Monday, September 2, 2013

The Status Quo of Chaos in Colombia: An opportunity for development

Opinion Article by: Juan Gonzalo Perez* (
* 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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