04 Jul Investment opportunities in areas affected by the armed conflict in Colombia
In a previous article, we mentioned that Colombia is in the process of establishing a new legal system for areas that have been affected by the internal armed conflict; these areas are referred to, with the name ZOMAC.
The ZOMAC legal system is established to create tax incentives for those who invest in areas that historically have been affected by violence. The two major tax incentives are, first that Corporations may choose to pay up to 50% of their taxes through direct investment in projects of social importance or infrastructure, in the areas most affected by the armed conflict. Secondly, the new companies, whether they are micro, small, medium and large companies, that have their main domicile and develop all their economic activity in the ZOMAC, will have a reduction of the payment of income tax until the year 2027.
Agribusiness involves everything from actual agricultural production to post-harvest and processing, to national and international marketing. According to the economist intelligence unit from the economist , the agro industrial sector is a major player in the national economy, generating close to 6.2% of GDP worldwide. In terms of exports, Colombia´s agricultural exports have increased by 32.2% within the last five years.
Among 223 countries where FAO developed an investigation of the potential for expansion of the agricultural area, without affecting the area of the natural forest, Colombia was classified in 25th place. Of the 22 million exploitable hectares in the country, only 4,8 million are occupied and in production. In other words, According to the FAO, Colombia is going to become one of the seven nations to be a world food pantry because it has enough land to expand the agricultural frontier without the need to deforest in the process.
The agro business in Colombia has been developed in six major sectors which are: Aquaculture, Bio fuels, Cocoa, and Chocolate, meat industry, fruit/vegetable, and dairy.
First, the aquaculture is one of the most popular sectors in the country due to its tropical location and climate; the temperature of the water shows few variations, allowing a high productivity throughout the year. Colombia counts 1,600 kilometers of coastline in the Caribbean Sea and 1,300 kilometers in the Pacific Ocean. Also, with five large rivers located in the regions of Pacific, Amazon, Orinoco, Catatumbo and Caribbean, that add an extension of 9,341 km. The enormous amount of water and better practices, have contributed to, in 2006 and 2015 an increment of 100% in the fish production, reaching 103.1 thousand tons in the last year.
Second, Colombia counts with about 7.4 million hectares suitable for the development of agro-fuels, and with the positive aspect that these lands do not affect natural forests. It has developed the recognition of been one of the largest Biodiesel productions in South America and fifth in the world, with more than 1,272,000 tons of biodiesel produce yearly . It has focused its production of ethanol and biodiesel on agricultural inputs with the highest energy efficiency such as sugar cane and oil palm.
Thirdly, another notable agricultural sector is the vegetable/fruit, which occupies more than 118.000 hectares, producing about 2 million tons of vegetables, which positions the country as the fifth producer in Latin America in this segment. Colombia is a tropical country with a variety of ecosystems, with more than 95 types of fruit trees planted, and around 42 species of vegetables. According to the Food and Agriculture Organization of the United Nations (FAO), Colombia, with a concentration of 10.9% of fruit ptoducts, is the third Latin American country with the highest number of hectares planted with fruit trees.
Lastly, the chocolate and cacao industry has a potential of 2 million hectares, suitable for the development of these crops, which makes the country one of the main cocoa growers in the world. The chocolate and confectionery sector are part of the Productive Transformation Program (PTP) of the Ministry of Commerce, Industry and Tourism, with the idea of improving sectorial competitiveness through public and private partnerships. This program has generated that in the year of 2016, cacao production reached 56,785 tons, which is considered a national record, representing a growth of 3.6% in relation to the previous year where the production achieved the weight of 54,798 tons.
It is important to highlight that 350 municipalities of Colombia produce cocoa, and many Colombians depend on it. Fedecacao estimates that there are about 38 thousand farming families, and added to these families are more than 100 thousand that depend on jobs associated with cocoa in the national territory.
Due to the great reliance Colombian families have on agricultural products and the low operating figures due to violence, the government was in the urge to creat a legal system that would increase production and protect peasant families. For this reason, the government created the ZOMAC regulation applying to some municipalities that have been chosen do to the abundance of products and the impact of violence. An example of these, are four municipalities such as Tibu located in Norte de Santander, which counts with a diversity of agricultural products such as cocoa, cassava, rice and banana.
Another well known territory is Fundacion in Magdalena, for its primary production is the castle rising and dairy. The main products harvested in this region are: Corn, cassava, orange, banana, bean and tobacco. Third, is Apartado in Uraba, with the banana and plantain cultivation that represent the most important economic activities of the Municipality. Apartado dedicates about 5% of its extension, to plant other crops, although of less importance, as: corn, cassava, and cacao, and fruit trees such as chontaduro, avocado, and borojo. Lastly, is the region of the Orinoquia with a major agricultural production in Cacao products and exporting flowers.
To conclude, The ZOMAC areas are excellent for investment, first because they have a great diversity of products and resources to be exploited and secondly, because there are tax incentives designed to make the investment more attractive.
Jose A Abusaid