Colombia - The development of Colombian agriculture

DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 81-CO THE DEVELOPMENT OF COLOMBIAN AGRICULTURE May 25, 1973 Latin America and the Caribbean E | This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.   TABLE OF CONTENTS Page No. SUMMAIRY AND CONCLUSIONS i - viii I. INTRODUCTION: AGRICULTURAL POLICY OBJECTIVES AND INSTRUMENTS II. LAND DISTRIBUTION AND AGRARIAN REFORM 6 Soil Types and Land Use Patterns. Distribution of Land Among Farms. Distribution of Rural Incomes. Employment in Agricultural Sector. Land Acquisition. Land Titling. INCORA Projects. Irrigation Projects. Colonization Projects. Farm Improvement Projects. Long-Term Planning of Agrarian Reform. The Communal Enterprise. Organization of Agricultural Workers. Users Associations. III. COST AND AVAILABILITY OF AGRICULTURAL CREDIT 35 Credit Management and Institutions. Reserve and Investment Requirements. Interest Rates. New Legislation and Interest Rates. Outflow of Funds from Agriculture. Agricultural Financing Fund and Proposed Expansion. Trends of Agricul- tural Credit. Future Growth of Agricultural Credit and Production. Credit to Small Farmers. Recent Events. IV. THE OUTLOOK FOR COFFEE AND OTHER CROPS 55 .Coffee and Coffee Diversification - The 1970 Coffee Census 55 The Diversification Program. Recent Events. B. Non-Coffee Crops - General. Production. Costs and Prices. 60 Price Policy. Marketing. Research and Extension. Exports. Imports and Import Substitution. Wheat. Rice. Sugarcane. Cocoa. Cotton. Domestic Consumption. Costs and Prices. Cotton Ginning. Cottonseed. Potatoes. Industrial Process- ing of Potatoes. Bananas and Plantains. Fats and Oils. Yucca. Corn and Sorghum. Minor Crops. Outlook. C. General Policy Considerations - Present Policies. Income Dis- 104 tribution. Employment. Agro-Industries Development. Extension. Transportation. Marketing. Import Substitution. Planning. V. THE OUTLOOK FOR LIVESTOCK AND DAIRY PRODUCTION 108 A. Summary and Conclusions B. General C. Beef Cattle. Beef. Profitability. Taxation. Employment and Income. Demand and Supply. Exports and Imports. Slaughtering, Processing, and Marketing. Outlook. This report presents the findings of a special agricultural mission which visited Colombia in 1972. The mission was headed by Mr. G.L. Hyde, and included Messrs. R. Arrivillaga and F. Earwaker (Bank staff), W. Liepe (Consultant), and A. Thieme, staff member of the Inter-American Development Bank. The report was prepared both for Bank needs and in response to interest expressed at the February 1972 meeting of the Consultative Group for Colombia. It is hoped that the report will prove useful to the Colombian authorities, who have been most generous in extending support to the mission.  Page No. VI. ENVIRONMENTAL PROT3CTION AND THE USE OF RENEWABLE 129 NATURAL RESOURCES Development versus Conservation. Forest Resources. Fishing Resources. Soils, Water, Wildlife, and Parks. VII. FOREIGN FINANCIAL AND TECHNICAL ASSISTANCE 144 The Historical Record, 1961-72. Studies and Technical Assistance. Future Assistance. Rural Development Strategies. Conclusion. VIII. THE TASK AHEAD 151 Background, Goals, and Instruments. Land Distribution and Reform. Availability of Credit. Crops. Livestock. Natural Resources. Excternal Assistance. Mission Conclusions and Recommendations. APPENDICES I.1 - The Physical Setting of Colombian Agriculture 170 I.2 - Institutional Organization of the Sector 173 II.1 - New Legislation Concerning Agrarian Reform 184 II.2 - The Colombian Institute of Agrarian Reform 191 II.3 - The Agrarian Reform Cooperative Center 193 II.4 - Community Action and National Agrarian Federation 194 V.1 - Beef and Dairy Production Areas 195 V.2 - Dairy Industry 197 V.3 - Pork 202 V.4 - Poultry 204 V.5 - Sheep and Goats 205 V.6 - Research, Extension, and Rural Education 206 V.7 - Statistics 213 VII.1 - AID's Fifth Agricultural Sector Loan 214 VII.2 - Description of IBRD Agricultural Loans not Fully 216 Disbursed at Mid-1972 VII.3 - Status of Agricultural Preinvestment Studies 219 VII.4 - Externally Financed Preinvestment and Technical 222 Assistance Projects and Activities in Agriculture and Natural Resources VII.5 - List of Project Proposals, Renewable Resources 227 and Education, 1972-76 VIII.1 - Trade-Offs Among Alternative Policy Objectives 229 A Nlote on the Definition of Value-added with Respect to the Agricultural Sector STATISTICAL APPENDIX MAPS CHART  THE DEVELOPMENT OF COLOMBIAN AGRICULTURE SUI4AARY AND CONCLUSIONS Output Growth i. Between 1950 and 1970 agricultural value-added grew at an average rate of 3.4 percent per annum, measured in constant prices of 1958, versus 5.7 percent for non-agriculture. This growth rate was barely above that of Colombia's population. In the 1965-70 period agriculture grew by 4.5 percent per year, however (compared to 6.2 per- cent in non-agriculture), permitting more domestic consumption as well as a better foreign trade balance in agricultural products. Severe weather conditions slowed agricultural growth to 2.2 percent in 1971, but preliminary figures indicate a 5.5 percent gain in 1972. ii. Output gains in recent years have been particularly impressive for cassava, cotton, potatoes, rice,sorghum, soybeans, and sugar. With the exception of cassava and potatoes these commodities have substituted for imports or expanded exports. Basic items of mass domestic consumption such as corn and beans have been stagnant or declining, however, and yields have been stable or falling for every major commodity other than rice and sugar. Crops grown predominantly by small farmers have suffered from bad weather, disease, and a failure to apply modern inputs in a timely fashion and on an adequate scale. Production of livestock, which is achieved primarily on large holdings, expanded at a relatively fast 5 percent per annum in 1967-71. This was influenced by the beef cycle, and between now and 1976 output is expected to rise at a slower rate. Coffee production has been well controlled and adapted to Colombiats quota within the International Coffee Agreement, iii. It should be feasible to boost the overall rate of agricultural value-added to 5-6 percent during the next decade. Domestic demand for agricultural products can be expected to be strong, in view of the relatively high income elasticity of demand for them at Colombia's per capita income level (US$340) and the government's commitment to higher rates of income growth. In fact, the achievement of high rates of income growth, on the order of 7 percent per year, is not going to be possible without a strong agricultural effort. External demand for Colombia's products is also expected to be better than in the 1960's -- the world coffee market is in its upswing phase, for example, and very favorable conditions exist for items such as meat and sugar. The outlook is somewhat less favorable for commodities such as bananas and cotton. iv. It is on the supply side where problems are likely to arise. The achievement of a 5-6 percent rate of agricultural output growth can * be accomplished only by (a) extending the amount of cultivated land, (b) improving crop yields, (c) raising labor productivity, (d) employing more agricultural workers, and (e) providing a range of services designed * to raise the quality of life in the rural areas. The simultaneous pursuit of these objectives will require changes in organizational forms and agri- cultural techniques, division of latifundia, consolidation of minifundia,  rationalization of land use, a judicious approach to farm mechanization, and a shift in crop mix toward higher-value and more labor-intensive commodities. Land Use and Distribution v. The Agustin Codazzi Geographic Institute and INCORA, the National Agrarian Reform Agency, have classified 69 million of Colombia's 113 million hectares into eight major soil classes. (The remaining 44 million hectares of national territory are located in the largely unpopu- lated regions of the Eastern Plains and Amazonia, which are at present marginal to agriculture.) The first two soil classes appear suitable for crop cultivation as they stand, and the third requires certain invest- ments in drainage facilities and other land improvements. There are more than 12 million hectares of class I, II, and III lands in Colombia suitable for crops, two-thirds of which are situated in the Andean and Caribbean regions. (Soil classes IV and V, which together amount to about 32 million hectares, are believed suitable for extensive livestock operations. The 21 million hectares of class VI soils are available for forestry, and classes VII and VIII may be disregarded as far as agriculture is concerned.) In 1960 only 3.5 million hectares were put to permanent and seasonal crops, and 14.5 million hectares were in pastures. These overall figures, supported by more recent surveys, point to a considerable under-utilization of available land resources. vi. It appears, moreover, that in the heavily populated Caribbean and Andean regions more than half of the 8 million hectares suitable for cultivation are used for livestock operations. At the bare minimum there are 3 million hectares of crop land in these two regions that are recorded as natural pastures. Despite the limitations and imperfections of the available data, it seems clear that Colombia's farm land resources are not being exploited in an optimal fashion. Visual evidence of this can be obtained by visiting the Cauca River Valley, by far the richest and most commercialized agricultural region of Colombia. The valley floor, about 200 kilometers long and an average 15 kilometers wide, is flat almost in its entirety. The whole valley is cultivable, save for perhaps 10-15 percent that has poor drainage. Sugar is the dominant crop, but as much as half of the area is still in pasture, versus a third in crops. vii. The size distribution of land among farms is highly skewed. According to the 1960 agricultural census the largest 10 percent of farm units accounted for 80 percent of farm land, while half of all units comprised less than 3 percent of farm land. Despite the activities of INCORA during the last decade, the 1970 agricultural census shows that the size distribution of farms remains as unequal today as it was in 1960. The Gini Coefficient of Concentration stands at a high .86 value in each of the two census years. (It should be noted, however, that the degree of concentration of crop land appears to be lower than that of ranch land. And it is also true that the distribution of farms by asset value is less skewed than the distribution of farms according to physical size.) Since most natural pasture and fallow land is in large holdings, it must be concluded that to improve the efficiency of land use in Colombia it is also necessary to improve the distribution of land ownership. Recent studies indicate, however, that even on very small plots land is not always properly utilized because of inadequate credit and supporting services.  - iii - viii. INCORA has been hampered in its efforts to rationalize land use by complicated and time-consuming legal codes and lack of finance. With the February 1973 passage of new agrarian legislation the agency should find it easier to redistribute land and to promote better land use. This new legislation (a) clarifies and simplifies the legal procedures of land acquisition; (b) provides better terms of compensation to owners of adequately exploited land; (c) provides worse terms of compensation to owners of inadequately exploited land; (d) establishes a National Fund for Land Purchases and Rural Welfare to finance purchases of adequately exploited land, and a National Village Welfare Fund to finance education, health, family assistance, and other services; and (e) in addition to reducing rights of retention, i.e., the maximum amount of land that an owner can retain when expropriated, the State's right to annul private ownership claims (Ilextincion de dominio privado"r) is extended to land left idle for 3 years or longer, as compared to 10 years under previous legislation. ix. A "presumptive"t agricultural income tax has also been intro- duced, based on the cadastral value of each farm or ranch. The State will presume that an operator should realize an income equal to at least 10 percent of the value of his property if it is dedicated to crops, 4 percent if used for livestock breeding and dairy operations. The value of property will be defined as 50 percent of the cadastral value of land under permanent cultivation (coffee, african palm, rubber, etc.), 75 percent for land under semi-permanent cultivation (sugar, bananas, pineapple, etc.), and 80 percent for land in annual crops (corn, beans, soybeans, potatoes, etc.). Dairy and livestock operations normally qualify for the 50 percent ratio. Thus, the rate of presumed income ranges from 2 percent of cadastral value for this type of operation to 8 percent for an annual-crop operation. Cadastral values run about 70- 80 percent of commercial market values, on the average. During an interim period adequacy of exploitation will be largely defined as the farmer's ability to realize an income at least 2 percentage points above the presumed income set for his operation. Eventually, however, technical criteria will be devised which will relate farm inputs and outputs in terms of physical efficiency. Social criteria will also figure in the calculation. Agrarian Reform x. This new legislation should facilitate implementation of the mission's main recommendation: the adoption of a comprehensive and sustained attacx on the problems of dualism and rural poverty in Colombia. Access to a decent plot of land must be arranged in many cases, and in all cases vigorous efforts will be needed to provide credit, technical assistance, access roads, marketing channels, health services, family counseling, and educational facilities. Although there is little conclusive evidence concerning the relative efficiency of small versus large commercial farm operations in Colombia, the mission  - iv - believes that there are many crops the production of which can be handled perfectly well by small farmers, e.g., fruits, vegetables, plantains, and potatoes. Even those crops susceptible to economies of scale may become fair game for smallholders willing to join together in cooperatives or other collective forms. (There are over 500 communal enterprises operating in Colombia at the present, but as yet little is known about their operations.) A lessening of interest in the larger farm operators is not suggested. A successful farmer should normally be held up as an inspiring example, not as an object of persecution through arbitrary and punitive measures. What is urged is increased attention and assistance to all agriculture, with most of the incremental effort directed toward the small farm component. xi. Despite government efforts in recent years to improve their lot, hundreds of thousands of landless workers, tenant farmers, and small- holders remain at the level of subsistence. In fact at least half of Colombia's 1.6 million rural families exist at this level, and their number appears to be rising rather than falling. Although precise figures would depend on the scope, pace, and precise procedures followed, an ambitious agrarian reform program to help these people would undoubtedly be expensive. A major, comprehensive study of the financial requirements of an accelerated program is recommended, to cover the costs of land transfer, research, extension, and both physical and social infrastructure. This study should include an analysis of the different ways by which financing might be obtained. The experience of other countries should be examined carefully for ideas that might be useful in the Colombian context. Another important topic calling for separate study has to do with the institutional and manpower requirements of a larger program. Several international agencies are able to provide assistance for such studies. The choice of an appropriate time horizon for an agricultural development program depends on the availability of fairly reliable estimates of financial and manpower needs and projected availabilities. It is impossible to set a 15- or 20-year horizon, for example, without knowing roughly how much it would cost to carry out various alternatives--e.g., how much to settle a farm family in a remote colonization area, in an irrigation district, or in a collective enterprise of some sort. Various target levels of family income or consumption should also be studied. Time horizons and quantified programs normally get decided only after an exhaustive, iterative study of many alternatives. Once they are decided, however, they should be spelled out clearly to the public to dispel uncertainties that may exist with respect to the proposed pace of land redistribution and other vital issues. Availability of Credit xii. Most credit to agriculture is extended in accordance with various laws and official regulations originally enacted to ensure an adequate supply of finance at a low rate of interest. Roughly half of commercial bank loans outstanding to agriculture at the end of 1971, for example, were made under the provisions of Law 26. This 1959 statute requires banks to invest 15 percent of their sight and time deposits, after deduction of legal reserve, in the sector. They are made at 10 percent interest plus half a percent more for each year  - v - beyond the first. Many other commercial bank loans are discounted through the Agricultural Financing Fund administered by the Bank of the Republic. This fund is used to discount short-term crop loans for a dozen major commodities, provided that such loans are made at 13 percent interest. Other lending to agriculture is usually motivated by a desire to qualify for reduced legal reserve ratios, and is made at 14-18 percent, allowing for fees and minimum deposit balance requirements. Special INCORA and Agrarian Bank credit programs involve interest rates of 8-12 percent per annum. Since there is only limited supervision and control over the ultimate use of many commercial loans,-a certain amount of money lent ostensibly for agricultural investment ends up in different uses. The extent of this diversion has not been quantified, but many believe it to be substantial. xiii. It is unfortunate that despite these official rules and selective credit regulations at least half of Colombia's small farmers have no access to credit from institutional sources. The use of interest rate ceilings on bank loans as a device to help small farmers is not effective, because the assistance is tied to credit access that is ordinarily denied them. The impression that one gets from looking at the experience of other developing countries is that the availability of credit is far more important to the farmer than the price he must pay for it. The mission feels that all farmers, even those participating in special development programs, should pay a positive real rate of interest for borrowed funds. To the maximum extent possible small-farmer loans should be associated with technical assistance and direction ("directed" credit is somewhat less demanding in terms of technical manpower requirements than fully "supervised" credit). The recently expanded Agricultural Financing Fund in the Bank of the Republic should provide a valuable mechanism for rationalizing agricultural credit practices and ensuring that loan proceeds get used for productive purposes. Recent efforts to raise interest rates, to coordinate the activities of the Agrarian Bank, INCORA, and other agencies, and to step up lending to small farmers are also promising. Research, Extension, and Price Support xiv. The quality of agricultural crop research and extension services in Colombia, at least those provided by the Agricultural Institute (ICA), appear to be good, but inadequate to the great need. Notwithstanding the fact that the Agrarian Bank and INCORA also provide technical assistance along with their credit operations, the mission feels that ICA should expand its extension staff eight times within the next few years. The mission also recommends that energetic efforts be continued to improve information dissemination techniques. More marketing assistance is badly needed. Price support activities need to be completely revamped, as IDEMA (the State marketing agency) involvement in the purchase of most harvests has been far below the minimum level needed to influence price behavior. On the livestock side, a great deal needs to be done if Colombia is to realize its natural potential. Prevailing levels of technology and animal husbanidry are low, as reflected by numerous measures of efficiency. Recent initiatives to prepare a National Livestock Development Program are gratifying.  - vi - Natural Resources xv. In addition to an impressive crop and livestock potential, Colombia has valuable stands of commercial grade timber as well as rich fishing resources waiting to be exploited, INDERENA, the govern- ment agency created in 1968, has plunged enthusiastically into the task of guiding firms and citizens toward a pattern of resource usage that gives proper weight to environmental conservation and protection. In view of the magnitude of the task, however, the mission feels that every opportunity should be taken to publicize the value of conservation and to facilitate this young agency's activities. Although comprehensive resource development plans have not yet been completed, several high-priority projects have been identified by INDERENA and the National Planning Department. Foreign Assistance xvi. The mission believes that foreign assistance will have to rise substantially if Colombia's rural sector is to be developed rapidly. Sizable amounts of local-cost financing will be required, since the foreign component of many agricultural projects is relatively low. Recurrent expenses may also have to be financed in certain cases if institution building is to be effective. The prime criterion for an expanded foreign assistance effort ought to be that favored programs be suitable for replication on a grand scale. Integrated packages of assistance need to be designed, and this will require a great deal of planning and administrative effort on the part of the lenders as well as by the Colombian authorities. It may be desirable to work out a rolling 5-year program whereby each external agency can concentrate on a specific subset of activities with full assurance that it fits well within a broader strategic framework. Rural Development xvii. Agricultural/rural development is a complex subject, and there are very few obvious solutions on the shelf. It is reasonably clear, nonetheless, that rapid economic and social improvement in the Colombian countryside will require (a) a consistent set of national policies to provide encouragement to the private sector; (b) strong and highly coordinated public institutions; (c) a willingness to permit decentralized decision making by local authorities on many issues; (d) an emphasis on labor-intensive and self-help methods; (e) the promotion of collective groupings; and (f) the adoption of an inte- grated and often multi-sector approach to provide social, infrastruc- tural, and productive support in a logically phased pattern. The range of activities involved is great, from the survey, analysis, drainage, irrigation, and conservation of soils to research, extension, marketing, credit, storage, processing, education, health, housing, roads, electricity, and many others. The challenge is to raise the absolute and relative levels of living of large numbers of rural  - vii - people at a reasonable cost per family assisted. If a specific program proposal requires such a high expenditure of financial and/or managerial resources that it could not be multiplied to reach tens of thousands of needy families this should normally be grounds for rejection. xviii. The mission is impressed with the awareness shown by Colombia's policy makers of most of the problems discussed in this report. It is hard to find weak spots that have not been identified previously and for which remedial measures have not at least been initiated. With complete appreciation of the many things that the government has done in recent years, however, the mission believes that a straight line extrapolation of existing programs would not be adequate to achieve a desirable rate of rural improvement. The general conclusion of the mission is that Colombia's great potential will not be realized unless and until the thousands of poor farm families that dot the steep slopes and high plateaus are brought into the process of development. With enlightened policies and programs Colombia's agricultural sector should be capable of generating thousands of job opportunities, food and fiber for home consumption, and a rising inflow of foreign exchange earnings. Agriculture is a complicated endeavor in all countries, however, and particularly so in geographically diverse Colombia. This means that the planning and organization needed to achieve success must be of the highest quality. Objective measures of performance must be devised, and feed-back mechanisms need to be strengthened. A determined effort should be made to involve small farmers in their own upgrading; government contact with the various interest groups sponsored by the larger farmers and ranchers appears adequate, but much remains to be done to establish a true dialogue with the peasant organizations--- which themselves need a considerable amount of strengthening if they are to represent their constituencies properly. xix. The mission wishes to emphasize its view that an expanded effort to reduce the dualism existing between commercial and subsistence farmers in Colombia need not be inimical to the achievement of high rates of output growth. In fact if the effort is handled properly it can ensure that satisfactory production growth will take place. The larger commercial farmers can continue to concentrate on cotton, sugar, and other commodities that are subject to scale economies, while the small and medium farm operators can focus on specialized, intensive-care export crops and food crops of mass popular consumption within Colombia. In view of the strength of home and foreign demand for agricultural foodstuffs and raw materials, there would seem to be little danger of sharp declines in commodity prices as a result of supply expansion. Foodstuff shortages in urban markets have been responsible for much of the inflation experienced in the last few years, as can readily be seen by examining the official cost-of-living statistics. Food prices have greater significance for overall inflation than their relative weight in !JP or consumption would suggest, moreover, because of all the items that consumers purchase none is paid for more frequently than food. This "high visibility" of food prices invariably gets reflected in collective wage contract bargaining positions and in other ways that affect prices in future periods.  - viii - xx. The obvious sensitivity surrounding the issue calls for one final statement of the mission's view of land reform in Colombia. The attention given in the report to the magnitude of the task ahead may lead some to conclude that the accomplishments of the last decade are of little significance. This would be a totally erroneous interpretation. The creation and operation of INCORA have been of great importance, and indeed if it and other Colombian agricultural institutions had not by now acquired valuable experience and reached a relatively high degree of sophistication it would not be feasible to make many of the suggestions contained in this report. INCORA has issued more legal land titles in ten years, for example, than was done in the entire previous history of the republic. It has also led efforts to identify collective farming arrangements suitable to Colombia in order to facilitate smallholder operations on a productive basis. Many other accomplishments could be cited, but perhaps one of the most significant is that the very existence of this agency has served as a constant reminder to the nation that Colombia has a number of urgent problems in the countryside, problems that will simply have to be addressed and resolved if real economic development is to be realized. The observations made in this report should be taken, therefore, as an endorsement of reform efforts rather than censure. The lessons learned during the last decade by INCORA and its sister institu- tions, not to mention the widespread awareness now evident in Colombia of the need to distribute the benefits of economic development more widely, should greatly facilitate efforts to move ahead with the creation of a strong agricultural sector. It is hoped that with the 1973 land reform legislation and the new presumptive agricultural income tax IN19ORA will be enabled to promote such efforts more vigorously than ever.1/ L/ For a fuller summation of the report see Chapter VIII, "The Task Ahead," which in addition to chapter briefs offers a series of action recommendations to improve administration, statistics, and other activities.  I. INTRODUCTION: AGRICULTURAL POLICY OBJECTIVES AND INSTRUMENTS 1. Before proceeding with this report on Colombian agri- culture it is appropriate to devote a few pages to a review of agriculture's performance, and to a consideration of the goals that might reasonably be set for the sector. The current scenario in Colombia is similar to that of many developing countries: high population and labor force growth rates, open unemployment and underemployment in urban areas, seasonal and disguised unemployment in the countryside, rapid rural-urban migration leading to the proliferation of city slums, inability of manu- facturing industry to generate large numbers of employment opportunities, hence the existence of a swollen service sector characterized by low productivity and incomes, and severe inequalities in both urban and rural income distributions. What can be done within the agricultural sector to promote balanced, equitable development and alleviate some of Colombia's problems? 2. Colombia has an estimated mid-1972 population of 23 million, roughly 40 percent "rural," i.e., resident in villages and towns of 1,500 or fewer inhabitants. If one assumes a continuation of rural-urban migration as recorded during the 1951-64 inter-censal period the rural population will decline to 25 percent of the total by 1985. In that year total popu- lation should approximate 33 million, with rural population about one million less than the 1972 figure of 9.5 million. Despite the fact that population is projected to grow at a decreasing rate --slowing from 3.2 percent per annum in 1972-75 to 2.4 per- cent in 1980-85, the changing age structure of the population and a modest increase in labor participation rates will cause the labor force to expand at a steady 3.5 percent per annum through- out the 1972-85 period. This means that the economically active population living in rural areas should hold constant at just under 3 million through 1985, while the urban labor force doubles from 4 to 8 million. 3. Colombia is evidently well along the way to become an urban nation. The 30 largest cities of the republic (each with 50,000 or more inhabitants at present) already contain over nine million people, and 100 cities have current populations of at least 10,000 inhabitants. There would seem to be little rea- son to expect urbanization trends to slacken dramatically during the next decade or so, moreover, although some slowing down could be conjectured.  - 2 - 4. The location of one's dwelling is not an infallible guide to his occupation, of course, although remote country homes do normally indicate at least a part-time agricultural avocation. Studies reveal that in Colombia many thousands of families main- tain their residences in hamlets, villages, towns, and small cities, --many with over 1,500 inhabitants and therefore categorized as "urban"-- and commute to their farms in nearby areas. They do this to enjoy the amenities of urban life, to be near other people, and to afford their children an opportunity to attend a few years of elementary school. On the other hand, some village dwellers are obviously not engaged in farming, being small merchants, bankers, artisans, and so forth. Surveys reveal that 40-h5 percent of Colombia's labor force is engaged in agriculture, nonetheless, which tends to indicate a fairly close correlation between a rural residence and an agricultural occupation. 5. Should Colombia's population multiply and urbanize roughly as projected, the agricultural labor force can be expected to decline from 40-45 percent of the total labor force at present to 25-30 percent in 1985. Each farmer would then have to produce food and fiber for 10-12 persons rather than 7-8 persons. The first objective that might therefore be set for Colombian agricul- ture during the next 15 years or so would be to feed Colombians. At current nutritional levels farm output must accordingly grow at a minimum rate of 2.8 percent per year. With a stable work force due to emigration, rural labor productivity gains would have to generate all of this increased production. If Colombia's ambitious export targets are to be met and nutritional levels raised output would have to grow much more rapidly, on the order of 5-6 percent per year. It would not seem feasible to expect labor productivity to rise by more than 3.5 percent per annum, leaving the difference to be made up by work force expansion. A work force growth rate of 2.0 percent per annum, for example, coupled with a 3.5 percent productivity gain, would generate an output growth rate of 5.5 per- cent. 1/ 6. To achieve a 2.0 percent rate of expansion the relative importance of the rural labor force would have to decline more slowly than projected, from 40-45 percent of the total labor force to 30-35 percent in 1985. This would relieve some of the pressure on the urban sector to provide jobs, housing, and welfare services. Repeating, if agricultural employment were to rise by 2.0 percent per year (historical 1950-70 rate l.5 percent) and labor productivity by 3.5 percent (historical rate 2.0 percent; output would rise by 5.5 percent per annum. With total population projected to expand at an average rate of about 1/ To be precise, the 2.0 percent rate refers to agricultural employ- ment rather than to the work force.  - 3 - 2.8 percent per year between now and 1985, and domestic income rising by about 7 percent per year (desired rate), it should be feasible to sell this produce to foreign and domestic markets without driving unit prices downward. Coffee production could rise by 2.2 percent per year, assuming 2.0 percent per year for export growth and 3.0 percent for domestic consumption growth. Non-coffee crops could rise by 7.0 percent per year, and livestock production at about 4.5 percent (see later chapters on these sub-sectors).I 7. Between 1950 and 1970 Colombia's agricultural production rose at an average rate of 3.4 percent, versus 5.7 percent for non-agriculture and 4.9 percent for overall gross domestic product. Table I.1 shows, however, that in the 1965-70 period these rates were 4.5, 6.2, and 5.8 percent, respectively. / There should be no insurmountable difficulty in raising the agricultural growth rate by one percentage point between now and 1985, although it will not be easy. Table I.1 COLOMBIA: AGRICULTURAL AND NON-AGRICULTURAL GROWTH RATES, 195o-70a (Average Annual Percentage Increase) Period Agriculture Non-agriculture Total GDP 1950-55 2.7 6.7 5.3 1955-60 3.5 4.3 4.0 1960-65 2.7 5.6 4.7 1965-70 4.5 6.2 5.8 1950-70 3.4 5.7 4.9 a/ Rates of change computed from market-price GDP data expressed in 1958 prices. Agriculture includes crops and livestock, excludes fishing, hunting, and forestry. Source: Banco de la Republica. 1/ To compute the agricultural GDP growth rate associated with this projected set of sub-sector rates the following base-period weights were assigned: coffee .20, non-coffee crops .45, and livestock .35. These initial weights were adopted after an examination of current-and constant-price data for value added in 1969-70 ("other" activities were suppressed, since they are essentially derived from these three). 2/ Several tables containing National Accounts data on agriculture in 1950-70 are attached to this chapter. Severe weather conditions slowed agricultural growth to 2.2 percent in 1971, but preliminary figures indicate a 5.5 percent gain in 1972.  - 4 - 8. If GDP were to grow by 7 percent per year, and agricul- tural output by 5.5 percent, the latter's share of the former would decline to about 21 percent by 1985. This would represent a continuation of a postwar trend: agricultural value-added measured at market prices has fallen steadily from 35.9 percent of total GDP in 1950 to 31.7 percent in 1960 to 25.9 percent in 1970. 9. Land, the other major factor of agricultural production, can be increased by (a) expanding the total area put to crops or pasture, and/or (b) raising its productivity (yield). In the past a substantial part of production gains in Colombia has come from simple acreage expansion, but yield improvements will be more and more necessary in the future. This will require that farmers use better seeds, more fertilizer, and more science in their general approach to animal husbandry and crop cultivation. The application and removal of water in appropriate quantities and at the right times will be of great importance, as well as the correct use of herbicides, insecticides, and other modern agricultural inputs. 10. Rapid output growth is not the sole objective worth pursuing, despite its importance for domestic food supply and as a source of export earnings. The welfare of Colombia's rural inhabitants is another. Sometimes the most direct way of boosting production conflicts with efforts to raise the level of living of the masses. It is the viewpoint of this report, nevertheless, that agricultural production can be expanded by 5-6 percent per year simultaneous with a significant improvement in rural welfare. This can be accomplished by (a) extending the amount of cultivated land; (b) improving crop yields; (c) raising labor productivity; (d) employing more agricultural workers; and (e) providing a range of services including health, education, extension, and many others designed to raise the quality of life in the countryside. These are not incompatible goals. Accelerated rates of increase in value- added and labor productivity are consistent with faster employment creation when accompanied by changes in output composition, i.e., by shifts in crop mix toward commodities of relatively higher unit value and labor intensity. 11. There are many ways that a government can stimulate rural development, most of which are treated in some detail in this report. Two brief appendices are attached to this introductory chapter, one describing the physical setting of Colombian agriculture and the other explaining the institutional organization of the sector. Chapter II deals with the critical issues of land use and reform, sweeping over forced land redistribution, colonization, land reclamation, and several other vital topics. Chapter III discusses the cost and availability of agricultural credit. Chapter IV is devoted to coffee and other crops, taking in price support programs,  marketing assistance, and related subjects. Chapter V deals with the livestock industry, from ranch management to slaughterhouse operations. Chapter VI outlines the progress being made with respect to natural resource exploitation and conservation. Chapter VII reviews the foreign assistance record of the past several years and makes suggestions for the future. And finally, Chapter VIII summarizes all the previous material and offers a number of specific recommendations for action. 12. It must be emphasized that this report is not presented as a definitive piece of work, one that spells out precisely what Colombia should do about its agricultural sector. It rather tries to describe the nature of selected agricultural issues and problems, and to suggest possible solutions that appear worthy of consideration. The report does not identify any "new" problems not previously recognized by the Colombians, moreover, which is a tribute to their general awareness of the country's strengths and weaknesses. It is hoped, nonetheless, that the material presented in the pages that follow will provoke serious thought and discussions within and out- side Colombia about rural development.1/ 1/ Although it has not been possible to include in this report a complete series of references to earlier missions and studies concerning Colombian agriculture, nearly all the points raised herein can be traced to previous evaluation. Such is the nature of many agricultural problems: they are not quickly overcome. It is instructive to look back, for example, at the report of the 1949 IBRD general surveynmission on Colombia: The Basis of a Development Program for Colombia (Report of an IBRD Mission Headed by Lauchlin Currie, Johns Hopkins Press, 1950). Consider some of the findings of that study, published 23 years ago: P. 61 "Agriculture is the most important segment of Colombia's economy." P. 71 "Lack of modern machinery and tools; failure to use good seed, fertilizer, pesticides, improved farming practices; inadequate credit facilities; lack of general education and special training; and poor diets and disease all combine to hold down labor productiv- ity in agriculture." P. 77 "There is great need for a combination of credit and technical asistance and supervision for the poorer small farmers..." P. 383 "Probably the most important single factor making for low productivity in agriculture in Colombia is the uneconomic and paradox- ical use of land." P. 384 "There are.. .two aspects to this problem: better and more economical use of land, particularly of the rich valley and savanna lands, and opportunity for wider land ownership for those who till the soil." P. 384 "Substantial amounts of good land, which could and should be used more efficiently, appear to be available..." It seems clear that the present report can make few claims to originality, but old truths bear repeating lest they be forgotten.  - 6 - II. LAND DISTRIBUTION AND AGRARIAN REFORM Soil Types and Land Use Patterns 13. The "Agustin Codazzi" Geographical Institute (IGAC) is officially responsible for conducting soil surveys and compiling soil maps in Colombia. When the Colombian Agrarian Reform Institute (INCORA) attempted to examine overall land availability in 1964, however, it was found that the IGAC soil surveys were insufficiently comprehensive to constitute an adequate data base. As a result, INCORA conducted a one-shot field survey with the objective of extending the existing information and providing complete (though by no means detailed) coverage of the Pacific, Caribbean, and Andean regions. A combination of the information obtained from the INCORA survey and that of the Geographic Institute provides a picture of soils classified into 8 types for 69 million of the 113 million hectares which comprise the national territory. A summary of this information is given in Table 2.1. The remaining 44 million hectares are located in the sparsely populated regions of the Eastern Llanos and Amazonia. At present these lands are marginal to Colombian agri- culture, although they have potential for certain types of development. 14. From this information it is possible to estimate the amount of land available for agricultural purposes. It is customary to assume that the first two soil classes are suitable for cultivation as they stand, and that the third class can be cultivated after some investments have been made in drainage facilities and other land improvement measures. This leads to the conclusion that there exists a total of approximately 12.3 million hectares of land suitable for crops, 4 million hectares of which are located in the Andean region and 4 million in the Caribbean region (see Map of natural regions). The remainder is located in the scantly populated areas of the Pacific coast, the Amazon, and the Eastern Plains. 15. Soil classes IV and V, which together amount to 32 million hectares, are generally considered to be suitable for extensive livestock operations, although their use for intensive operations would usually require investments in land improvement and soil conservation. The 21 million hectares of class VI soils are considered suitable for forestry, but the productive potential of classes VII and VIII is so very low that they should be dis- regarded from the point of view of agriculture. Greater detail concerning the regional grouping of soil classes according to their suitability for agricultural activities is given in Table 2.2. 16. A comparison between the potential suitability of land for agriculture, and the actual use to which land is put, would constitute a valuable input for agricultural planning. This comparison could only be made from a cross-classification of soil  - 7 - types and land use patterns at the farm level, however, and no such data exist in Colombia. It is possible, nevertheless, to reach some tentative conclusions concerning the efficiency of land use by combining information from the 1960 Agricultural Census with the IGAC-INCORA soil classification. 17. The 1960 Agricultural Census gives the following classi- fication of farm land use at the national level: Million Hectares Total farmland enumerated 27.34 Seasonal crops 1.95 Permanent crops 1.51 Pastures 14. 61 Fallow land / 1.58 Mountain and forest 6.39 Other 1.30 From this it can be seen that land under permanent and seasonal crops amounted to only 3.5 million hectares, compared to the 12.3 million hectares which were calculated as being suitable for crops on the basis of the soil surveys... It is also apparent that only 14.6 million hectares of land were in pastures, as compared with 31.7 million hectares shown as being suitable for livestock by the soil surveys. This overall view points to a considerable under-utilization of available land resources. 18. More recent data concerning land under cultivation have been assembled by INCORA and classified by regions. This information indicates that in 1968 there were 3.5 million hectares planted to 18 principal crops, and that 2.8 million hectares of this production were concentrated in the Andean region. Since these 18 principal crops account for between 90 and 95 percent of the total area under cultivation, the exclusion of minor crops is not critical in this context. As for livestock, the area under production in 1969 can be estimated from the agricultural sample survey of DANE (the National Statistical Agency) and it is notable that 90 percent of the estimated 17.7 million hectares of livestock land was under natural pastures. 19. It is instructive to take a closer look at the infor- mation available with respect to the Caribbean and the Andean regions, where the great bulk of the rural population is located. It can be seen from Table II.1 that while more than 4 million 1/ Land idle for 5 years or more. 2/ Of these 12.3 million hectares, 5 million (Classes I and II) require no or minimal improvements and 7 million (Class III) may require major improvements.  - 8 - hectares of land in the Caribbean region were suitable for crop culti- vation, (Classes I, II, and III) only 0.6 million hectares were actually being used for the cultivation of the 18 major crops. Table II.1 COLOMBIA: POTENTIAL AND ACTUAL LAND USE IN THE CARIBBEAN AND ANDEAN REGIONS, 1968-69 (Millions of Hectares) Land Under Production Land Suitable for Under 18 Livestock Production Principal Improved Natural Crops Pastures Pastures Arable Livestock Caribbean Region 0.60 0.98 3.83 4.03 5.01 Andean Region 2.81 0.70 6.41 4.13 8.80 Sources: DANE, INCORA, IGAC. There are two possibilities with respect to the remaining 3.4 million hectares: either it was lying idle, or it was being used for livestock activities. It is reasonable to believe, however, that whenever a choice exists between good land and inferior land the former will be brought into production before the latter. Rather than leave this good arable land idle, it can be assumed that it was used for cattle ranching in preference to the 5 million hectares of inferior land that was classified as being suitable for livestock operations in the Caribbean region. Table II.2 shows the land use pattern of the Caribbean and Andean regions which follows from this hypothesis. Table II.2 COLOMBIA: ASSUMED LAND USE PATTERN ACCORDING TO THE PRODUCTIVE POTENTIAL OF THE LAND (Millions f Hectares) Soil classes I, II, and III suitable for cultivation Caribbean Region Andean Region Cultivated Land o.60 2.81 Improved Pastures 0.98 0.70 Natural Pastures 2.45 0.62 Total 4.03 4.13 Soil classes IV and V suitable only for livestock Caribbean Region Andean Region Natural Pastures 1.38 5.79 Idle Land 3.63 3.01 Total 5.01 70- Sources: INCORA, ICAC, IBRD.  - 9 - 20. From the data of Table II.2 it can be deduced that there is a considerable underutilization of the 8.2 million hectares of land suitable for cultivation in the Caribbean and Andean Regions. More than half of the area is used for livestock operations, and only a few of these appear to be intensive livestock operations (which, broadly speaking, may be defined as those using improved pastures). At the very minimum it may be said that there are 2.45 million hectares of good land in the Caribbean region and 0.62 million hectares in the Andean region which are at present devotedto natural pastures and which could be used for the cultivation of crops. Some of this land requires investments in land improvements in order to prepare it for cultivation, but INCORA studies indicate that a substantial part of it could be brought under cultivation with only relatively minor investments in drainage and flood control. These tentative conclusions are admittedly based upon imperfect data which do not provide an ade- quate basis for definitive, quantified conclusions. It is believed, however, that the suppositions made are reasonable. There are 4.75 million hectares of land in the Caribbean and Andean regions suitable for cultivation that are not being cultivated. If this land is not being used for cattle ranching the only other possible conclusion is that it is lying uncultivated, and this would represent a still greater misuse of resources. The Distribution of Land Among Farms 21. The 1960 Census showed the distribution of land in Colombia to be extremely skewed. Of the 27.3 million hectares of farmland enumerated, 81 percent was concentrated in the largest 10 percent of farms. At the other end of the scale, half of all the farms enumerated were less than 3 hectares in size and occupied less than 2.5 percent of total farm land. The picture of land distribution presented by the 1960 Census has been criticized on the grounds that it exaggerates the maldistribution of land by making no allowance for differences in the quality of land. It has also been held that the agrarian reform of the past decade has made an appreciable impression upon land distribution, so that the 1960 Census does not provide an adequate picture of the present situation. Preliminary results of the 1970 Agricultural Census, covering all Departments except Cundi- namarca and Choco, became available just prior to the printing of this report. Even if one assumes a strong redistributive trend for the missing Department, the data indicate that there has been no appreciable improvement in the size distribution of Colombian farms during the nineteen-sixties. The Gini Coefficient of Concen- tration stands at a high .86 value in each of the two census years. The largest 10 percent of farm units continued to account for some 80 percent of enumerated farmland in 1970, and the bottom half of farm units continued to account for less than 2.5 percent of farm- land. Table II.3 compares the 1960 and 1970 census data.  Table II.3 COLOMBIA: DISTRIBUTION OF FARM4 UNITS BY SIZE, 1960 AND 1970 v Size of Farm 1960 CENSUS 1970 CENSU b (Hectares) Number of Farms Farm Anrea Number of Farms Farm Area Thousand rriho u sanid Number Percent Hectares Percent Number Percent Hectares Percent Less than 1 298,071 24.6 131,993 0.5 204,012 20.6 95,219 0.3 1 and less than 2 191,347 15.8 270,308 1.0 i45,664 14.7 194,951 0.7 2 " " 3 117,005 9.7 275,656 1.0 93,896 9.5 215,936 0.7 3 4i 1a 92.001 7.6 309,165 1.1 69,291 7.0 227,872 o.8 4 " " " 5 58,181 4.8 251,854 0.9 48,584 4.9 207,202 0.7 5 " " " 169,145 14.0 1,164,749 4.3 134,716 13.6 921,825 3.1 10 " 20 114,231 9.4 1,572,076 5.8 103,959 10.5 1,417,952 4.8 20 " " 30 44,049 3.6 1,043,554 3.8 45,058 4.6 1,057,818 3.5 30 " " 140 26,500 2.2 890,100 3.3 28,598 2.9 953,667 3.2 40 " 50 16,240 1.3 705,047 2.6 19,567 2.0 848,624 2.8 50 " " " 100 39,990 3.3 2,680,471 9.8 45,974 4.6 3,075,436 10.3 o 100 " " 200 22,317 1.8 2,996,152 11.0 25,635 2.6 3,424,884 11.5 200 " " 500 13,693 1.1 3,994,319 14.6 15,872 1.6 4,626,827 15.5 500 " " " 1,000 4,141 0.3 2,730,764 10.0 4,703 0.5 3,107,412 o0.4 1,000 " " 2,500 1,975 0.2 2,808,210 10.3 2,238 0.2 3,245,754 10.9 2,500 and over 786 0.1 5,513,409 20.2 1,007 0.1 6,185,031 20.7 Total 1,209,672 100.0 27,337,827 100.0 988,774 100.0 29,806,410 100.0 a/ Columns may not sum to totals because of rounding. F/ Preliminary data, excluding Choco and Cundinamarca but including Guajira. SOURCE: 1960 and 1970 Agricultural Censuses.  - 11 - 22. This result may seem surprising in view of the substantial activities of INCORA during the past decade, especially in annulling private titles in cases where land had lain uncultivated for 10 years or more. It has been claimed that many of the very large estates enumerated in the 1960 Agricultural Census included large tracts of barren land, and that this caused an exaggerated impression of the degree to which land was concentrated in a few hands. The annulment of private title to nearly 3 million hectares of land by the time of the 1970 census should have corrected this impression. It appears, however, that many of these holdings were not even enumerated in 1960 for the simple reason that they were not agricul- turally exploited and did not therefore constitute farms. The 1970 census shows an increase in the number of very large farms. 23. It should be noted that the 1960 Census was confined to 47 percent of the national territory (principally in the Caribbean and Andean regions) where an estimated 98 percent of the rural population is located. It did not extend to the Amazon region or to the Eastern Llanos, so that the poor quality of lands in these areas did not affect the census results. There are substantial differences of land quality and use even within the area covered by the census, nevertheless, and the failure to make an adequate distinction between these different land qualities undoubtedly gives an exaggerated impression of the degree to which the ownership of good land is concentrated in a few hands. In Table 2.3 the total farm land enu- merated in the 1960 Census has been separated into livestock and non- livestock operations, and it can be seen that the distribution of the latter is significantly less unequal than is the overall distribution of land. Whereas the overall picture shows 81 percent of land to be concentrated in the top decile of farms, in the case of non- livestock operations only 68 percent of farms are concentrated in the top decile. In the case of livestock operations, 76 per- cent of the land is owned by the top ten percent of ranchers, but it is probable that this percentage would be reduced even further if it were possible to distinguish between dairy operations and beef operations.2 I/ It should be borne in mind, therefore, that the distribution of farms by size is a measure not only of the concentration of land ownership but also of the diversity of farm production. The overall coefficient of land concentration is not necessarily equal to the average of all subsector coefficients. It is possible for the coefficient of land concentration in each agricultural subsector to be relatively low and for the overall coefficient of land concentration to be high. Consider, for example, the case of a country with two types of land. Assume that the good land is nine times more productive than the poor land, and that nine-tenths of the country's population is settled on the good land. Within each type let land be dis- tributed equally, so that the top deciles of farm units own ten percent of the land. For the country as a whole the largest ten percent of farm units (which happens to be those on the poor land) own 50 percent of all the land.  - 12 - 24. On the other hand, disparities in the quality of land can sometimes cause the maldistribution of land to be under- estimated. There are many areas of minifundia located on very poor soils indeed. In Boyaca, for example, 90 percent of all farms in the municipalities of Paz del Rio, Bet6itiva, and G&meza are smaller than 5 hectares, and are located on class VII soils which the Geographical Institute considers would be difficult to exploit economically even in forestry. In contrast, the municipality of Bugalagrande in the Cauca Valley is situated on prime class I soils, and the benefit of this rich agricultural land is reaped by the 2 percent of farms which occupy half of the municipality. These specific examples have been confirmed by the visual impressions of this and other missions that minifundia are often located on poor lands in mountainous terrain. 25. An attempt to resolve the problems of classification arising frcm different land qualities and land use patterns is summarized in Table II.4, which classifies farms according to the number of families that they support, From this table it can be seen that 66 percent of the total value of agricultural production was produced on family and sub-family farms which occupied 29 percent of the total farm area. Some 90 percent of the labor force was employed on those farms, and the remaining 10 percent was employed on the few multi-family farms which occupied 70 percent of the total farm area. Table iI.4 COLOMBIA: FARM LAND, WORK FORCE, AND PRODUCTION ACCORDING TO FARM SIZE GROUPING (Percentage distribution) Sub-Familya Family-/ Medium_/ Ldre/ Total Farms 64 30 5 1 100 Agricultural Labor Force 58 31 7 4 100 Land in Farms 6 23 21 50 100 Value of Production 21 45 19 15 100 a/ Farms which provide employment for less than two persons under prevailing conditions of incomes, markets, technology, and capital. b/ Farms large enough Io provide employment for 2 to 4 persons on the assumption that most of the farm work is carried out by the members of the farm family. c/ Farms large enough to provide employment for 4 to 12 persons. d/ Farms large enough to provide employment for more than 12 persons. Source: CIDA, Tenencia de la Tierra y Desarrollo Socio-economico del Sector Agricola: Colombia. 1966.  - 13 - 26. The distribution of land in Colombia is not exceptional within the context of Latin America as a whole. Table II.5 indicates that the situation in Colombia is probably no worse than that prevail- ing in the greater part of Latin America. Table II.5 CONCENTRATION OF AGRICULTURAL LAND IN LATIN AMERICA (Gini Coefficient) Argentina 86.3 Bolivia 93.8_a/ Brazil 83.7 Chile 93.8a/ Colombia 84.9 Costa Rica 89.1 Cuba 79..2a/ Dominican Republic 79.5 Ecuador 86.4 El Salvador 82.8 Guatemala 86.0 Honduras 75.7 Nicaragua 75.7 Panama 73.7 Peru 87.5 Uruguay 81.7 Venezuela 90.9 a/ Before the initiation of agrarian reform programs. Source: Terry L. McCoy. The Politics of Structural Change in Latin America: The Case of Agrarian Reform in Chile, Wisconsin Land Tenure Center, 1969. The Distribution of Rural Incomes 27. A number of studies indicate that the ownership of farm land has a strong influence on the distribution of incomes in the rural sector. Table II.6 shows how the income of agricultural producers is closely correlated with land ownership (farm size).  - 14 - Table II.6 COLONBIA: AVERAGE INCOME OF PRODUCERS BY FARM SIZE IN 1960 Farm Size Average Annual Income Number of (Hectares) in Pesos Producers 1-2 1,300 191,350 2-3 1,900 117,000 3-4 2,320 92,000 4-5 2,640 58,200 5-10 3,670 169,150 10-20 5,580 114,200 20-30 6,750 44,0o0 30-40 8,340 26,500 40-50 10,203 16,240 50-100 12,800 40,000 100- 00 23,800 22,300 200-500 41,140 13,700 500-1,000 102,500 4,140 1,000-2,000 189,800 1,975 2,000 and more 527,700 790 TOTAL 6,145 911,595 Source: Albert Berry, Land Distribution, Inccme Distribution and the Productive Efficiency of Colombian Agriculture, Discussion Paper No. 108, Yale Economic Growth Center, March 1971. 28. The fact that the distribution of land is heavily skewed points to the conclusion that the distribution of rural incomes will be highly skewed, and this is confirmed by the research that has been done on this subject. It can be seen from Table II.7 that in 1964 the distribution of incomes within the rural sector was more skewed than the distribution of urban incomes, and that more than half of total rural incomes accrued to the top  - 15 - decile of the occupied rural population. Attempts to distinguish between the share of personal incomes corresponding to capital remuneration and the share corresponding to the remuneration of labor have shown that 93 percent of the income of the top decile corresponds to remuneration from capital. In the case of the poorest half of the rural population, however, 90 percent of their income corresponds to the remuneration of labor. Table II.7 COLOMBIA: DECILE DISTRIBUTION OF URBAN AND RURAL INCOMES IN 1964 Rural Population Urban Population Average Annual Income Average Annual Income Of Total per Person Occupied Of Total per Person Occupied Decile Income (Pesos) Income (Pesos) 1 1.4 880 0.9 1,140 2 3.1 1,940 3.3 4,200 3 3.6 2,260 4.3 5,1470 4 3.9 2,450 5.0 6,360 5 4.5 2,820 5.5 6,000 6 5.5 3,1450 7.0 8,910 7 6.0 3,760 8.0 10,180 8 8.0 5,020 11.0 14,000 9 13.0 8,160 14.5 18,450 10 51.0 32,000 40.5 51,530 TOTAL 100.0 6,274 100.0 12,72 Source: Miguel Urrutia, "La Distribucion del Ingreso en Colombia," unpublished paper, January 1972. 29. Not only is the distribution of rural incomes more skewed than the distribution of urban incomes; it can be seen from Table II.7 that the absolute level of rural incomes is only one half the level of urban inccmes. Projecting this level of rural income to 1970 on the basis of the growth of value added in agriculture gives a figure of Col$11,900 per occupied person in 1970, or roughly Col$3,250 (US$175) per rural inhabitant. This is a telling indi- cator of the extent of rural poverty in Colombia. 30. The calculations of INCORA as to the number of families that would qualify to receive land in a program of agrarian reform throw further light on the extent and nature of rural poverty  - 16 - in Colombia. In defining the concept of poverty, INCORA adopted a benchmark family income of Col$14,700 in 1970, and with respect to this benchmark income it was estimated that in 1962 there were 802,000 families that would have qualified for participation in a program of land distribution. / These families had the following characteristics: 85,000 were families without land. 633,000 were families with less than 5 hectares of land and an income of less than 80 percent of the benchmark income.2/ 34,000 were families with 5 to 10 hectares of land and an income of less than 60 percent of the benchmark. 50,000 were tenant and sharecropper families working plots of less than 15 hectares. 31. By projecting these figures to 1970 on the assumption of a 1.4 percent average annual rate of formation of rural families (net of migra- tion), and by making several other assumptions, INCORA concluded that the number of landless families more than doubled to 190,000, that the number of families on minifundia of less than 5 hectares and earning less than 80 percent of the benchmark income increased to 658,000, that the number of families on farms of between 5 and 10 hectares and having an income of less than 60 percent of the benchmark increased to 37,000, and that the number of tenant farmers and sharecroppers working lots of less than 15 hectares remained at about 50,000. 32. It is important to note that the greater part of the increase in the rural population is reflected in the rising number of landless families. In fact it appears that these projections may underestimate the rise in the number of landless families. It is generally recognized that the 1968 law which gave small tenant farmers and sharecroppers the right to purchase the land they worked resulted in many of them being summarily evicted. Although the law applied only to rented holdings of 15 hectares or less, panic-on the part of landowners sometimes resulted in the eviction of tenants on much larger holdings, which gives cause to believe that the ranks of the landless rural population may have swelled beyond the estimate of INCORA. 1/ The benchmark family income of Col$14,700 is equivalent to a per capita income of about US$135. Since the average per capita rural income is estimated at US$175, INCORA's choice of a bench- mark poverty level seems reasonable. See La Realidad Rural y la Reforma Agraria como Factor de Cambio, INCORA, 1970. 2/ That is, 1970 income properly deflated to 1962 price level.  - 17 - 33. The rising number of landless families gives reason to presume that the trend in the distribution of rural incomes has been toward greater inequality. The real wages of agricultural labor apparently remained stationary over the 1930-70 period, but the development of a commercial agricultural subsector enabled the value added per capita of the sector as a whole to rise 150-175 percent during the same period. There are few grounds for supposing that a further expansion of the commercial sector would directly benefit the rural population, other than that small portion which controls the ownership of land and capital. Indirect benefits such as lower food prices and higher export earnings might be generated, however, which would be beneficial to larger numbers of Colombians. Employment in the Agricultural Sector 34. There can be no improvement in rural incomes in Colombia without a solution to the problems of unemployment and low pro- ductivity within the agricultural sector. It seems probable that there is a higher level of unemployment in the rural areas than in urban areas, though the evidence on this point is conflicting. From a conceptual point of view it is difficult to make a direct comparison of unemployment in rural and urban areas. First, seasonal agricultural unemployment has no comparable parallel in urban areas (except perhaps in the construction industry). Second, and more fundamental, in rural areas the family and community structure is such that the whole concept of un- employment takes on a different nature. Because the institu- tional structure of employment is much less clearly defined in rural than in1urban areas, the interpretation placed upon the term "unemployment" by rural residents will be quite different from the interpretation of urban residents. Thus the conclusions of a 1970 household survey in Colombia, to the effect that only 4 percent of the rural population was unemployed as compared with 10 percent of the urban population, must be interpreted with caution. Alternative calculations indicate that the household survey greatly underestimated rural unemployment. It has been calculated that 450 million work days were required to produce the total output of the agricultural sector in 1968, under the existing conditions of technology in Colombia.l/ On the basis of a 280-day year, it can be estimated that 750 million work days were available from the agricultural labor force in that year, which indicates that only 60 percent of the available work-days were uti- lized. To identify the remaining 40 percent as a measure of un- and under- employment seems a reasonable procedure. A figure of 40 percenl exceeds even the most pessimistic estimates of urban employment and disguised unemployment. 35. Quite apart from the absolute level of unemployment, it is clear that the rate of increase of employment opportunities is much slower in rural Colombia than in urban Colombia. Although the natural increase of the rural population is about the same as that of the urban population (3.2 percent per annum), it is 1/ USAID Mission to Colombia. COLOMBIA: Agricultural Sector Analysis Paper. April 1972.  - 18 - estimated that during the last ten years agricultural employment rose by only 1.4 percent annually compared with an average rate of 3.2 percent in other sectors. It has been calculated that even within the context of the existing market for agricultural products it would be possible to raise employment in agriculture by 30 percent within a period of 7 years, by shifting the crop mix to labor-intensive products. The present distribution of land and capital is such that farmers are not motivated to make this shift in production, however, and it will be difficult to increase motivation without first changing the distribution of land and capital. 36. The Colombian Government has recognized that the interrelated problems of rural poverty, low agricultural produc- tivity, and rural unemployment cannot be solved without a change in the structure of the agricultural sector, and INCORA is the agency primarily responsible for implementing Government policy in this field. One fundamental objective of INCORA has been to broaden the base of land ownership, and this has involved both the acquisition and redistribution of private lands and the titling of public lands to those who effectively work them. Land Acquisition 37. The acquisition of land by INCORA is governed by Law 200 of 1936, Law 135 of 1961, Law 1 of 1968 and Law 4 of 1973. The law permits land to be acquired in the following five ways. First, with respect to private land which has lain uncultivated for a period of three years or more, INCORA can annul the private title so that the lands revert to the public domain (Exctinci6n de Dominio).l/ Private title may also be annulled in cases where private lands are cultivated by a third party who, in good faith, has assumed the land to be public. All landholdings of more than 2,000 hectares are systematically examined to determine the extent to which they lie uncultivated, and it can be seen from Table II.8 that 80 percent of the land acquired by INCORA has been obtained through the annulment of private title. A substantial proportion of this land has been acquired by INCORA as custodian of public lands, and as much as one million hectares may be unusable for agricultural purposes. Nor it can be assumed that all of the 3.5 million hectares at present in process of acquisition will eventual- ly be incorporated into the public domain. Many of the landowners concerned will be able to show that they have cultivated the land within the last three years, and there are often technical and legal reasons which cause INCORA to suspend the process of acquisition. 1/ Prior to 1973 the minimum period needed for title annulment on uncultivated land was ten years.  - 19 - Table II.8 COLOMBIA: LAND ACQUISITION BY INCORA THROUGH DECEMBER 1972a/ Land in Process Land Acquired of Acquisition (Thousand (Thousand Hectares) (Percent) Hectares) (Percent) Annulment of private title 2,329.3 80.3 3,347.2 70.4 Purchase 282.9 9.8 494.i 10.4 Compulsory purchase 5.1 0.2 47.2 1.0 Tenant and sharecropper programb/ 73.7 2.5 744.9 15.7 Grant 204.0 7.0 10.3 0.2 Other 4.9 0.2 110.7 2.3 TOTAL 2,899.9 100.0 42754.4 100.0 a/ Includes only land for which legal documentation (escritura) establishes INCORA ownership, i.e., excludes land held under informal agreements (convenios). b/ Land acquired by both voluntary and compulsory purchase. Source: INCORA Office of Statistics. 38. The second manner in which INCORA may acquire private land is by grant. Some landowners, when faced with the certainty of INCORA annulment of their title by court order, prefer to cede their land voluntarily rather than to incur the cost and incon- venience of contesting the issue in court. 39. A third mode of land acquisition is that introduced by Law 1 of 1968, which sought to give small tenant farmers and share- croppers title to the land they work and authorized INCORA to acquire this land from its present propietors by compulsory purchase if necessary. According to the 1960 Agricultural Census there were at least 250,000 farmers renting farms of less than 15 hectares, and all of these should have been eligible to benefit under the 1968 law. The enactment of this law led to panic among landowners, and according to the findings of the 1971 Agrarian Reform Exvaluation Committee the result was "an arbitrary,  - 20 - indiscriminate, and disorderly eviction of many sharecroppers and tenant farmers including those to whom the law did not apply." Only 77,000 sharecroppers and tenant farmers have registered claims under this law, and it can be seen from Table II.8 that 74,000 hectares of land has been acquired under this provision. Compensation for these lands is based on value determined by the Geographic Institute, half of which is paid in 15 equal annual installments at 7 percent interest on the balance outstanding, and half of which is paid in non- negotiable bonds of fifteen years maturity which yield 6 percent. 40. Apart from the special program for tenant farmers and share croppers, INCORA may purchase lands by negotiation or by compulsion in areas where the maldistribution of land has given rise to strong social pressures. In cases where powers of compulsory purchase are invoked the owner of adequately culti- vated land has the right to retain 100 hectares of arable land. The letter of the law appears to give INCORA broad discretionary powers in defining circumstances of social pressure which would justify the compulsory purchase of land, but in practice little use has been made of these powers. One reason for this has undoubtedly been the complicated legal procedures for land acquisition, which have been documented in detail by the Interamerican Institute of Agricultural Sciences (IICA). Compulsory purchase cannot take place until negotiation has been attempted and failed, and there are many ways in which a recalcitrant landowner can delay the process. One of the objectives of the 1973 legislation is to eliminate these delays, which previously could take two years or longer. 41. In all cases other than the small tenant farmer and sharecropper program mentioned in paragraph 39, the method of payment for land acquired either by compulsory purchase or by negotiation is as follows:1/ a. In the case of uncultivated land which cannot be subjected to annulment of title, payment is made with 25-year bonds yielding 2 percent interest. b. In the case of land judged to be inadequately used, the general rule is 20 percent cash down with the balance payable in 15 annual installments at 4 percent interest on the balance outstanding. The cash down- payment is subject to a maximum of Col$100,000. c. In the case of land judged to be adequately used, the 1973 reform legislation introduced more generous terms of compensation than previously allowed. A cash downpayment is made in accordance with a sliding scale: 40 percent of the first Col$500,000 land value, 35 percent for the second 1/ A detailed comparison of compensation under the 1973 legislation and previous legislation is provided in Appendix 1 to this chapter.  - 21 - Col$500,000 land value, declining in steps of 5 percent to eighth and higher tranches. The balance is then paid in five equal annual installments, at 8 percent interest on the balance outstanding. 42. A broad overview of the land acquisition program reveals a number of significant characteristics. First, a very substantial area of land has been affected in one way or other by INCORA's activities. Land acquired and in process of acquisition through December 1972 sums to 7.7 million hectares. A further 5.7 million hectares has been investigated, with the process suspended when it became clear that the land in question was not eligible for ac- quisition. Thus a total area of some 13.4 million hectares (equiv- alent to nearly half of the farm land enumerated in the agricultural censuses) has at one time or another been affected by INCORA acti- vities. The presence of INCORA has been felt over a very large part of the country. On the other hand, the great bulk of land actually acquired by INCORA was uncultivated at the time of acquisition and much of it is uncultivable. Comparatively little land has been ac- quired by purchase, and most of the Agricultural Bonds which have been issued by the Government for the purpose of purchasing land remain with INCORA. The average cost of land purchased by INCORA has been about Col$2,600 per hectare through 1971.1/ Even allowing for the fact the the evaluation of the Geographic Institute may generally fall short of market prices, this figure is low and indicates that INCORA has been buying poor land and land situated far from markets.2/ Land Titling 43. Title insecurity has been common in Colombian agriculture for a long time. Many people do not register their titles, especially when land is inherited, and local registration adminis- tration is often inefficient. In addition to this, the situation is complicated by the process of colonization and by invasions of private unused lands. The clarification of this confused situation is an objective of Government policy which has important implications for agricultural development. A secure title is important to farmers who seek credit, since their land may constitute their only collateral. Title insecurity may discourage long term investments in land improve- ment, furthermore, and may prejudice the whole development process. L/ The implicit GDP deflator was used to standardize cost per hectare on the basis of 1971 prices. 2/ In the Sabana de Bogota or the Cauca Valley, for example, the cadastral value of land averaged Col$14,000 and Col$15,000, respectively, in 1970.  - 22 - 44. At the time of its establishment in 1961 one of INCORA's functions was to "clarify the situation of lands frcm the point of view of ownership" and "to facilitate the clarification of private titling." Most of INCORA's activity in this field has been related to the titling of public lands. Any colonist who settles on public lands and works them for 5 years or more may apply to INCORA for a title. In the case of claims of 200 hectares or less, INCORA will survey the land free of charge so that the colonist pays only a small legal fee for title registration. In some areas of the country the colonist may claim up to 450 hectares, although in these cases he must pay for surveying costs. In practice the average size of holding to which title has been granted under this procedure is 32 hectares. 45. It is still possible for claimants to follow older titling procedures which were in existence before the establish- ment of INCORA, but in all cases INCORA must give final approval. Many claimants prefer to initiate proceedings through the office of the local mayor, nevertheless, and it has been alleged that many of these claimants assemble farms by buying land on favorable terms from colonists who find themselves in financial difficulties. It is impossible to say to what extent this practice prevails in areas of colonization, but it is estimated that about 10 percent of all public lands titled by INCORA were privately processed. 46. INCORA issued 105,000 titles to 3.35 million hectares of public lands through May 1971, and this has constituted by far the greater part of its titling program. The principal result has been to give legal ownership status to those who have colonized public lands, and it is clear that this does not constitute land redistribution. Titling which represents an effective redistribution of private ownership has been much more limited. By May 1972 only 1,000 of the 77,000 families registered under the tenant and sharecroppers program had received title to the land they worked. About 8,500 titles had been granted to 132,000 hectares of land acquired by INCORA through purchase, compulsory purchase, or from grants through June 1972, and a further 82,000 hectares of these lands had been provisionally assigned to 3,800 families pending completion of the titling process. When compared with the estimated 190,000 landless families whose ranks are swelling by at least 15,000 a year, this is a modest achievement indeed. The achievement appears even more modest when it is recalled that of the 8,500 titles which represent the total extent towhich private lands had been redistributed as of May 1971, more than 3,300 were located in irrigation districts. The land to which these titles were issued had a very low level of productivity under its previous ownership, and became suitable for intensive agriculture only after major investments in land improvements had been made. It is clear that the redistribution of good land has been marginal.  - 23 - 47. Although INCORA's accomplishments in titling and distributing land have fallen short of Colombia's needs, this is a measure of the size and complexity of the rural problem rather than a criticism of the agency. INCORA has in fact done a commendable job within its legal terms of reference and financial limitations. Since 1962 more agri- cultural land has been titled than in the entire previous history of Colombia, and the programs of land acquisition and transfer have represented a substantial effort. In view of the magnitude of the remaining task, however, an even greater effort is needed. INCORA Projects 48. Apart from juridical activities with respect to programs of land titling and land acquisition, INQDRA has irrigation, colo- nization, and farm improvement projects throughout the country. The term "project" is used by INCORA to denote the unit of administration in the field, and in May 1972 there were 34 ongoing projects as listed in Table 2.4. From time to time projects are reclassified, expanded, or subdivided according to administrative convenience, so that any particular list may quickly become outdated. Since many of INCORA's statistics are compiled on a project basis this can give rise to pro- blems of compatibility, especially when an attempt is made to distin- guish between the activities of INCORA in irrigation, colonization, and farm improvement. Many projects combine two or all three of these elements, and the project classification may differ from one source to another depending on when the data were compiled and the purposes for which they were assembled. In Table 2.5 an attempt has been made to classify expenditures by project into three groups which broadly reflect the three lines of activity of INCORA--irrigation, colonization, and farm improvement. Since these expenditures are summed over the whole ten years of INCORA operationp, the project list is not the same as the current project list.1/ Irrigation Projects 49. These projects have constituted the principal line of action of INCORA throughout the ten years of its existence, and it can be seen from Table 2.5 that they account for 55 percent of total direct project expenditure. The irrigation districts are primarily land reclamation projects which involve elements of drainage and flood control as well as irrigation. The attraction of this kind of project for INCORA was that landless rural families could be provided with land and at the same time the total agricultural potential of the nation could be visibly expanded. It was believed that both developmental and redistributional goals could be simultaneously fulfilled, and since the land on which these projects were developed was formerly unproductive, INCORA could not be accused of disrupting agricultural production. Irrigation projects appeared to afford an excellent opportunity to accomplish agrarian reform without tears. 1/ See map concerning the location and nature of INCORA development projects.  - 24 - 50. Some 16 irrigation districts have been developed by INCORA, although not all of these constitute independently administered projects. In addition, four districts developed by other agencies such as the Agrarian Bank have been handed over to INCORA. A number of the salient characteristics of these districts are presented in Table 2.6, from which it can be seen that of the total 286,000 hectares of agricultural land included in the districts, some 53,000 hectares had been brought under effective irrigation by September 1971. Most of this irrigated land is located in the four irrigation districts handed over to INCORA by other agencies. Within INCORA's own 16 irrigation districts only 16,000 hectares were under irrigation and operative as of September 1971, and INCORA had settled no more than 1,100 new families on 10,000 hectares of this land. In all the districts within the jurisdiction of INCORA, a total of 4,000 families have been settled on 52,000 hectares of both irrigated and non-irrigated land. Of the remaining land, 200,000 hectares is still in private farms under original ownership. 51. This appears to be a meager achievement after 10 years of activity, during which time irrigation districts have constituted the main focus of INCORA's activities and have directly absorbed US$150 million of INCORA's budgetary expenditure in real terms. It would not be fair, however, to base an evaluation of the irrigation districts upon the results achieved thus far, because many of the districts are only beginning to come into production, and eventually it should be possible to settle a much larger number of families. Nevertheless, there are two compelling reasons for believing that the benefit/cost ratio of the districts will be less than was originally anticipated. First, completion of the districts is running five years behind schedule on the average, and this must have a serious negative effect upon the discounted value of estimated benefits. Second, plans for the completion of many of the projects have been changed, and land that was originally designated for irrigation will now be used for rain-fed farming. This change of plan probably constitutes the most rational strategy in the present situation. But had it been known from the beginning that larger areas of the districts would eventually be used for rain-fed farming than was originally envisaged, in many cases they would not have been economically justified. These changes of plan have been the cause of sustained criticism, and indicate the need for more careful project appraisal in the future. Partly as a result of financial limitations, INCORA has recent- ly decided not to initiate any new ventures in this field without first complet- ing the existing districts. 52. A great deal of controversy has surrounded the cost of the irrigation districts. It appears from Table 2.5 that some 1.7 billion constant 1971 pesos has been spent on land improvement investments in irri- gation projects. INCORA estimates that another billion pesos would be required to finish the districts, permitting a total of 26,000 families to be settled in the long run. This may, however, be an over optimistic estimate of the number of families that can eventually be settled. It has already been noted that most of the land in the irrigation districts is still in the hands of its original owners. Even where INCORA purchased land compulsorily the original owner could retain 100 hectares, and this has impeded the process of land distribution. The new agrarian reform program has reduced this "right of exclusion" to 50 hectares, but even this reduced allowance may stand in the way of INCORA settling 26,000 families. In the event of INCORA being able to fulfill its target, the implied cost per family would be in the order of Col$100,000 (US$5,000). This cost, however, includes only fixed investments in land improve- ment, and it might be questioned whether other costs associated with  - 25 - the settlement of the irrigation districts should not also be included. The total direct expenditure of INCORA in these projects has already amounted to 3 billion constant 1971 pesos of which only 1.7 billion pesos corresponds to fixed investments. If indirect overhead costs are allocated in proportion to direct expenditures, total overall expenditure on these projects has been in the order of 4 billion pesos. Some of these costs, such as land purchases, constitute transfer payments, but the greater part represent resources consumed in the settlement of families. A detailed evaluation of the irrigation projects would involve a major research effort, and it is regrettable that INCORA does not have an operations evaluation and monitoring system. As in the case of many operational agencies, the imple- mentation of projects is a more-than-full-time job for INCORA, and conside- rations of evaluation and appraisal have taken second place. INCORA has recently initiated a comprehensive evaluation of its irrigation districts, and it is to be hoped that this will throw more light on their overall effectiveness. Colonization Projects 53. When INCORA took over responsibility for public colonization programs from the Agrarian Bank in the early sixties it was keenly aware that earlier attempts to organize the process of colonization had resulted in failure, and in order to avoid the mistakes of the past INCORA did not and does not involve itself in any way with the transport of families to colonization areas. Its programs are confined to the construction of infrastructure (principally roads and social infrastructure such as schools and health centers) and to the provision of credit and technical assistance to those families who have shown themselves to be willing and capable of making the effort to establish a viable agricultural livelihood from the wilderness. The colonist, who must be able-bodied, is expected to clear one or two hectares of land within a month of settling on his land. He then receives credit which enables him to sow his first subsistence crop. After one year he may receive provisional recognition of title and further credit that will enable him to enter into production for the market. Final title to the land is given only when he has demonstrated that he can function as an independent producer. 54. The main areas of colonization are generally located in the territories to the east of the Andean region, in the Llanos and Amazonia, but there are also colonization projects on the Pacific and Atlantic coasts, as well as in the Andean region. It can be seen from Table II.9 that the Intendencias and Comisarias, which at that time included Meta and Caqueta, had a positive migrational balance between the years 1951 and 1964 which reflects the strength of the colonization process even before INCORA became active. In all other areas which experienced net immigration during this period, the migration process was associated with the growth of major urban centers.  - 26 - 55. There are 11 projects classified in Table 2.5 as being prima- rily of a colonization nature, and among them they have accounted for about 20 percent of direct project expenditures of INCORA. It is difficult to measure the number of families that benefit from these expenditures, because many of the benefits accrue to all farmers within the area and not just to those who are incorporated into an INCORA settlement program. The titling of public lands provides some measure of the overall advance of colonization, although it is not an ideal indicator of progress. FFrom 1962 through 1971 some 63,000 titles were granted to 2 million hectares of public lands in the ten Departments, Intendencias, and Comi- sarias where colonization programs are in progress (i.e., Antioquia, Arauca, Boyaca, Cauca, Caqueta, Choco, Meta,Narifio, Putumayo, and Santander). In these same regions about 15,000 families have at one time or other received supervised credit from INCORA. Table II.9 OOLOMBIA: POPULATION NEGRATION BY DEPARTMENTS, 1951-64 (Thousands) Difference Immigration Emigration Difference (percent) a/ Antioquia 101 .4 58.3 43.1 27.0 Atlantico 64.3 27.5 36.8 40.1 Bolivar 37.4 104.1 -66.7 -47.1 Boyac'a 43.7 117.8 -74.1 -45.9 Caldas 36.1 166.4 -130.3 -64.3 Cauca 29.4 38.0 -8.6 -12.7 Cundinamarca 374.5 67.3 307.7 69.5 Choco 7.0 19.5 -12.5 -47.2 Huila 21.1 40.6 -19.5 -31.7 Magdalena 84.9 32.1 52.9 45.2 Narifno 7.3 49.7 -42.4 -74.5 Norte de Santander 22.8 29.1 -6.3 -12.2 Santander 28.7 &i.i -52.4 -47.7 Tolima 9.2 161.6 -152.3 -89.2 Valle 161.2 109.3 52.0 19.2 Intendencias and Comisarias 112.6 39.3 73.4 48.3 Total 1,141.6 1,141.6 a/ Net migration 1951-64 as percent of 1951 population. Source: National Planning Department.  - 27 - 56. As in the case of irrigation projects, colonization projects have been heralded as a means of resolving the rural employment problem without resorting to land redistribution in settled areas. Many agri- cultural labor syndicates are cool in their attitude toward greater government involvement in colonization precisely because they fear it may be used as a substitute for land redistribution, and there is a great deal of controversy concerning the costs of settlement per family. Estimates made by INCORA from its own experience of the infrastructure costs per family differ widely from a low of Col$5,000 in the first stage of the Caqueta to Col$167,000 in the case of Sarare. It is difficult to arrive at any meaningful average when the particular cir- cumstances of the colonization area result in such wide discrepancies in costs. 57. More fundamentally, there are serious conceptual problems that must be faced in evaluating colonization projects. First, there is the problem of identifying and enumerating the beneficiaries of these projects. Second, there is the problem of exactly what should be in- cluded and what should be excluded from the costs of colonization. The opening up of new areas creates a demand for a whole range of social infrastructure, from health and educational services to highways, rail- ways, and eventually whole cities. The colonists are already politically active in pressing their claims for a much more extensive social infra- structure. To take into consideration only a few selective investments associated with the early stages of settlement is to define the costs of settlement in a very arbitrary and restrictive manner. INCORA is at present conducting an evaluation of its colonization projects with the aim of preparing a future development strategy in this field. It is to be hoped that this evaluation will face these issues explicitly. 58. Irrespective of the degree to which government policy seeks to encourage the process, spontaneous colonization will continue with a momentum of its own. Government involvement is thus inevitable at some point, and it is appropriate that INCORA should continue to assist the process of settlement. It is clear, however, that migration to colon- ization areas is naturally selective. The earlier experience of the Agrarian Bank demonstrates that only a minority of the population can successfully adapt themselves to the particular demands and hardships of colonization, and if for no other reason this alone should be sufficient to indicate that colonization cannot substitute for directly addressing the structural deficiencies of the agricultural sector. Farm Improvement Projects 59. All INCORA projects, including those of colonization and irrigation, contain an important element of farm improvement. The 14 that have been listed in Table 2.5 as farm improvement projects are simply those that do not involve major infrastructure investments.  - 2d - Some of those projects do include an element of irrigation or colonization, and to the extent that this is the case they incorporate investment in land improvement works, roads, etc. 60. The principal aim of this category of projects is to improve management and production on small farms by providing technical assist- ance and credit, encouraging the formation of cooperatives, and provid- ing supporting services and farm inputs. Although these projects do not involve major infrastructure investments, they may include minor investments in neighborhood roads and community services--often in support of local community action initiatives. These projects may also include attempts to restructure the system of land tenure by regrouping minifundia or by the parcellation of large farms either into small family farm units or into units to be worked by communal enterprises. The element of land redistribution has been very limited relative to the size of the problem. Through June 1971 about 76,000 hectares of land that had been purchased or compulsorily purchased by INCORA in these project areas had been either assigned or titled to 3,600 families. As in the case of its irrigation districts and colonization projects, INCORA has placed a great deal of emphasis in recent years upon the development of cooperative forms of farming. More than 1,700 families have been organized into communal enterprises on these farm improvement projects. 61. The most important instrument of farm improvement employed by INCORA is supervised credit. At the end of 1971 the supervised credit portfolio amounted to Col$545 million pesos, and an estimated 40,000 fami- lies had loans outstanding under this program. Borrowers pay 8 percent interest plus one percent for life insurance. The length of loans varies from one year in the case of family subsistence credit, two years for the financing of operating expenses, and up to 15 years for investments in farm infrastructure. 62. Supervision is the key element in this program, and borrowers must (with the assistance of INCORA personnel) make a comprehensive farm development plan within the framework of which the credit is to be de- ployed. The implementation of these farm development plans is super- vised by INCORA field personnel, who currently number 560. Since there are about 30,000 plans currently in operation the average workload of supervisors is very high. This inevitably reduces the effectiveness of supervision, particularly in colonization areas where there are problems of communication that may make it impossible to visit more than one farm per day. More intensive supervision would push up administrative costs, on the other hand, which at present run about 10 percent of the total loan.  - 29 - 63. In the final analysis the adequacy of supervision must be judged by the overall success of the credit operation in raising the standard of living of the borrower. In this respect, results have been most encouraging and vindicate the policy priority given to this line of action by INCORA. A recent sample evaluation of results in 8 INCORA projects conducted jointly by INCORA and USAID in 1970 yielded the results shown in Table II.10. Not only have production and family living standards risen substantially as a result of the credit program, but an appreciable demand for farm labor has been generated. Table II.10 COLOMBIA: EVALUATION OF INCORA SUPERVISED CREDIT (1964 pesos per family) Expenditure Gross on Cost Farm Hired of Farm Net Farm Production Labor Inputs_ Inccme Before entering program 11,500 2,000 4,500 5,000 After 1 year 17,300 3,000 6,800 7,500 After 2 years 20,100 3,500 7,500 9,100 After 3 years 23,200 4,800 8,700 9,700 After 4 years 28,400 5,100 11,300 12,000 After 5 years 34,900 6,400 14,400 14,100 / Including value of inputs produced on the farm (principally animal feed). Source: USAID/INCORA The Long-term Planning of Agrarian Reform 64. In 1970 the Planning Directorate of INCORA prepared a detailed analysis of the agricultural sector as a basis for a long-term strategy for land reform. Although the proposals of the study were not adopted as official policy, they merit close examination. The study chose Col$14,700 (US$800) as a benchmark minimum family income for purposes of agrarian policy. It was then calculated that in 1970 some 935,000 families would qualify as beneficiaries of a land distribution program in the sense that they fell into one of the four categories described earlier in connection with the discussion of rural incomes, namely: (a) landless peasants, (b) tenant or share-croppers renting less than 15 hectares, (c) minifundis- tas owning less than 5 hectares and having an income lower than 80 per- cent of the benchmark, or (d) small farmers owning less than 10 hectares and having an income lower than 60 percent of the benchmark. 65. It was estimated that by the end of the century 1,600,000 families would qualify to receive land under these criteria, and that INCORAts services of technical assistance and supervised credit should  - 30 - be made available to a further 200,000 families. In order to meet this goal a mixed strategy of irrigation, parcellation, and colonization was proposed with the objective of serving within a span of 25 to 30 years the needs of 70 or 80 percent of those families which would qualify for assistance. This strategy called for an expansion of irrigation dis- tricts from the present total area of 285,000 hectares to 1.4 million hectares, and it was estimated that this would permit the settlement of 195,000 families. The colonization of 13.5 million hectares of land would permit a further 270,000 families to be settled, and it was pro- posed that 670,000 more families be settled through programs of parcel- lation involving the redistribution of 5 million hectares of land. 66. Some of the assumptions on which these proposals are based are open to question. The proposed parcellation program, for example, is based on the assumption that most of the beneficiaries would receive parcels of 5 hectares, and the subdivision of unirrigated land into such small parcels could result in a proliferation of minifundia. Greater thought should have been given to the encouragement of cooper- ative forms of farming. Nevertheless, this study constitutes a serious attempt to assess the overall implications of a program of agrarian reform. By international standards it does not rank among the most radical of proposals, but it does call for the acquisition by purchase or compulsory purchase of 70 percent of landholdings larger than 100 hectares for purposes of parcellation. Compared to the present land reform program of Colombia it is indeed a radical proposal. An average of 38,000 families per year would have to be settled by the land reform program, 22,000 of them on parcellation projects. 67. Of particular interest are the cost estimates which were made with respect to the proposed long-term strategy. In fact three alterna- tive programs were proposed, and as is to be expected the annual pattern of public expenditure varied significantly depending on the scheduling adopted. The average annual level of public expenditure over the remainder of this century was estimated to be in the range of 4 to 4.7 billion 1970 pesos, and was expected to peak at 6 or 7 billion pesos in the decade of the eighties. This compares with Central Government revenues totalling 12 billion pesos in 1970 and expected to reach 14 billion pesos (in 1970 prices) this year. It would represent a massive increase over the present level of spending by INCORA, which in 1972 amounts to little more than one billion pesos. Some of this expenditure, particularly that designated for land purchases, is in the nature of a transfer payment rather than a direct absorption of factors of production, but whatever may be the economic significance of the expenditure it must still be financed from fiscal revenues. In fact only 14 percent of the total estimated expenditure corresponds to land purchase, and the great bulk of the expenditure is related to land improvements and to the cost of settling  - 31 - families -/. The conclusion that must be drawn is that the most severe constraint upon an acceleration of agrarian reform (next to the political constraint) is the fiscal constraint. 68. The conclusions of the INCORA study are pessimistic as regards the employment generating effect of a long-term program of agrarian reform. According to the calculations of INCORA the settle- ment of 38,000 families per year would not reduce the rate of outward migration from rural areas, and employment in agriculture would rise at no more than the present rate of 1.4 percent per year for the rest of the century. But the methodology upon which this conclusion is based is open to question. Too much emphasis is placed upon farm size as a determinant of the demand for agricultural labor, and not enough recog- nition is given to the fact that the structure of agricultural output (in terms of crop mix) and farm technology are the basic determinants of the demand for labor. An agricultural development policy which encourages a change in crop mix toward more labor intensive products and gives special consideration to labor-intensive technologies has good prospects for increasing the rate at which labor is absorbed by the agricultural sector in Colombia. The Communal Enterprise 69. It is clear that a successful program of agrarian reform and agricultural development can only be achieved through the large scale mobilization of capital and human resources. The rural sector itself must contribute a major part of these resources, and new forms of association between agricultural workers must be explored to the full. The 1961 law which established INCORA explicitly directed the policy of colonization and parcellation toward the establishment of farms suitable for family units. In the last few years INCORA has become increasingly dissatisfied with the family unit as a basis for planning, because the small size of the farm hampers the organization of agricul- tural production and pushes up the administrative costs of titling and supervision. A solution to this problem is being sought in the esta- blishment of communal enterprises, and priorities within INCORA have clearly shifted to this form of agricultural organization. The agrarian reform law of 1973 alters the 1961 law to give preference to the formation of communal enterprises and other forms of cooperative farming over the family farm unit. 1/ The general order of magnitude of these costs is consistent with independent estimates of the cost of agrarian reform made for Latin America as a whole. See A.L. Domike and V.E. Tokman, "The Role of Agricultural Taxation in Financing Agricultural Development in Latin America," in Keith Griffin (ed.), Financing Development in Latin America, Macmillan, London, 1971.  - 32 - 70. The communal enterprise consists of a number of peasant families who own and work a given area of land in common. It differs from a cooperative in that individual plots cannot be identified within the common holding, and there is no possibility of any single family with- drawing and cultivating part of the land separately. In the event of any individual family withdrawing, its place within the communal enterprise is taken over by an outside family so that the unity of the organization is preserved. The peasant families who constitute a community enterprise all qualify as beneficiaries of INCORA. Their contribution to the capital of the enterprise is in the form of labor, and the profits of the enterprise are distributed according to the manpower contribution of the members. It is not envisaged that the enterprise would hire outside labor except in exceptional circumstances. The enterprise is administered by the members themselves, through an elected administrative council. The responsibilities of administration are normally rotated among the members, and the enterprise does not employ professional management, though it may benefit from the technical assistance services of INCORA. 71. INCORA began experimenting with this form of collective production in 1965 on its C6rdoba 2 Irrigation Project. In 1971, after six years of experience, some 70 communal enterprises containing a total of 700 families were operating in Cordoba 2, and the idea has been taken up in many other IFNCORA projects. It is now estimated that there are about 500 communal enterprises operating on 135,000 hectares land, and that 5,800 families are involved in these ventures. Some 80 percent of the land is used for live- stock operations, and although yields are above the national average, they are lower than on INCORA family size farms. This may be because the communal enterprise is a relatively recent innovation which has not yet accumulated as much experience as the INCORA family farm. The following summary data of a communal enterprise in Cordoba illustrates some of the general character- istics of these enterprises. The implied net income per capita amounts to Col$4,400 (US$235) and this compares favorably with average rural incomes. Table II.11 COLOMBIA: ILLUSTRATIVE SUMMARY DATA FUR A COMMUNAL ENTERPRISE IN CORDOBA Number of familie~ 10 Manpower supply - 5,060 days Total area of enterprise 100 hectares Agriculturally productive land 90 hectares Value of land 279,000 pesos Value of credit provided -/ 387,000 pesos Manpower requirements 4,650 days Income per man/day 55 pesos Net income per family 25,600 pesos a/ Calculated on the basis of 2.2 workers per family and 230 working days per year. b/ For buildings, equipment, and inputs. Source: INCORA  - 33 - 72. The policy shift toward the communal enterprise is already a reality, and INCORA has declared its intention to give the communal enterprise priority in the provision of supervised credit. As yet there is no formal legal instrument governing the structure and operation of the enterprises, but the 1973 agrarian reform law requires the Minister of Agriculture to promulgate regulations concerning these matters within one year of its enactment. Organization of the Agricultural Worker 73. It is essential that the participation of the agricultural worker in the process of agricultural development extend beyond the level of the farm, and that he should be actively involved in the for- mulation of agricultural policy. INCORA has often been criticized for its excessive paternalism toward the beneficiaries of its reform pro- jects, but it would be unjust to suppose that there is no participation at all on the part of the agricultural worker. At present, however, the participation of the agricultural worker is dispersed throughout a number of organizations and his voice in the process of agrarian reform and agricultural development is not as effective as was expected a few years ago. A summary of the main institutions involved in the organi- zation of the agricultural worker is given below. The Users Associations 74. The most explicit attempt of the Government to bring the agri- cultural worker into the process of planning and implementing the deve- lopment of the agricultural sector came in 1967, when the Ministry of Agriculture was charged with the responsibility of establishing Users Associations at local and national levels. The term "Users Associations" was employed to indicate that membership should be drawn from the ranks of existing or potential users of such state services as credit and technical assistance. 75. A Division for the Organization of the Agricultural Worker was set up within the Ministry of Agriculture, with a staff of promoters whose function was to go out into the countryside and organize Associations at the Municipal level. In May 1972 there were 44 such promoters active withlin the Division. The Division is also responsible for organizing courses of training directed at the leaders of municipal organizations, and over 500 such courses had been given through March 1972. 76. The growth of Users Associations has been so rapid that as of March 1972, 559 Municipal Associations were in existence and one million applications for membership had been received by the Ministry. Above the Municipal level a pyramidal structure of Departmental Associations and a National Association has also been built.  - 34 - 77. The functions of the Users Associations are defined in very broad terms, and include cooperation in the promotion and implementa- tion of Agrarian Reform '"on a massive scale," and the incorporation of the rural population into the development process. In addition, the Associations are required to cooperate in the development of programs of research, technical assistance, education, and training and are em- powered to suggest improvements in government services. In order to be able to fulfill these functions the National Association was given representation on the Board of Directors of INCORA, the Agrarian Bank, ICA, and INDERENA, and lower level Associations are also represented in the regional and local agencies of these organizations. 78. Within the last two years, the National Association has adopted a policy platform which calls for the immediate expropriation of all large farms without compensation, the nationalization of all credit institutions, official recognition of both urban and rural land invasions, and the immediate cancellation of all debts incurred by agricultural workers with respect to the acquisition of land. 79. Relations between the Ministry of Agriculture and the National Users Association became strained, particularly at the time of the 1972 Departmental elections, when one Departmental Association was dissolved and another had its constitution suspended on grounds that they had become involved in political affairs. At the present time it is dif- ficult to see a way out of the present iTpasse that would lead to a resumption of a dialogue between the Associations and the Ministry.  - 35 - III- COST AND AVAILABILITY OF AGRICULTURAL CREDIT Credit Management and Institutions 82. The Colombian Government takes an active role in the manage- ment and selective control of credit according to economic sector and purpose. Monetary policies are determined by the Monetary Board, of which the Minister of Agriculture is a member, and carried out by the Bank of the Republic (BOR). The Superintendency of Banks watches over the enforcement of laws and regulations applicable to Commercial Banks and other financial institutions. Policy instruments include reserve requirements, compulsory and preferential investments, modest open market operations, lines of discount with the Central Bank, and control over interest rates charged to the borrower. Interest rates on bank loans are generally held below free market levels, which leads to problems of excess demand and credit rationing. 83. To assist in channeling credit into specific sectors according to governmental development priorities, a number of admin- istered funds have been set up within the BOR which can extend loans and discounts to ccmmercial banks and other financial institutions. They include the Private Investment Fund (FIP), the Agricultural Financing Fund (FFA), the Industrial Financing Fund, the Urban Develop- ment Financing Fund,and the Export Prcmotion Fund (PROEXPO). PROEXPO makes some direct loans, while the other Furfds extend loans and discounts only to financial intermediaries. d4. Of these funds, the FFA is concerned exclusively with short- term loans (up to one year) for eleven major agricultural crops, while a portion of the loans of the FIP go to agriculture at medium and long terms (up to ten years) for sugar and tree crops such as cocoa, african palm, and bananas. Apart from these five administered funds, the BOR can extend discounts, subject to various decrees and regulations. 85. Among financial intermediaries, specialized institutions have been created to channel funds to particular sectors of the economy. Agricultural credit is provided by the Commercial Banks, including the semi-official Livestock and Coffee Banks, the Agrarian Bank (Caja Agraria), and to a lesser extent by the Livestock Funds, the Agrarian Reform Institute (INC9RA), and the Development Finance Companies (Corporaciones Financieras).I/ The Financieras devote most of their resources to 1/ According to the Banking Superintendency at the beginning of 1972 the commercial banks included 15 domestically-owned private banks, 6 foreign- owned private banks, and 3 semi-official banks (the Livestock Bank, the Coffee Bank, and the Popular Bank). The Agrarian Bank and the Central Mortgage Bank are official specialized banking institutions subject to the policies and regulations of the Monetary Board and the Banking Superintendency, but are not considered part of the commercial banking sector.  - 36 - manufacturing, but one of them, the government-controlled Agricul- tural Finance Company (COFIAGRO), finances agricultural processing, marketing, and production for export and import substitution. 86. Financial institutions which extend credit and invest in non-agricultural activities include the Central Mortgage Bank, mutual funds, the stock market, and insurance companies. The order of importance of the different institutions is indicated by, their out- standing loans at the end of 1971, shown in Table III.1.