Colombia - Agricultural Machinery Project

L-74 FILE COPY This report is restricted to use within the Bank INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT on the COLOMBIAN AGRICULTURAL MACHINERY PROJECT July 22, 1949 Loan Department  TABLE OF CONTENTS I. Description of ProJect A. Cost of Project B. History and Purpose C, Factors Considered in Developing the Program 1. The geographical-division of Colombia. 2. Crops in which there were production deficiencies. 3, Variation in local customs. 4. Service and maintenance facilities. 5. Existing agricultural machinery. D. Types of Hlachinery and Facilities Included in the Program 1. Farm machinery repair and maintenance centers. 2. Heavy trectors and equipment. 3e Medium tractors and equipment. 4. Light tractors and equipment, 5. Miscellaneous and processing machinery. 6. Animal drawn implements and small equipment. S. Plan for the Distribution of ilacliinery F. Plan for Farmer Repayment of Loans to the Caja de Credito Agrario y Industrial y ilinero, II. An Analysis of the Project A. Technical B. Economic 1. Present tractor nopulation and composition. 2. Local production. 3, Exports. 4. Imports, 5. Duties and regulations.  6. Replacements and net increase. 7. Channels of distribution. C. Labor and Efficiency D. Reduction of Imports I. Conclusions - Appendl. A. The Proposed Agricultural Machinery Program - Justification by the tlinister of Agriculture and Animal Husbandry  COOLOILBIA REPORT OT TE AGRICULTURAL iIACHINBRY PRCOGRiA 1. This report is presented in three narts, a description of the project, an analysis of the project and the conclusions to be dranm. I. DESCRIPTION OF TIM PROJECT A. Cost of Project 2. Colombials project of import requirements for agricultural m,achinery wsas first submitted to theBank on June 1, 1948. 2a. This oroject, designed to implement the agricultural development program of Colombia through the nrovision of farm mechanization, is estimated to cost the equivalent of 5 million dollars. Cost estimates by general categories of machinery and facilities required have been presented to the Bank b7r the prospective borrowrer, the Caja de Credito Agrario Industrial y ilinero and are as followis: U,S, Dollars 1. Heavy Tractors and Equipment 525,400 2. M4edium Tractors and Equip:ment 1,586,700 3. Light Tractors and Eciuipment 267,000 4. iIiscellaneous, Animal Drearn Imnlements and Small Equipment 1,157,900 5. Replacement Parts and S-pares 6336,669 6. Export Packing, Insurance 8& Transportation 712,891 7. Renair Shons, and ilaintenance Centers i3,~440 Total $5,000,000 A cop)y of a more detailed farm machinery and equipment import requirements has been submitted to the Banlk by the Caja and is available irn the Engineering Division of the Loan Department. B, History and Purrpose 3. On Hay 20, 19'48,the Colombian IIinister of Agriculture and Animal Industry called a conference to discuss a -)ro)osed loan project for the im- portation of agricultural machinery. He defined the general limits of the  -2- program and named a Commission to develop a logical and balanced program for the country. 4. The Commission named consisted of: the Director of the Division of Agricultural Economics, Dr. Raul Varela lartinez;. the Chief of the Section of .Agricultural Engineering, Dr. Luis Castadeda Rey; the Chief of 7arrA ir.c inery. Dr. Jose Luis Bernudez C.; and two members of the United States Agri- cultural ilission to Colombia, jir. J. Dennet Guthrie, Chief of the iiission; and Jeff E. Flanagan, Agricultural Engineer. The Comnission wras '.ssisted by Kenneth '.'erniment, Agricultural Atteche, American Embassy in Colombia. 5, The justification of the --roject (see Appendix A) is based on the thesis that agricultural machinery is necessary owing to:.- (a) the scarcity of farm labor, (b) the high cost of production. The result of the use of additional farm machinery is empected to (a) an increase in total production,;. (b) a reduction in irnorts and an increase in,exports. C., Factors Considered in Develop,ing the Pro,eram,. 6t In develo,ping the program, the-Commission examined the major f'actors by recourse. to existing data, both Loublished' and un?ublished. and personal knoiorledge of one or more members- of the Commission of all 'narts of the country considered in the program. Because of'time linitations no field investigations wrere undertaken, the past e--oerience of the Commission being considered adequate.. 7. IMembers of-the Commission coinferred .with leading st-riculturists in order to benefit. from their concepts of agriculture in' general and import requirements in particular.  - 3 - 8. The Commission conferred writh farm machinery dealer-distributors rho provided data as to typoes of machinery most suitable, prices and related data. 9. The more im-oortant factors considered by the Commission 'rere the f ollowJing:.- (1) The Geogranhical Division of Colombia 10. The main features of Colombia's topograp-y are its thiree oarallel mountain ranges with their valleys, that broaden in the north to form grassy plains. The southern nart is covered *rith forests. 11. This general mountainous terrain as contrasted w:rith the lowland areas, gives rise to a difficult trans-portation nroblem wrhich renders movement from one area to another extremely difficult. Ho'lever, .rith climatic conditions being so extremely variable, ranging from tropical in the -plains, to temperate andl cold in the higher regions, the range of types of products groim and their methods of cultivation is considerable, Such varied conditions had to be taken into consideration in -rorking out a suitable farm machinery program for Colombia. 12. The total machinery requirements wrere based upon the power uinits (tractors) required to handle the cultivated area. The machinery wras distributed nationally on a regi-nal bosis. Each region, insofar as possible, represents a homogeneous unit and has one, twro or three -oredominant cro0-s. The tyoe of machinery allocated to each region .was based on the type of croios produced in the region., Fifteen regions, trith the area to be mechanised, proposed additional tractors and their predominant agricultural ty-pes -rere set up as follows:  -4 Cultivated area to be Proposed Denartment mechanized Additional Hain Crop (hectares) Tractors Antioquia 12,000 30 Potatoes, beans, pasture Atlantico 3,000 16 Corn, sugar cane, pasture Bolivar 10,000 24 Corn, rice, sugar cane, nasture Boyaca 12,000 26 Small grains, corn, potatoes Caldas 2,000 5 Sugar cane, corn, platanos, pasture Cauca 10,000 31 Rice, cacao, sugar cane, corn, beans Cimdimarca 13,000 56 Small grains, notatoes, corn, pasture Huila 4,000 36 Rice, corn, pasture c Igdalena 7,000 28 Rice, sesame, cacao, sugar cane, corn Mlarino 4,000 10 Small grains, potatoes, corn Norte de Santander 3,000 21 Rice, sugar cane, corn Santander 2,000 10 Sugar cane, corn, tobacco, pasture Tolima 13,000 121 Sesame, cotton, rice, corn Valle 8,000 141 Rice, beans, cacao, sugar cane 11eta 6,ooo 000 Rice, corn, yuca, pasture Totals 109,000 544 (2) Crons in which there rere uroduction deficiencies 13. The problem of increasin- the volume of -,roduction through the application of machinery w;ras undertaken not on a national scale in a nutritional sense but from the point of vie'r of the individual locality, wrhat it can grow, as determined largely by its pattern of agriculture, and the factors retarding increased production which could be overcome by the application of machinery. 14, Within this framework emphasis was given to cotton, rice and oils and fats. All of these commodities renresent either instances *rhere there are imn.ort requirements (cotton and oils and fats) and lrhere a larger production could be obtained from mechanization. In the case of cotton there is a large amount of land it the Espinal center which could be brrught into  - 5 - cultivation 'rith more equipment. In the case of rice the country has reached self-sufficiency and in many instances the land is rrepared mechanically but there is a dearth of harvesting equipment such that' much of the grain is harvested by hand directly from the field. In one area near Bogota farmers trere giving the harvesters one-half the crop just for harvesting and some rere losing a lot of the cron wrhich wJas not harvested due to lack of labor. Combines wSill save a lot of this loss and perform the operation much more cheaply. The area around Espinal is experiencing a rapid expansion in production of sesame for oil; this crop and the terrain on wrhich it is produced is 7nerticularly conducive to production by machine methods and their application wrould permit a more rapid enransion of out-out at economic costs. (3) Variation in local customs. 15. The methods of land holding and cultivation is reflected in the suitability of certain types of farm equivment. In areas where there is tenancy and share cropping, there tends to be relatively small holdings and thus a larger apnplication of labor to a given unit of land. Such methods of production are suitable for the utilization of small lhnd t,,r1es of equipment T.rhereas in areas where the land is held in large holdings, such as the Cauca and Tolima Valleys, farming is more extensive and the heavier types of equipment are in demand. 16. iloreover, the type of holding lrargelyf reflects the avail- ability of capital and credit facilities available to the farmer. The small tenant and sharecropnper has usually little of either and has to rely on government services to prepare his land. prior to harvesting. Thus, in such communities the equipoment will necessarily be government olmed and the service hired out whereas in areas of large holdings or tenancies where cash  - 6 - and credit facilities are more likely to exist the possibility is that a greater pronortion of this machinery ,till be disposed of by cash or cred.it and relatively little government service wrould be needed. (4) Service and maintenance facilities. 17. Facilities required to service the agricultural machinery were determined in relation to the type of equipment required in the region, the accessibility of the various regions to servicing facilities, present availability of government land, buildings and facilities, etc. (5) Existing apricultural machinerr. 18. In establishing the quotas for erch region, data wfas considered as to the volume and t.r7pes of mechanical farm equipment already in existence in each area currently under cultivation or in areas wrhich could be cultivated. D. Ty-aes of iHachinery and Facilities Included in the Program (1) -Farm UNachinery Repair and ilaintenance Centers 19, Four different t-y7pes and size of stationary shops *rith complementary mobile 6ho7ns wrere recommended for the various reaions dependent on the numbers of tractors and implements to be served and the existing facilities. (2) Heavy Tractors and Equipment 20. No private enterprise has shot-n any interest in p-roviding a service to agriculturists *.rith heavy, earth moving, land reclamation and development machinery. This *rill all be for government provided service. (3) I-ledium Tractors, and Equipment 21. The major part of import requirements are in this category as it is most suitable to most parts of Colombia.  -7 (4) Light Tractors and Ecquiument 22, In certain sections of Colombia this tv-oe of equiument is the most satisfactory. (5) Miscellaneous and Processing ilachinery 23. These are for - ilot plants 'rhich will serve to stimu'.ate interest in processing of agricultural products for the benefit of producers. .(6) Animal Drawm Imnlements and. Small EQuinment 24. These are to nrovide a balanced. orogran even though emphasis i.s on mechani,zti,on, E. Plan for the Distribution of Machinery 25, The Caja de Credito Agrario Ind.ustrial y ilinero will be the reciprient of the loan end .rill onurchase the machinery and equinment through the -orivate machinery dealer-distributors in Colombia. 26. The Caja is the hub of Colombia.1s farm credit system. it ,!as created under the terms of Lawr 57 of 1931, the original bill having been introduced in the National Congress by Represpntative ilariano Osoina Perez now President of the Republic. 27. Beginning with a canitalization of pesos 2,000,000 the Caja's actuvitie.s have expanded greatly during the nast eighteen years. Its present authorized capitalization iJs nesos 50,000,000 of which pesos 32,907,540 we.re paid in as of June 30, 1948. The bulk of this capital is subscribed by the National Government. In addition, theCaja finances its operations through notes discounted by the Banco de la Renublica, the sale of medium term bonds to banks and other nrivate agencies, andl the net gains from interest on its loans. 28. The Director of the,Division of Agriclilture in a memorandum of Hay 21, 1948, suggested to the Commission that anproximetely one-half of  - 8 - the proposed loan be dedicated to the acquisition of motorized equipment for the use by the ilinistry of Agriculture and Animal Husbavidry in service operations to those whose economic condition will not permit the nurchase of such equipment and who can best be benefited by means of an orge.nized service. 29. The Ilinisterio de Agricultura y Ganaderia wtill place all the machinery received from the Caja de Credito Agrario, Industrial and 'Iinero at the disposal of the Fondo Rotatario de Fomento Economica (Revolving Fund), a part of the Iiinistry of Agriculture, which organization 'iill per- form custom w.rork on a fee basis for those farmers wrho can not afford to purchase equipment. 30. In addition to the above, the Caja de Credito Agrario, Industrial y ilinero agrees to use up to 15 -ercent of any loan received to purchase spare parts so that the machinery can be nroperly maintained-, 31. For regional distribution the cultivated area iqas used as the basis for determining the agricultural machinery potential. The total machinery requirements of each region .:Tere based unon the po~Jer units (tractors) required to lhandle the cultivated area. 32. The machinery is to be allocated on a regional basis. The Commission considered that the distribution should be by regions because of tro. factors, (a) the existing political and administrative divisions and, (b) the abrupt geographic changes. Each region, broadly represents a homogeneous unit and has one, tw.ro or three predominant crops. Because of the diversity of crops found in distinct regions, complementary equip- ment is equally diverse. Regional allocations were made on the basis of power units (tractors) required to handle the area to be cultivated and complementary equipment on the basis of the number of such units and nre-  - 9 - dominant crops. Consideration in allocating power units by regions wJas also given to the following:- (1) Present cultivated area in wrhich motorized equipDment can be effectively used. (2) Existing motorized eauipment. (3) Area not now in cultivation but which can be developed and utilized economically by means of motorized equi-;ment. (4) Characteristics of the region.. (5) Capacity of the region to abs6.rb and effectively utilize motorized equipment. F. Plan for Farmer Repayment of Loans to the Caja de Credito Aprario, Industrial v llinero 33. The Caja wrill make se;f-liquidating loans on farm macllinery sold to farmers. The farmers will make a 30 percent doxm payment and sign a chattel mortgage on the machinery for the balance of the 70 oercent. Payments will be made in equal annual installments plus interest, spread over a period of four to five years. In comnpliance with existing legisla- tion, the Caja charges interest at the rate of 6 percent on loans un to one year and 7X percent on loans extending from one to five years. Normally, the maximum time limit on ordinary farm machinery is three years, but occasionally this period is extended uo to five years, especially for heavy machinery used in the development of new land.  - 10 - II. -AY AgNALYSIS OF TIE PROjECT 34. This analysis has been made on two broad bases, (a) the teclmical and (b) the economic. A description and analysis of the agricultural economy is being presented in the Economic Reoort. This will pDrovide the necessary background of Colombian agriculture and its prospects for develonment. A. Technical 35. From direct observation, inquiry, and material collected in Colombia and Wlashington the followring has been ascertained: 36. (1) The Colombian agriculture and crop system is in -)art suit- able for mechanization. It is estimated- ' that it is possible to mechanize up to 40' of the area presently cultivated representing 1,063,600 hectares. 37. (z) Existing mechanizaticn has increased the rate of performance of field. work., improved the preparation of the soil and the timeliness in performing farm operations. 38. (3) Owring to geogranhic factors, servicing, repair and mainte- nance present considerable difficulty in Colombia. ServicinG at present is considered to be only fair by American standards but a considerable inmTrove- ment has taken place in the last two years and this trend is expected. to continue. Stocks and spare parts are in general ade4uate and amnle funds for spare p)arts is provided in the program. New