and improvement of the country's risk ratings. New investment will enable the development of innovation processes and technology transfer, the modernization of the production chain, and the procurement of capital goods, machinery, and equipment imported at lower costs. This will strengthen Colombia's competitive advantages over other countries that have not signed an FTA with the US. However, the country faces key challenges, especially in terms of transport infrastructure such as roads, airports, and ports, as well as innovation and technological development and qualified and skilled human capital. To better position Colombian agricultural products in international markets, it is necessary to improve phytosanitary accreditation systems for products in which the country has comparative advantages, such as fruits and vegetables. The Colombian Altillanura, considered the country's last agricultural frontier, has an area of more than 3.5 million hectares for the development of agricultural projects and activities within the rubber, forestry, sugar cane, palm oil, corn, soybean, sorghum, rice, and sustainable livestock segments. In addition, the country has some 17 million hectares suitable for reforestation, and its expansion is certainly very attractive to foreign investment. Finally, the government has submitted to congress a draft law on foreign investment in the agricultural sector. The project regulates the acquisition of rural land for the development of agricultural production involving foreign investment. It also proposes the creation of the National Registry of Foreign Investment in the agricultural sector that would be under the Ministry of Agriculture.

“Colombia is one of the most stable countries in Latin America, and offers a positive economic climate to attract foreign investors."

What trends in investment can you identify, and which sectors are the most attractive?

Colombia is one of the most stable countries in Latin America, and offers a positive economic climate to attract potential foreign investors to develop the advantages and opportunities offered by the sector. According to the IMF, the Colombian economy will grow by 4.4% in 2013. Total foreign investment increased from $2.47 billion in 2000 to $13.39 billion in 2011, mainly in the mining and energy sectors, and in free zones and hotels. Although the flow of foreign investment in agriculture accounts for only 1% of total FDI, the Colombian agricultural sector offers great investment opportunities. Colombia is one of the countries with the greatest potential for the expansion of agricultural lands in the world. Of the total area suitable for agriculture (21.5 million hectares), only 4.7 million hectares in agriculture and 459,000 hectares in commercial forestry are currently in use. Therefore, we hold huge potential to develop production facilities in crops like cacao, highly recognized for its flavor. Colombia has expanded its cacao acreage by 56% between 2002 and 2011, reaching 145,000 hectares, and we target the establishment of 28,000 new hectares and the renewal of 36,000 more as part of the Decennial Cacao Plan. In cattle, the country ranks fourth in Latin America (29.2 million head in 2012). The formalization of the industrial link (slaughter plants), as well as the improvement of distribution and marketing practices, present opportunities for private investment. In terms of biofuels, the country has been increasing its production capacity in biodiesel and ethanol. Nearly 439,000 tons of domestic crude palm oil production are used for biodiesel, and more than 374,000 tons of raw sugar are used in the production of ethanol. To increase our competitiveness we urgently need to attract further investment to improve local and national road networks, transport capacity in ports and consumer centers, as well as irrigation and drainage infrastructure.

What measures are being taken by the government to improve the efficiency of livestock production and the mechanization of agriculture in the country?

The government has prepared financial instruments, technical assistance, and risk management tools in an effort to improve agricultural productivity and the competitiveness of small and medium producers. Colombia has a scheme of second-tier banks to ensure credit resources offering favorable financial conditions, with preferential rates for small producers to finance agricultural and agribusiness activities. It also defines special credit lines under specific conditions aimed at a segment of producers or agricultural activities that require special attention. Between 2009 and 2011, financial resources to farmers increased by 32%, reaching $2.7 billion. In 2012, the same figure reached $3.2 billion. External market challenges make risk management a must in the government's agenda. For that reason, Colombia has developed the Agricultural Insurance and Hedging Program. The government supports the purchase of insurance against natural and biological hazards, from 60% to 80% of the value of the policy.

What steps are being taken to increase the volume and quality of small producers?

The government, through the draft Rural Development Act, is proposing a new regulatory framework that aims to promote programs of rural development, more effective management of territory, and sort and formalize land ownership issues, define protected areas, and resolve conflicts in land use. The proposed regulation aims to strengthen rural human capital, with a focus on early childhood nutrition, offer a universal coverage of education and basic health, as well as universal social security in rural areas. It will increase capital, spread knowledge and productive technology, strengthen partnerships and rural organizations, and improve the basic infrastructure of transportation, water, education, health, and sanitation in rural regions. Also, according to the National Administrative Department of Statistics (DANE), 32,000 new or rehabilitated housing units were delivered to low-income farmers in 2012. For 2013, we have an ambitious budget plan to increase the figure to up to 100,000 housing units. Finally, more than 20,000 small producers have benefited from the Productive Partnerships Program that the government launched five years ago, which aims at establishing market links between small producers. Also, we invested some $17 million in the Rural Opportunities Program to support micro entrepreneurs.

What is your outlook for Colombia's agriculture sector for 2012 and beyond?

The agricultural sector has traditionally been a generator of growth and employment opportunities in the domestic economy, providing more than 3 million jobs in rural areas. We estimate that agricultural GDP will grow about 3% in 2012. We aim at improving and strengthening key crops like coffee. In 2012, we renovated and planted nearly 61,419 hectares of coffee, which represents an increase of 9% compared to 56,316 hectares in 2011. In fact, between 2010 and 2011 we awarded more than $495 million in grants to finance coffee activity, technical assistance, research, and care programs for the rainy season. The expected performance of the agricultural sector will depend on the evolution of internal and external variables such as climate, international prices, exchange rates, and natural disasters.

© The Business Year - December 2012