VZCZCXYZ0001
RR RUEHWEB

DE RUEHBO #0276/01 0281836
ZNR UUUUU ZZH
R 281836Z JAN 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 6718
RUEHRC/DEPT OF AGRICULTURE WASHDC
INFO RUEHBR/AMEMBASSY BRASILIA 8603
RUEHCV/AMEMBASSY CARACAS 1574
RUEHPE/AMEMBASSY LIMA 6934
RUEHLP/AMEMBASSY LA PAZ JAN PANAMA 2925
RUEHQT/AMEMBASSY QUITO 7632

UNCLAS BOGOTA 000276 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ETRD TBIO KPAO CO
SUBJECT: AGRICULTURE SECTOR BRACING FOR TUMULTUOUS 2009 
 
REF: BOGOTA 7 
 
¶1.  (SBU) SUMMARY.  Local experts expect the agriculture 
sector, which employs 24 percent of Colombia's population, to 
weather the 2009 economic slowdown with modest growth, 
insulated from the worst of the global financial credit 
crisis by the sector's dedicated credit institutions.  Their 
greatest concern is a decrease in exports to the United 
States, Europe and Venezuela, as worldwide demand continues 
to shrink.  Beyond economics, there is also concern about the 
policy impact of the upcoming departure of Agriculture 
Minister Andres Arias to seek higher political office. 
Nevertheless, producers remain confident, despite public 
statements to the contrary, that the GOC will step in and 
protect the sector if the outlook worsens.  END SUMMARY. 
 
2009 Growth Uncertain 
--------------------- 
 
¶2.  (SBU) The agriculture sector grew by an estimated 3.9 
percent in 2008, but the Ministry of Agriculture (MOA) and 
the Colombian Farmers Association (SAC) disagree on 2009 
predictions.  According to Senior Trade Advisor to the 
Minister of Agriculture, Andres Espinosa, the MOA forecasts 
the sector will grow by roughly the same amount, 3.5 to 4 
percent, barring unusual climatic conditions.  He said it 
would be a tough year for both Colombian and global 
agriculture, but that stable local financing would help 
mitigate the impact of the global financial crisis.  Rafael 
Mejia, the President of SAC, disputed the MOA growth forecast 
as too optimistic, stating that the sector would most likely 
grow about one percent less.  However, MOA and SAC agree that 
agriculture would be more stable than the financial, 
industrial and service sectors. 
 
Agricultural Financial Institutions Insulated 
--------------------------------------------- 
 
¶3.  (U) The MOA and SAC cite the insulation of Colombia's 
agricultural credit institutions as the main reason for the 
sector's stability in 2009.  The commercial Agrarian Bank 
(Banco Agrario) as well as Colombia's Fund For Agricultural 
Development (Finagro), are state-controlled institutions that 
exclusively finance the agriculture sector.  They deal only 
with local resources and have no international exposure. 
Mejia noted, however, that the overall government fiscal 
cutbacks (reftel) could affect government assistance to 
agriculture as it would every other sector that received 
public credit.  The Director of Credit at Finagro told us he 
believed that the allocations to farmers and the sector will 
remain consistent in 2009, but caveated that it was too early 
to tell. 
 
Exports Threatened By Worldwide Crisis 
-------------------------------------- 
 
¶4.  (U) Espinosa stated that rather than lack of financing 
and credit, the primary problem confronting the sector is the 
threat to Colombian exports posed by the worldwide reduction 
in food demand.  (NOTE:  The three biggest importers of 
Colombian agricultural goods are historically the U.S. (30 
percent), Venezuela (21 percent) and Europe (26 percent). 
END NOTE.)  Mejia also expressed concerned with the 
recessions in the U.S. and Europe, as well as falling prices 
for Venezuelan crude, threatening demand.  While no product 
will be immune from the crisis, Espinosa stated that the 
flower sector, which makes up 17 percent of the value of 
agricultural exports, will be the most vulnerable in 2009. 
This view is not shared by all. A prominent flower grower 
told EconCouns that the sector was somewhat "recession proof" 
since consumers tend to stay and entertain more at home, 
helping maintain demand.  The exchange rate, he pointed out, 
was a far more worrisome factor.  SAC will also be monitoring 
the coffee sector, which comprises 29 percent of the value of 
agricultural exports.  Mejia expressed confidence, though, 
that the GOC would quickly subsidize coffee prices if 
necessary.  Neither the MOA nor SAC believe Ecuador's recent 
import restrictions will negatively impact agriculture 
(septel). 
 
Need To Protect Farmers By Regulating Prices 
-------------------------------------------- 
 
¶5.  (SBU) Mejia said, however, that despite its credit 
programs, the GOC focuses more on consumer rather than 
producer interests.  He highlighted the need for price 
controls for farmers to guarantee domestic prices beyond the 
two currently regulated products -- coffee and cotton. 
Producers of other products have little control over the 
prices they receive, even in difficult times.  The Director 
of the Colombian Institute for Rural Development (Incoder), 
Rodolfo Soto, said that the GOC would like to further protect 
producers but does not have the financial resources to do so. 
 
 
Minister Arias, The Unknown Coefficient 
--------------------------------------- 
 
¶6.  (SBU) Beyond economic uncertainties, rumors that 
Agriculture Minister Andres Arias will soon leave the MOA to 
focus on his presidential candidacy are fueling concern about 
potential changes in GOC agricultural policies.  Espinosa, 
confirming the rumors, told us he supports Arias in his run 
for either the Senate or the Presidency.  Meanwhile, 
agricultural experts worry about prospects for future 
resource increases at the MOA after Arias' departure.  All 
local experts we spoke with told us that Arias, despite 
sometimes making decisions based upon political calculations, 
brought more resources and attention to the sector than any 
other recent minister.  Mejia stated that before this 
administration the MOA was of little importance in the 
cabinet but that now, greatly due to the closeness of the 
Uribe-Arias relationship, it is one of the most influential 
ministries. 
 
Comment:  Keeping Farmers Farming 
--------------------------------- 
 
¶7.  (SBU) While no one doubts 2009 will be a tough year, the 
agriculture sector is confident it can weather this storm. 
Some of the confidence remains rooted in the expectation that 
the GOC will act to protect the sector, despite MOA public 
statements to the contrary, if the economic hit is worse than 
expected.  This expectation is not unreasonable given that 
agriculture employs almost one-quarter of Colombia's 
population.  Nevertheless, meeting such an expectation in an 
extremely tight fiscal environment and with a newly-minted 
Minister at the helm could be particularly challenging for 
the Uribe Administration. 
BROWNFIELD