Global Forum for Food and Agriculture Berlin 2012 Octavio Sotomayor - UDA/DDPE CEPAL - Santiago de Chile, 17 de enero de 2012

PUBLIC POLICIES FOR AGRICULTURE AND RURAL

DEVELOPMENT IN LATIN AMERICA

TABLE OF CONTENTS

• CONTEXT

• NEW APPROACHES TO PUBLIC POLICIES

• SMALL AND MEDIUM-SIZED FARM MARKET INTEGRATION

– Institutional models

– Experiences in Latin America

• AGRICULTURAL POLICIES

• CONCLUSIONS

CONTEXT

Agriculture in LAC: main assets

4

Latin America and the Caribbean are characterized by their diverse productive resources:

• 30% of the total productive soil in the world (576 million hectares)

• 30% of the world’s renewable water resources

• 25% of the world’s forests (46% of the tropical forests)

• 30% of the world’s biodiversity Source: PNUMA, 2002

Agriculture in LAC: not all the countries are the same

Fuente: CEPAL, FAO y PNUMA

MERCADOS (Sólo extra ALC)

PAÍSES QUE TIENEN PREFERENCIAS ARANCELARIAS Y OTRAS VENTAJAS

(TLC, AAP, otros)*

China Chile (TLC-2006)

Población (mill.; 2004): 1324 Perú (TLC & AIE- 2010)

PIB per cápita (2008 dólares): 3267 Costa Rica (TLC-2010)

Estados Unidos México (TLC-1994)

Población (mill.; 2004): 304 Chile (TLC-2004)

PIB per cápita (2008 dólares): 46350 CAFTA-RD (TLC-2006)

Perú (TLC-2009)

Unión Europea (27) México (TLC -2000)

Población (mill.; 2008): 497.6 Chile (TLC & AIE 2003-2005)

PIB per cápita (2007 dólares): 24800 CARIFORUM - ACP (TLC & AIE 2008)

Centro América (Acuerdo de Asociación - 2010)

Japón México (TLC-2004)

Población (mill.; 2004): 127.7 Chile (TLC & AIE -2007)

PIB per cápita (2008 dólares): 38455

Canadá México (TLC-1994)

Población (mill.; 2004): 33.3 Chile (TLC-1997)

PIB per cápita (2008 dólares): 45070 Costa Rica (TLC-2002)

Perú (TLC- AIE 2009)

India Chile (AAP-2007)

Población (mill.; 2004): 1139.9 Mercosur (ACP – 2009)

PIB per cápita (2008 dólares): 1017

Israel México (TLC - 2000)

Población (mill.; 2008): 7.3 Mercosur (TLC-2007)

PIB per cápita (2008 dólares): 27652

Australia Chile (TLC & AIE 2009)

Población (mill.; 2008): 21.4

PIB per cápita (2008 dólares): 47370

Fuente: Sistema de Información sobre los Acuerdos Comerciales Regionales (SI-ACR), OMC; Sistema de Información sobre Comercio Exterior, OEA-SEDI-DDECT. *TLC (Tratado de Libre Comercio), AIE (Acuerdo de Integración Económica), AAP (Acuerdo de Alcance Parcial).

The most important extra-regional trade agreements signed by the LAC countries

0,0

50,0

100,0

150,0

200,0

250,0

300,0

I Sem 2005

II Sem 2005

I Sem 2006

II Sem 2006

I Sem 2007

II Sem 2007

I Sem 2008

II Sem 2008

I Sem 2009

II Sem 2009

I Sem 2010

II Sem 2010

I Sem 2011

Productos tropicales

Café arábiga Bananos EUA

Azúcar, mercado mundial

-50,0

0,0

50,0

100,0

150,0

200,0

250,0

300,0

I Sem 2005

II Sem 2005

I Sem 2006

II Sem 2006

I Sem 2007

II Sem 2007

I Sem 2008

II Sem 2008

I Sem 2009

II Sem 2009

I Sem 2010

II Sem 2010

I Sem 2011

Complejo de la soya

Torta de soya Aceite de soya Soya

The prices of the main agricultural exports have been increasing

Source: UDA/CEPAL, from World Bank data

(Index 2005 = 100)

Outcomes

• Agricultural exports in 2009 reached US$ 136 billon, with a positive

trade balance of US$ 80 billon.

• In the 2010/2011 season the region contributed 45% of the world’s

soy exports, 37.8% of beef exports and 27.6% of corn exports.

• Comparative per capita consumption shows enormous export

potential to Asian markets as their demand grow:

• Coffee: 0 kg/per cápita in China vs 4.1 kg in the USA

• Sugar: 8.7 kg vs 67.6 kg

• Poultry meat: 11.8 kg vs 50.7 kg

• Dairy products: 28.7 vs 253 kg.

• Banana: 5.7 vs 10.8 kg

AGRICULTURAL PRODUCTION IN THE LAC COUNTRIES CAN MAKE A

MAJOR CONTRIBUTION TO REDUCING THE WORLD’S FOOD IMBALANCES

SIGNIFICANCE OF PEASANT AGRICULTURE

Some studies show the following results: (Barril and Almada, 2007)

• ARGENTINA (2002): 218.868 small farmers (66% of total farms)

• BRASIL (1995/1996): 4.139.369 small farmers (85.2% of total farms)

• CHILE (1997): 278.000 small farmers (85% of total farms)

• PARAGUAY (2002): 300.000 farms between 0.1 to 50 ha (94% of total farms)

• URUGUAY (2000): 39.120 small farmers (79% of total farms)

NEW APPROACHES IN PUBLIC POLICY

In the productive sphere

• Rural and agricultural development

– The synonymous association between rural and agricultural no longer exists

– The increasing importance of the non-agricultural rural economy (jobs and income)

– Increasing links between rural and urban areas

• Productive links

– Supply chain approach (actor integration)

– Value-added agriculture: beyond primary production

– Clusters to gain competitiveness

In the global sphere

• Importance of product differentiation

– Product origin

– Cultural aspects

– Labor and social conditions

– Environmental issues

• New trends in consumer demand

– New dietary practices (health, identity, others)

SMALL AND MEDIUM-SIZED FARM MARKET INTEGRATION

MARKETS

Farm Asociations (e.g. Cooperative)

Tech transfer Loans

Organization

P1 P2 P3 P4

Traditional Model (from production to market)

Traditional Model

• Farm organization to improve production levels and reach markets

• Approaches traditionally used in LAC

• Requires too much organization and management capacity

• The success stories are explained by good links to markets (e.g. dairy cooperatives in Costa Rica and Uruguay)

• The traditional model is useful in areas without agribusiness (factories) and infrastructure

Supplier Programs (PdP) (from the market to the production)

MARKETS

Agribusiness (technical transfers)

State

support

P1 P2 P3 P4

Domestic Export

Supplier Programs

• Shared profit

– Small farm

– Agribusiness (private enterprises)

• Pragmatic approach

– Raw material suppliers

• Self-sustainable mechanisms

• Frequent conflicts

– Pricing (raw materials)

– Quality parameters

Inclusive Business (or Shared Value Creation)

MARKETS

“Anchor” Enterprise (technical transfer, loans, organization, contracts)

Contracts

P1 P2 P3 P4

Domestic Export

Inclusive Business

• Recent experiences: Ecuador (PRONERI/MAG)

• The inclusive business approach requires a significant commitment from the Anchor Enterprise to the small farmers

• Entrepreneurial Social Responsibility is the basis of this approach

• Beyond philanthropy: the win-win business approach

• A new relationship: the partnership approach (vs. suppliers in the PdP)

• Services others than technical transfers: – contracts, loans, certifications, marketing, other joint ventures…

The Inclusive Business Model

Private benefits

So

cia

l b

en

efi

ts

Inclusive Business

Entrepreneurial

philanthrophy without

profit

Commercial ventures

with profit goals

Low

High

Not sustainable in the

long run

Not enough benefits to

the community

Source: SNV

Public Purchases

Fome Cero (Without Hunger) Program (Brasil,

2003)

• Family Agriculture Food Purchase Program (Programa de

Adquisición de Alimentos de la Agricultura Familiar )

• Administered by Compañía Nacional de Abastecimiento

(CONAB)

• Institutional markets

• At least 30% of the total food purchased for public school

lunches must come from small farmers (established by law)

Differentiation

• Quality Attributes

• Public Regulation

• Organisation

• Innovation, standardization

SMALL AND MEDIUM-SIZED FARM MARKET INTEGRATION : EXPERIENCES

Supplier Programs

• México (1997)

– Secretaría de Economía, PNUD, Cámara Nacional de la Industria de Transformación

– Economic support

– From 2003 to 2008: 1600 micro enterprises (suppliers)

• El Salvador (2010)

– Cámara de Comercio e Industria de El Salvador con apoyo de PNUD y del BID

– First step: 6 companies and 60 suppliers.

– Second step: 18 companies and 180 suppliers

– Private initiative with state support

Supplier Programs

• Colombia (2010)

– Productive Partnership Program (Alianzas Productivas)

– Operated by the Ministerio de Agricultura

– Co-financing for 300 partnership (23,000 small farms) from 2010 to 2015

• Chile (1998)

– Operated by Corporación de Fomento (CORFO)

– Public subsidies for 50% of technical assistance costs

– 2002-2007: 150 programs with 2,800 suppliers (95% from the agricultural sector)

– Productive Partnership (Alianzas Productivas) of INDAP: 24 Partnerships (1,800 suppliers). 2014 target: 10,000 suppliers

Inclusive Business

• Ecuador: Rural Inclusive Business Program

– Ministerio de Agricultura, Ganadería, Acuacultura y Pesca

– Supply chain approach

– Today: 10 large agribusinesses

– 2013 target: 36,000 suppliers, 120 agribusinesses

– Other experiences in Perú and Central America

Public Purchases

– From 2003 to 2008 the Brazilian government spent US$ 1,180 million to purchase roughly 2 million tons of food.

In 2008, 118,900 small farmers participated.

– The second generation of the Fome Cero Program, called “Brazil without Poverty” (Brasil sin Miseria) is attempting to erradicate extreme poverty in 4 years. This program maintains the family agriculture food purchase program and is trying to involve supermarkets and the private sector in general.

Product differentiation by origin

• Denomination of origin

– BOLIVIA: Singani (aguardiente de uva, 1992), Quinoa Real (2002)

– MÉXICO: Tequila (1994), Mezcal (1994), Café Chiapas (2001)

– PERÚ: Pisco, 1991

• Geografical Indications

– ECUADOR: Cacao fino de aroma Cacao Arriba

– HONDURAS: Café de Marcala, 2005

– COSTA RICA: Banana de Costa Rica, 2011

• Colective Brands

– MÉXICO: Tropicao (cacao, 2003), Prodigio de México (arroz, 2004), Caboxca (uva, 2004), Queso Cotija Región de Origen (queso, 2005),

– PERÚ: Chirimoya Cumbe (Santo Toribio de Cumbe, 106 comuneros empadronados) , APDL Cajamarca Perú (Asociación de productores de derivados lácteos)

In LAC there are 42 Denominations of

Origin, 16 Geografical

Indications and 30 Colective Brands

Product differentiation by productive process

• Organic agriculture

– Natural products without chemical inputs

– México (128,000 farmers), Perú (46,000 farmers)

• Biodynamic agriculture

– Farm as live organism, closed system

– Self-production of the inputs, few external materials

– Brasil (fruits and grains); México and Perú (coffee); Paraguay (sugar)

• Carbon Neutral Certification

– Café Dota: Costa Rica (Coopedota, 2001 – small coffee farm cooperative, roughly 800 associates)

Product differenciation by other attributes

• High Quality

– México: México Calidad Suprema (SAGARPA, Secretaria de Economía)

– Argentina: Alimentos Argentinos, una elección natural (MAGP)

• Fair Trade

– More equity in international trade

– Rights of producers and workers

AGRICULTURAL POLICIES

SECTORAL POLICY: A LOGIC

SEQUENCE?

Tiempo

Complejidad delDispositivo dePolíticas

SanidadInvestigación Agronómica/Zootécnica,Defensa Comercial

Crédito, Asistencia TécnicaRiego, Suelos, Capacitación

Acuerdos Comerciales (TLC)Sellos de Calidad / InocuidadBienestar Animal

Medio Ambiente

Seguros Climáticos

Estabilización de Precios

Cambio ClimáticoI&D

Excelencia

Alta

Baja

SECTORAL POLICY: MAIN

EXPERIENCES

• Chains and clusters management (Chile, México, Brasil, Uruguay)

• Innovation (Brasil, Argentina, Chile, México)

• Income stabilization (Brasil, México, Colombia, Costa Rica)

• Soils fertilization (Chile)

• Irrigation (Chile, México)

• Micro basin management (Colombia, Brasil)

• Technical transfer (Argentina, Perú, México)

• Rural poverty programs (Brasil, Perú, Bolivia, Central America)

• Inclusive Business (Ecuador, Perú)

• Animal and Vegetable Health (Chile, Uruguay)

• Quality (México, Costa Rica, Perú, Bolivia, Brasil)

• Climate insurance (México, Brasil, Argentina)

• Environment management (Costa Rica)

• Climate change (all countries)

http://www.cepal.org/publicaciones/xml/8/45598/2011-593-LBC-113_WEB.pdf

SOME CONCLUSIONS AND LESSONS LEARNED

Conclusions and lessons learned

• Stronger public policy mechanisms

• The role of the public sector is very important

– Motivator, facilitator, driving force

– Development and technical services provider (training, research, technical transfer, innovation)

– Financing

• All models are valid

– Traditional approach (cooperatives), Supplier Program, Inclusive Business, Public Purchases, Differentiation

– Each experience is different

Conclusions and lessons learned

• The private sector is more and more involved: its main

asset is its links to the markets

• Quality, identity and differentiation is an emerging trend

• Activating the innovation process is a critical factor

• Environmental issues play a critical role in public policy-

making

References

• CEPAL, BID, OEA (2011). Experiencias exitosas en innovación, inserción internacional e inclusión social: una mirada desde las pymes. LC/L.3371. Santiago de Chile, septiembre.

• Ferraro, Carlo. (Compilador) (2010). Clusters y políticas de articulación productiva en América Latina. LC/W.337, CEPAL-FUNDES, Santiago de Chile.

• Sotomayor, Octavio; Rodríguez, Adrián y Rodrigues, Mônica (2011). Competitividad, sostenibilidad e inclusión social en la agricultura: nuevas direcciones en el diseño de políticas en América Latina y el Caribe. Libros de la CEPAL No. 113. Santiago de Chile, diciembre.

• Van Haeringen, R. y W. R. de Jongh (2010). Los negocios inclusivos en el sector agropecuario: práctica y desafíos. Revista Estudios Agrarios, N° 44, Procaduría Agraria, México, pp. 63-74.

• Veiga Aranha, A. (2010). Fome Zero. Um projeto transformado em estratégia de governo. En: Da Silva, J. G., M. E. del Grossi y C. Galvão de França (Org.) (2010), Fome Zero. A experiência brasileira. MDA, Brasilia, pp. 85-109.

¡Muchas gracias!