The Need to Boost Productivity of Colombian Agriculture

Over the past 20 years, labor productivity in Colombia’s agricultural sector has been stagnant at 15.1% below the Latin American average and well below (47.5%) countries with similar soil and climate conditions such as Costa Rica. Low productivity is exacerbated by informality in land ownership, which also has negative consequences on the credit market, and even on investment in public goods. As part of the nation’s efforts to revive the economy, it is essential to expand the role of the agricultural sector in terms of job creation and long-term economic growth.  

Informality in tenure prevails over 52% of the country’s lands, according to the Rural Agricultural Planning Unit(UPRA), and this impinges on agricultural productivity on three fronts:

• First, the absence of property deeds hinders the proper functioning of the land market, which is crucial to ensure adequate allocation of both land and work.
• Second, informality in land tenure discourages long-term investment because it creates uncertainty about the appropriation of returns.
• Third, the proper functioning of the credit market for the agricultural sector is constrained by land tenure informality.

The analysis should also include agricultural infrastructure. Irrigation and drainage infrastructure only covers 6% of the potential in the country. The consequences are obvious, ranging from loss of business opportunities and low competitiveness, to difficulty integrating the produce into global value chains. In this sense, the use of instruments such as Public-Private Partnerships (PPPs) are paramount to accelerating the modernization of agricultural infrastructures and enabling development while factoring agriculture into the equation.

In this context, there are two situations we must take into account for the rural development of Colombia: The offer of services for the formalization of land ownership and the proper functioning of the land register. The Multipurpose Land Registry Policy aims to address this concern, with the ambitious goal of covering 60% of the territory by 2022 and 100% by 2025. Amid the fiscal difficulties and emergencies brought about by the pandemic, this policy should be seen as an intrinsic part of the recovery. One of the main challenges in the implementation of this policy will be its financing, with an estimated investment of 5.28 trillion pesos (USD 1.4 billion) between 2019 and 2025.

With this outlook, there is an interesting opportunity for multilateral banking. It can play a pivotal role in promoting the participation of citizens in the process of land surveying for registering purposes, following public policies that provide for the active participation of communities in the surveys using technology. This requires strategies to disseminate the policy and promote community ownership of the process. The third challenge is to underpin the digital transformation required for the safe and complete operation of the multipurpose land registry.

The efforts made by CAF in this regard include the support for the evaluation of financing alternatives to the multipurpose land register, enhancing risk management of the agricultural sector, and working with the National Planning Department (DNP) in the development of technical and methodological policy guidelines related to land preparation.

As progress is made with the property formalization policy, it is essential to continue our efforts to encourage investment in irrigation along two lines. First, it is necessary to devise concrete schemes for the development of PPPs for land preparation in the country. Second, public co-financing of irrigation projects through tender mechanisms has been proposed, in which support with multilateral banking credits could also be key to achieving financial feasibility.