VZCZCXYZ0016
RR RUEHWEB

DE RUEHBO #0043/01 0091612
ZNR UUUUU ZZH
R 091612Z JAN 09
FM AMEMBASSY BOGOTA
TO RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHC/SECSTATE WASHDC 6407
INFO RUEHBR/AMEMBASSY BRASILIA 8583
RUEHCV/AMEMBASSY CARACAS 1478
RUEHZP/AMEMBASSY PANAMA 2835
RUEHLP/AMEMBASSY LA PAZ JAN QUITO 7563
RUEHPE/AMEMBASSY LIMA 6867

UNCLAS BOGOTA 000043 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ETRD TBIO KPAO CO
SUBJECT: CENTRAL BANK AND AGRICULTURE MINISTRY CONFLICT 
OVER FOOD IMPORTS 
 
REF: BOGOTA 7 
 
¶1.  (SBU) SUMMARY.  To counter inflation, the Colombian 
Central Bank has publicly urged the Ministry of Agriculture 
(MOA) to reduce agricultural tariffs and increase food 
product imports.  The MOA states that they are receptive to 
imports, but do not believe tariff reductions are necessary 
amid a recent decline in commodity prices.  Furthermore, MOA 
officials stressed to us that the Central Bank has neither 
the legal nor the political authority to involve itself in 
tariff related matters.  The Ministry of Trade -- which does 
have authority on tariff issues -- told us that they have 
made no movement on the issue and are unlikely to do so 
without MOA support.  Local agricultural leaders insist that 
increased imports would only harm the sector, threatening the 
employment of 11 million Colombians.  For the meantime, the 
Central Bank appears to have sparked a lively debate, but it 
is unlikely the recommendation will take root.  END SUMMARY. 
 
Rising Food Prices Causing Inflation? 
------------------------------------- 
 
¶2.  (SBU) Despite price reductions on certain food products 
in December -- the first such reduction in months -- and 
lower overall inflation expectations for 2009 (reftel), the 
Banco de la Republica (Central Bank) has publicly called in 
recent days for the MOA to increase food imports to counter 
the traditional new year spike in inflation.  (NOTE: 
Colombian food prices traditionally rise rapidly in 
January-March due to a combination of weather, seasonal, and 
economic factors, generating a disproportionate amount of the 
annual inflation rate.  END NOTE.)  Andres Espinosa, the 
Senior Advisor to the Minister of Agriculture, told us that 
the Central Bank believes that reducing food price inflation 
is key to reducing overall inflation.  He added that the 
objectives of the Central Bank are misplaced, and that now 
more than ever the Central Bank should be focused on 
promoting economic growth and production rather than 
inflation targets.  He also highlighted that the commodity 
prices of many imported items such as corn, wheat and 
soybeans fell in December and will most likely continue to 
fall internationally if the price of oil remains low. 
 
Imports Already Significant 
--------------------------- 
 
¶3.  (SBU) Espinosa reiterated that many of Colombia's most 
important food products already heavily depend upon imports 
of raw materials and that the situation is not going to 
change.  Minister Arias confirmed the same, stating in the 
press that while there are no plans to adjust tariffs on any 
food products, Colombia would continue to be receptive to 
importing agricultural products in 2009.  To reinforce that 
message, Espinosa said that a special tariff-rate quota (TRQ) 
of rice of zero duty was created to meet demand and stabilize 
prices at the end of 2008.  The Trade Ministry, the entity 
with authority on tariff issues, also told us that they had 
made no movement on the Central Bank,s recommendation to 
further increase imports and would not do so without MOA 
support and guidance. 
 
Local Producers Incensed 
------------------------ 
 
¶4.  (SBU) Nevertheless, the president of the Colombian 
Agricultural Association, Rafael Mejia, stated publicly that 
he was appalled that the Central Bank was pushing for 
increased imports, as it directly threatened the livelihood 
of 11 million Colombians employed in the agricultural sector. 
 Rather than increasing imports, local experts state that the 
GOC should be concerned with helping producers in the flood 
affected areas, as it is still unknown as to how damaging 
last year's rains will be on production. 
 
COMMENT: Why Is The Central Bank Even Involved? 
--------------------------------------------- -- 
 
¶5.  (SBU) The Central Bank -- absent legal or political 
authority over tariff policy -- is laying the groundwork to 
shield itself from criticism from inflation hawks should, as 
expected, it continue to lower interest rates in 2009. Its 
efforts to generate the political will necessary to reduce 
agricultural tariffs will likely fall victim to the political 
punch enjoyed by this sensitive sector.  The Trade Ministry 
 
won't move on agricultural issues without the support of the 
MOA, which is adamantly opposed to what Espinosa described as 
a "ridiculous idea".  It is still too early to tell if MOA 
policies will change as the financial crisis continues to 
unfold, but the Central Bank is likely fighting a losing 
battle. 
NICHOLS