Metro-Medellin’s Flower Exports Bloom; Dutch Connection Beats ‘Dutch Disease’

Just a few kilometers to the east of Medellin in the Llanogrande-La Ceja-Rionegro region, the long-established cut-flowers industry is seeing its export profits bloom this year.

Thanks to the rise of the U.S. dollar – up about 70% year-on-year, to around COP3,000 per US$1 – flower exporters are more-than-recovering from losses suffered when the U.S. dollar fetched only COP1,800 just a few years ago.

What’s more, the local cut-flowers industry is among the leaders in the emerging “global value chain” (GVC) trend seen as crucial to creating a more-balanced, sustainable Colombian economy – in contrast to the 15-years-long overdependence upon petroleum and mining exports (see “Andi: ‘Global Value Chain’ Opportunities Opening for Colombia: Part One”).

That over-reliance on petroleum and minerals exports caused a classic “Dutch disease” in the Colombian economy – the result of a relatively short-term flood of petroleum/mining-industry dollar inflows for capital projects, and a simultaneous spike in the relative cost of the Colombian peso.

This “Dutch disease” phenomenon consequently made almost all other Colombian industrial exports relatively expensive – and sometimes downright uncompetitive.

Result: While oil and minerals boomed, Colombia’s other industrial and agricultural sectors tumbled. Job opportunities declined in many sectors, and the “Dutch disease” left Colombia vulnerable to the next, inevitable downward swing in global commodities prices.

But now that oil and minerals prices have crashed – and U.S. dollar inflows consequently have subsided – the best way for Colombia to right a listing ship is to expand exports from its other industries, according to the recent Andi study.

On that front, cut flowers are among the first-mover industries taking advantage of the stronger dollar and new free-trade agreements, as a recent U.S. Department of Agriculture (USDA) Foreign Agricultural Service (FAS) study shows.

According to that study, “the Colombian cut flower industry will remain prosperous in the free trade environment of the CTPA [Colombia Trade Promotion Agreement, which took effect in 2012] and should continue to put a smile on the faces and warm the hearts of [North] American [flower buyers] for years to come.”

Colombia’s cut-flower industry began industrialization just 50 years ago, tapping the aid of pioneering, U.S.-based entrepreneurs (including the late David Cheever) as well as U.S. government development projects, including the “Alliance for Progress” in the 1960s and subsequent work by the U.S. Agency for International Development (USAID), the study notes.

Since those early days, the Colombian flower industry has bloomed, hitting US $1.34 billion worth of exports in 2013, with the United States accounting for over 75% of the total at $1.09 billion. Roses were the primary export flower, at $365 million, followed by carnations at $156 million and chrysanthemums at $147 million, the study shows.

What’s more, key “global value chain” players from Europe and the U.S. are helping metro-Medellin’s flower exporters take advantage of the new free trade agreements with innovative products and relatively efficient distribution chains.

As it turns out (perhaps ironically), a Dutch company – Deliflor — is among those helping Colombia along the path of recovery from the “Dutch disease,” especially in metro Medellin’s chrysanthemum-exports business.

In a September 18 interview with Medellin Herald, Deliflor-Latin America product manager Juan David Lecuona explained recent technological breakthroughs that have emerged in the business.

Thanks to continuing research at Deliflor’s laboratories in the Netherlands and test-programs undertaken at Deliflor’s greenhouse lab facilities in Llanogrande (near Medellin), the company has enabled the development of hundreds of new cultivars (plants selected for desirable characteristics) that result in different colors, resistance to disease, vase life and much-faster growth cycles.

The family-owned company – with 2,200 employees – is now one of the world’s largest “breeders” of chrysanthemums, with sales topping 950 million cuttings per year to some 45 countries around the world. Production locations are in France, Kenya, Brazil, Uganda and Ethiopia, with sales offices in France, Japan, Colombia and the United States.

Among its best-known chrysanthemum varieties are Anastasia, Baltica, Zembla, Radost and Stellini, according to the company.

“Ten to 20 years ago, chrysanthemums only survived five days [in consumer vases] and it took 20 weeks from rooting to cutting,” Lecuona told us. “Now it takes only eight or nine weeks [from planting to cutting] and there’s up-to one month of vase life.”

The secret to its success: Genetics and testing, he said.

Deliflor is testing 1,000 to 2,000 varieties annually, and 55 new varieties are under development at the Deliflor-Llanogrande facilities just this year, he explained.

Not every new variety will make it to commerce, however, as rigorous evaluations are required in areas including disease resistance, color quality and vase life, he explained.

However, the varieties that survive these test and evaluation programs can spell big successes. Just this year, Deliflor won six major prizes at the Society of American Florists annual meeting, he said.

In many of its markets, Deliflor sells small stems to industrial flower producers. But in Colombia, Deliflor usually gives-away its patented, “mother” stems to industrial flower producers that subsequently reproduce more stems for their own flower greenhouses. Deliflor then earns royalties on each flower sold, he said.

While Colombia is a principal market in Latin America, Deliflor also is growing its businesses in Brazil, Mexico, Chile and Ecuador, he said.

Mexico has already become the biggest chrysanthemum producer in the world, but except for two producers, most of its production can’t be exported to the U.S. because of the “white rust” disease that is commonplace among Mexican chrysanthemum producers, he added.