Colombia: Ploughing room in all parts
With a large amount of arable land left unused and strong growth in the palm oil and biofuel sectors, Colombia is rich in opportunities for agricultural expansion. In particular, prospects for foreign investors are likely to be re-enforced by recently proposed legislation.
“The promotion of investment in arable land has been consolidating in recent years, as only 4.3% of the total territory for agricultural use is being exploited, while another 25% is being used for livestock, primarily ranching, with potential to host agricultural projects,” Ricardo Jaramillo, the director-general of Agrofuturo, a local company dedicated to promoting the use of idle land and production of agricultural products for export, recently told OBG.
A total of 3.5m ha of arable land is available mainly in the country’s eastern plains, the northern regions surrounding the Magdalena River, and the Colombian Altillanura – an area the US Department of Agriculture has identified as “Colombia’s next agricultural frontier”, citing the production of corn, palm oil and biodiesel as potential projects for the region.
Increased security throughout the country has created opportunities to utilise previously unexplored lands in the south of the country as well, emphasising the progress of areas such as Huila, Nariño and Cauca.
Potential investors are likely to be attracted to Colombia for its success in cultivating palm oil, as well as several other important export crops. At present, Ecuador and Colombia are the largest palm oil producers in Latin America, with palm oil the fastest-growing segment in Colombia’s agriculture sector.
In 2011, Colombia exported some 100m tonnes of palm oil, accounting for 3.3% of the agriculture sector’s output to GDP. Meanwhile, the number of small palm oil producers has increased substantially and currently accounts for 23% of the total number of palm oil producers in the country.
While palm oil producers have been accused of engaging in illegal land appropriation and encouraging the forced displacement of individuals residing on arable land, Colombia is certified as an adherent to regulations laid out by the Roundtable on Sustainable Palm Oil (RSPO).
The RSPO is collaboration of organisations, such as the World Wildlife Fund, Unilever and Migros, which supports “the use of sustainable palm oil for people, the planet, and prosperity”. To obtain certification, Colombian palm oil producers had to comply with regulations to consider employees and all other individuals affected by palm oil production, as well as to implement environmental preservation practices.
Part of the reason that palm oil is growing in prominence is its use in the production of biofuels. The minister of agriculture, Juan Restrepo Salazar, recently told local press that the country has six plants capable of converting palm oil to biodiesel, with a total capacity of some 500,000 tonnes.
Jorge Bendeck, the executive vice-president of Fedecombustibles, the Colombian national federation of bio-combustibles, told OBG that “ethanol and biodiesel are being produced in response to three main reasons: very low oil reserves, to enhance the environment, and to create jobs in very poor areas”.
Regulation has also played a large role in supporting the growth of the biodiesel sector. The 2001 passage of Law 693 required that all gasoline be 10% ethanol by 2009, eventually increasing to 25%. Law 939, passed in 2004, requires that diesel gasoline be 5% biodiesel.
Bendeck said that the development of the biofuel industry in Colombia has other goals in addition to environmental sustainability. “Both the Ethanol Decree (693) and Biodiesel Decree (939) consider biofuel production to provide jobs to young people, earning good salaries with their families, and as an alternative to reintegrate many people into society to end the illegal drug business.” At present the biodiesel and ethanol industries employ more than 80,000 direct and indirect workers.
Despite the many opportunities that exist for foreign investment in palm oil and biofuel production, a recent proposal for a law that would strictly regulate foreign investment in agriculture would have likely made it difficult for foreigners to become involved in the sector. The law did not win support from the minister of agriculture or the national government, however. As of November, there were plans to submit another law proposal to Congress that would guarantee the rights of foreign investors to participate in the agricultural sector.
Overall the future for Colombian agriculture seems bright. With arable land available for production expansion and a government that supports and protects both the development of the sector and foreign investment, there are strong growth opportunities.