Opinion Article by: Juan Gonzalo Perez* (jperezg@eafit.edu.co)
* International
Business Student, Universidad EAFIT, Medellin, Colombia
A year later after
the implementation of the Free Trade Agreement (FTA) between Colombia and the
United Sates, as a result of the lack of development policies for rural areas, several
agricultural sectors are on strike. The status quo of chaos in Colombia has led
to a serious economic and political crises.
Protesters are blocking main roads of transportation, causing a shortage
of agricultural goods and, consequently, food prices are increasing. Also, according
to some government officials, political opposition movements are taking advantage
of the urban and rural riots to gain popularity for the upcoming elections.
Protesters are asking
the government for subsidies, elimination of import tariffs on agricultural
supplies and adjustments in the FTAs already signed. Let’s try to analyze the
causes and possible solutions to this problem.
According to Dhanraj
Harrypersad from the Export Market Research Centre in Trinidad and Tobago, the
reality is that in most cases there is a disconnect between those negotiating FTAs
and those which stand to be affected. He also argues that FTAs are often more
politically than economically motivated. They are negotiated quickly and do not
give sufficient thought to the impact they will have on some of the smaller
producers in a country. Usually it is the larger companies, groups and
conglomerates which have the say in negotiations because they may have funded
the political campaigns of the governments.
It is true that as
Colombia becomes more open to international markets it is necessary for local industries
and small farmers to become more competitive. The challenge is to develop a
higher value added agricultural industry that creates quality jobs and
increases the salaries of farmers. To accomplish this task the government
should implement clear development policies and take advantage of the benefits
from the large amounts of Foreign Direct Investments (FDI) coming into the
country as well as the royalties from the extracting industries.
Although subsidies
can solve the farmer’s problems in the short term, the fact is that it affects
the country’s welfare. Also, they cannot rely on the government to give
subsidies and preferential treatment indefinitely. At some point in time
farmers need to be able to stand on their own and compete in international
markets. For instance a more feasible solution could be to implement programs to
transform the agricultural sector from one of primary goods, like potatoes, raw
coffee beans and bananas, which are low cost but also low profit, to one of
value added products that can be incorporated in global value chains. For
example, Chilean pineapple exporters have recently determined that exporting
pineapple juice, a value added product, is more profitable than exporting the
pineapple itself. The role of the government should be to get farmers to that
state rather than offering subsidies and reducing import duties on inputs.
Furthermore, there is
little chance that the government will accept to negotiate the terms of the FTAs
because it is a risky political and diplomatic decision, even though it is
legal for the Colombian government to establish consultations with the US
claiming that the FTA is causing internal social conflicts.
In conclusion, the
status quo of crisis in Colombia can be seen as an opportunity to develop the
agricultural sectors. But, most important is to establish a clear plan to
improve the technology to transform the basic production of agricultural goods
into value added products that will allow small farmers to become more
competitive in international markets and even become part of global value chains.
For now, let’s hope that the protests stop and the parties can come to some
sort of agreement soon because the fact that people are using it as an excuse
to gain political benefits and damage property just shifts the focus away from
the true reasons behind the protest.
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