A Simulation Analysis Of Policies For The Northern Colombia Beef Cattle Industry
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The Atlantic Coast of northern Colombia (known as the Costa) supports between 40 and 50 percent of Colombia's cattle population and, with easy access to domestic and world markets, is the most important of Colombia's five beef-producing regions. Because cattle raising is the main economic activity in the Costa and is an extensive operation with low technical efficiency, the region has been a priority target for cattle development programs. In the mid-1960s, with the financial and technical assistance of several international agencies, the Colombian government started a cattle development program aimed at increasing beef production mainly on the Atlantic Coast. In the early 1970s this program was reinforced with a disease control program and then revised and issued as a national cattle development plan. The main instruments of this plan are credit, technical assistance, export subsidies and improved marketing and slaughtering facilities. Its long-term objectives are to increase the protein supply to the Colombian population and to generate foreign exchange earnings. The primary purpose of this study was to develop a system simulation model to (1) analyze the effects of production incentives on the decision of farmers to adopt new production methods, and (2) estimate the effects of the expanded regional production on the income of farmers, government revenues, Colombian beef consumption and sustained level of exports. Four alternatives to traditional production were considered. Alternative 1 considered the improvement of native and artificia grasses; alternative 2 considered the improvement of artificial grasses and the substitution of artificial for native grasses; alternatives 3 and 4 addedthe'production of forages and silage to the improvement of range lands in alternatives 1 and 2 respectively. At the present stage of the study, however, alternative 2 was the only one comprehensively tested and used as a base run for policy experimentation. The cattle system simulation model has five major components (including a cattle demography model) which (1) aliocate land use according to the farmer's perceived profitabilities of cattle and crops subject to land and capital constraints; (2) calculate yield and output of cattle and crops and their respective producer and market prices; (3) provide the instrumental linkages for government revenue, export trade policies, and production campaign policies; and (4) generate the performance criteria necessary to evaluate the impacts of alternative programs on the cattle economy through time. The five major sets of assumptions investigated were (1) disease control in the traditional herd, (2) alternative cattle industry taxing policies, (3) alternative development credi t policies, (4) alternative Levels of government production campaign promotion, and (5) alternative cattle pricing and export policies. The results of the cattle policy experiments were discussed in terms of the projected time paths (from 1966-: to 1985) of five of the most important performance indices incorporated in the model: (1) regional cattle population, (2) Colombian beef consumption per capita, (3) regional farm income from cattle, (4) capitalized grazing land value per hectare, and (5) annual regional government revenue from cattle. Experiments with disease control and export promotion policies each used two indices instead of the above five: regional cattle population and extraction ratio for the disease control policies and domestic market price of finished males and export margin for the export policies. In general, the study demonstrated that (1) the projected outcomes with the government disease control campaign were greater than under precampaign practices in the traditional herd; (2) the projected outcomes with government programs easing development loan terms were in all cases greater than the base run which assumed current credit policies; (3) the projected area in improved land and the modern cattle population with government policies benefiting both the traditional and modern operations were in all cases lower than under policies benefiting only the modern operation; (4) the projected area in improved land with the increased land tax rate was greater than the base run which assumed current land tax rates; (5) the projected outcomes with the removal of special taxes on cattle were lower than the base run which assumed no removal of these taxes; (6) given the assumptions on farmers' decisions and accounting mechanisms in the model, availability of credit for land improvement does not seem to be a serious constraint to land modernization; and (7) the projected outcomes with a flexible exchange rate suggest that this is an effective incentive to export without involving large transfers from public revenues to exporters in the form of subsidies. The study indicated areas where more research and regional data are needed to improve the model's performance, and discussed possible extensions that could help analyze more fully alternative policy strategies for the Costa's overall development. Finally, the study demonstrated that the system simulation approach with a computerized model of the cattle economy which incorporated information from diverse sources and accounted explicitly for the dynamic interactions and feedbacks that might occur can be a very useful methodological tool for policy analysis
CitationDoctor of Philosophy in Agricultural Economics,Michigan State University ,1974.
University of Nairobi.Department of Agricultural Economics