Eighty eight percent of Latin America’s and Europe and Central Asia’s rural populations are in urbanized countries. In these countries, domestic food markets are being transformed, in particular through the supermarket revolution, and several agricultural subsectors have sustained spectacular growth.
But successful performance in the agricultural sector has not resulted in rural poverty reduction in many countries. The overall goal in using agriculture for development is to promote the inclusion of smallholders in the new food markets and to provide good jobs in agriculture and the rural nonfarm economy.
After the structural adjustment of the 1980s, Latin American countries have been striving to accelerate growth in competitive sub-sectors of agriculture, supported by public investment to induce private investment in agriculture (but with significant misinvestment in subsidies). This has been complemented by social assistance delivered through (often conditional) cash transfers targeted to the chronic poor and to regional pockets of poverty. In Brazil, in the context of a booming agriculture, social security transfers and the rural nonfarm economy were the fastest-growing sources of income for rural households over 1991–2000 1. With structural adjustment effectively over at the macro level, this approach, based on growth and safety nets, has been costly, creating dissatisfaction in Brazil and across the continent.
Many countries have turned to an alternative approach, seeking to reduce rural poverty by increasing earned incomes in agriculture and the rural nonfarm economy as opposed to social assistance, thus attempting to reconcile growth with poverty reduction, while relying less on social protection. In Ecuador, the Poverty Reduction and Local Rural Development Program (PROLOCAL) is based on increasing the access of the rural poor to assets, improving the context for asset use with an emphasis on territorial development, and providing social protection. In Peru, the Sierra Exportadora program also builds on increasing access to assets, supporting rural institutions for competitiveness, and providing social protection 2.
In this new model, the policy objectives are as follows 3:
Include smallholders in the new food markets, which requires, among other instruments, greater access to land and skills for the new agriculture.
Improve productivity in subsistence agriculture and provide social assistance, together with payments for environmental services to create incentives for conservation.
Follow a territorial approach to promote the rural nonfarm economy and enhance skills to give access to the jobs and investment opportunities offered by growth of the rural nonfarm economy.
Increasing access to assets for the new agriculture. Increasing the participation of smallholder farmers in dynamic domestic food markets requires paying special attention to deep-rooted inequalities in access to assets and public services, inequalities that challenge their competitiveness 4. Smallholders still at the margins of markets can take advantage of the new opportunities through greater access to land, research, training, technical assistance, financial services, and farmer organizations. Producer organizations and contract farming are essential for these smallholders to take part in value chains and cater to supermarket demands. Also important are public private partnerships, with an agribusiness sector active in organizing smallholders as competitive suppliers in these markets.
Improving livelihoods in subsistence agriculture and providing social assistance. Subsistence farming can be a holding pattern in the long transition out of low-productivity family farming. Some subsistence farmers can become viable smallholders, diversifying their income to improve their well-being, but the agricultural part of their income (self-employment) in many circumstances has little potential for growth. There are, however, clear social benefits in investing in the agricultural part of their incomes for two reasons: it is critical for their food security and basic nutrition, and it sustains their income in the absence of better employment options. The needed investments include more resilient farming systems and better coverage of nutritional needs based on home production. Improving livelihoods also requires social assistance, especially pensions for those too old to be retrained. Rural noncontributory pension programs have expanded rapidly, helping the younger generation gain earlier access to land and combating the selective migration of the more entrepreneurial out of agriculture.
Supplying environmental services. Countries in Latin America and the Caribbean and in Europe and Central Asia have started to set up regulatory mechanisms to protect their environment and introduce payments for environmental services. Regulation needs to be anchored in greatly improved governance, and payment schemes must be made financially sustainable, accountable to those who buy the services, and expanded over the continent.
Territorial development to create rural jobs. The rural nonfarm economy is a source of self-employment and wage employment, but it is highly dual, with high- and low-skill jobs and high- and lowvalue- adding enterprises. Promoting skills for high-productivity jobs can provide a pathway out of poverty. The Latin American countries are pursuing a distinctly territorial approach, promoting clusters of complementary firms in selected geographic locations. Local agricultural production systems can capitalize on the comparative advantages of a territory’s agroecology, proximity to urban centers, or institutional and cultural or historical endowments. Territory-driven development projects go beyond community-driven development to create new economic opportunities based on scale, local synergies, and market access. This territorial approach to rural development is being pursued in Eastern Europe as well, building on rural links to towns and small cities.
Poverty reduction based on earned incomes requires a reassessment of governance mechanisms, institutions, and agents, many of them in disarray. Ministries of agriculture have to be redesigned to correspond to the new functions of the state and the transformation of agriculture in value chains. And civil society has to be engaged as an active participant in governance despite long-standing patterns of social exclusion rooted in deep inequalities 5. This is a huge agenda (chapter 11). Improving governance for agriculture and rural areas must be a priority, requiring experimentation and learning.
This policy brief has been extracted from the World Bank's 2008 World Development Report, Agriculture for Development. Further information and detailed sources are available in the Report. The Report uses a simple typology of countries based on the contribution of agriculture to overall growth, 1990-2005 and the share of rural poor in the total number of poor (2002 US$2-a-day level). In agriculture-based countries (mostly Sub-Saharan Africa),agriculturecontributesasignificant(>20%) share of overall growth. In transforming countries (mostly in Asia), nonagricultural sectors dominate growth but a great majority of the poor are in rural areas. In urbanized countries (mostly in Latin America and Europe and Central Asia), the largest number of poor people are in urban areas, although poverty rates are often highest in rural areas.
1 Helfand and Levine 2005 2 Pichon 2007 3 Inter-American Development Bank 2005 4 World Bank 2005o 5 Martínez Nogueira 2007