FARM MACHINERY SUPPLY
PRACTICES AND PROBLEMS
Pedro J. Chac6n, Rural Credit Advisor
Peter Hildebrand, Agricultural Economic Advisor
The following report on farm machinery and equipment is the re-
sult of a brief survey conducted as a means of investigating how this
important phase of the agricultural field operates in Colombia, both
with the farm machinery dealers, and the farmers.
Several dealers were contacted, and several small, medium and
large farmers were interviewed. Some of the local farm machinery manu-
facturers were also included in this survey. This report compiles their
views and some of their recommendations for the improvement of farm ma-
chinery services in Colombia.
Our appreciation is extended to the Caja de Credito Agrario, In-
dustrial y Minero (Caja Agraria), Colombia's largest and most important
agricultural bank, Colcaribe, Casa Toro, Velez Angel y Cia., and all
those farmers who contributed with valuable information, and made this
II DESCRIPTION OF CAJA AGRARIA ACTIVITIES
The Farm Machinery Division of Caja Agraria is composed of Pro-
vision Agrfcola (Agricultural Supplies), the Maquinaria Emprestito Sec-
tion (Machinery Loan) and the Administrative Section.
Among the various activities of Caja Agraria, a system called
"Maquinaria Emprestito" (Machinery Loan System) has been in operation
for more than 10 years. This system was established to facilitate the
purchase of desired tractors and equipment by farmers and farm machinery
dealers on easy terms. At the present time there are 29 dealers duly re-
gistered in Caja Agraria's "Maquinaria Emprestito" with offices or stores
in all major areas. The factories assign the territories or Sale Zones to
To be eligible to import farm machinery through Caja Agraria, the
dealers submit an application which is studied by a Financial Committee.
If the dealers comply with the requirements set forth in the convenants
of Caja's contract, and the Financial Committee approves the application,
they can immediately put in an order for importing farm machinery. No
minimum or maximum ceiling has been established, but Caja assigns the "cupo"
or quota to each individual dealer. The amount granted each dealer depends
on the dealer's financial backing. Caja Agraria carries all the expendi -
tures of importation to the time the farm machinery reaches their "Almace-
nes de Depdsito" (storage shops). The dealers are then notified and they
sign 90-day drafts which haVe t6 be.paid off whenever the tractors and
farm equipment are removed from the storage shops.
Sales tax (3%), custom duties (2%), consular fees, transportation,
and insurance (2-3%) are paid by Caja, and charged to the price of farm
machinery. In addition to the above charges on the total value of the
farm machinery imported F.O.B., Caja charges 12% to take care of the ad-
ministrative expenses involved, storage and other expenditures encountered
within the country. Dealers are authorized to charge an additional 25%
which are broken down into: 13% to pay commission fees and other local ex-
penses and 12% net profit (see page ).
Sales through Caja Agraria
The majority of farm machinery dealers uses Caja Agraria's facili-
ties to import their tractors and some equipment. Practically, they are
importing tractors alone since the majority of farm implements like plows,
disks and diskharrows, weed cutters, etc., are being manufactured locally,
and no import licenses are issued for this type of equipment.
Sales of imported equipment to the farmer through Caja Agraria have
the following percentage markups.
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Farm Machinery (F.O.B.) 100%
Custom Duties 2%
Transportation, Insurance 2.5%
Sales Tax 3%
Caja Agraria (on value of Sub-Total) 12%
Dealer's Commission (on value of Sub-Total) 25%
Total Price to Farmer 147.3%
The price at which the dealers sell their machinery is controlled
by Caja Agraria. If they go above the established price they will have
to reimburse the excess to the farmer. The dealers sell their farm ma-
chinery through salesmen who contact the farmers and help them in filling
out the application for financing with Caja. These farmers can purchase
tractors and other farm equipment by making a down payment of 25% of the
value. The outstanding balance is financed by Caja at 13% per annum for
36 months. Installments are scheduled according to the purpose for which
the machinery will be put to use: 6 months for seasonal crops, 1 year for
annual crops, etc.
During 1966 the Board of Directors of Caja Agraria raised the loan
ceiling for farm machinery from Ps.$180,000 to Ps.$270,000. The Monetary
Board later authorized loans up to Ps.$350,000. These measures were taken
in response to the tremendous increase in the price of farm machinery and
equipment. Loans for farm machinery during 1966 totalled "s.$72,171,000,
while in 1967 loans for the same purpose only reached Ps.$57,033,000 or a
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decline of 21 percent over the ptevi6is year.
All farm machinery dealers agree that the services rendered by
Caja Agraria are very good, and seem to be satisfied with the way the
Machinery Loan System operates. However, they agree that the only draw-
back in the whole process of importing farm machinery is obtaining the
respective import licenses. Import licenses are obtained directly by
farm machinery dealers. It is a long, tedious, process, and many times,
for no good reason, or for some reason the dealers find unjustifiable,
the licenses are denied. On the average it takes seven months to process
an import license.
Under the "Maquinaria Emprestito" system, Caja Agraria imports 60%
of its farm machinery. The other 40% is accounted for by imports through
"Provision Agricola" (Agricultural Supply). This equipment is sold direct-
ly by Caja Agraria to its own customers through its "Almacenes de Provisi6n
Agricola" (Agricultural Supply Stores).
Caja Agraria's Administrative Section distributes and controls the
sales of farm machinery in the 12 zones under which more than 400 agricul-
tural supply stores have been grouped throughout the country.
All agricultural implements sold by Caja Agraria are identified
under a code. This system enables Provision Agricola to control monthly
sales, to establish the annual demand, and to project future purchases in
order to keep a permanent stock.
Provision Agricola sells small implements like horse drawn plows,
cultivators and rakes; drilling equipment for water wells, electric fences,
hay balers, milk separators, manual corn sellers, overhead irrigation e-
quipment, wind mills, motor-pumps, diesel motors, grass choppers, hydraulic
rams and trailers, and others. Provision Agrfcola also imports heavy e-
quipment, especially Caterpillar tractors and tawners.
Sales are either cash or credit. On credit sales the customer fills
out an application which is submitted to the Credit Department of the local
branch of Caja Agraria. Once this application is approved Provision Agri-
cola collects 25% as down payment; the Credit Department finances the re-
maining 75%, and grants a 36 month term. Only heavy equipment which costs
more than Ps.$500,000 at the present time, is granted a 48 month term. In-
terest rates go from 8% up to 13%. The longer the term the higher the in-
On imported farm machinery Provision Agricola charges 25% on the
price of the equipment placed in the respective zone. The 25% is divided
into 20% for administrative expenditures and 5% profit. On nationally pro-
duced products they charge 15% divided into 10% for administrative expendi-
tures and 5% profit.
Provision Agricola has repair parts and maintenance for much of the
farm equipment sold. If the respective zone does not have the repair parts,
a radio order is sent to the Machinery Division in Bogota. In the latter
case all expenditures are born by the customer.
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III ACTIVITIES OF FARM MACHINERY DEALERS AND MANUFACTURERS
As was stated in the previous chapter, 29 dealers are duly re-
gistered in Caja Agraria's Machinery Loan System. The exact number of
farm machinery dealers in Colombia was not established, but it proba -
bly exceeds 100. Dealers who either sell or import water pumps for a-
gricultural uses, equipment for overhead irrigation, etc., are also con-
sidered farm machinery dealers.
In Colombia practically all U.S. manufactured tractors are re -
presented by some important farm machinery dealers. European brands
are also represented, but the number of tractors and equipment is re-
latively small as compared to the large number of American tractors al-
ready in operation or for ready sale in the open market. Farmers pre-
fer U.S. tractors because they are well represented, they have been long-
er in existence in Colombia, and they are of good quality which means that
they are highly efficient.
Some dealers directly import tractors and equipment. These im-
ports are financed:
1. Out of their own resources,
2. Through commercial banks,
3. Through manufacturers.
Very little or no credit is obtained from the manufacturers, and
then only under special circumstances.
When dealers have their own financial resources they prefer to
import directly since they make more profit that way.
To obtain financing from a commercial bank the dealers must fur-
nish the bank the following requirements:
When they sell farm machinery to the farmer from direct imports
they help the farmers obtain credit from commercial banks (Law26) at
18% interest p.a. and up to 36 months. The dealer will be the cosigner
and will hold a reservea de dominio" (reserve of ownership) on the e -
quipment until it is paid in full. In this particular case the farmer
must pay 40% down on the date the transaction is closed.
On direct sales the following are the percentages charged the
Farm Machinery (F.O.B.)
Transportation and Insurance
Total price to Farmer
The dealer's commission in this case includes both the 12% of
the Caja and the 25% of the dealer. Hence, the farmer pays the same
The dealer sells tractors with or without farm implements. Some-
times they accept an old tractor as part of the down payment on the new
equipment. The price is agreed upon between the dealer and the farmer
but, logically, the dealer has the last word on this type of transaction.
The price fluctuates between Ps.$5,000 and $25,000 depending on the con-
dition of the old equipment.
Some of the farm machinery dealers have been wanting to start the
sale of used equipment, specially tractors. Their main problem has been
the customer himself. If the tractor breaks down, and used tractors are
not guaranteed, the farmer either wants his money back, or he just tells
the dealer that he won't pay the balance and that the dealer can send for
the tractor whenever he sees fit.
Maintenance and Repair Parts
All local dealers have to comply with the manufacturer's stipu-
lations to maintain a stock of repair parts for 80% of their customers.
A guarantee of one year on manufacturing imperfections should be stipu-
lated in the sales contract. Wherever they have a center of operation
the dealers must keep a farm machinery maintenance service.
The cost of mechanic's service is relatively high. This is par-
ticularly true for farmers located a considerable distance from the
dealer's office. The dealer charges the mileage as well as for the mech-
anic's service from the time they leave the dealer's office. The mech-
anic's services are charged per hour. Many farmers do their own re -
pairing or privately hire a local mechanic to do the repair work.
Repair parts are more of a problem to the farmers than they are
to the dealers. The dealers, according to Caja Agraria's regulations,
must import 18% in repair parts. They comply with this regulation when
the import licenses are approved, but, in many instances the licenses
are denied or delayed pending the availability of divisas (trade funds).
Dealers consider the life span of new machinery to be up to five
years. Farmers consider it to be more than five years. Both of their
reasons are obvious, especially with the steady rise in prices from one
year to another. (See page 19)
Stipulations and Regulations Governing the Sale of Farm Machinery
When the dealer imports through Caja Agraria the following sti-
pulations must be complied with:
1. Application for registration as importer of farm machinery,
2. Caja will assign the corresponding import quota,
3. Dealers are allowed a 25% profit (not counting the 12% charged
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on imports by Caja)
4. Dealers must keep a stock of repair parts (equivalent to 18%
of value imported)
1. Maintenance of repair parts for 80% of their customers
2. One year guarantee on manufacturing imperfections
3. Maintenance service wherever the dealer has established its
offices or branch offices.
1. Import license
3. The dealer must buy locally manufactured farm implements such
as plows, disks, planters, rakes, etc.
Manufacturers of Farm Equipment
Equipment such as light and heavy plows, disks, cultivators, trail-
ers, subsoilers and others are locally manufactured. There are not very
many manufacturers of farm machinery in Colombia. A few like Agromet, Ma-
nagro and Apolo are highly specialized and their technique is satisfactory.
However, they buy many of their raw materials from local manufacturers.
These materials vary in quality and resistance. Due to this condition the
quality of the finished product is not constant; this is one of the main
problems encountered by the manufacturers. Not all the parts that go into
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the manufacturing of these implements are produced locally. Imports
comprise about 30% the finished product. Lamina and rolling parts are
All the equipment produced locally is sold through farm machinery
dealers. Dealers are allowed a 25% profit on these farm implements and
are given a six-month guarantee on manufacturing imperfections.
The Colombian Government has encouraged the establishment of fac-
tories of farm implements by granting a 100% exemption on taxes. This
exemption will expire on December 31, 1969.
The manufacturers produce only the necessary equipment to match
the number of tractors imported, this is a limitation they have to face
since they say they are in a position to satisfy any demand.
Local manufacturers are financed by local commercial banks, the
Finance Corporation and also use their own financial resources. However
they find credit to be scarce and difficult to obtain and interest rates
high, especially those of the corporation.
The Farm Machinery Importers and Distributors Association
ADIMAGRO, the Farm Machinery Importers and Distributors Association
has been in operation a little over a year. This is a non-profit organi -
zation of persons or societies dedicated to commercial activities related
to the importation and distribution of farm machinery and implements, in-
cluding those locally manufactured.
At the present time, it has it$ headquarters in Bogota. Future
plans are to enlarge activities and to establish other offices in Co-
The principal objectives are: (1) to protect and represent the
general interests of its affiliates, (2) to promote the development of
agricultural activities by using mechanized equipment that will increase
productivity, (3) to conduct the necessary studies to assist the National
Government, private and public organizations, associations or private en-
terprises with respect to the development of agricultural activities in
The Association is ruled by the General Assembly of Affiliates,
a Board of Directors, a President, one Secretary and those employees au-
thorized by the Board of Directors for the better functioning of the As-
sociation. It also has an Auditor. The Board of Directors, elected by
the General Assembly for annual periods, meets at least once every two
At the present time it supports itself from ordinary and extra -
ordinary contributions from its members. Dealers with more than Ps.$
10,000,000 worth of business, per year, pay $1,250 pesos monthly. Other
members pay $750 pesos monthly. There are 24 members. MANAGRO is the
only local manufacturer of farm machinery to belong to the Association,
but it is expected that other local manufacturers will eventually join.
ADIMAGRO considers import licenses for farm machinery as one of
the greatest barriers in the importation of farm machinery. The problem
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is not only the delay in issuing the license but turning them down for
minor details not justifiable in their judgment.
From 1000 to 1500 individual units worth from 6 to 8 million dol-
lars were imported by farm machinery dealers during 1967. It is consider-
ed by the Association that annual imports could go easily up to 4,000 in-
dividual units or to 24 million dollars. Actually there is a shortage of
farm machinery as every unit imported during the year is sold without dif-
ficulty. Local manufacturers produce as many farm implements as tractors
imported and are prepared to increase production. Even though listed in
the "Arancel Aduanero" under No. 8425A1, farm equipment like combines are
hard to import chiefly due to their high cost and to the scarcity of funds
IV DFiEA Lt ROBLEIS
Financing of farm machinery does not seem to be a major problem.
Caja Agraria has been a great link in facilitating the importation of
farm machinery. Caja pays for all expenditures until the equipment reaches
the storage shops. Then the dealers are notified of the arrival of the
farm machinery and they sign 90-day drafts which are payable the day the
machinery is taken out of storage. In the meantime the dealer sells the
machinery to the farmer and helps the latter in obtaining credit facilities
from Caja Agraria.
Some dealers prefer to import farm machinery directly when possible.
The reason for this preference is that they make more profit on their sales
since they obtain a 37% profit instead of the 25% which Caja Agraria allows
Obtaining import licenses seems to be the dealer's major headache.
Seven months is the average time to process a license, and sometimes the
dealer's application is turned down for minor details.
Because some farm implements are being manufactured in Colombia,
there are other implements like riceplanters which are not manufactured
locally, and yet the "Oficina de Control de Cambios" (The Exchange Con-
trol Office) does not approve the import license. It is felt that the
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persons in the Exchange Control Office who handle the licenses for im-
porting farm machinery do not realize the country's agricultural needs.
Following Caja Agraria's regulations and the manufacturers stipu-
lations, farm machinery dealers try to keep their supply of spare parts
up to date. However, they have some problems in obtaining import licenses
to maintain in stock enough spare parts to comply with the stipulations
set forth by Caja Agraria and the manufacturers.
The price of farm machinery has been going up steadily for some
years. Monetary devaluation and the increasing cost of producing farm
machinery are mainly responsible for this phenomenon. This increase in
prices causes certain resistance on the part of the farmers who think
the dealers are speculating.
At the present time the Colombian Government has established
price ceilings for farm machinery (since November 1967). However, a
new rise in prices is expected since the "siderdrgicas" (foundries, etc.)
have increased the price of the raw materials by 25%. Several dealers
have received notice from the manufacturers in the United States that
the price of tractors has been increased by 4 to 5 percent starting this
As was stated by the dealer's association, Colombia could import
more than 4000 tractors annually. At the present time they are import-
ing between 1000 and 1500. Even though financing has not been a major
problem, the availability of additional funds to import the additional
equipment has been a handicap to the dealers and to the mechanization of
important agricultural regions of Colombia.
V FARMERS COMPLAINTS
Even though only a limited number of farmers were interviewed in
the Departments of Tolima and Meta, some interesting conclusions can be
1. The majority of the farmers find the life span of a tractor
to be more than five years. Dealers consider the life span
to be 5 years.
2. Farmers claim that their main problem is spare parts. Dealers
claim some difficulty with spare parts. The main objection
on the part of the farmers is that spare parts are too high
in price, and very difficult to obtain. Sometimes they have
to wait several days to buy the piece of equipment so badly
needed. Then they are charged more for it than the original
3. Combines are limited by the high price. The smallest combine
costs $300,000 pesos. Not even the very large farmers want to
get indebted for that much money knowing that they are going
to need additional capital for operating costs, which are go-
ing up steadily.
The following table gives an example of the rise in prices
of farm machinery and some other agricultural commodities
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COMPARATIVE PRICES OF SOME COTTON GROWING INPUTS
Cultivator Tractor (N)
Cultivator Tractor (X)
1 Gallon of Gas
Transportation per ton from Armero
Tire for Tractor
1 Gallon of Methyl-Parathion
1 Gallon of Toxaphe DDT
1 Gallon of Sevin
SOURCE: Revista Nacional de Agricultura, No. 752 January 1968
4. Custom work is carried out by quite a few. Some farmers like
it because they don't have to invest in equipment or have to
hire a permanent tractor driver needed only during certain sea-
sons of the year. Other farmers complain about the lack of
responsibility on the part of the farm equipment renters because
they very seldom do the work when the farmers need it -- that is,
at the proper time. Custom workers claim that sometimes they
can't meet their obligations because of the lack of spare parts
which are hard to get at their local dealer.
5. The cost of custom work varies. Some charge on an hourly basis,
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other charge per hectare. One plowing and two diskings cost
from Ps.$400 to Ps.$600 depending on soil conditions, how
clean the field is, or how far they have to travel from their
headquarters, and the type of equipment used. Planting, cul-
tivating, etc., are charged separately.
6. Farmers find farm machinery prices high and hard to amortize
in addition to the cost of the crop they are going to plant.
7. The amount of capital a farmer needs to initiate the growing
of 50 hectares of cotton is as follows: (cotton is generally
grown during the first semester in Tolima, and during the second
CAPITAL NEEDED TO INITIATE 50 Has. OF COTTON
Tractor (small cultivator) Ps.$ 70,000
Farm equipment: 3 disk plow, 4 row
cultivator planters, etc. 70,000
Operating cost (50 has. at $4,000 each) 200,000
8. Only farmers with less than 50 hectares will have to resort to
custom work. The great majority of farmers, if they were given
a chance to buy farm machinery on good terms, would like to buy
it mainly because of the timeliness of their farm operation.
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9. In Meta, the Llanero prefers to clear land by machete, burn
the plot, and allow the stumps to rot in the field. After
two or three crops mechanization is justified. They claim
it is too expensive to clear land with farm machinery. Only
the well off farmers consider mechanization from the beginning.
10. Farmers are always willing to work more land if they had e -
lastic credit facilities both for land and farm machinery.
11. Few farmers complained about dealers who wanted to sell them
machinery they did not use. All farmers agreed that they try
to sell them tractors with more horse power since they would
have to enlarge their farming operation sooner or later,
12. Tires and fuel did not seem to be any problem, unless for those
who live too far "inland", as is the cane in the Llanos. This
causes a considerable rise in prices because of the distances
travelled, and the various means of transportation used: car,
mule, canoes, etc.
13. Maintenance is carried out 90% by the farmers. Dealers charge
too high a price for many repairs.