The growth of emerging markets is something that global investors generally keep a close eye on, especially in the COVID-19 era. When a major development occurs, such as a large-scale public/private sector investment project, investors often seek to be the first to gain exposure. Now, such a development is being seen in the realm of Colombian agriculture.
The agricultural sector in Colombia is poised for rapid and systemic growth, especially in terms of exports. The Productive Alliances Support Project (PASP’s), a joint venture between the public and private sectors, has recently pledged to invest $155 million in Colombia’s agricultural production, not only for improvements to supply chains and farming practices, but for marketing integration and competitiveness.
This is great news for Colombia’s ag industry. Even businesses not directly affected by the program will benefit from the rising tide of large-scale ag investment in the country. Positioning Colombia’s agricultural goods in foreign markets will make access easier for all Colombian agribusinesses, not just those that receive funds from the program.
Since 2002, Colombia has been a pioneer in Productive Alliances (PA’s), massively improving marketing integration and competitiveness for producers. For 2020, most of the projects involve tropical fruits like bananas, lemons, pineapples, avocados and mangos – some of the fastest growing products in the region.
Exports variation for Colombian agricultural products (2018 – 2019) (Source: Ministry of Agriculture)
The proposal’s 90% success rate shows how with proper technical assistance and investment, growers are capable of considerably increasing their incomes (30% on average). It is no coincidence that tropical fruits are gaining prominence both internationally and in the PASP’s for 2020. These products fetch a high price in foreign markets, and Colombia is ideally suited to fill the annual production gaps that major producers like Mexico and Brazil have to content with.
The Colombian Ministry of Agriculture will allocate $42,000 million COP (around 115 million USD) for all the chosen projects, after receiving tremendous support from producers. As a result, there are almost 100 proposals from 20 Colombian municipalities, mainly focused on tropical fruits. With 28 profiles of productive projects and a stunning record of thousands of families benefiting from the PA’s, the project will have a significant impact on Colombian agriculture.
PA’s – an overview
PA’s foster diversification, as well as increased sales volumes and prices. According to the World Bank, PA’s have a massive effect on their beneficiaries, increasing their sales by 20% to 60%. Also, the average net income of the participants has considerably increased, being 30% higher than the non-participants. The PA’s scheme is simple, but quite powerful.
Marketing integration, competitiveness, social inclusion and environmental sustainability are at the core of the projects. However, there’s a strong emphasis in improving marketing integration and competitiveness. With a greater presence in markets, exports become more viable, adding value to entire supply chains.
PA’s in Colombia
From the beginning, the Colombian Government has shown great interest in guaranteeing that the opening of markets generates the adequate conditions for the development of the agricultural sector. These programs have not only supported promising fruit-related projects such as cacao, short-cycle fruit trees, blackberries and long cycle fruit trees, but also have aimed to consolidate the image of transparency and efficiency in the use of funds.
The result is that in 2017 and 2018, there were 1.5 times more alliances than in the last years. Likewise, the stunning rates of financial sustainability justify the almost 500 million USD of total investments in PA´s. More than 90% of the proposals have succeeded, and more than 70% of them still go on. Meaning that is not only a short term boost to competitiveness, but a sign of strengthening commercial ties between producers and buyers.
Regarding marketing integration, the Secretary of Agriculture, Rural Development and Environment, Julio César Cortés Pulido has said, “this is how we want to target this strategy to strengthen marketing (…). The idea is to make profitable, sustainable and competitive proposals that are worthy of the Modular Incentive that the national government provides”.
Additionally, PA’s can greatly strengthen the private sector by reducing transaction costs, providing quality products, and shortening the supply chain. Meanwhile, 86,524 rural families have received benefits from the 1,444 productive alliances established by the national government. In other words, working from the base of the pyramid not only brings social benefits, but can lead the way towards international markets.
This new round of support for Productive Alliances in Colombia is great news for anyone with a vested interest in the nation’s ag sector. By integrating small and medium enterprises into global supply chains, these alliances will bring huge value to the nation’s ag industry as a whole. The success of these alliances is a win-win situation, for small growers, foreign investors, established agribusinesses, global consumers, and the nation of Colombia itself.