14
Conclusions
The series of analytical steps reviewed above lead to an assessment of the Andean Price
Band System which is mixed in terms of the policy’s success in achieving its objectives.
It is clear that under the APBS, domestic producer prices in Colombia and Ecuador have
achieved a more moderate level of price variability. Is this entirely due to the price band
policy itself? No. As we have seen, a major reason for this was the significant effect of
lower exchange rate volatility in contributing to dampening price variability in these two
countries. This was not the case in Venezuela, where exchange rate volatility contributed
significantly to price instability even under the APBS policy. In terms of protection, the
results of this analysis are more definitive: the APBS has led to significantly increased
nominal protection levels across most all countries and crops. This appears to confirm the
concerns of many authors that the APBS induced increased protection of domestic
agricultural sectors, regardless of its effects on price stabilization. In terms of producer
welfare effects stemming from greater price stability, we find that the benefits from risk
reduction are nearly universally small. The transfer benefits, however, are considerably
larger, although they range in magnitude and absolute value depending on the crop,
country and analytical assumptions, as reflected in the various scenarios estimated. The
net producer benefits which result are accordingly highly variable, and in some cases -
e.g., maize and rice in the “historical policy” scenario - are positive and significant.
Much depends on the secular trends in international commodity prices, which generally
trended downward in the 1990’s.
The Andean Price Band System has had varying though demonstrable effects in
controlling producer price instability, increasing protection, and in generating welfare