Colombia Strives to Revive Its Flagging Cotton Industry

Bogotá — Colombia’s cotton production experienced its golden years between 1950 and 1978, during which it became one of the drivers of the country’s agricultural sector, but the lack of incentives for producers, failures in the export promotion strategy adopted and weak technological development have all served to stymie the industry.

The decline of Colombia’s cotton industry is reflected in the fact that the country not only stopped exporting the product in 2014, but also went from consuming more than 100,000 tons per year in the past to only 24,000 tons in 2021 due to difficulties in importing yarns and fabrics.

In 2005, the Colombian government adopted a public policy that was aimed primarily at solving the price problem, while at the same time aiming to increase production and productivity of the crop.

But that policy “ended in 2015 without achieving the main aims. The only thing that was achieved during that time is that those who planted cotton received a payment”, but then the sector “was left without any permanent support”, according to César Pardo Villalba, executive presidente of the Colombian Cotton Confederation (Conalgodón)

He said that has only been “some sporadic support” and that “planting has declined”.

“For the price issue there is no problem, and other than that, some rewards are agreed in the contract for cotton quality that have to do with the length of the fiber, resistance, color and also some penalties when it has contamination (...). We have had a more or less stable negotiation with Diagonal, which is the company that represents the textile companies,” he said.

The problem then today is mainly focused on production costs, which, he says, have been resolved little by little. In 2014 producing a pound of cotton cost almost a dollar, and today it costs between $70-75.

And “we can still reduce that cost much more with the productivity increases we are obtaining with the use of certified, transgenic seeds. Ninety-nine percent of the crop in Colombia is grown with transgenic seed, which not only gives cotton quality and productivity, but also serves fundamentally to control pests - lepidoptera and weeds - which avoids too many applications of insecticides and herbicides.

The Beginning of the End

“Colombia has been losing the vocation for cotton, unfortunately, in the midst of all the illicit crops and because the domestic industry has also been declining,” according to Camilo Rodriguez, president of the Colombian Chamber of Apparel and Allied Industries (CCCA).

He said in an interview with Bloomberg Línea that a pound of cotton is quoted at around 550 or 60 dollar cents, and that at one point it was over 120 cents, “which would have been a boon for our Colombian farmers, and a golden opportunity for all textile and apparel manufacturers”.

However, the country has overlooked the opportunity to sell the raw material in a scenario in which the world was demanding commodities, and the prices of some fabrics rose by over 300%.

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“Colombia has unfortunately lost a golden opportunity, as we are also seeing today that the final consumer and brands have begun to stop buying cotton from the northeast region of China, which represents about 22% of world production, and about 38% of local production,” he said.

Research in 2014 by Jorge García García of Banco de la República concluded that “the cotton sector in Colombia developed despite government policies that oppressed it during most of the period”.

“Although the sector received some initial protection, it was small and short-lived. Policies to support the sector, such as export promotion and subsidized credit, attenuated but did not eliminate the disincentive produced by the policy of forced sales to Diagonal at prices below international ones,” CCC&A’s Rodríguez says.

According to Statista figures, China was the world’s leading cotton producer in 2021, with 6.42 million metric tons, followed by India (6.1 million), the United States (3.1 million) and Brazil (2.3 million), which is also the world’s leading exporter.

The main importers of cotton are China (2.7 million metric tons), Bangladesh (1.8 million), Vietnam (1.5 million) and Turkey (1.1 million).

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According to Rodríguez, Colombia began to destroy its cotton industry after the economic opening-up implemented by former president César Gaviria in the 1990s, and that the South American country went from having close to 398,000 hectares (983,478 acres) planted to fewer than 9,400 hectares currently.

“At that time, the cotton sector generated about 1.4 million jobs in the agricultural sector alone, and today the total number of jobs in the apparel sector is close to that figure,” he said.

Conalgodón’s Pardo said Colombia has had an “overly protectionist” vision, and that the problem was that the country did not adopt policies that favored the competitiveness of the crop.

“It was not about protecting mediocre production, but fundamentally about increasing production and competitiveness. The problem with cotton was first of all the production costs, which increased and reached a ceiling due to pests. In Armero (in the country’s Tolima department), which was the cotton city of Colombia, more than 25 applications were made for each crop and that is an exaggerated figure,” he said.

And as with cotton production, Colombia’s textile industry is currently experiencing the impact of large volumes of imports and the disruption of the productive apparatus.

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This has been manifested in the current situation of companies such as Coltejer, which does not foresee the reactivation in 2022 of its production, paralyzed since last year in Colombia, due to the high costs involved, according to a report by the company’s management.

According to the country’s company register, Colombia has 35,111 apparel companies, 215 yarn companies and 7,294 textile companies.

The vast majority are micro, small and medium-sized businesses that are the driving force behind the sector (making up 99.7% of the total), and are the main employer of women in the manufacturing sector.

The Industry’s Vision

In a conversation with Bloomberg Línea, entrepreneur Mario Hernández pointed out that Colombia failed to sufficiently develop its raw material production chain and companies did not keep up to date with the fabric manufacturing processes available in markets such as Asia.

“We were assemblers and did not offer the complete package, which was raw materials, design and production,” Hernandez said, who believes that taxes are very high in Colombia and that takes away the market’s competitiveness.

“So you can’t get materials, you have to bring fabrics and everything (...) Coltejer was a company that has been around forever, but there was a lack of administration, a lack of knowledge, a lack of entrepreneurs joining forces. You see, entrepreneurs in the world get together, they get involved, they develop products. Lafayette, for example, continues to move forward because the owners are still on top of it, developing materials and everything. If this is neglected, things don’t move forward”.

Arturo Calle, a well-known entrepreneur in the sector in Colombia, told Bloomberg Línea that Colombia was once a large cotton producer and even had surpluses for export.

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“In Tolima they had a large company that bought all the cotton, processed it and stored it in bales and so on. Colombia in the great days of Coltejer, Fabricato and other large companies produced all the cotton that was required,” he said.

Calle, founder of the homonymous clothing chain, recalled that the department of César “was a white sea of cotton”, as it was in the valleys and plains of Tolima, in towns like Armero.

“Today, if Colombia were a cotton-producing country, the growers would be doing well, because it is becoming scarce globally. A big pity, definitely, as it’s nowhere anymore, at least I have never heard of any place where there were cotton crops,” Calle said.

How to Revive the Industry

Regarding solutions to the problem, Calle said a recovery is not easy because most of the large factories that required cotton have closed.

Added to this are the difficulties in changing the vocation of some departments, where the land is now used as pasture for raising cattle, as well as planting rice, corn and palms.

“To turn that around, to do away with pasture, with livestock, is very difficult,” he said.

Calle also referred to the difficulties involved in refitting the sector’s productive apparatus with new machinery and the adoption of technologies.

“I personally do not see any concept where one can say it [the cotton industry] can come back, it is definitely not easy.”

To solve the issues, “the only thing is for the Colombian government, whoever it may be, to supply a subsidy per ton of cotton produced for domestic consumption. And if it is for export, then there should also be a subsidy,” he says.

A View to 2025

Conalgodón’s Pardo Villalba says that, despite the challenges, the company is optimistic about the situation given that “prices have ostensibly improved with the international commodity issue”.

“Today we have [domestic] prices that exceed $11 million per ton, while just two years ago we had prices that were below $5 million per ton. Despite the fact that the increase in prices also brings with it the increase in production costs, today we can say that the cotton crop is profitable,” he said.

He said Conalgodón has set goals for 2025, which start with exceeding 16,000 hectares of cotton cultivation in Colombia in 2022, and in three years to increase the amount of cultivation to about 40,000 hectares, with production of between 5,000 and 50,000 tons.

“We believe that cotton can recover, it can once again become an important short-cycle crop,” he said, adding that part of the strategy is based on encouraging crop rotations with rice and corn.

This “would be quite important, not only for farmers’ profitability, but also for soil improvement and sustainability. So we are optimistic”, he said.

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