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Latin America Reading of World Development Report

2007 ANNUAL MEETINGS
INTERNATIONAL MONETARY FUND
THE WORLD BANK GROUP

PRESS BRIEFING: LATIN AMERICA READING OF WORLD DEVELOPMENT REPORT 2008

IMF Headquarters
Washington, D.C.
 
P R O C E E D I N G S

MR. JACKSON:  We have today a briefing on the Latin American reading of the World Development Report.

To my left I have Alain de Janvry, who is one of the co-authors of the World Development Report.  And we're going to do a reading on the Latin American findings of the Report.  He will start with his briefing and then we have, to our left, the Sector Director for Sustainable Development, Laura Tuck.  And then she will give her reading.  And then, to her immediate left, we have our Sector Manager, Ethel Sennhauser.

So go ahead and start with your reading.  You can go ahead and do it from your seat. 

MR. de JANVRY:  Good afternoon or good morning, still.
Let me follow up on some of the discussions that we had in the presentation and let me remind you, in a sense, that the main proposition that the WDR is making is to give more importance to agriculture in public budgets and in donor programs because so much of the poverty is located in the rural areas.  In Latin America, for instance, we do see that about 40 percent of the poor are located in rural areas.

Very few differences in terms of Latin America compared to the rest of the world that really matter in terms of the role of agriculture.  The first one is that even though the share of the sector is relatively small, it's about 7 percent of GDP, what we see is that there is a very large agribusiness sector which accounts for about 30 percent of the economy.  And so even though agriculture as a whole is not a large share of GDP, there are some--the agribusiness sector does represent an very important part.

Second, there are some specific subsectors of agriculture which have been booming.  Think of soybeans in Brazil.  Think of fruits in Chile.  Think of vegetables in Guatemala.  Think of cotton, again, in Brazil in Mato Grosso.  So we do see very important sectors in terms of economic role. 
And then finally, there's important issue in terms of the environment.  And here Latin America has been a leading sector in terms of putting into place schemes of payments for environmental services, countries like Costa Rica, Mexico, Colombia with important initiatives to create incentives for farmers and for forest owners to manage their forests and lands in a most sustainable fashion in such a fashion that they keep on delivering environmental services. 

Let me mention just two or three features about Latin America that make a difference for the World Development Report.  The first is that overall Latin America is an urbanized--falls in what we call the urbanized category.  Namely agriculture is not an important contributor to aggregate growth and most of the poor tend to be in the urban environment. 

However, you do find a number of countries that don't belong to this category.  Paraguay and most of the Central American countries have more than half of their poor in the rural sector and an important part of growth is originating in the agricultural sector. 

Second, when you look at the large countries like Mexico and Brazil, you do find that there are particular states that actually fit into the category of what we call agriculture-based.  States that depend very heavily on agriculture for growth and where there's an important share of poverty which is located in the rural sector. 

In Mexico this would be states like Zacatecas, like Sinaloa, like Oaxaca.  In Brazil, very interestingly what we see is that even though most of the poor are urbanized, there are states that depend very heavily on agriculture for growth.  Those are, of course, the Mato Grosso, the Rio Grande do Sul, states like Parana, like Goias, et cetera.  So we do see a lot of heterogeneity and this has to be taken into account in terms of the way in which agriculture is going to be used for development. 
Let me make two or three points beyond this.  The first one is that overall the performance of agriculture as a sector has been quite satisfactory.  It is not been spectacular.  Is has been better in some countries.  Others have been better overall in, for example, Brazil than it has been in Argentina.  What we see, however, is that even though the sector has done well, people have not done so well.  Poverty has been very resilient.  The poverty rate in the rural sector is much higher than in the urban sector.  And the poverty rate has stayed more or less at 50 percent and has not really decreased much over the last 10 or 15 years.  So we see this contradiction that a sector which is doing well, but rural poverty which is really not following in terms of partaking into the benefits of agricultural growth. 

And that may be a Latin America feature, namely due to the way in which land is distributed, due to the way in which public services are accessed, what we see is that high growth which, in countries like China or India or the Eastern European countries lead to a reduction in poverty, we don't see this kind of impact following up so easily from growth in the Latin American countries. 

Which does tell us that something more has to be done, growth is necessary but growth is not sufficient, and we have to be concerned with issues of access to land, meaning land reform, access to credit which means new financial services, access to extension that has to be put back into place in a satisfactory fashion, better access to insurance schemes, less transactions, custom markets for small holders, more capacity to negotiate, small holders getting into organizations to be able to service, for example, supermarkets. 

In Latin America today, 60 percent of the food which is being consumed travels via supermarket.  It's very hard for small holders to gain access to supermarkets without strong organizations to capture economies of scale to be able to meet the standards, to meet the timing of the deliveries. 
So there is something very special about Latin America.  Successful agricultural growth, not so much success in terms of poverty, growth necessary but not sufficient.  And as the need for a set of complementary policies and interventions which are going to reconcile agricultural growth with what we would like to see happen in terms of growth having an impact on poverty reduction.
And that's very specifically Latin American and I think that's the challenge, in a sense.  And it questions, as I said, issues of access to land and land reform, issues of the way the institutions work, the way the public goods are being delivered, the way the political economy systems provide local accountability. 

A lot has been happening in Latin American in terms of trade agreements and especially trade agreements between the United States and Mexico, and then the United States and CAFTA, Dominican Republic environment.  More recently, the negotiations with Colombia, which is not yet ratified.  Ecuador has been suspended.  Chile has been successfully implemented. 

There has been a lot of debate in terms what to expect in terms of rural poverty.  What we see here is that there will be a negative impact on the price of some of the staples.  And this raises the issue of what we call the special products.  For example, white corn has been taken off the CAFTA negotiations when Guatemala, came into the agreement. 

Now what it means in the sense that the price of white corn is going to be higher than it would have been otherwise.  So what we did for this case is to spend a lot of time looking at who is on what side of the market.  Namely, are you a net buyer or a net seller?  If the price goes down, it is going to hurt producers but it's going to benefit consumers.  Who are the poor in those regions?  Are the poor mainly buyers of food?  Are the poor mainly sellers of corn?  That's the big issue. 

What we found is that, in fact, the vast majority or a large majority of poor people are of the buying side.  Of course, all of the urban poor are on the buying side.  All of the landless are on the buying side. 

But a lot of the small holders are the buying side as well.  It doesn't mean that there are not some small holders and quite a few small holders who are on the selling side who are going to be negatively affected and need compensation and need to be helped to adjust to shift their production towards the cooperative advantages.  Pro campo, in a sense, in Mexico, was quite effective in supporting the rural economy over a 15 year transition period to help the economy adapt.
What pro campo did not do, however successful a program it was, was to come with not only transfers but also with the instruments that you need to have in order to respond.  It should have come in a better package with technology, a better package with extension, a better package with infrastructure investment in order to be able to shift away from say the corn and the products which are negatively affected by the trade agreement moving on to the commodities that require cooperative advantage in that context. 

A final point is that very importantly in Latin America is the emergence of a rural non-farm economy which provides a multiplicity of sources of income for all populations.  Quite often people who keep a foot on the farm but also have part of the family members who are working in other activities.  The man may be a farmer and the daughter may work in the maquilas in Honduras or in Mexico. 
That's quite important but it needs to be managed.  What we have learned are two things.  One is in order to be able to enter into those activities, you need skills.  You need education.  Levels of education in the rural areas of Latin America is a still under six years of school, very low.  Very significant efforts done in Brazil with Bolsa Familia, very important efforts done in Mexico with [Spanish word].  Important efforts done in Nicaragua, in Honduras, in Argentina, in Chile with Chile Solidario, et cetera.  But there's still a major effort to be made to uplift the capacity of the rural population. 

But more importantly, it's on the demand side, namely to manage the availability of employment and investment opportunities in the rural areas.  That's what we call territorial development.  At the IDB, we work very closely with [inaudible] Chile, we work very closely with Graciello da Silva, who is now at the FAO in Santiago, who have been pushing very importantly a sort of more territorial approach to the way to manage local economies and to generate local employment and investment opportunities via this approach. 

So let me leave it at this but in the end what we are saying for the WDR is basically a five-pronged approach.  One is to increase the competitiveness of the small holder sector to be able to participate in the modern economy, mainly the supermarket revolution.  That is not trivial.  It's going to require a lot of attention.  It's been done, quite importantly, in Brazil.  Organizations are the key for this and institutions which are going to service more holders are the key for that.

The second is to improve livelihoods in a large subsistence economy, differentiated policies recognizing that many small holders are really not so much in selling a surplus of produce.  They are, to a large extent, producing for home consumption and then they participate to other markets, to the labor market for example, as complementary source of income. 

This large subsistence economy is here to stay for quite a long time.  It's part of a long transition where eventually those household will move into the market economy, may acquire more land and be bale to become net sellers or enter more into the labor market.  But there's a long transition that needs to be taken care of, looking at who is in that subsistence economy, this sort of milpa type or the kunuko type in the Dominican Republic if you like, those subsistence economies that could receive--where the productivity of land and labor could be increased.

Third, we need to make the labor markets work more effectively.  Labor markets, especially agricultural labor markets, tend to be quite informal, quite harsh, a lot of seasonality in employment, a lot of child labor, a lot of labor mobility.  People have to follow the crops.  Then because they follow the crops, their kids do not go to school.  So there's a lot that could be done in looking at the agricultural labor markets and doing a better job in terms of using those labor markets as a way of providing--making it easy whereby people can get out of poverty. 


Four, we need to boost the rural non-farm economy.  This is back to my issue of skills on the one hand, territorial development on the other hand.  That is very important.  If you look at how the family farmer has survived in Europe, how the family farmer has survived in the United States, it's largely because of what we call plural activity.  Namely, those households do farming but they also do other things.  But those other things have to be available to them.  They have to have the skills to participate and the opportunities to find jobs and to invest in those activities have to be available. 
And finally, to finish, the issue of governance.  What we find is that governance on behalf of agriculture needs very significant revision, improvement, increased capacity.  The ministries of agriculture have not usually found their new functions and their new ways of operation beyond structural adjustment.  They have new functions to assume, new capacities have to be acquired.  They need to regulate.  They need to engage more into public-private partnership, more proactive ways of relating to the private sector. 

Decentralization very importantly in Latin America, very important in Mexico and Brazil, everywhere in a sense.  But what we find is that much of decentralization has been at the municipal level, a level which is good for public goods but not so much for public project, for economic projects because the scale is not sufficient.  But mainly what is important is to put into place accountability systems. 
And then finally, the Bank especially has been promoting this idea of community driven development, namely to make funds available to communities, for communities to decide on how best to allocate those resources to the provision of local public goods.  Like in the Tres por Uno Project in Mexico, to also support the productive project.  And here what we see as the need to improve the quality of community governance, the capacity to formulate project and the capacity to manage projects. 
Sorry to be so long. 

MR. JACKSON:  Thank you. So Laura Tuck.

MS. TUCK:  Thanks very much, Alain. I'll be brief so that you can have a chance to answer questions.  I just wanted to talk for a minute about how we in the regions are learning from a lot of the work that's been done in the WDR and how we want to move forward. Obviously, Alain has talked about a number of different areas that were covered by the report and they're all very important.  But I just wanted to touch on three for us in the region that are very important.  The first, and he talked quite a bit about this, is the importance of making future agricultural growth more inclusive.  That is, bringing the benefits to the small holders. 

The second is in a world characterized by climate change and scarcity of natural resources and contamination of those resources, the importance of making agriculture production more environmentally friendly. 

And the third is the importance of both improving the level and the quality of public expenditure in the sector.  I'll touch on each of those very briefly. 

The first on the subject of inclusive growth, because I find this very interesting.  And as Alain said, Latin America is really set apart from the rest of the regions on this.  All of the regions' agriculture is growing, some faster than others.  But all growing.  In Latin America it's growing.  But what's unique, as he said, about Latin America is that the impact on rural poverty, we're not seeing it.  It is not inclusive.  We're not doing a good enough job at bringing the small holders into this process. 

What are some of the things we can do about that?  I won't belabor this because Alain actually went through quite a long list.  But we really can focus on this development of associations that bring producers together so that they can get the economies of scale and accessing the market chains, whether they be supermarkets or for acquisition of inputs and all kinds of other things.

The development of contract farming to improve the efficiencies at each of the steps in the marketing chain.  Disseminating technology directly to them, making sure that the services that are being provided aren't just going to the larger scale, providing technical assistance so that small farmers understand the nature of quality and safety standards in the export markets, because it's a very new complicated areas they enter, as these countries enter into these trade agreements they have to meet the standards, particularly in the United States.  And bringing both the information about it and then how they can go about complying with those regulations. 

We can also help improve the access to land and forests.  There are a number of ways we've been doing it and we can do this in the future, through market-based transactions, through the facilitation of how the market works in these areas.  But also through sometimes financial incentives to help small farmers be able to purchase land or to get the package of other inputs they need to be able to use that land if they buy it. 

We can help facilitate diversification of the non-farm economy, Alain talked about that.  And again, we can improve public investment in areas that really reach the small holders, things like rural roads, water supply and sanitation that really reaches the poor people. 

The second, on environmental sustainability, Alain talked a bit about how this region has been a leader in some of these areas.  For instance, in payment for environmental services.  This is absolutely true.  But one of the other features of Latin America is that agriculture has also been doing some harm to the environment.  In particular, if you look at deforestation, half of the emissions, the greenhouse gas emissions from the region, come from deforestation.  Which is quite astounding if you think about it.  As much as comes from power generation, transport, and all other areas combined, the emissions from deforestation are huge.  And most of that is because of conversion to agriculture. 

So there's a lot we can do to develop sustainable use plans for the forests and for the lands that have already been cut, for the watersheds, a lot we can do to help develop water resource management plans, forest plans, etcetera. 

We can help improve practices for the use of chemicals and inputs.  We can build capacity for biosafety management.  We can improve the price and policy frameworks that in some areas give incentives for overuse and exploitation of the natural resources.  And again, we can improve public expenditure for things like water management.  We have canals that have cracks and wastewater and so forth.  So there's a lot that can be done on the infrastructure side. 

Finally, I wanted to talk about a topic that hasn't come up so much, and that's on public expenditures.  One of the features of Latin America overall, not just in agriculture, is that the level of spending on public investments is quite low.  Actually, it's less than--on average for the region, it's less than 2 percent of GDP and it's been going down.  In a number of the large countries, Mexico, Brazil, et cetera, it's down closer to 1 percent. 

Of the spending that's going on, something like as much as 50 to 80 percent of it is going for subsidies.

In countries like the East Asian Tigers, if you will, they're spending 4 to 6 percent of GDP on public investment.  So the ideas is to try to make the spending that's going on more efficient and orient it away from subsidies toward public goods and public investment and then to increase those levels. 
A lot of the subsidies, of course, are going--not only are they not going for public goods but much of them are captured by the top 10 or 15 percent of the beneficiaries.  So if we want to move back to the first point, to a more inclusive and pro-poor policies, there's a lot that can be done to improve the efficiency of public expenditure. 

And again, I want to be clear, the Bank is not saying that subsidies are all bad.  Subsidies can be very useful if they're targeted toward poor people, toward introduction of new technologies, toward helping small farmers--as I said before--access export markets, helping people adapt to the impacts of climate change.  So there are areas where subsidies make sense.  But we need more in public investment. 

And you see both Brazil and Mexico coming on with new infrastructure investment programs this past year and starting to make that push.  I think that's a step in the right direction. 
So I will conclude there.  There's obviously a lot more we could talk about but I would like to give you a chance to ask whatever questions you might have. 

MR. JACKSON:  Okay, if you could identify yourself and speak into the microphones, which are at your chairs.  NOTIMEX?

QUESTION:  Ruben Barrera with the Mexican newswire, NOTIMEX.
On Mexico, corn is a very important produce for Mexico.  It may be the most important produce for the country.  Right now there is a huge crisis because Mexico import around 8 million pounds of corn because the country is not producing enough. 

Starting in January, because of NAFTA, Mexico will be able to export corn and beans without any tariffs.  I wonder do you see--I mean what is the impact that you see after the U.S. lift tariffs on this to produce? 

And also, do you see a reverse on trend--I mean maybe that will boost production in Mexico in these two particular produce or maybe the lack--as you pointed, the lack of official investment for agriculture will impede the country to regain the position that they had a couple of years ago. 

MR. JACKSON:  Alain?

MR. de JANVRY:  Just an observation that, in fact, corn production has not declined in Mexico, which is quite interesting.  It's the gap between the increase in consumption and domestic production which has been made by increasing imports from abroad.  But it's quite interesting that there's so much resilience to corn production in Mexico, which is culturally based, it's related to the fact that there is a lot of small holder farming where people produce their own corn for consumption.  It's also a very safe crop to produce compared to other crops. 

I think the key is, in a sense, that those small farmers should really try to move more into high-value crops.  Land is scarce.  There are expanding markets in the urban sector.  There is the U.S. market which is accessible in terms of high-value crop.  In fact, exports of high-value crops to the United States have increased also very sharply. 

So in terms of supporting gains in income in the Mexican countryside, corn is important because it's a food security issue.  It is related to a long tradition of culture.  There are also important quality dimensions to corn, blue corn, different types of corns which are so much appreciated in the diets. 
But the key response, in the sense, is to be able to invest, to acquire new technologies, to link to new markets, to gain access to credit which is still very scarcely available, and to be able to link to the international market opportunities and to the new domestic food market opportunities which are created by supermarkets and the modernization of food systems. 

So to finish, there were kind of two options that we saw in terms of the small holders.  One is you can say let's go towards the niche markets, the local farmers markets and whatever.  And that's part of the answer, including for school lunches and proximity advantages.  That's part of the story.  But really that's not enough.

What's important is for small holders to also link to where the action is.  And the action is the way the food systems are transformed and whether they are going to be left behind or not.  Niche markets are not enough.  They have to be able to move on to those new markets.  And that's possibly via moving on to the high-value activities and be able to contract with the agri-exporters, the agri-industries, and the supermarkets because that's where the action is. 

MS. TUCK:  I would just add one point on that.  One of the interesting features of the corn market is because of the use of corn now for biofuels, you're starting to see corn prices following a bit the prices for oil, and they have been increasing.  This is troubling in some dimensions but for corn producers it's actually been a good thing. 

MR. JACKSON:  Please identify yourself. 

QUESTION:  Hugo Alconada Mon from La Nacion from Argentina. 
From the produce prices that are in the developing countries, the reforms have significantly reduced taxation of agriculture.  But I wonder in Argentina, on the contrary, export tariffs have been increasing.  And apparently they might be going up again next year. 

MR. de JANVRY:  I think this is following the story where in Argentina there has been a long tradition of whenever there is an important exchange-rate devaluation to increase export taxes.  So you try to redistribute the burden. Now tariffs, that would be on imported goods.  Can you repeat to what commodities was the tariff--

QUESTION:  [off microphone]

MR. de JANVRY:  That is my answer. 

In other words whenever there's an exchange rate devaluation, there's a tendency to raise taxes in order to absorb part of the--to retain part of the income transfer to the countryside and then to use a countercyclical movement in taxation as the real exchange rate appreciates again. 

QUESTION:  Chet Blount [phonetic] Bloomberg News. 

I just wanted to ask about this issue of poverty reduction.  There's been a lot of talk about the need to redistribute land.  Yet you also look in places like Mato Grosso.  The towns there that center around the largest farms have the highest human development index of some of the cities in Brazil. 
What sort of things can you say about the specific types of specific countries or specific regions or specific types of crops that would be best suited to land redistribution and which ones wouldn't?  Because it seems somewhat counterintuitive that--some of the largest farms in Brazil are centered in areas with the highest level of human social development.  Maybe we're generalizing too much. 
My other question would be where would you put the issue of infrastructure?  How does that fit into your--the lack, for instance, in Brazil of good port facilities, good railways, getting these products that actually are at the center of growth to the world markets? 

MR. JACKSON:  Would you like to answer that, Ethel? 

MS. SENNHAUSER:  Let's see if I'm understanding what you're saying. 

MR. JACKSON:  Ethel, go ahead and identify yourself. 

MS. SENNHAUSER:  Sorry, I'm Ethel Sennhauser.  I'm the Sector Manager for Agriculture and Rural Development in Latin America. 

The WDR talks about redistribution of land as something that is needed.  It has some provisions on how to do redistribution of land.  and some of those things, we are helping some of the countries in Latin America to do.  It's not something easy.  It's something that is complex and it needs a lot of safeguards and mitigations to that we do it right.  And particularly, because it has some principles that we want that to be embedded in. 

The land issue in the Amazon is a particular critical feature because it is complex because it brings all of the environmental dimensions into that. 

Now crops that are--our position on redistribution and what to do, redistribution of land based on market reforms needs to be linked also with what you are going to do with the land when you have it there.  So normally, the cases where we have seen efficient use redistribution packages are the ones where it's tied with production investments after that. 

What's best depends on the particularity of the geography.  It's not that you pick up a chain and then you say we're going to promote this.  You give the land to--you facilitate access to credits to access the land and then facilities to promote productive investments linked to that, and the linkage to the market.  So it's a whole package where land becomes one more of the elements into what is needed for the small producers to increase their income. 

MR. JACKSON:  Did you want to add to that, Laura? 

MS. TUCK:  I was wondering if you were thinking that we were espousing, for instance, land reform, taking land away from the large producers in Mato Grosso and giving them to small holders. 

QUESTION:  It was this interesting thing that you pointed out how there were certain areas in Latin America where growth had been significant contributors to growth of those countries.  And one of those areas, and also how the growth hadn't seemed to trickle down to the poorest people.
Yet at the same time it seems that these export areas, some that are to a certain degree also coming under a large amount of tax, soybeans in Brazil, Mato Gross, are also the ones that also have shown the highest level of social development. 

MS. TUCK:  There is no right size for land.  Certain crops have economies of sale and they should be produced on larger plots of land.  And others can be done on a small scale.  And we don't come in with a preconceived idea as to what size they should be and where.

But what I think Ethel was trying to say is what we do is we promote the ability of small people to buy land.  We don't take it away involuntarily or force people to sell involuntarily.  The idea is, as she said, to promote credit markets, sometimes with directed subsidies, to promote the access to packages of inputs and technology to use the land or to invest in the land when they get it, sometimes with subsidies, whether it be a grant

For instance, we have a project in Bolivia in the lowlands where there's been a lot of soybeans.  But a lot of that land is not being used by some of these larger scale producers.  They haven't done anything because there's actually no active market. 

So by helping to create the market, disseminate information, bring buyers and sellers, and to learn about how you appraise the value of the land, what the potential is, then help the small farmers either use their own income or get credit to it, get this package of inputs, and then they buy.  So it's not forcing anybody to sell anything.  Does that answer a little bit?

QUESTION:  More or less.  Thank you. 

MR. JACKSON:  Nestor Ikeda, Associated Press.

QUESTION:  Nestor Ikeda, Associated Press reporter for Latin America. 
I have a question on these free trade agreements.  As you know, the agricultural issues were the most difficult to negotiate during this many countries procedures.  My question is how do you assess the impact of the free trade in the agriculture in Latin America? 

MS. TUCK:  John, do you want to say something?

MR. NASH:  Well, we actually have been doing some studies on this--

MR. JACKSON:  Please identify yourself. 

MR. NASH:  I'm John Nash.  I'm the Lead Economist in the Sustainable Development Department.
We have been carrying out, as you know, some studies of the impacts of some of these agreements, including in fact on corn, beans, and sugar in Mexico of NAFTA and the impact of CAFTA. Francisco Piccone [phonetic], sitting right here, has been directing that work.  I think that the conclusions are certainly that on average the impact is expected to be modestly positive on the agricultural sector, open some opportunities and have relatively modest negative impacts on a few producers. 

But the fact that, as you say, agriculture has been very difficult and these agreements have all included very specific provisions for crops that were expected to be particularly sensitive has insulated the agricultural sector from a whole lot of impact. 
Anything else, Francisco? 

MR. JACKSON:  We have time just for a couple more questions.  El Clarin Newspaper QUESTION:  I'm Ana Baron from Clarin, Argentina. 

You said that growth in agriculture didn't translate to much on diminishing of poverty.  But in Argentina, there was a diminishing of poverty lately.  So I was wondering if this was due to other factors or which was the role of agriculture on that? 

MR. de JANVRY:  I don't know the figures for Argentina in terms of decomposing where poverty impacts came from, but there were some interesting studies done by Pepe de Varos [phonetic] for Brazil.  And then interesting studies for Mexico, as well. 

What one tends to see it, for instance, in Brazil there has been a reduction in rural poverty and extraordinarily there has been a reduction in inequality which, in a sense, for Brazil is a huge achievement because a country that has tremendous inequality, inequality has been rising.  And in the last 10 years it has declined.

This, to a large extent, has come from transfers.  It has not come from transfers, from Bolsa Familia, from transfers.  In has come from not so much minimum wage.  It has come much more from the role of non-farm economy and not so much from agriculture. 

So what we see is that there has been an agricultural boom but it's not the boom that has directly contributed to poverty reduction.  It has come much more in a roundabout fashion, if you want, via programs that the government has been putting into place.  They have been quite effective, especially the pension program has been quite important in terms of--a non-contributory pension program, which has been quite important to reduce rural poverty. 

And then the role of non-farm economy, and that's why I think that President Lula is putting a lot of emphasis in the FAO, Graciella da Silva [phonetic] coming from in a sense the Lula tradition if you want, putting a lot of emphasis of boosting the role of non-farm economy where you can find, especially in the services sector, employment for relatively low skilled individuals who don't find so much opportunities in the agricultural sector. 

Now what we are saying is there's a better way of doing things.  The small holders can be given a place and that the agricultural markets can also be more amenable to providing livelihoods than it has been in the past. 

So there is, in a sense, two models which are competing.  One is a model of transfers which can be done but it's sustainable in as much as the political will is there to sustain the transfers. 
The other is to sort of give more vitality to the small holder sector and a better performing rural labor market as sources of livelihoods which are sort of incomes that people generate for themselves based on the effort that they make. 

QUESTION:  Thank you.  I'm Jaime Rios  from Noticero Economico of Colombia. 
I would like to know how do you see the future of biofuels in Colombia?  And how do you see it has a way of reducing poverty in the countryside?
Thank you.

MS. TUCK:  Biofuels is a very complicated question because it's become very in vogue these days.  And Brazil has done some really incredible, made some really incredible progress doing it on a financially sustainable basis.  So we've been doing a lot of analysis. 
What's clear is that it's not something that can be rolled out to every country successfully.  It depends on everything about where you are exactly.  So your question is right about Colombia and I haven't looked specifically at Colombia. 

MS. SENNHAUSER:  We're doing a study.  We're studying it.

MS. TUCK:  We're starting the analysis because it really depends on the actual economics on the particular commodity in question that you're going to use.  But what is clear to us is that in most countries it hasn't been shown to be financially viable.  Not that it can't be, but that it isn't at the moment with the technologies that we have.  And we have to be careful about expanding the Brazil success, if you will, everywhere.  But in a number of places it can be if the conditions are right.  So you have to look at individual and specific circumstances.  We are going to do the study in Colombia. 

MS. SENNHAUSER:  You can ask us in some months and we will have some more details for you specifically in Colombia.  We're starting to look into that. 

MR. JACKSON:  I know there are a lot of questions but this is the last question.  Please identify yourself. 

QUESTION:  Alicia Salgado from El Financiero Newspaper, Mexico. 
I just want to ask you about this post-structural adjustment cost of changing the bureaucratic bodies of ministries of agriculture, especially improving governance of the agricultural sector.  Could you please expound about that?

MS. SENNHAUSER:  I think what she's asking is about your comment on governance and about how ministers of agriculture have to look more into having a new role. 

QUESTION:  Having new urgencies for fixing prices or something like that. 

MS. SENNHAUSER:  While we were trying to say there is that with the new role that agriculture has where we need to involve more other partners and bring the private sector in to us, the public sector has to understand and the ministers have to work in seeing that new vision that they have for them.  And trying to see how they can be more in a facilitating role and getting the private sector as a partner to work with them together to bring the farmers, the poor farmers into having more benefits from agriculture.  And that's like a vision statement. 

Some countries in Latin America are moving very much into that direction.  Some others are doing it slower.  But that's where agriculture should be and that's part of what we were trying to say on the new governance for agriculture in the ministries.  I think that's what you were saying, isn't it?  Alain, do you want to say something more than? 

MR. de JANVRY:  There are interesting experiments in different countries.  What we see, for example, in Chile is outsourcing a lot of the functions that ministries were doing before.  So you bring the private sector in on the supply side.  You have to have the absorptive capacity to receive what is being outsourced and make use of it for regulation and for policy.  In Brazil, we see sort of two ministries side-by-side with some competition, one devoted more to agriculture and the other more to rural development.  In Mexico we see the rural development issue within the Ministry of Agriculture, within a sense the possibility of a better coordination. 

But what we see, in a sense, is a whole set of experiments that are going on as to how to redefine the way ministries work.  I think that's very interesting and we need really to understand better what are the different formulas and which formula would apply better to which context. 

MR. JACKSON:  Okay.  Laura Tuck will give just a few final words about what we're doing in the region on agriculture and rural development. 

MS. TUCK:  I just wanted to conclude by saying that the World Bank is very committed to the lessons of--implementing the lessons of the WDR and supporting agriculture and rural development in the region.  We currently have a portfolio some $1.8 billion in 42 projects and we are developing new projects in most countries.

That's only referring to things that are specific agriculture and rural.  The work we're doing on biofuels and environment, payment for services, some of the things we talked about that come under more of the natural resource management heading is in addition to that. 

And so we're very actively engaged in trying to increase the visibility of some of these issues that have been raised through the WDR, things like working with the ministries of agriculture to redefine the roles, the producer organizations, increasing the productivity in the land projects and so forth across the region. 

So thank you very much for your attention.  We appreciate that you all came. 
MR. JACKSON:  Thank you all for coming today.
[Whereupon, at 12:22 p.m., the briefing was concluded.]