Since 2002, the Rural Productive Partnerships Project (Projecto Apoyo a Alianzas Productivas – PAAP in Spanish) is part of a series of initiatives by the Colombian government aimed at linking small-holder farmers to markets. A productive partnership is an agribusiness contract between a producer organization and one or more commercial partners such as companies from the processing industries or wholesalers. By subsidizing producer organizations and its members with training and technical assistance, the government helps farmers to meet the quality and quantity goals of these contracts.
In the last thirteen years, the PAAP has created over 800 partnerships and reached around 50,000 rural households all over Colombia. CIAT’s Linking Farmers to Markets team has analysed the policy’s impact and effectiveness in a series of studies. Most recently, the performance index of the partnerships, IDAP (Indice de Desempeño de las Alianzas Productivas), was updated to include 2013 and 2014 data from the monitoring and evaluation data base of the Colombian Ministry for Agriculture and Rural Development (MADR).
Generally, a productive partnership is defined to have a high level of performance if the market linkage it creates generates value for the producer organization and its members as well as for the commercial partner. In our research, this value creation is assessed on the basis of three dimensions: competitiveness, efficiency is business management and sustainability.
Source: LFM-Policy Analysis, DAPA, CIAT.
Overall, partnerships seem to do best in the dimension business sustainability which includes variables such as the capacity to reimburse the resources of the productive partnership and the proportion of the producer organization’s sales which are sold through the partnership.
This can be seen in Figure 2, to the left, which shows the performance in each of the three dimensions and the performance overall. We can also see that the older the partnership and the more experience it has, the higher the overall score and the performance in each dimension (See Figure 2, note). The IDAP is constructed by analyzing the relationship between the variables composing each dimension with the help of a multivariate statistical method called Principal Component Analysis (PCA).
Note: competitiveness (blue); efficiency is business management (Red); sustainability (green); and IDAP avg. final scores (orange). Age of partnerships, less than 2, 2-3, 4-5, 6-7, 8-9, and higher than 10 years. Source: LFM-Policy Analysis, DAPA, CIAT.
The analysis of additional data years (2010-2014) with an updated methodology brings the following additional and interesting conclusions:
- The older a productive partnership is, the more experience all participating parties have and therefore, the better these partnerships perform compared to the younger ones (Figure 2.).
- Most products sold through PAAP are long growing cycle crops such as coffee or cocoa. Partnerships with these type of products show a moderate performance.
- Partnerships with short growing cycle crops such as fruits and vegetables perform highly according to the index.
- Partnerships selling the following products performed consistently well in the IDAP: golden berry (uchuva), shrimps, palm oil, strawberries, aquaculture, asparagus, specialty coffee, milk and raw cane sugar. This does not mean that they should be more supported than others. Their share in the production of all partnerships varies strongly.
- A large part of all commercial partners in PAAP comes from the processing industries, and therefore, these firms play a central part in the project as buyers.
- In general, most commercial partners are large businesses. However, the results show that the size of the commercial partner does not matter for successful business relationships. Large, medium and small firms perform equally well when entering productive partnerships with producer organizations.
- The productive partnerships that perform the best involve commercial buyers which trade the goods both on domestic and the international markets.
Rafael Isidro Parra-Peña S., Economist and Policy Analyst @ LFM-CIAT.
Jana Bischler, Visiting Researcher @ LFM-CIAT, University of Oxford, U.K.
Bilver Adrian Astorquiza, Visiting Researcher @ LFM-CIAT, Universidad del Valle, Colombia
Linking Farmers to Markets Theme of CIAT’s Decision and Policy Analysis (DAPA) Research Area.