ENERGY POLICY:

Biofuels push becomes weapon in Colombia's war on narco-traffickers

TIBU, Colombia -- A farmer smiles as he surveys his 25-acre palm plantation in the steamy hill country near the Venezuelan border.

Government support for biodiesel has spurred a robust demand for palm oil that has put 50 percent more income into the pocket of farmer Misael Monsalve Moreno. He is almost finished replacing his family's cramped wooden shack with a new brick house.

It is hard to believe, he said, that just five years ago he and many of his neighbors were growing coca -- the main ingredient for cocaine -- for Fuerzas Armadas Revolucionarias de Colombia (the Revolutionary Armed Forces of Colombia, or FARC), a narco-trafficking rebel group that then controlled this part of the Catatumbo region.

"Everybody was growing coca around this area," he said. "I have to say the truth. Everyone had to grow coke."

Ex-coca farmers describe a tough life growing coca for FARC. The money was good, but the cost of importing almost anything into their dangerous region skyrocketed. Many say it was not uncommon for a can of soda to cost $10, or for an average daily meal to cost double or triple its price elsewhere in the country.

Harassment and killings were a daily occurrence here under the guerillas, government security forces say. And when farmers were not dodging armed thugs, they were worrying about whether the U.S. government might bombard their coca fields with herbicides and wipe out their investments.

Now palm plantations are replacing coca fields in the Catatumbo region. Improved security started the move away from coca, but it was the 2007 law requiring diesel retailers to mix in 10 percent biodiesel that provided the big push, biofuel industry insiders say.

This corner of North Santander Department, patrolled these days by 6,000 army personnel, is former jungle and was once considered among the best places in the world for growing, processing and smuggling cocaine. Today those fields are planted with row after row of palm trees.

Jens Mesa Dishington, president of the National Federation of Palm Oil Growers, or Fedepalma, estimates that during the past few years about 173,000 acres of coca fields have either been directly converted to palm crop or stripped of their workforce by one of Colombia's fastest growing agriculture sectors.

"We have developed in the past decade about 70,000 hectares of small holders, mostly in areas where we are sure many of those people said, 'Before this, we were working in the coca business,'" Mesa said. "We have about 105 different alliances with this 70,000 hectares, and maybe 6,500 families involved."

Meanwhile, coca cultivation in Colombia has been declining steadily. Last year Peru replaced Colombia as the world's top source of cocaine, according to the U.N. Office on Drugs and Crime (UNODC). From a peak of about 402,000 acres under coca cultivation in 2000, Colombia now hosts less than half that, about 168,000 acres of coca, according to the Ministry of Defense. It all means much less money for armed groups that continue to wreak havoc.

Reduced cocaine consumption in the United States, the military offensive against guerillas, spraying and manual eradication all played a role. But among all the crops that have been tried in substitution programs, palm seems to have the most staying power, experts say.

And compared to how business was done in the past, working with the palm oil industry is almost a dream come true, farmers say.

"The coca work is much hotter," said Arriva Castillo Aron, another palm grower lured away from the illicit crops. "With palm it's easier. You work under the shade. It's much better, and you don't have the oppression of the guerillas."

From field hand to landowner

Castillo, a former field laborer who was responsible for stripping leaves off coca plants, said he has since earned enough money working on palm crops to purchase his own farm plot.

And now he is president of an 80-member farm association organized to negotiate better terms with bank lenders and buyers, a five-year story of social progress almost unheard of in rural Colombia.

"The main thing is that we have everything for ourselves," Castillo said when asked what has changed most since troops ran out the FARC. "The palm oil is the main business, but also we have cattle and our own crops for our food."

The rise of palm crops has caught the attention of the new Colombian government and, most recently, the U.S. Agency for International Development (USAID).

For the better part of the past decade, both entities have been pressing to encourage farmers to grow something other than coca.

Coffee, plantains, cocoa (chocolate) have all been tried with some success but with plenty other setbacks when commodity price crashes pushed farms back into coca's embrace.

Supporting illicit crop substitutes through a biofuels program, however, seems to hold promise. The nation's minister of defense, for one, says palm ranks high on the list of tools the government plans to deploy against the FARC and other armed groups over the next four years.

"The army is here and guaranteeing protection, security, because with security you can have development and the best example of this is the palm oil industry," said one soldier here, who spoke on the condition that his name not be used. "It lets people have development, jobs, security and live a better life."

No one knows for sure why biofuels crops appear to be a solid substitute for illicit crops, but there are some theories.

Unlike other cash crops or food commodities, biofuels industries usually exist because the government sets the national demand. Prices may fall, but not through the floor as has occurred in the past.

Traffickers also have a big advantage over legitimate buyers because they come to pick up the produce, relieving farmers of having to deal with poor storage and infrastructure to get crops to markets. Energy companies, it is assumed, will behave similarly if they are concerned with maintaining supplies of their feedstock materials. At least that is what seems to be happening in Colombia.

During one hot, muggy afternoon on a tour of another 25-acre plot, grower Dario Desiderio Peña counted himself among the converted. He abandoned his land for 12 years rather than deal with the guerillas, but he returned after the Colombian army chased them into Venezuela about five years ago. He said it only took him 18 months to start earning a steady profit.

"It's pretty good, because actually all the farmers are getting good revenues, good money," Desiderio said. "My whole life I've been in the country, and this is another benefit from the biofuels: I'm able to meet new people like you."

2007 law promoted biofuels

Jabbing a finger at a window on the Fedepalma-chartered airplane during a flight to Tibu, Carlos Murgas Guerrero points to hundreds of small palm plantations.

"All this used to be coca," he said. "Some used to grow taro here 15 years ago but they left because of the guerillas. Now they are back, for this, the oil palm."

Murgas, formerly this nation's minister of agriculture, understands the appeal of palm.

As one of the principal investors in Oleoflores SA, a major palm product distributor, Murgas himself controls about 9,900 acres of palm plantings, much of it near Agustin Codazzi, about a half-hour's drive south from Valledupar.

Unlike the lush tropical setting of Tibu, the area near the Oleoflores plantation resembles Napa Valley. Once the home of cotton plantations and cattle ranches, the area is now dominated by palms.

Oil palms have been grown in Colombia in one form or another since the 1960s with government sponsorship. From 25,000 acres at its start, the industry has steadily grown to around 940,000 acres of palm crops today, mostly in the far north near the Caribbean coast.

Palm oil is famous for its multiple applications, from food additives to soaps and hand creams, sometimes even for chemical manufacturing. In Colombia, palm oil has historically been used for either making cooking oil or margarine.

But that changed when the government of former President Alvaro Uribe pushed through a 2007 law mandating a 10 percent biofuel blend for domestically distributed diesel. Months later, in January 2008, Murgas and Oleoflores opened Colombia's first biodiesel factory, adjacent to the company's palm oil extraction facility.

Today 60 percent of the liquid they extract from the palm fruit is diverted to biodiesel production.

And now there are also six other plants built by competitors that produce about 516,000 metric tons of biodiesel per year, according to the Colombian Ministry of Mines and Energy.

Fedepalma chief Mesa said fuel production can meet current demands, but it is not enough to meet long-term goals.

Before stepping down from the presidency, Uribe outlined a plan to increase the blend standard to 15 percent within a couple of years and eventually further to 20 percent, which would require doubling the biodiesel production capacity now in place.

Murgas said he was eager to help fill the void, but he quickly ran into trouble as land prices soared, fueled by drug barons hiding their ill-gotten proceeds in real estate.

So Murgas instead turned his attention to the Catatumbo region, where palm actually grows better, he said.

'Win-win'

Armed with a $1 million grant from USAID, Murgas decided in 2007 to go to Tibut and launch an experiment in the Catatumbo, based on an idea he said he got from visiting massive Unilever operations years ago.

"With the money-laundering business, I could not afford to buy very expensive land to produce more oil palm," Murgas explained. "So I went to the small holders because I needed to apply something I once saw in Southeast Asia, in Malaysia."

This was the deal he offered: If farmers agreed to switch from coca to palm, then Oleoflores would provide seeds, fertilizer and technical assistance. Farmers then would organize themselves into cooperatives to improve their chances of obtaining financing from banks, with Murgas' assistance. Murgas would even dispatch trucks to pick up the produce. And the raw palm fruits would be bought according to international prices, keeping everything open and transparent.

Murgas describes the deal as a "win-win," openly admitting his main goal was to expand production without expanding acreage. Tibu's farmers say the more they learned about palm oil, the more enticing the deal became.

The trees developed for Colombia's climate grow so quickly that farmers can begin producing within 18 to 24 months. Harvesting is conducted every eight days, year-round, providing a steady source of income.

Heavy rainfall common in the Catatumbo means irrigation is largely irrelevant. Whereas Oleoflores' own farm in the drier Valledupar climate produces around 25 metric tons per hectare, Tibu's farmers enjoy yields closer 28 tons per hectare.

USAID grant support ended in 2009, but the biodiesel blend rule propelled the plan. Today nearly every farmer in and around Tibu is involved in palm cultivation. Land not planted with palm is used to grow food or to raise cattle, depending on how each individual farmer chooses to diversify.

Brig. Gen. Fernando Pineda Solarte, commander of the 6,000 troops deployed throughout North Santander, said surrounding communities are following suit, eager to get in on the business and be free of the dangers and stress of coca. His forces work closely with Murgas and the biodiesel industry as it seeks to expand production.

"This is a good way to improve the area, to improve the security conditions, to remove the cocaine crops from the area," Pineda said. "We're trying to prove to the population that it's possible, that we have other choices different from cocaine. That's the success of this area and that's why this project is so important."

In an interview in Bogota, Defense Minister Luis Roberto Rodriguez Castillo explained the four-year plan his government is persuing to ultimately defeat the FARC, other guerilla movements and the armed criminal gangs that all work together in the trafficking business.

Once the army secures new areas, the government will work to provide the small holder farmers with former titles to land and assistance with establishing licit crops. Palm is high on the list of options, he said.

"I think it's one of the more attractive and appropriate crops for this type of land," Minister Rodriguez said. "The important thing is that we can help them migrate from illegal to legal by giving them land and titles and financial support."

Murgas insists he has found the ultimate answer to ridding Colombia of its cocaine scourge.

"It is the solution!" he shouted.

But not everyone was pleased with the palm oil push.

Guerilla threat persists

On the night of last Nov. 20, FARC guerillas slipped across the Venezuelan border and blew up a key bridge linking Tibu with Cucuta, a large city and key market to the south.

Thousands of tons of harvested palm oil fruit rotted in the sun, and the community found itself cut off economically until the army established a temporary ferry system to move vehicles across the river.

It was the clearest sign yet that the armed trafficking organizations consider palm to be a key threat, but not the only one.

Sensing the threat in the mid-1990s, guerillas in 1994 attacked and destroyed Oleoflores' first palm oil extraction plant, killing one worker. Over the past months they have periodically slipped back into the Tibu region to harass residents and security forces, setting up roadblocks and burning vehicles.

Several times they have destroyed construction equipment at a site where Murgas is trying to build Colombia's largest oil extraction facility on land just outside Tibu. Murgas himself is under personal threat, and his business partner narrowly avoided execution in one chilling incident he described.

Fed up, Murgas is now paying $500,000 to build a military base across the street from where the extraction plant will be built.

The planned $15 million project will eventually churn out 100 tons of crude palm oil an hour, more than his facility farther north. From there trucks will take it to processing centers where it will be turned into margarine, cooking oil and biodiesel.

But construction won't start until at least 40 troops are garrisoned at the site to protect it.

"We will have this [military base] finished in two months, I think, and after it's finished they will move and they will start construction on the other side," he said during an inspection of the now-stalled project. "Every producer, we will have a way of making them owners of the plant through shares. Each hectare will give them one share." The Tibu plant will employ about 250 workers directly, he added.

All parties involved in the fight against drug crops admit theirs is an uphill battle.

Gen. Pineda said that much of the coca cultivation that once dominated the Catatumbo area has been shifted either across the border into Venezuela or farther west into remote mountainous regions north of Teorama. The bridge attack was meant to send a message to those farmers as much as it did to the community affected, military officers say.

Security in and around Tibu is adequate, the military says, but nobody is taking any chances.

Visitors and dignitaries to the area are often accompanied by a dozen or so heavily armed Colombian soldiers. The last foreign visitor to the region, they said, was the U.S. ambassador in 2007, checking on how the $1 million American grant was being spent.

USAID

Ken Yamashita, director of USAID operations in Colombia, said his agency is well aware of what is happening in the Catatumbo. Still, the idea of establishing a policy of crop substitution that explicitly emphasizes biofuel crops remains just talk, he said. But it is talk that is growing louder.

Yamashita denies Fedepalma's assertion that USAID payments for palm stopped because of pressure from the U.S. soybean industry. Rather, he said, USAID grew concerned that some of the drug trafficking organizations themselves might be seeking to gain a foothold in the palm oil industry.

USAID even believes, he said, that the sugarcane industry could be pressured to join the fray. Colombia also has a law requiring an 8 percent blend of ethanol in national gasoline stores.

Sugarcane growers insist land being eyed by their industry does not host drug crops. But Yamashita points to areas on the Pacific coast, where the predominant Afro-Colombian communities there hold different agricultural traditions and are in need of the boost to their rural economies that a biofuels industry could offer. Any effort has to be focused and serious, he said.

"The government ... has tried things where eradication is happening over here, security is happening over there, and crop substitution is happening over there. It doesn't work," Yamashita said. "All these have to be at the same place at the same time. That's the critical piece."

Expanded investment

Neighboring Venezuela has promised more support in the fight against the FARC and other groups. That nation's strongman Hugo Chávez has even donated a bridge for Tibu to replace the one destroyed by the guerillas last November.

Fedepalma's Mesa said his industry has no benchmark for how big it wants to grow.

The main thing Fedepalma wants to see, he said, is the 10 percent biodiesel blending standard increased to 15 and later 20 percent, as proposed by the previous administration.

Proper security, land title and cooperation on financing from Colombia's banks will also be necessary, he said.

"We have over 105 different alliances, and maybe you'll find 20 big entrepreneurs that were willing to even give the support of their signature and to risk their capital," he said. "If it's a government program, the government is the one that should support and guarantee those projects."

Meanwhile Tibu's farmers say they are mostly looking to invest in either more production or diversification of crops, with enhancing self reliance on food one of the priorities most often heard.

Once Oleoflores builds that massive extraction plant on the edge of town, the company will have plenty of palm oil from local farms to feed the burgeoning demand, they say.

"I was a small farmer, and now I'm a medium farmer," said Trino Quintero as he explains why he came to Tibu and ultimately planted palms on about 150 acres.

"I came here to invest, to buy land and to grow," he said. "And right now I have pretty good production, so I'm planning to invest more."

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