Development of the Agricultural Sector in Colombia. Co 630.9561 Yale Univ. Economic Grow-Tn Center. B534 Development of the Agricultural Sector in Colombia. R. Albrt Berry. July 1967. 2 v. Includes bibliographies. AID/REPAS - 12. l.Agricultural development - CC.L.3ector analysis - Agricuiture - CO. 3 .Agro-industry - U6.4 Input-Output analysis - Agriculture - CO.r.GovernmenL policies ­ CO.6.Coffee - CO.I.Berry, R. Albert. L.Contract. III .Title. DLVI L0iL~i;T CF2: AG.RICUL1TRA by R9. Albert Berry "hapters i ­ . f" V.1 0 .1 ... ' ... .1 A ,2" PM. I.~1 Cflh) ,o:.l,.. UNITED STATES GOVERNMENT TO :?C/TA/PARD, Mr. aniel Slake DATL: October i, 1968 ,C.I.:..,/4/ it-, 0 P.O. WO;i/ARDS, Alvin . aers / UnJEcT: Review of the "Developmznn of the ricultral Sector in Colombia" WOH/ILRDS has competed the review of the "Development of the Lgricultural. Sector in Colombia" by R. lb Berr'ya of the Yale Economic Cent0r undcr AID-Repas-1i2-"Quanitativc Studies Economic Structure and Growzh. This reporT is an objective analysis of ta agricultural sector of Colo.mbia from 1925 to 1965. The aLnalysis includes the private and public investments that have been rne i agricultural sector during this period. The study is a co3ilation f the statistical data available (the report acknowledges the unrliability of data) within Colombia in rcgards to investments azd production. The data and the nertinent factors ffcting the changes Ln production have been analyzcd by the use of acceptable economic analysis methodology. The analysis included the Listory o r policies of the various govcrnments of Colombia during this time period, how the policies affected the dvolop­ ment of the agricultural sactor. t Ay did -not include ari cuUra storage and mrketing. This is the only significant criticism of the study. Each section of the study includes broad scale reco,-,nendations on needed changes that could or =hav changed the rateo of developent. Zany of these recosinendations have been accepted or undertakon by the present 0C. This study does not criticize the Government of Colozbia, nor any of its entities per se. There are no points of view or personal opinions that could damage or prejudice the relationship between the Government of the U. S. and/or the Government of Colomba. WOi/APS recomeends that the Yale Zconomtic Center be advised thnat the report is approved for publication. ALS also recorraends that the Io-her studies pertaining to the a.ricultural sector should include the data relating to storage and rarketing of the :ajor i tems for indigenous consumption and for export as part of the szudies. t.m: TIR. P.,-i,,.rTonds Rei::larl', on the PayrollSavings Pla'n CHAPTER I An Introduction to the Key Issues in Colombian Agriculture The performance of a country's agricultural sector may be judged by whether it produces enough food and raw materials so that their prices do not become too high, and whether it provides farmers with adequate income levels. In the long run, at least, these two goals tend to be closely linked; high productivity is almost sure to lead to higher incomes of the factors engaged in the sector and to lower relative prices of the goods it produces. Uhen about half of the active population is engaged in agricul­ ture, as in Colombia, the most relevant measure of the success of the sec­ tor is its ability to provide adequate income levels to its members. Its ability to expand output fairly quickly when prices rise is also important, as is its contribution to the balance of payments, in the form of exports. During most of its history the agricultural sector in Colombia could 1 not be construed as a serious bottleneck in the development of the economy. This remains true today. Agricultural production has tended to rise at only about the same level as that of population for a decade now, but the demand is apparently rising rather slowly so that this is all that is re­ quired to maintain more or less stable relative prices of agricultural and non-agricultural products. 2 And there is very clear evidence that the 1Except in the sense that it is a large part of the economy; in one sense every sector is a bottleneck in that the economy would progress faster if costs went down in that sector. 2See Table 11-4 for the detailed price series. There was a mild (10 per centl increase in food prices as compared to other prices in the blue collar workers cost of living index during the two decades 1945-1964. (continued on following page) -2­ potential prcductivity of the sector is very high. In the long run it is not difficult to think of means by which large increases in output could be achieved. Whether such means will be implemented remains to be seen. Our understanding of the sector is still too deficient to be able to pre­ dict with assurance that production will not expand too slowly relative to demand; if it did so this could imply both continued low levels of income within the agricultural sector, and a shift of the terms of trade against the product of the urban sector which would slow down capital formation within that sector, and in general slow down the rate of growth. The problem of lagging output in the future is a possibility; that of poverty due to very uneven distribution of income within the agricultural sector is already severe and could become worse. Here both past and future trends are in (continued from preceding page) Prices (received by the farmer) of crops other than coffee did not change relative to prices of non-agricultural goods over this period; those of livestock did rise (presumably accounting for the mild increase in food prices in the urban areas). Coffee prices rose substantially but this, of course, had no adverse effects on other sectors. Prior to 1945 there had been increases in relative prices of agricu*.­ tural products; it is possible that the advent of commercial type farming (a post-World War" II phenomenon) contributed to the leveling off of prices. While it is true that the two decades 1945-1964 saw only a mild increase in the price of domestically consumed agricultural products (due entirely to the increase in prices of livestock), one could argue that the pre-war upward trend in the relative price continued to the mid-fifties and was then reversed, the relative stability of the whole period resulting from the averaging of the earlier upward trend and the later downward one. The advance of commercial farms might again be adduced as a factor contributing to this reversal. Other factors will be discussed farther on. -3­ doubt; much effort would be required to get a clear picture of the way in­ come distribution has changed in the last thirty or forty years and more to guess whether past trends are likely to continue into the future. The behavior of income distributi-n in the future, as well as that of output and exports of agricultural produce, will depend on the patterns of development of each of four important subsectors, i.e., coffee, livestock, commercialized crop growing, and non-co.iercialized or small-scale agricul­ ture producing for the domestic market. Vide differences exist among these in terms of output per person, capital per person, land per person and technology; it is these differences which make it especially necessary to consider their individual paths in the future. The generation of a high and increasing level of exports depends pri­ marily on the performance of the coffee sector (although here the problem is principally the lack of demand and not difficulties on the supply side) and on the beef sector, which has historically been characterized by great in­ efficiency, latifundismo, absenteeism, and waste of resources. Since there are some crops, including bananas, sugar, cotton, and others, which are either exported currently or are potential exports, the commercial crop sector will also play a role in the achievement of this goal. Its likely contribution is, however, overshadowed by that of the coffee and beef 1 sectors. 1 With the passage of time it is hoped that the livestock sector will become modern and "commercialized" as part of crop growing is now. But, partly in deference to current usage in the Colombian literature, we use the term "commercial" to refer to crop growing, although this involves impre­ cis-ion. -4- The achievement of a sufficiently rapid output of goods to satisfy the domestic market in such a way that the relative price of agricultural goods does not rise will depend on the livestock, commercial and domestic sectors. Much of the recent increases in production of crops have probably occurred on commercial farms, and further increases in corwercialization and mechan­ ization of agriculture will probably contribute to the achievement of this goal. To the extent, however, that commercialized agriculture becomes the source of a high prcportion of future increases in output, it may worsen the distribution of income among the people in agriculture. Whether such an evert occurs--or more specifically whether the lower stratum of the agricul­ tural income earners becomes better off or worse off in relative and abso­ lute terms--will depend largely on the relative increases in technology and in land and capital as between large-scale farming and small-scale farming. A very marked dualism has already developed within agriculture, almost entirely within the last fifteen or twenty years. Commercial planting of cash crops on a reasonably technical basis has developed rapidly, thus con­ tributing to the increase in total output.