Researchers meet to discuss findings from 11 countries on the impact of the financial crisis on rural poor people

Rome, 23 April 2009 – Development experts and researchers are gathering for an international seminar on the impact of the global financial crisis on poor rural communities in Latin America, at the headquarters of the International Fund for Agricultural Development (IFAD) on 23-24 April.

Entitled “The Global Financial Crisis and the Rural Sector in Latin America: Options for IFAD Engagement”, the seminar was opened by Kanayo F. Nwanze, the President of IFAD. The Brazilian Minister of Agrarian Development, Guilherme Cassel also addressed the meeting.

Participants include representatives from other UN agencies, the Ford Foundation, the Central America Regional Unit for Technical Assistance (RUTA) and the Latin American Center for Rural Development (RIMISP). They will  assess recent findings on the impact of the financial crisis in eleven Latin American countries with high rates of rural poverty - Bolivia, Colombia, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Peru - as well as in Brazil and Mexico, which have the highest overall numbers of poor people in the region.

When the financial crisis hit, Latin America was witnessing its fastest rate of economic growth in 30 years and was meeting important goals to reduce poverty.

These Latin American countries are feeling the pinch because of lower incomes due to fewer jobs (caused by a drop in demand or investments), a decline in remittances from migrants and reductions in public spending, especially in the social sectors.

On the jobs front, rural households, which are more dependent on labour income and urban markets, are likely to be pushed below the poverty line.
Where remittances are concerned, many countries in the region have experienced a sharp drop in remittances flows. This reduction has been greater in Central American countries (El Salvador, Guatemala, Honduras, Mexico and Nicaragua) and in the Dominican Republic, where one in five households - at national and rural level – receive remittances that represent one quarter of the total household income.

“In today’s economic crisis, migrants are returning to their villages in developing countries, having lost their jobs in the cities or abroad. This re-migration means more mouths to feed with less food and less money,” said IFAD President, Kanayo F. Nwanze.

Another negative impact of the global financial crisis is the drop in overseas demand for agricultural, mining and industrial (especially textiles) products, leading to fewer jobs. In this context, agriculture will take on the role of a socio-economic safety net.

“Agriculture should be the backbone of economic development of any country,” added Nwanze, as it is “the key to food security and a fundamental engine of economic growth and wealth generation”.

Some countries have developed counter-crisis policies for the agricultural sector. Those policies have been limited to creating temporary jobs or partially subsidizing production costs. In spite of the urgency of dealing with the short-term effects of the crisis, Latin American countries must create the opportunities to complement short-term mitigation measures with medium- to long-term actions. These should include improving protection mechanisms for rural households and establishing broader strategies to diversify rural incomes.

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Notes to editor

Remittances

The drop in remittances implies:

• a decrease in income for smallholder rural households of between 12 and 25 per cent (El Salvador - 12.5 per cent, Honduras-12.5 per cent, Guatemala - 15 per cent, Mexico - 21 per cent, Nicaragua - 20 per cent, Dominican Republic - 26 per cent).
• a decrease in income for vulnerable smallholder rural households of 10 per cent (in Central American countries).
• The range of decrease in remittances spans from 10 - 30 per cent: (Dominican Republic - 10 per cent, Honduras – 11 per cent, Guatemala and Mexico - 11.9 per cent, Paraguay - 12.5 per cent , El Salvador - 15 per cent, Bolivia - 30 per cent).

Employment

• Urban and rural employment will be affected, both in terms of quantity and quality, by the drop in overseas demand for agricultural, mining and industrial products.
  
• Less than 15 per cent of smallholder rural households in Bolivia, Colombia, Guatemala, Paraguay and Peru depend on salaried employment. While in Brazil, Dominican Republic, El Salvador, Honduras, Mexico and Nicaragua and this figure is between 25 and 48 per cent.

Social and sector policies

• In the rural areas of Latin America there is a high percentage of  poor (52.1 per cent) and extremely poor (28.1 per cent) people.
  
• In ten out of the 11 countries analyzed, rural poverty represents more than 40 per cent of overall poverty (except Paraguay).
  
• Social programmes and targeted financial benefit schemes relieve but don’t resolve the condition of poor people.
  
• In Brazil, Guatemala and Peru smallholder rural households with indigenous origins are more likely to be pushed into poverty.
  
• In the majority of countries, except Paraguay, the amount of public or private transfers has not shown a clear link to poverty reduction.

The international seminar “The Global Financial Crisis and the Rural Sector in Latin America: Options for IFAD Engagement” and the associated analytical work conducted on the impact of the crisis on Latin America’s rural poor are a joint initiative of the Latin American and the Caribbean Division of the International Fund for Agricultural Development (IFAD) and the Rural Territorial Dynamics Program at Rimisp – Latin American Centre for Rural Development.

The research project was directed by Carolina Trivelli of the Institute of Peruvian Studies (IEP), which is based in Lima, a partner organization of Rimisp and its Rural Territorial Dynamics Program. Independent researchers from each of these 11 countries collectively summarized the crisis and rural poverty in a series of case studies. Authors of the research documents are: Luis Baudoin (Bolivia); Juan Jose Perfetti del C (Colombia); Tomas Rosada and Lucilla Bruni (Guatemala); Manuel Villa and Horacio Lovo (Honduras); Carlos Chiapa (Mexico); Eduardo Baumeister and J. Rocha (Nicaragua); Julio Ramírez and Cynthia González (Paraguay), Johanna Yancari (Peru); Pedro Juan del Rosario, Julio Morrobel  and Cesar Martínez (Dominican Republic); Manuel Delgado and Melisa Salgado (El Salvador); Antonio Marcio Buainain and Henrique Dantas Neder (Brazil).

Press release No.: IFAD/21/09

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The International Fund for Agricultural Development (IFAD) works with poor rural people to enable them to increase their incomes, build their livelihoods and have a voice in the decisions that affect their lives. Since 1978, IFAD has invested over US$11 billion in grants and low-interest loans, helping 340 million people in developing countries worldwide. IFAD is an international financial institution and a specialized UN agency based in Rome – the UN’s food and agricultural hub. It is a unique partnership of 165 members from the Organization of the Petroleum Exporting Countries (OPEC), other developing countries and the Organisation for Economic Co-operation and Development (OECD).