By Josefina Stubbs
This year’s mid-term review of the Productive Initiatives Support Programme in Rural Areas (PAIP) in Haiti will provide unique insight into the challenges facing the rural sector.
The coming of a new year is always a time for dreamers. And as we break into 2011, the International Fund for Agricultural Development’s Latin America and the Caribbean Division is dreaming big.
In the upcoming year, we hope to bring over 10 new project-funding requests to our Executive Board for approval – plus a half dozen country and regional grants. These projects will work in places like Argentina, Brazil, Colombia, Ecuador, Haiti and Honduras to improve market access for family farmers, ensure long-term sustainability, increase territorial approaches to multiply (and magnify) economic opportunities, and facilitate pro-poor policy dialogue. More importantly, these projects strive to leverage our collective wisdom to create better lives for the rural people living in poverty in Latin America and the Caribbean.
And while we must look forward to bigger projects, greater challenges, and a whole lot of work in 2011, I think it’s important to reflect first a little on our past.
Successes from 2010
IFAD’s Latin America and the Caribbean Division currently funds 33 ongoing programs in the region. There are projects in 20 member countries with a total investment portfolio of around US$700 million.
In 2010, the IFAD Executive Board approved six large programs in the region. The Latin America and Caribbean Division also continued working with our ever-evolving regional portfolio, as well as on a number of grants that provide the backbone of our knowledge-management and policy dialogue platform.
In the Dominican Republic, the US$48.5 million Rural Economic Development Project in the Central and Eastern Provinces will increase the incomes and assets of poor men, women and young people. It will do this by building strong organizations and by creating mechanisms for these organizations to access markets and value chains. This program will work in concert with the Development Project for Rural Poor Economic Organizations of the Border Region, which will be implemented in 11 provinces in the western area bordering Haiti, where poor smallholder farmers are cultivating high-quality organic coffee and bananas, but lack the resources to bring their produce effectively to market.
Also in the Caribbean, the US$7.5 million Market Access and Rural Enterprise Development Programme (MAREP)will increase the incomes of unemployed or self-employed young men and women in rural areas.
While rich in culture, northwestern Mexico is particularly poor in natural resources due to the degradation of the land and limited access to resources.
From there we go to Central America, where our innovative market-access and value-chain programs have been proving successful. In Guatemala, the US$41 million Sustainable Rural Development Programme in El Quiché places an emphasis on women and young people, but its benefits will extend to the business operators, family farmers, wage labourers, craftspeople, and microentrerenuers in the region.
Next door in El Salvador, the US$40 million Rural Territorial Competitiveness Programme (Amanecer Rural) will help to increase employment, incomes and food security for family farmers. The programme also seeks to expand agro-entrepreneurial associations and create more opportunities for small businessmen and women.
Heading down the Central American Isthmus to Honduras, the US$37 million Sustainable Rural Development Programme for the Southern Region (Emprende Sur) will facilitate participation of small rural enterprises in value chains, expand their access to national and external markets, increase food security and reduce vulnerability to climate change.
In Nicaragua, we have the US$15 million Development Programme for the Agricultural, Fishing and Forestry Productive Systems in the Indigenous Territories of RAAN and RAAS (NICARIBE). The programme will raise incomes in the region through enhanced production, sustainable natural resource management and development, and stronger community organizations.
And while 2010 was a challenging year for Haiti, we are working with the government to build a long-reaching plan that includes programs that will improve access to credit, markets, tools and training. In its April 2010 meeting, the Executive Board of IFAD approved a debt-relief package that provides the basis for permanent debt forgiveness of Haiti’s debt burden to the organization.
Prior to the earthquake, IFAD had three ongoing projects in Haiti, for a total amount of $50 million, and was the second-largest financier of the agricultural and rural sector. We recently allocated an additional $18 million for a project that is currently under design, plus $2.5 million for a job-creation and irrigation project.
With these new projects – plus the ones we have in the pipeline for 2011 and 2012 – we can expect our regional portfolio to become younger and more dynamic. More importantly, the projects and programs we fund will provide a greater emphasis on market-access, micro-enterprise development and value-chain strengthening, which, as we see from our article on ‘proximate context’ will be key drivers for rural poverty reduction in the region.
Imagining the inevitable
“So many of our dreams at first seem impossible, then they seem improbable, and then, when we summon the will, they soon become inevitable.” You’ll never guess who this quote comes from… Superman himself, the late-great Christopher Reeve. And while it may require Superman- or Wonder Woman-like powers to meet our goals for 2011, I nevertheless think that what may seem improbable now will soon become inevitable.
At the heart of our 2011 work will be the design, implementation support and direct supervision missions carried out by our dedicated Country Program Managers and their teams. Especially noteworthy are the mid-term reviews of the Productive Initiatives Support Programme in Rural Areas (PAIP) in Haiti, the Sustainable Development Project for Rural and Indigenous Communities of the Semi-Arid North-West (PRODESNOS) in Mexico, and Paraguay’s national rural poverty-reduction program, Paraguay Rural.
This year will also see the project completion of programs we’ve come to know and love, including the Sierra Sur program in Peru, the Management of Natural Resources in the Chaco and High Valley Regions Project (PROMARENA) in Bolivia, the second phase of the Food and Crops Intensification Program in Haiti, the Programme for the Economic Development of the Dry Region in Nicaragua (PRODESEC), and Uruguay Rural. These programs have provided invaluable lessons in rural poverty reduction and have helped improve the lives and livelihoods of thousands of poor rural people. My greatest wish for 2011 is that the bold first steps taken by these programs continue on for the next generation to enjoy.
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The world is trembling over the rising cost of foods. The basic ingredients that feed us everyday – things like sugar, rice, wheat and corn – are surpassing their high-water mark from the 2008 Food Crisis. In Mexico, tortilla prices could rise by as much as 20 per cent if you believe the headlines. But high crop prices shouldn’t necessarily be a bad thing for family farmers.
“In fact, if you look at the rules of supply and demand, this should be a boon year for family farmers in Latin America. At least, that’s what we would hope for. But unfortunately, many smallholders in Latin America will be more at risk this year as a result of the price spike, as the basic foods they eat – corn, wheat, rice – will cost them more,” said Josefina Stubbs, Director of the International Fund for Agricultural Development’s (IFAD) Latin America and the Caribbean Division.
But why can’t these farmers capitalize on higher prices? And how can an organization like IFAD help smallholders take advantage of these new market conditions to improve their livelihoods and create new opportunities to step out of poverty? Part of the solution was presented at this January’s conference on New Directions for Smallholder Agriculture, where Julio Berdegué , Principal Researcher at the Latin American Center for Rural Development (RIMISP) and the Acting Regional Economist for IFAD’s Latin America and the Caribbean Division, shared his thought-provoking paper on The State of Smallholders in Agriculture.
The key for change, argue Berdegué and his co-writer Ricardo Fuentealba, is to understand there are different types of family-farmers in Latin America and examine how the proximate context of these groups affects their ability to overcome poverty. In order to achieve sustainable poverty reduction, the paper argues that we must look toward public policies and institutions focused on the provision of public goods, concentrate efforts on providing access to domestic markets, and work within differentiated policies that give increased emphasis to linking not just groups of farmers, but the regions where they live and work, to value-chain linkages.
“The vast majority of smallholders, surely more than 90% of them, work for and depend on domestic markets, and, more precisely, domestic commodity markets. Yet, agricultural development agencies, international and domestic, are heavily under investing in improving access to and participation in those markets, and in the past ten years or so have turned their energy and their most creative attention to export markets and, within them, to higher value and niche markets. This is a terrible mistake, and one which is particularly costly to most of the 9 million subsistence farmers and to the majority of the 4 million [intermediate-level family farmers in the region].
“Policies that support the improvement of public services and the provision of public goods are a good part of the solution to these challenges. Unfortunately, they are not in vogue. In all but three or four countries, policy has been reduced to a collection of targeted projects, and a disproportionate share of the public effort is focused on delivering private goods and services to groups of farmers. While this may be satisfactory from the perspective of donors who want to measure impact as fast as possible and certainly within three years, it surely spells disaster for the majority of smallholders who don't happen to be included among the lucky few.” - Latin America: The State of Smallholders in Agriculture, Julio A. Berdegué and Ricardo Fuentealba
Cardamom production is good business in Guatemala. But only if you can create a value-added product and process the beans yourself. Genero Xona, and members of his small-producers association in the rough-and-wild El Quiché region of Guatemala, are doing just, thanks in part to a new cardamom facility provided by IFAD-funded FIDA Occidente. “After the war we had to move a lot, and there was a lot of misery,” said Xona. Now with the increased revenues the cardamom processing facility is bringing, Xona has noted less migration and an overall better quality of life for people living in the region.
The proximity of progress
In the late 1990s and early 2000s on the back of new liberalization policies, increased focus on exporting non-traditional agricultural products, and the growth of large corporations and supermarkets, the Latin America and Caribbean agricultural sector experienced a substantial boom.
Even the economic crisis could not keep it down, with the sector growing around 4 per cent in 2009. But, paradoxically, “this did not translate into higher rates of rural poverty reduction,” say Berdegué and Fuentealba. Only 25 per cent of the population in 11 Latin American countries surveyed – Brazil, Bolivia, Chile, Colombia, Ecuador, El Salvador, Guatemala, Honduras, Mexico Nicaragua and Peru – lived in places that experienced growth and poverty reduction over the past decade.
These numbers show us that around 50 per cent of the rural population are facing a lose-lose situation.
The problem, say the report’s authors, is that instead of investing in domestic market access and the “proximate contexts” of smallholders – the linkages of interdependent actors “(poor and non-poor, agrarian and not, urban and rural, private and public) that mobilize complementary assets and capabilities” – too much emphasis has been given to investing in on-farm resources and exportation.
For instance, in Latin America, an area with rapid urban growth – especially notable is the growth in small cities between 20,000 and 50,000 inhabitants – urban centers have played a key role in agriculture by ensuring the research and development of new agricultural technologies. They are also providing valuable links for family farmers to access domestic markets.
“While production for the export market tends to be concentrated in capitalized farms and agribusinesses, a large percentage – probably the majority– of medium and small family farms and agri-processors tend to focus on the domestic market. This creates a potential for direct and indirect impacts of agricultural growth on the reduction of rural poverty and inequality. The case of Chile is particularly illustrative of this point; despite the fact that this is one of the most export-oriented countries, there are 11 times more farmers engaged in the domestic market than those dedicated primarily to the export sector. Of those Chilean farmers who produce food for the domestic market, 89 percent are commercially-oriented small and medium family farmers. Two thirds of Chilean commercially-oriented small farmers produce for the domestic market (ODEPA 2002). These trends are likely to be augmented in countries with a large domestic agriculture market and high proportions of small scale farmers, such as for example Bolivia, Brazil, Colombia, Guatemala, Mexico or Peru.” - Latin America: The State of Smallholders in Agriculture, Julio A. Berdegué and Ricardo Fuentealba
“Without technology, we cannot feed this world,” said Dr. Shenggen Fan, Director General of the International Food Policy Research Institute in a presentation at IFAD headquarters this January. “Higher prices can provide great opportunities for farmers.”
But one of the challenges we are seeing, according to Fan and others, is that smallholder farmers have high transactional costs, making it difficult to capitalize on food price jumps.
Further, reliance on imports, and vulnerability resulting from potential fluctuations in fuel and fertilizer costs, is putting smallholders at even more risk.
We are also seeing a change in the way people eat. This is affecting the ability of smallholders to capture new markets and capitalize on the increase in food prices. In Latin America and the Caribbean today, people eat 22 per cent more food per capita than they did 30 years ago. And it’s not just how much they eat, it’s also what they are eating, with notable jumps in the consumption of fruits, vegetables and vegetable oils, along with meat and dairy products.
Of course, not all news is bad news. And there are glimmers of hope that smallholder farmers will be able to benefit from the price hike. For instance, IFAD Associate Vice President Kevin Cleaver pointed out that in Peru, the price hike has stimulated the rural sector, providing more wage jobs for farmers as well as other new off-farm opportunities.
Source: Berdegué et al. 2006.
Summing up the challenges
“What we are seeing out of Latin America – and from the rest of the world – leaves me to conclude that improving market access and value-chain linkages will be a key cog in our overall strategy for poverty reduction,” Stubbs said.
For starters, according to Berdegué and Fuentealba, we need to focus on helping those who can be helped – the 4 million family farms that are integrated into markets but have limited assets and weak proximate contexts. This is best achieved by focusing on public goods and services, which will allow for improved access to domestic markets, and ultimately, could work toward poverty reduction.
For the 10 million subsistence farms that make much of their money from non-farm jobs – plus remittances and social subsidies like conditional cash-transfer programs – the key is to “guarantee minimum living standards and reduce vulnerability,” say Berdegué and Fuentealba.
Where are we getting it right?
In many ways, IFAD funding in Latin America is already taking valuable steps forward. For instance, many IFAD-funded projects in the region emphasize building territorial approaches and improving market access.
Coming to a close in 2010, the Dom Hélder Câmara project in Brazil improved access to local markets, created more efficient and diverse production models, and increased social and technical capital. Management of water and other natural resources within the project raised agricultural yields and improved marketability and profitability, while mitigating environmental risks for participants.
In Guatemala, IFAD-supported projects are leveraging private-sector partnerships and looking across value chains – from production to processing, marketing, and ultimately to consumption. The support has allowed area farmers to access some of the largest markets in the world and has increased incomes by as much as 50 per cent.
“We are replicating the strongest parts of this model across the region in places like El Salvador, Ecuador, Peru and Colombia,” said Stubbs. “By continuing our investment in value-chains and market access, we hope to create a model for rural development that can be shared throughout the developing world. It is this type of investment that will provide family farmers with the training, skills and infrastructure they need to capitalize on higher food prices.”
Changing patterns of food consumption in Latin America and the Caribbean, 1970-2003. (Food per capita per year in kg, base 1970=100). Source: FAOSTAT (Food Balance Sheets)
Read the papers presented at the ‘New Directions’ Conference
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Some 15 countries in the Latin America and Caribbean region have conditional cash transfer programs (CCT). These programs – Oportunidades in Mexico, Bolsa Familia in Brazil and Juntos in Peru – have received wide acclaim, with some going as far as to call them a “silver bullet for poverty reduction.”
But we all know there are no silver bullets in this world. So how can organizations like the International Fund for Agricultural Development (IFAD) work alongside these massive poverty reduction programs to ensure better opportunities for women and youth? And how can we make sure the benefits of these programs – better education, health, food security and nutrition – will work in unison with longer-term projects that focus on value-chains, market access and rural finance? In short, how do you make it work?
The challenges in coupling the two are immense and complicated. And in order to properly engage on the subject, it’s important to examine how these conditional cash transfer programs work.
“Conditional cash transfer (CCT) programs are one of the most popular interventions in the social sectors in developing countries. While the details of program design vary, all of these programs transfer resources to poor households conditional on them taking active measures to build up the human capital of their children (enrolling their children in school, taking them for regular health care visits). In almost every instance, transfers are made to women,” according to the paper Conditional Cash Transfers: Reducing Present And Future Poverty by Ariel Fiszbein and Norbert Schady.
In Latin America, conditional cash transfer programs comprise the lions-share of public-sector spending on poverty reduction. And to a large degree they are seeing success. For example, Mexico’s Oportunidades now covers around 5 million families, and has reduced stunting in babies by 39 per cent in girls and 19 per cent in boys. It’s also improved maternal mortality rates. But has it helped rural people overcome poverty?
“A large number of conditional cash transfer recipients live in rural areas or depend economically on rural activities,” says Carolina Trivelli, economist at the Institute of Peruvian Studies. But few of these programs are truly targeted at rural communities. That’s where organizations like IFAD can come in, says Trivelli. “IFAD knows about rural poverty and its characteristics and should support conditional cash transfer programs to better adapt the services provided within these rural settings.”
As we said, there are no silver bullets in development. And one of the gaps of conditional cash transfer programs is making sure that the beneficiaries of these new funds – especially the droves of newly educated young people – have opportunities for employment and income-generating activities.
“The rising percentages of rural children in the school system, combined with the effects of the conditional cash transfer programmes adopted in various countries in the region, is leading to the appearance of large groups of better educated young people from poor rural families. In some countries, policy-makers are realizing that education is not enough and that a balanced package of measures is needed to enable these better educated young people to achieve the work integration to which they aspire. Otherwise, their discontent could well have serious consequences for governance,” writes Martine Dirven, Professor of Rural Development at the School of Geography at the University of Chile, in her paper Non-Farm Rural Employment and Rural Poverty Reduction: What We Know in Latin America in 2010.
Another challenge for conditional cash transfer programs is meeting medium-term needs. In the short term, the success of these programs is boldly apparent. People are eating better, they are going to school longer, and they are healthier. But, that doesn’t necessarily mean they will be wealthier in the long run.
“This leaves out the medium term and the impact on the present generation that receives the transfer – sure they eat better, but that’s it,” says Trivelli. “IFAD has a long experience developing alternatives to improve livelihoods and income generating opportunities for adults and young people who are currently receiving conditional cash transfers.”
These IFAD-funded programs complement the conditional cash transfer programs, and could also provide an exit strategy for the beneficiaries to graduate from the programs.
More money from new crops like onions and French beans means more children are able to go to school in Guatemala’s El Quiché region. In this school, attendance has nearly doubled over the past two years with around 75 students now crowding into the K-6 two-room schoolhouse. The Guatemalan Mi Familia Progresa CCT program, which pays families a small stipend to send their children to school and to the area clinic, has also helped increase class attendance.
Defining the opportunities
There are opportunities large and small for IFAD-funded projects and programs to work in unison with large conditional cash transfer programs.
“One of the first spots we can look is at micro-enterprises coming from young self-starters,” says IFAD Country Program Manager for Colombia and Peru, Roberto Haudry. “One of the direct results of conditional cash transfer programs is that there’s going to be more young people with more education in places like Colombia and Peru. Many of these young people will end up migrating to small urban centres – cities between 20,000 and 50,000 – to look for work and better opportunities.”
And while these young people may not want to work as smallholder farmers – after all, farming is a high-risk, low-pay job that breaks your back and earns you little – they will very likely be the key links in new micro-enterprises that can increase production and establish stronger access to domestic markets.
At field level
One solid example of how conditional cash programs and IFAD-funded projects are working in harmony comes from Proyecto Capital. Made possible through financing from the Ford Foundation, Proyecto Capital’s mission is clear: “the project supports the implementation of public policies that link social protection with inclusion in the financial system in Latin America and the Caribbean by promoting grassroots savings, the long-range goal of the project is to promote the equitable inclusion of citizens and social protection with productive development. This means increasing poor families’ human, social, financial and physical capital while facilitating effectiveness (good governance) and efficiency, as well as economic growth and stimulation of markets for their products.”
Proyecto Capital was based on a group of pilot projects in which IFAD and several governments in the region worked together with conditional cash transfer programs to allow beneficiaries to set up savings accounts with the money they received from the CCT program.
“This makes a lot of sense, and is a lot better than just giving the money away,” says Trivelli. “It could offer a number of benefits to the recipients – financial inclusion, better management of their liquidity, a safe place to build short-term savings.”
It’s a classical win-win situation. The conditional cash program has greater impact, is more transparent and can even be cheaper to operate. And for the financial system, this means a new set of clients. The end beneficiaries of these types of programs, of course, should be the people themselves. And for Elvira Flora of Los Halcones, Peru, the new savings have provided a whole new world of opportunities.
“From the very beginning, I really wanted to save, but I was afraid that the money would be in the president’s name or that the bank would bilk me. I finally took the plunge because the other women did. As time passed, I was delighted to see how my savings grew in a safe place,” says Flora. “My first withdrawal was for school expenses, and that’s when I discovered there were also incentives for withdrawing. That was an even greater motivation. Saving has made me more organized and has also given my husband responsibilities. I have more self-esteem, because now I am useful and I know how to express myself. Now I am making withdrawals to fulfil my original dream, which was to build my house, and I am president of a communal bank.”
Proyecto Capital has three on-going pilot projects in Peru with around 25,000 beneficiaries. The project also has operations in Colombia, where nearly 40,000 people are benefiting from the savings plans, as well as a small pilot project in Chile. The program is currently being expanded to Bolivia, Ecuador, Paraguay and the Dominican Republic with the support of Fundación Capital.
Bringing these conditional cash programs together with IFAD-funded projects and remittance programs could bring us one step closer to the silver bullet we’ve been looking for all these years.
By working with the Peruvian conditional cash transfer program, Proyecto Capital is hoping to reduce risk and build assets for poor rural people.
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Capturing ‘the State of Smallholders in Agriculture’ in Latin America
This is rural poverty in Latin America. And while its dimensions and striations, variegations, flaws, strengths and commonalities are nearly impossible to capture in a single portrait, it’s certainly worth the effort. In their recent paper Latin America: The State of Smallholders in Agriculture, agronomist Julio A. Berdegué and sociologist Ricardo Fuentealba strive to define and delineate the nuanced reality facing one important component of the 62 million rural people living in poverty in the region: agricultural smallholders. The paper presents strong arguments on the nature of rural poverty, development and family farming in the region, also revealing a series of numbers and facts on rural inequality that lead the paper’s authors to conclude that Latin America has “the most unequal rural sector in the world.”
One thing we know for sure, according to Berdegué and Fuentealba, is that the Latin America of today “is truly a very different place than one generation ago.” Since the scorched earth days of the 1980s, the region has changed the way it works and does business. Its politics and economics have turned 180 degrees – in some cases the turn has been more like 270 degrees – presenting new paradigms for industry and development, and new opportunities and challenges for the rural sector.
“The past three decades have seen the region: liberalize and open its economy, including its agricultural sector; dismantle numerous public services related to agriculture; redefine the relative roles of the state, markets and civil society in development; nurture a growing number of medium and large corporations, including multinational ones, that play a dominant role in agriculture as in other sectors of the economy; dramatically expand the provision of basic health and education services, including in rural areas; introduce television, radio and mobile phone communications to the majority of rural areas; reduce its population growth; concentrate population in urban centers, including small and medium provincial towns and cities; expand the rights and opportunities of women; reestablish democracies and strengthen the rule of law and the respect of human rights; increase the responsibilities of regional and local (municipal) governments; expand the size, voice, and contributions of organized civil society; deforest vast regions, contaminate many of its rivers and lakes, and further erode its soils, while at the same time experience an awakening of an environmental consciousness and activism on the part of growing sectors of the population.” - Latin America: The State of Smallholders in Agriculture, Julio A. Berdegué and Ricardo Fuentealba
All in all it looks like things should be going well for smallholders in the region. Sure, the growth in large corporations may be siphoning off some of the money that would otherwise be landing in smallholder wallets, but, with all that growth, surely the region’s smallholders would be able to capitalize somehow on three decades of growth. Unfortunately, the numbers just don’t add up. Over the past three decades, GDP jumped by over 25 per cent in real terms in the region, yet the number of rural people living in poverty dropped by only 12 million – with a drop of 6 million in the number of people who could not meet their food needs. This means that in rural Latin America today, some 35 million people do not have enough to eat on a daily basis and 62 million people are poor.
Inequality for all
In Ecuador, ‘a subsistence farm on the coastal plains is twice as big as one in the Andean highlands, while one in the Amazon basin is eight times larger.’
Berdegué and Fuentealba say that unequal access to wealth and land are to blame. “If adjusted by inequality, the Human Development Indexes (HDI) of 18 LAC countries, for which there is data, drop below the HDI for Africa (four countries) or Asia (11 countries),” according to the paper, citing current data from the United Nations Development Program’s Human Development Report.
And according to the Economic Commission for Latin America and the Caribbean (ECLAC), the rich keep getting richer and the poor keep getting poor. “The 20 per cent richest of the rural population earn between 10 and 50 times more than the 20 per cent poorest ranges (ECLAC, 2010); in 9 of 16 countries for which there is data, this measure of income distribution is worsening (Berdegué, 2010).”
Many of the countries have Gini coefficients of 0.5 or higher for rural income, according to the paper, confirming this to be the most unequal rural sector in the world (a Gini coefficient of ‘0’ represents complete equality, while ‘1’ represents maximum inequality). Inequality in land access is even more marked, with an overall Gini score of 0.78, compared with Africa’s 0.62.
Data from the World Bank tells us that every country in the Latin America and Caribbean region – with the exception of Haiti – falls in the middle-income category ($996 to $12,195 per year in GNI). But, as anyone who has ever spent any significant time in the countryside in Latin America knows, these national averages give a rather distorted view of the reality facing most poor rural people in the region. For example, while Mexico’s GDP per capita is US$8,920, the average income of the poorest 40 per cent of the rural population is just US$652 per year, and that of the poorest 20 per cent is US$456 per year (equivalent to the GDP per capita in United Republic of Tanzania).
Defining our target
One of the greatest achievements of the Berdegué and Fuentealba paper is a refined and multi-tiered definition for smallholder farmers in the region.
“The smallholder or family-based agriculture sector in Latin America and the Caribbean (LAC) is defined as a sector made up of farms that are operated by farm families, using largely their own labor. A detailed analysis of recent data for several countries allows us to approximate that there are 15 million family farms in LAC, controlling about 400 million hectares. The family farming sector can be classified in three large groups: (a) Almost 10 million subsistence farms, with 100 million hectares, where households derive a large proportion of their income from non-farm jobs, remittances and/or social subsidies; (b) an intermediate group of 4 million farms with 200 million hectares, that are integrated in agricultural markets but face significant constraints derived both from their asset endowment and from the proximate contexts in which they operate; (c) about 1 million family farms that hire some permanent labor and that manage about 100 million highly productive hectares. The performance and opportunities of these family farmers is largely determined by the characteristics of their proximate context, which is unfavorable in most cases. Recent trends of agrifood markets also create a new environment for family farming in LAC.” - Latin America: The State of Smallholders in Agriculture, Julio A. Berdegué and Ricardo Fuentealba
And while most indicators point to rapid urbanization and increased diversification of incomes for rural people in the Latin America region, according the paper, the smallholder sector is not actually getting any smaller. In fact, in Chile, Colombia, Guatemala and Honduras more rural households are now defining themselves as “self-employed in agriculture.” The problem, say Berdegué and Fuentealba, is that we are using a set of rules and parameters designed for Asia and Africa, and trying to apply them to Latin America and the Caribbean.
“Using the definition of the smallholder sector as that comprised by farms of less than 2 hectares, Nagayets (2005) finds that there are about 5 million small farms in the Americas. This estimate, adopted by other authors (e.g., Wiggins et al., 2010; Hazell et al., 2010) as well as by IFAD in the background concept note for the conference on "New Directions for Smallholder Agriculture" [held January 24 and 25, 2010 in Rome], is patently wrong. While a limit of 2 hectares perhaps fits the distribution of landholdings in Asia, it certainly does not in LAC. Therefore, this procedure distorts our understanding of smallholder agriculture, and misguides the design of public strategies and policies, as it reduces the smallholder to a fraction of its real size, particularly if measured in terms of economic and social contributions.” - Latin America: The State of Smallholders in Agriculture, Julio A. Berdegué and Ricardo Fuentealba
And while the reclassification of the family farming sector in Latin America and the Caribbean as outlined in the Berdegué and Fuentealba paper is far too complex to capture in a brief format, in examining the issue of farm sizes, it’s worth noting the importance of regional context. For example, in Ecuador, “a subsistence farm on the coastal plains is twice as big as one in the Andean highlands, while one in the Amazon basin is eight times larger. At the same time, a farm of 4.5 hectares in the Andes is already ‘transitional,’ while one of 25 hectares in the Amazon Basin is still in the ‘subsistence’ group.”
Also worth noting is the increased diversification of incomes in the region. According to the paper, about 65 per cent of the region’s 15 million family farms rely on non-farm incomes to keep themselves afloat. “for them, agriculture complements other activities, and remittances and cash, as well as in-kind social transfers and supports are of great importance. Still, this group owns or controls about well over 100 million hectares. Even if small, the income derived from this land is absolutely critical for their survival and to reduce their vulnerability to shocks of all kinds. Many if not most in this group would be considered poor. Yet, an agriculture-based or agriculture-led development strategy would miss the fundamentals in the case of this group.”
A second group of family farmers derive much of their livelihoods from the plow and are well integrated into agricultural markets. Yet this group of about 4 million small farms that control some 200 million hectares of farmland face significant challenges in regards to risk and assets, and would certainly not fall under the guise of the 2-hectare limit.
Supporting this second group is key to the revitalization of rural economies in the region. “The contribution that this group makes to feeding Latin America and, increasingly, other regions of the world, cannot be underestimated. Because they are deeply embedded in the local economies, their agriculture-based development has production and consumption linkages that makes them important local and regional players.”
The final group of family farmers would then be farms that fall somewhere between a traditional Mom-Pop-and-four-pups family farm and a corporate farm. These are farmers that hire labor to increase scales. They hold roughly 100 million hectares and represent 8 per cent of the smallholder sector.
Group A includes smallholders with relatively high assets and productivity. Group B “is often ignored in polarized policy debates, that is, those that are reduced to dichotomous categories (large versus small farms; commercial versus subsistence; "viable" versus "unviable"; poor versus rich).” Group C is comprised of resource-poor farmers located in places where conditions are adverse not only for agriculture, but often for other economic activities.
The Berdegué and Fuentealba paper was presented at the New Directions for Smallholder Agriculture Conference held at the International Fund for Agricultural Development’s Rome headquarters in January 2010. To read more about the conferences conclusions see our story ‘Proximate context’ key to capitalizing new market conditions.
Read the papers presented at the ‘New Directions’ Conference
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