'Agriculture for Development': Implications for Latin America?

Bay Area Latin America Forum Fall 2013
Alain de Janvry

Title Conditional: 'Agriculture for Development': Implications for Latin America?
Monday, October 1, 2007
Time: 12:00 pm - 1:15 pm | Home Room, International House

Alain de Janvry, September 2007.
Alain de Janvry, September 2007. 

Article by Alain de Janvry

Will Small Farmers Win This Time Around?
By Nathan McClintock

With the world’s governmental and private sector donors rallying around meeting the UN Millennium Development Goals aim of cutting poverty in half by 2015, one would expect to see money pouring into the rural sector. Yet while three-quarters of rural dwellers live in poverty, only 4 percent of official development assistance (ODA, or aid to developing countries) is directed towards agriculture.

For UC Berkeley agricultural economist Alain de Janvry, this “inconvenient discrepancy” serves as the impetus for the forthcoming World Development Report 2008: Agriculture for Development (WDR). De Janvry, who helped lead a team of 75 to write the report, argues that achieving the Millennium Development Goals will be a long and difficult, but not impossible, struggle. However, greater investment in agriculture is essential to poverty reduction. Agriculture not only provides food but also serves as a trigger of growth that benefits the world’s poorest countries two to three times more than nonagricultural growth. Despite the important role agriculture plays in bolstering food security, economic growth and environmental services, only a small percentage of public funds in the developing world are invested in the agricultural sector.

Presenting the WDR’s findings at UC Berkeley’s International House three weeks before its official release on Oct. 19, de Janvry explained how poverty and growth have different faces in the “three worlds of agriculture.” In agriculture-based economies — which include most of Sub-Saharan Africa — more than two-thirds of the poor are rural and agriculture accounts for 32 percent of GDP growth. In “transforming countries” such as China, India, Indonesia and Morocco, which are experiencing tremendous industrial expansion, agriculture accounts for only 7 percent of growth. In these countries, de Janvry stated, “you have a major contradiction: huge success in terms of economic growth, but a failure in that the rural population is left behind; 80 to 90 percent of the rural sector is in total poverty.”

In the largely urbanized economies of Latin America, Central Asia and Eastern Europe, just under half of the poor are rural. Large-scale agribusiness and agri-food industry/services (such as processing and distribution) account for a third of GDP, yet overall, these sectors are relatively stagnant. Agriculture in these countries accounts for less than 5 percent of overall economic growth.

 

Within these “three worlds,” however, there is tremendous variation, de Janvry explained. In Mexico, for example, the states of Chiapas and Oaxaca are still agricultural like their Central American neighbors. In Brazil, several urbanized states continue to have largely agricultural economies. De Janvry underscored the importance of identifying multiple approaches to match the specific needs of an area. “In the end, the policy recommendations are going to be tailored to each of these different contexts.”

Alain de Janvry speaks with a graduate student after his talk, September 2007.
Alain de Janvry speaks with a graduate student after his talk, September 2007.

In agricultural areas worldwide, the economic terrain consists of a patchwork of subsistence farms and large-scale commercial farms, each with very different needs. During the Green Revolution — the period from the 1960s to the 1980s when high-input farming technologies were introduced to Asia and Latin America, doubling cereal production — development agencies focused mostly on large-scale farmers, steering them towards packages of high-yielding hybrid seeds, fertilizers and other agrochemicals. Small farmers were largely left behind. This time around, agricultural development has to be tailored to the specific needs of diverse farmers.

The WDR highlights new opportunities for agriculture in the developing world. Trade agreements have created better incentives for investment. New markets are opening for high-value exports, biofuels and supermarket provisions. Technological innovations are improving production. Institutional innovations such as producer organizations are helping small farmers tap into larger markets.

Yet as the report emphasizes, there are still enormous hurdles. Subsidies in the industrialized countries continue to distort trade. Reorganization of agricultural value chains — the network of industries involved in the production, harvest, transportation, processing and distribution of a particular crop — “tends to be detrimental to smallholders.” These independent producers on small farms have a hard time meeting the marketing and food safety demands make by large-scale distributors and retailers. Global warming also affects the poorest to a greater extent as they tend to live on the most marginal land in zones of water scarcity.

Perhaps the greatest obstacles lie at the level of institutions and governance. One of the key themes of the report is that while “structural adjustment” programs mandated in many developing countries by the International Monetary Fund (IMF) entailed the decentralization of state power, there has been neither a redefinition of roles for the state nor sufficient reallocation of resources to local communities. “If you ever visit a Ministry of Agriculture, it’s usually a rather pitiful institution,” de Janvry observed. “The building is crumbling. People are not trained for their new functions. There is decentralization but that quite often doesn’t play in favor of agriculture.” As the pressures facing agriculture are increasingly global in character, these institutions have not been prepared for increasingly complex problems that demand the collaboration of multiple governmental and nongovernmental players.

The new Green Revolution that has been proposed for poor smallholders in Africa and other regions will have to be fundamentally different than the one that brought fertilizers, hybrid seeds and tractors to Asia and Latin America several decades ago. The WDR recognizes that this time solutions must be specific to the local landscapes and cannot be technological alone. Additionally, health, education and rural infrastructure are preconditions for success. But the overarching message of the WDR, de Janvry stated, “is that we have no choice. These countries will not progress without agriculture.”

 

According to the report, free trade agreements will provide new comparative advantages for farmers as new markets open up. In Latin America, where most smallholders are net buyers of food, poor farmers will gain from the lower food costs that are the hoped-for result of liberalization. However, where smallholders fail to out-compete cheap imports, there must be some sort of safety net in place. In Latin America’s larger countries such as Brazil and Mexico, “transfers” — a category that includes both direct government subsidies and remittances from family-members living abroad — have been crucial to the reduction of household poverty, yet they are insufficient for providing real development. The WDR argues that direct autonomous income for the smallholder should play a larger role. Accessing new markets will be key. In largely urban Latin America, where supermarkets now control 60 to 80 percent of food sales, domestic agriculture must be increasingly geared towards meeting the needs of booming urban markets in order to stay competitive with food imported from abroad.

Alain de Janvry answers some questions for a graduate student after his talk, September 2007.
Alain de Janvry answers some questions for a graduate student after his talk, September 2007.

De Janvry concluded by underscoring the need to improve the capacity for smallholders to negotiate. The “aid for trade” model must support the comparative advantage of agricultural economies in developing countries. In such a system there will inevitably be “losers” unable to compete on the world market and who are pushed out of agriculture. These losers, de Janvry argued, need to be compensated via transfers and protected via a strong social safety net.

Prefacing the question and answer session that followed his talk, de Janvry made clear that he anticipated criticism of the WDR, adding with a laugh, “If it survives Berkeley, it will survive Washington!” He likened the document to a Trojan horse that opens doors into the World Bank, allowing entry for progressive ideas from the academics, scientists, NGOs and farmer organizations who served as consultants and co-authors of the report.

Nevertheless, some members of the audience questioned the inclusiveness of the WDR. Environmental Science, Policy and Management Professor Miguel Altieri, an outspoken advocate for small farmers in Latin America, commented that the WDR fails to adequately address food sovereignty, the right of communities and countries to control their food sources outside of the neoliberal logic of free trade and comparative advantage.

In response to another question about the WDR’s minimal attention to the role of land reform and popular movements such as Brazil’s Landless Workers Movement, de Janvry explained that things have come a long way. “It used to be illegal to talk about land reform at the World Bank,” he joked. Now land market assistance reforms—the government-subsidized purchase and subdivision of large land-holdings for redistribution to the landless poor—such as those underway in Brazil are widely accepted at the Bank. Yet land in and of itself is not enough. While access to land is a step forward, the crux lies in helping those who farm it become more competitive. Otherwise the landless poor simply become poor with small parcels of land.

The World Development Report is no more than its title implies: a document that unveils the state of the agricultural economy and advances some policy recommendations to the World Bank leadership. Moving from theory to praxis, however, may prove to be more of a challenge. The next phase includes working sessions bringing together NGOs, farmer organizations, governments and the World Bank in order to figure out the nuts and bolts of site-specific action plans. This collaborative effort to frame policy that addresses the needs of diverse farmers is what de Janvry is most looking forward to.

What remains to be seen is how much can actually be accomplished under the current neoliberal economic paradigm, with its program of privatization and the rolling back of the state. Indeed, the WDR’s recommendations seem in many respects to entail an undoing of structural adjustment and decentralization: namely by bringing back the social safety net and strengthening institutional support. How will governments that have been downsized and decentralized by Washington Consensus economics be able to meet the recommendations of the WDR while privatization and deregulation continue apace? Without the significant state investment in rural infrastructure, healthcare, education and market access that the WDR recommends, it is not clear how smallholders will be better off this time than they were following the last Green Revolution. A Trojan horse is a good start, but those inside — and the millions they are fighting for on the outside — clearly have a long battle ahead.

Alain de Janvry is Professor of Agricultural & Resource Economics at the University of California, Berkeley, and one of the authors of the 2008 World Development Report: Agriculture for Development. He presented the report and its implications for Latin America on October 1, 2007 at the Bay Area Latin America Forum.

Nathan McClintock is a doctoral student in Geography.