Posted by Gustavo Silva Cano on Oct 12, 2009 Leave a comment

Dear government, please stop giving free money to the rich

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Colombia news - agriculture

Agricultural subsidies are a nasty thing. They are a source of government waste, inexplicable tax money handouts for a few, an affront to the free market principles that are essential for economic growth. The European Union and the Unites States have bloated and complex systems of farm subsidies, which, among other things, impede fair and free competition in world markets for products grown in the developing world. In Colombia, subsidies of all kinds are relatively small due to budgetary constraints, although the government in recent years devised a large program designed to give citizens’ hard earned pesos to agribusinesses. Agro Ingreso Seguro (AIS), as the program is called, has the aim to “promote the competitiveness and productivity of [Colombia’s] farming sector” according to the official website. Between 2007 and today, the Colombian state has spent around 1.26 trillion pesos (around US$630 million again, according to, another official website) in AIS subsidies.

That is a huge number. When you have such large, arbitrary transfers of taxpayers’ money to private individuals, the least one expects is some transparency and accountability. And there has been very little of that. Cambio, a leading news magazine, ran a story that says how some AIS subsidies ended in the pockets of a few rich agro-entrepreneurs in northern Colombia. According to the article, that has created a scandal of enormous proportions, four wealthy families in the department of Magdalena received around 25,000 million pesos (12.5 million dollars) in handouts. The news became scandal material, in part because one of the recipients of the money was Valerie Dominguez, a former Miss Colombia. The article claims that members of these four families divided their farms in smaller parts among themselves in order to qualify for more AIS funds.

Ever since the Cambio article was published, more information on AIS recipients has come to light. Caracol, a broadcasting network, has it that 18 “rich families” in the department of Santander received around 9 billion pesos (4.5 million dollars). According to newspaper El Espectador, Ismael Pantoja, a drug lord better known as ‘El Negro’ who is now imprisoned in New Jersey, received 200 million pesos (US$100,000) in AIS subsidies.

Now, all eyes are on Andres Felipe Arias, the former Minister of Agriculture and a presidential hopeful from the Conservative Party. The subsidy program was designed under his tenure, and he is coming under attack from many quarters for it. Rudolf Hommes, a former Minister of the Economy, wrote recently in El Tiempo that Arias’ AIS amounted to an application “of the idea, popular among the noblesse prior to the French Revolution, that in order to help the poor one has to give money to the rich.” With presidential primaries for the Conservative Party coming soon, Arias wants to get rid of the scandal before it affects his image any further. Whether he will be able to do it remains an open question –and Arias does not have much in his favor. Nobody wants the president to be a brazen benefactor for the wealthy on top of young and inexperienced.

President Uribe has already ordered that all the names of AIS beneficiaries be revealed to the public. An investigation may follow. Will it change anything? Of course, the recipients who have come under scrutiny due to the scandal claim that they got the funds through legal means, and not through corruption or wrongdoing. They may be right. As a matter of fact, the law and the regulations of the AIS allow such high amounts of money to be allocated as they have been –the law has not been violated. And that is precisely the problem: the fact that AIS was designed in a way that lets wealthy entrepreneurs seize millions of dollars in taxpayers’ money is simply outrageous. The program must be overhauled and the funds going to the well off ought to be frozen or returned.

This AIS scandal is the perfect example of what is so wrong with agricultural subsidies: besides distorting the market (prices for subsidized products become artificially low giving them an unfair advantage over unsubsidized products), they benefit very few people, who end up getting paid to produce crops that people neither need nor want. As with all government spending, once these subsidies are put in place, it is virtually impossible to get rid of them in the future, no matter how inefficient and wasteful they are. Moreover, the fact that so many rich people ended up receiving government money in a country so ridden by poverty and inequality, makes the whole affair even more disgraceful. I even do not want to think about the growing fiscal deficit, or the many important things in which that money could have been spent instead.

The beneficiaries defend themselves by saying that without those AIS funds they would have been unable to complete their projects, that the subsidies have helped them expand production and hire more workers. But of course! You guys are getting free money! It is simply natural that these people are better off, and some benefit for a few others is also expected. The real question is whether AIS is good for the Colombian economy, for the treasury, and for Colombian agriculture.

I seriously doubt it.