Latin America and the Caribbean
2. Agriculture and rural economic activities are major sources of employment in Latin America and the Caribbean - more than 30% of the labour force working in agriculture - and are of critical importance in terms of eradicating poverty. Latin America and the Caribbean account for almost 25% of the world's forests and woodlands, and it is the region with the highest forest coverage. It is also one of the main producers of primary commodities such as coffee, sugar, maize, bananas, etc. 3. From the 1930s to the early 1970s, and particularly after World War II, the majority of countries in the region followed a growth strategy known as 'import substitution industrialization'. The main idea was that, in order to achieve economic progress, developing countries should shift their focus from agriculture to manufacture. The main tools in this process, which was accompanied by agrarian reforms, were import-licensing, tariffs, direct public investment in key industries, low interest rates and easy access to credit under soft monetary regimes. However, this strategy had a number of weaknesses in that: (i) it encouraged industrial growth at the expense of agriculture; (ii) it led to distorted allocations of domestic resources and promoted capital-intensive industries (despite serious unemployment); (iii) tax exemptions and subsidies created large budget deficits; and (iv) it led to overvalued exchange rates. The unsuitability of the model became increasingly apparent during the debt crisis of the early 1980s. 4. The 1980s, usually referred to as the 'lost decade', was a period of acute stagnation in Latin America and the Caribbean. The average annual per capita rate of growth for the region as a whole (including the Caribbean) was -1.0%. During that same period, important stabilization and structural adjustment measures were taken, which, coupled with a more propitious international environment, allowed growth to resume in the region during the 1990s. These measures included: (i) price deregulation in goods and factor markets; (ii) trade liberalization; and (iii) reducing the role of the public sector in the economy. 5. The stabilization and structural adjustment policies implemented by Latin-American and Caribbean governments in the 1980s and early 1990s had a profound effect on the macroeconomic climate and on the lot of the rural poor. The institutional vacuum created by shrinking government policies has also had a damaging effect on the poor. Rural financial services, as well as extension and rural development programmes, often suffered serious setbacks that further aggravated the situation of marginalized populations. Although the overall economic situation improved somewhat in the 1990s, these gains did not generally reflect on the living conditions of the poor. Since 1997, the losses caused by natural disasters (El Niño, Hurricane Mitch, landslides and earthquakes) and several international economic crises, have stunted the region's economic growth, limited its short- and medium-term development prospects and significantly increased rural poverty. 6. The already difficult situation in the Latin America and the Caribbean region deteriorated drastically in 2001 as a result of the slowdown in world trade that was further aggravated by the tragic events of 11 September in the United States. In view of the region's economic openness and its close economic links with the United States, the downward revision in the global outlook that followed these events was felt much more in Latin America and the Caribbean than in any other region of the world. 7. Urban development, market integration and the opening up of the economy provide an incomplete picture of what has happened both within the region and in terms of its agriculture. Changes in trade terms and the growth in output and productivity have been far-reaching, albeit unevenly distributed, and have taken place alongside misplaced economic policies, weak institutional development, a vastly diversified geographic landscape that has withstood technological progress and, above all, a lack of pro-poor economic policies that have survived despite the significant advances made in some countries of the region. The limited possibilities for change in Latin-American and Caribbean agriculture have become apparent through the current process of globalization. The voices of the poor, and their organizations, are still waiting to be heard with regard to the design and implementation of economic policies. 8. The Latin America and the Caribbean region has six unique features that must be borne in mind when designing and implementing rural development strategies aimed at poverty eradication:
9. The vulnerability of the different economies of the region, coupled with natural disasters, fragile democracies and slow social and economic change, has meant that the level of rural poverty, including extreme rural poverty, has remained unchanged over recent decades (although trends vary considerably across countries). 10. Poverty, especially rural poverty, continues to be one
of the major problems assailing the region, with approximately 44% of
its entire population and 64% of the rural population, living below the
poverty line. The rural poor are thus generally worse off than those in
the urban areas.
12. In view of the above, it would not be appropriate to base any definition of rural poverty in the region solely on income levels to describe the nature and causes of the problem and provide feasible solutions thereto. Poverty in general, and rural poverty in particular, should be seen as a process within which human beings develop and exhibit social and behavioural patterns that shape their actions and relationships within and outside their homes and communities. Poverty is also a mindset: it is the perception that the rural poor have of themselves vis-à-vis the local community, rural society and country as a whole that accounts for the lack of self-worth and low self-esteem common among poor rural men, women and youth. 13. Rural poverty in Latin America and the Caribbean is frequently associated with geographical isolation, poor communities often being located in remote areas with insufficient and/or unreliable means of communication. In such circumstances, the rural poor create social safety nets based on family relationships, community associations, religious groups or affiliations with indigenous organizations. Types of Rural Poverty 14. There are two main types of poverty in the region: structural and transitory. Structural (or 'hard' poverty) is found mainly among indigenous communities, rural women and ethnic minorities. People affected by this type of poverty generally have little or no schooling, few or no productive assets, limited knowledge about production, few work skills and lack of access to basic services. Transitory poverty applies to farming families and rural households that have little or no access to land, and are especially vulnerable to changes brought about by structural reform, cyclical economic change, and social and political instability. Any sudden changes in economic policies or the occurrence of crises affect both farm and non-farm incomes, causing periodic drops in earnings and deteriorating living conditions. Magnitude of, and Recent Trends in, Rural Poverty 15. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), the number of poor in the region amounted to 211.4 million in 1999 (7.6 million more than in 1997), of which more than 89 million lived in conditions of extreme poverty. Poverty rates continue to be far higher in the rural areas of the region than in the towns and cities. 16. In 1999, there were more than 77 million poor people in the region's rural areas (out of a total rural population of 121 million), of which almost 47 million were living in extreme poverty. Comparison with figures for 1980 show that, overall, the proportion of rural poor increased from 59.9% in 1980 to 63.7% in 1999 (see figure below). In absolute terms, the number of people living in poverty in the rural areas rose from 73 million in 1980, and the number of rural people living in extreme poverty has increased from 39.9 million to 46.4 million over the last two decades. In this context, the poverty-alleviation achievements of the 1990s were not sufficient to reverse the increasing poverty of the 1980s. 
Source:
ECLA: Social Panorama of Latin America, 2000-2001. Table 1
18. Halving, by the year 2015, the proportion of people living in conditions of poverty and extreme poverty - one of the main objectives of the United Nations Millennium Declaration - calls for significant efforts on the part of most countries of Latin America and the Caribbean. Economic growth would play a key role in reaching this goal. ECLA has estimated that, during the 1990s, each percentage point of growth lowered the rate of extreme poverty by 1.21%. However, there was a wide dispersion around this mean value and the effect was much weaker in the rural areas. This is consistent with IFAD's firm belief regarding the need for explicit and pro-poor development policies, particularly in the rural areas. 19. Estimations of poverty figures have not been unanimous because different calculating methods have been used. However, while estimates of the number of poor people in the region differ markedly, trend figures on total poverty levels are similar. ECLA's regional poverty estimations were based on weighted aggregate information from household surveys conducted by governments of the region. This included data from 19 countries that account for 87.8% of the region's total population. In all cases, the poverty and extreme poverty lines were calculated according to the cost of a 'basic basket' of goods and services that took account of prevailing wage and price structures. 20. The World Bank estimated poverty levels by using an income of less than USD 1.08 per day as a poverty threshold or universal poverty line. As estimated by the Bank, the total number of poor people in Latin America and the Caribbean in 1998 amounted to 78.2 million (World Development Report 2000/2001: Attacking Poverty. Table 1.1). The income figure was estimated on the basis of country income and consumption data derived from studies conducted in 1985-98. That methodology did not, however, take sufficient account of differences among regions or among countries in a given region. Furthermore, it did not take account of the fact that poverty is a relative concept, depending on the social and economic development of a country. Who Are The Poor? 21. Poor rural people in the region include indigenous peasant communities, shepherds, smallholder farmers, subsistence and landless farmers, rural wage workers, native Amazonian and rainforest Indians, and artisanal fishermen. 22. In absolute terms, the largest group within the poor rural population of the region is made up of rural indigenous people that encompass indigenous groups in the Andean region, the numerous indigenous communities and ejidos of Mexico, the Mayan populations of Guatemala, and the Mapuche of southern Chile. The majority of families in this group live in extreme poverty and constitute the structural poor, or the 'hardcore' segment of the region's poor population. An estimated 24 million people - one third of the rural poor of the region - fall into this category. 23. The second group is made up of small farmers, who account for 27% of the poor rural population in Latin America and the Caribbean and include roughly 4.6 million small livestock farmers, 8.5 million crop farmers and 11.3 million farmers producing both crops and livestock. The main distinguishing feature of this group is their ownership of small plots of land in arid or semi-arid regions, on hillsides or on the sides of irrigated valleys. Agricultural production takes place on ecologically fragile lands and is subject to the vagaries of the climate. 24. The third group consists of subsistence and landless farmers (numbering 19.3 million and 9.4 million, respectively). The former are smallholders, whereas the latter have only seasonal or yearly access to leased land. The families of both sets of farmers are among the poorest of the rural population, with incomes that place them below the extreme poverty line owing to the severely limited agricultural production base and their dependence on seasonal demand on rural and urban labour markets. 25. More than 90% of the rural poor population in Latin America and the Caribbean is concentrated in four major ecological areas: (i) mountain slopes in subtropical zones and arid and semi-arid plateaux; (ii) humid and semi-humid tropics; (iii) subtropical valleys; and (iv) coastal plains. Thirty-two per cent of the entire rural poor population of the region live in arid and semi-arid subtropical areas, which account for more than 9 million km². 26. Poverty trends in Latin America and the Caribbean have been affected by the lack of improvement in income distribution. The latest estimates indicate that, in most countries, this situation did not improve during the 1990s and that it worsened in some countries. In countries such as Bolivia, Brazil and Nicaragua, the per capita income of the richest quintile (20% of all households) is more than 30 times higher than that of the poorest quintile. Although several countries have managed to expand their economies and social expenditure, and despite increasing concern about inequality issues, income disparity is still one of the main features of, and challenges to, government policies. 27. IFAD has an effective portfolio of 40 projects in 24 countries of the region, for a total value of USD 636 million in IFAD loans and USD 510 million financed by other donors, borrower governments and beneficiaries. Principal cofinancing partners in the region include the European Union, Inter-American Development Bank, OPEC Fund, the World Bank group, Central American Bank for Economic Integration and Caribbean Development Bank. 28. IFAD activities in the region include a network of regional and subregional programmes that currently involve 14 IFAD-financed technical assistance (TA) grants. Such grants play a critical role in IFAD's strategy in that they support projects, promote synergies and facilitate links with civil society. They also provide an innovative way of dealing with the development constraints facing the region, and serve as a tool to enable poor people to rise out of poverty. 29. The main constraints facing the region in terms of achieving rural development and eradicating rural poverty are: (i) adverse macroeconomic policies; global and regional financial crises and pervasive barriers to trade applied by developed countries; (ii) institutional weaknesses; (iii) lack of access to assets such as land, water and finance, etc.; (iv) limited investments in human and social capital, poor infrastructure and insufficiently developed support services; and (v) difficulties in dealing with issues related to heterogeneity, gender and ethnicity in rural areas. 30. While the root causes of poverty in Latin America and the Caribbean are based on historical and political factors, macroeconomic policies (fiscal, monetary, exchange rate and price policies) have had a detrimental effect on the rural areas. Moreover, some countries of the region are still recovering from past civil wars and natural disasters, which have deteriorated their social and physical capital, and delayed effective national and local-level institution-building, a precondition for sustainable and equitable growth. Abrupt withdrawals of state institutions from the agricultural sector have not been offset by influxes of private suppliers of support services previously offered by governments in the fields of research and extension, marketing, financial services, construction and maintenance of irrigation systems, etc. 31. The persistence of poverty in Latin America and the Caribbean is often related to the gradual loss of productive land that affects a large proportion of the rural poor. In many cases, indigenous groups have lost access to land due to their lack of knowledge about property rights and the abuse and discrimination they have suffered. Geographically isolated regions of large countries have also been plagued by guerrilla warfare, drug trafficking and political patronage. 32. Public investment in social capital (such as education and health) is lower in the rural areas than in the towns and cities, and the poor level of rural education prevents emigrant seasonal workers from finding employment as unskilled labourers on the demanding urban job market. Since schooling in rural areas has an opportunity cost for households - namely, the loss of any income that might be earned by children - families send their children to school only in the event the benefits likely to be derived from education are sufficient to offset the loss of that income. Therefore, in order to increase investments in social capital in the rural areas it will be necessary to act on both the supply and the demand side of the labour market. 33. Another obstacle to overcoming rural poverty in the region is the lack of investment in interpersonal and community relationships, which facilitate communication, knowledge and control of material assets. This lack of investment deepens rural poverty because it increases the transaction costs associated with gaining access to markets. Collective action is therefore essential in order to overcome the economic and social exclusion caused by the absence of social mechanisms that support the most vulnerable members of rural communities. 34. Yet another problem concerns the management of issues relating to heterogeneity, gender, and ethnicity in rural areas. The region is characterized by growing heterogeneity in the income-generating strategies of rural poor households. Currently, the vast majority of rural families practise mixed farming and earn additional income from non-farm activities. Economic viability does not depend only on agricultural activities but also on the managerial capacity of microenterprises, off-farm work and, ultimately, all activities in which rural families and their members of both sexes participate for the purpose of earning income. 35. One serious error made by international financial institutions (IFIs) during the 1970s was to believe that the rural poor consisted mainly of farmers with small plots of land and that the best way to reduce their poverty was to help them increase the productivity of that land. However, this approach failed to recognize that the rural poor also include people who have very little or no land, and that this was the segment of the population that was growing the most rapidly and suffering the most serious forms of poverty. One important implication here is that, for a large proportion of the rural poor, assistance should not be limited to development projects oriented towards land and farming. What is needed is a broader concept of rural development that takes account of these trends. 36. As an organization with a clear and well-focused mandate - the eradication of rural poverty - and long-standing experience of working with the rural poor, IFAD is in a unique position to tackle such constraints. Another distinguishing feature of IFAD in its approach to the poverty problem is its strong emphasis on income-generating activities and focus on enabling the poor to overcome the constraints they face. Lessons Learned 37. For almost an entire decade - while most IFIs reduced their involvement in, or withdrew from, the financing of agricultural and rural development - IFAD has continued to invest, together with the governments of the region, in projects clearly oriented towards rural development and poverty alleviation. Several lessons can be identified from the evaluation of projects financed by IFAD over the last 20 years:
Opportunities 38. As a result of its work in Latin America and Caribbean, IFAD has identified an important set of opportunities to reduce rural poverty in the region, as follows:
39. The aim of IFAD in Latin America and the Caribbean is to enable the rural poor to overcome their poverty. IFAD strategy derives from four fundamental sources: (i) the unique characteristics of rural poverty in the region; (ii) recent financial crises and emergency situations in several countries; (iii) IFAD's strategic framework; and (iv) its experience in the region. 40. The rural poor in the region constitute a highly diverse
and heterogeneous group. Some countries, including Bolivia, Dominican
Republic, El Salvador, Guatemala, Haiti, Honduras and Nicaragua, fall
squarely within IFAD's mandate in terms of the degree and extent of
rural poverty that they face. Several middle-income countries (such
as Brazil, Colombia, Mexico and Peru) have significant pockets of rural
poverty. IFAD's operations are targeted directly to such areas, promoting
new initiatives to reduce poverty, analysing the results of such initiatives
and making the lessons thus learned available to other countries. In
all cases, care is taken to adjust the Fund's strategy and projects
to the specific circumstances of the country concerned. In this way,
IFAD is expected to contribute indirectly to the alleviation of poverty
in all regions through a continuous process of cross-fertilization.
42. Two cross-cutting themes in PL's work are:
43. Flexibility in applying its strategy is one of the salient features of the Fund's experience in Latin America and the Caribbean, and care has been taken to adjust project design and implementation to the constantly changing macroeconomic and institutional situation in the countries involved. IFAD has demonstrated its ability to learn from past experiences and to incorporate lessons learned into the design and implementation of new projects. 44. TA grants play a critical role in IFAD's strategy in that they support projects, promote synergies and facilitate links with civil society. Grants have been provided for four regional thematic networks (working on monitoring and evaluation and impact assessment, gender mainstreaming, rural microenterprise development and an Internet-based knowledge management network); nine implementation support programmes working at the subregional level; and one policy dialogue support programme. 45. These grants assist in overcoming the constraints described earlier in this document. Several of the programmes supported by grants have an important scaling-up and catalytic effect on poverty reduction and interact, in an innovative manner, with other agencies and civil-society institutions working in the region. The Regional Unit for Technical Assistance (RUTA), the Programme for Improving the Technical Capacity of Local Organizations to Support Rural Investment Projects in Central America, Mexico and Panama (SETEDER), the Foundation for Training and Applied Research in Agrarian Reform (CIARA), the Regional Rural Development Training Programme and the Caribbean Regional Unit for Technical Assistance (CARUTA) all provide important technical assistance to projects (see box below), while the TA grant to the Southern Cone Common Market (MERCOSUR) supports policy dialogue. Access to financial assets is supported by the Foundation for International Community Assistance (FINCA International) and the Rural Financial Services Support Programme (SERFIRURAL). Problems in the management of heterogeneity, gender and ethnic issues are the main focus of the Regional Programme in Support of the Indigenous Peoples of the Amazon Basin, PROGENDER and, to some extent, the Regional Support Programme for the Development of South-American Camelids. The Rural Microenterprise Support Programme in Latin America and the Caribbean (PROMER) promotes market access and microenterprise development, whereas FIDAMERICA and the Programme for Strengthening the Regional Capacity for Monitoring and Evaluation of Rural Poverty-Alleviation Projects in Latin America and the Caribbean (PREVAL) provide general support in the key areas of Internet-based networking, knowledge management and impact assessment. 46. In its lending and TA grant programme, the Fund focuses on the following strategic objectives in the region. 47. Enhanced impact assessment
and implementation support. IFAD accords priority to developing
innovative tools for measuring the impact of its projects in terms of
more sustainable poverty reduction, and to feeding the results back
into the design and implementation of new and ongoing projects. Special
attention is accorded to: (i) greater beneficiary participation as a
way of increasing project effectiveness and accountability; and (ii)
exploring innovative and cost-effective methods for monitoring and impact
assessment.
48. Improved policy dialogue. In many countries where IFAD is active, there is an urgent need to develop a more proactive agricultural and rural development policy coordinated with macroeconomic policies. IFAD's experience in demand-driven approaches to rural development programmes, where the poor both identify and own the solutions, is shared with governments in the process of project design and implementation. This ensures better links between poverty reduction initiatives and rural development programmes. 49. Improved knowledge management and partnership. The process of learning and innovation is at the core of IFAD's activities in the Latin America and Caribbean region. Five thematic areas of knowledge management have been defined in 2001, taking account of the Fund's previous experience and comparative advantage in the region. These are:
Impact indicators of success 50. The foregoing strategy provides an overview of the main characteristics of poverty in the region, a synthesis of IFAD's experience and a set of guiding principles and tools to overcome the problem. Achievements will be measured on a periodic basis and updated and revised on the basis of lessons learned during implementation of the strategy. Such revision will concentrate on changes in the lives of the rural poor; to what extent, and how, IFAD's strategy contributes to enabling the poor to overcome poverty; and, more specifically, on assessing IFAD's contribution to achieving the Millennium development goals. Indicators to measure success in implementing this strategy include:
1/ The strategy on rural finance is summarized in the document Expanding Access to Microfinance in Rural Areas as a Tool for Poverty Reduction: A Strategic Challenge for Latin America and the Caribbean, presented to the Microcredit Summit, Puebla, October 2001. 2/ One source for the present document (particularly the sections on Rural Poverty in the Region and IFAD Experience in the Region) is the regional poverty assessment prepared by the Latin America and the Caribbean Division, Hacia una Región sin Pobres Rurales, Santiago, Chile, November 2000. The task was led by Benjamin Quijandria, Anibal Monares and Raquel Peña-Montenegro. The analysis was updated and further developed by Raquel Peña-Montenegro, Director, and Raul Hopkins, Regional Economist, PL. |
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1. Almost 64% of the rural population in Latin America and
the Caribbean live below the poverty line and, over the last two decades,
the number of poor people in rural areas has increased in both absolute
and relative terms. Poverty reduction is therefore one of the major current
challenges facing the region. The present document outlines IFAD's strategy
for reducing poverty in Latin America and the Caribbean, an overview of
the region's main characteristics and trends, and a review of the root
causes and nature of rural poverty and of what IFAD has learned from experience.