Colombia faced a big issue in the Caribbean region due to ICJ decision about San Andrés. Government is making attendance to avoid public disorders from islanders, moreover she will give economic resources in about US$111 million to slowdown the situation, nevertheless these resources are a short run solution with low added value for island economy due to island fiscal situation is excellent and they can sort out their problems in water supply without any difficulty. However, islanders can really improve their welfare if government and private banks works on it through technical support and financial support to improve fishing activity (real opportunities to make business for islanders). Fishery industry in Colombia faces economies of scale, therefore an increase of volume of fishing production in about 1.0%, then the cost per tonne will face a decline in about 3.0%. Moreover gross profits from this activity showed a real annual growth of 9.0% since 1995. Colombia has 10 big firms that works on fishery industry and gave 3,623 work positions in 2011. Antillana is a firm that works in San Andrés island and Cartagena, she faces a good development and gives 400 work positions, she is a good example about how to improve fishery industry in Colombia. The idea is to increase exports of sea food and export them through Free Trade Agreements.
Author: Humberto Bernal,
Economist
e-mail: zhumber@gmail.com
San Andrés is an island that belongs to Colombia since 1803 when she started to be part of Viceroyalty of New Granada. This island went from 393 citizens in 1793 to approximately 70 thousand in 2012. Citizens from this island dependent on fishery resources and influx of tourists. Last days government faced an issue due to International Court of Justice (ICJ) issued a ruling where Colombia lost sea territory in about 75 thousand square km. San Andrés citizens feel without government who protect them. According to island citizens, this area of sea lost is full of economic resource for fishing (fishes, lobsters and craps). Government attended the calling of citizens last week and she announced a public investment of US$111 million (Col$200,000 million), these resources are going to be taken to improve water supply and as a compensation (subsides) for those who can not go to that area that ICJ banned for Colombians.
The government resources (US$111 million) can be thought as a very short run solution to avoid an emancipation from islanders from Colombia, moreover this money will not improve too much islanders economic welfare. Government direct investment in islanders has been high since 2007 as figure 1 shows, the per capita government direct investment in San Andrés was about US$447 per year in 2011, one can compare this value with money received by two big regions in Colombia: Bogotá citizens who faced an investment of US$480 per capita in 2011 and Antioquia citizens who faced just US$189. Moreover, the fiscal situation of this island is well managed compared with other regions, she is on the place 25th out of 1,123 regions in whole Colombia. Therefore government is doing partially her job for the short run.
Figure 1. Government direct spending per capita
2007-2011
(US$constant prices of 2011)
Source: Government Department of Statistics (DANE and DNP) and own calculations.
How to improve economic development in San Andrés
San Andrés is an island that depends in deep from tourist flows, the percentage of her GDP that comes from this activity is 46% (it includes: hotel, trade and transport activities) and a 13% comes from government activities such as public services (electricity, water supply and others). There is a small fraction that comes from fishing, it is about 1.0% of her GDP.
Now, if one goes in deep about fishing industry in Colombia, one realizes that it faces economies of scale (as the production increase, the average cost per tonne of fishes, lobster and craps goes down). Figure 2 shows this fact, one can look an average cost declining as volume increase, the lower average cost per tonne of frozen fish is about US$1,400 at FOB prices per tonne and for crustaceans is about US$4,900 at FOB prices per tonne. In international market these prices are higher than in local market, in the first case the international price is about US$1,980 at FOB prices per tonne and the second case it is about US$7,900 at FOB prices per tonne. Through econometric tools one can forecast that as the production increase in 1%, the the average cost faces a reduction of 3%. Therefore there is a big market to be exploited by islanders with support of government and private banks.
Figure 2. Economies of scale from fishing industry in Colombia
Average Cost and total production 1992-2010
(US$constant prices of 2011)
*Through Random Effects Panel Data Model there is evidence of economies of scale for fishing activity , moreover it includes lobsters and crabs.
Source: Government Department of Statistics (DANE) and own calculations.
Colombia counts with 10 big firms that works in fishery industry and they face huge gross profits (before administrative cost and taxes) as figure 3 shows. This companies employ about 3,623 workers in 2011, therefore they add welfare to society. By 1996 they faced a gross profits in about US$5.1 million at 2011 prices and it increased to reach US$35.4 million in 2011, therefore gross profits faced an annual average real growth of 9.1%.
Figure 3. Gross profits for fishing companies in Colombia 1995-2011
(US$thousands constant prices of 2011)
Source: Government Department of Statistics (Superintendenciade Sociedades) and own calculations.
In San Andrés island there is a big company working in fishing, she is called Antillana, this company works also in Cartagena city and employ 400 workers around colombia including those from San Andrés. Moreover, this company exported 70% of the total frozen sea food exported through the island in 2011.
The conclusion is to work in real opportunities for islanders such as increasing the number of fishing production through technical criteria (environmental and profitability). Through credits and government technical support this opportunities can be real. Technical support must work on education through government bodies such as SENA places and setting up economic research offices such as DANE branches in the island. Government has to make presence through technical support instead of money subsides.
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