To attract impact investments, developing countries will need to have strong local entrepreneurship
Nearly three years since the signing of a historic peace accord, Colombia remains a country in transition. That’s more than expected as recovering from a 52-year civil war and building peace will take time.
The same goes for restoring the country’s forests, a major casualty of that conflict. Even now, they continue to suffer; in fact, it’s worse, given the increasing rate of deforestation.
Nonetheless, we can see some progress. In Caqueta, Cesar and other areas most affected by the conflict in Colombia, there are efforts to build formal agricultural value chains, such as those around zero-deforestation cocoa and livestock value chains. This is a way to enable farmers to move away from informal, often illicit activities, such as coca leaf farming, which dominated the economy in the rural regions during the war and caused much damage to the country’s forests.
Developing sustainable agricultural value chains is undoubtedly a good move for Colombia. It’s not only to meet its ambitious commitments to preserve its forests and cut carbon emissions, but it’s also to create long-lasting peace.
Building sustainable value chains, however, requires big investments, and some are looking to impact investors, mostly external, to fill the need.
The reality at the moment is that Colombia and most post-conflict, deforested developing countries are struggling to attract impact investments. That’s because rural economies are not yet “ready” for them.
Impact investors, like any in the private sector, are all about the bottom line. Unless they are sure they can get their money back, they won’t invest.
Moreover, many enterprises in rural areas in post-conflict, forested developing countries do not necessarily comply with legal, quality, environmental and social standards. This makes pouring capital in the local private sector very risky for foreign investors.
And agriculture, by its nature, is already a very risky venture.
In order to attract foreign investments and ensure the success of sustainable agricultural value chains, there’s a need to create the environment for them. In the case of rural areas in post-conflict, forested, there’s a need to have a network of formal, professional local entrepreneurs that can deliver the services required along the value chain.
Although it is emerging from conflict, Colombia has a booming middle class. As such, locals who can invest or start enterprises are not lacking. What is lacking is access to existing information to help would-be entrepreneurs know where and how to invest in sustainable agricultural value chains.
The idea of promoting entrepreneurship as a strategy to develop a successful industry is definitely not new. But it hasn’t been explored as much for Colombia nor for reducing deforestation and sustaining peace.
In Peru, I saw first-hand an effort to develop a sustainable value chain. After working on a survey of coca leaf producers in the Peruvian Amazon as part of a program seeking to provide a sustainable alternative, I worked with an owner of a Peruvian enterprise that sought to export edible snails or escargots to Italy and Spain. I was a recent university graduate then.
Lima is a desert with high relative humidity (roughly 90 percent), thus providing the perfect environment for producing escargots. Despite this, no one invested in escargot cultivation. As such, the enterprise couldn’t satisfy the high demand from the two European countries.
To address the situation, the business owner promoted snail production among young professionals and a booming middle class that emerged after years of conflict. In addition, the company worked to convince locals to start businesses that can provide the services needed to produce and export snails. He engaged me to provide advice to local investor partners on how to build snail farms and then contracted someone else to be a supplier of snail eggs to these farms.
Although the company that started it all has ceased to exist, there are now Peruvian enterprises that are thriving as snail producers.
The experience in Peru offers lessons on how to build a sustainable value chain. It’s a model that can certainly work in other post-conflict, forested developing countries.
Without a doubt, impact investments would be a huge and much-needed economic boost for Colombia, especially as it moves ahead with its peacebuilding process and efforts to save its forests. But for them to come, the country must have organized value chains, which would involve formal local businesses that provide the required services and comply with international quality, social, and safety standards. Moreover, locals who can afford to invest must have access to the right information, which exists already, to know how to do so.
Additional information:
This Blog was supported by the project “Implementing Sustainable Agricultural and Livestock Systems for Simultaneous Targeting of Forest Conservation for Climate Change Mitigation (REDD+) and Peacebuilding in Colombia” aims to contribute toward reducing land-based greenhouse gas (GHG) emissions, conserving forest, restoring degraded landscapes, and improving rural livelihoods while stimulating peacebuilding in rural Colombia. It is part of the International Climate Initiative (IKI). The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) supports this initiative on the basis of a decision adopted by the German Bundestag. The SLUS project is implemented by CIAT, together with the Centre for Research on Sustainable Agriculture (CIPAV), Leibniz Centre for Agricultural Landscape Research, and Thünen-Institut.
