PUBLIC POLICIES FOR AGRICULTURE AND RURAL DEVELOPMENT IN LATIN AMERICA

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

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 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

4 Source: PNUMA, 2002

Agriculture in LAC: not all the countries are the same

Fuente: CEPAL, FAO y PNUMA

The most important extra-regional trade agreements signed by the LAC countries MERCADOS (Sólo extra ALC)

China Población (mill.; 2004): 1324 PIB per cápita (2008 dólares): 3267 Estados Unidos Población (mill.; 2004): 304 PIB per cápita (2008 dólares): 46350 Unión Europea (27) Población (mill.; 2008): 497.6 PIB per cápita (2007 dólares): 24800 Japón Población (mill.; 2004): 127.7 PIB per cápita (2008 dólares): 38455 Canadá Población (mill.; 2004): 33.3 PIB per cápita (2008 dólares): 45070

PAÍSES QUE TIENEN PREFERENCIAS ARANCELARIAS Y OTRAS VENTAJAS (TLC, AAP, otros)* Chile (TLC-2006) Perú (TLC & AIE- 2010) Costa Rica (TLC-2010) México (TLC-1994) Chile (TLC-2004) CAFTA-RD (TLC-2006) Perú (TLC-2009) México (TLC -2000) Chile (TLC & AIE 2003-2005) CARIFORUM - ACP (TLC & AIE 2008) Centro América (Acuerdo de Asociación - 2010) México (TLC-2004) Chile (TLC & AIE -2007)

México (TLC-1994) Chile (TLC-1997) Costa Rica (TLC-2002) Perú (TLC- AIE 2009) Chile (AAP-2007) Mercosur (ACP – 2009)

India Población (mill.; 2004): 1139.9 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, OEASEDI-DDECT. *TLC (Tratado de Libre Comercio), AIE (Acuerdo de Integración Económica), AAP (Acuerdo de Alcance Parcial).

The prices of the main agricultural exports have been increasing (Index 2005 = 100)

300,0

Productos tropicales

300,0

250,0

250,0

200,0

200,0

150,0

150,0

100,0

100,0

50,0

50,0

Complejo de la soya

0,0

0,0 I II I II I II I II I II I II I Sem Sem Sem Sem Sem Sem Sem Sem Sem Sem Sem Sem Sem 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 Café arábiga

Bananos EUA

Azúcar, mercado mundial

Source: UDA/CEPAL, from World Bank data

-50,0

I Sem II I Sem II I Sem II I Sem II I Sem II I Sem II I Sem 2005 Sem 2006 Sem 2007 Sem 2008 Sem 2009 Sem 2010 Sem 2011 2005 2006 2007 2008 2009 2010

Torta de soya

Aceite de soya

Soya

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: Sugar: Poultry meat: Dairy products: Banana:

0 kg/per cápita in China vs 4.1 kg in the USA 8.7 kg vs 67.6 kg 11.8 kg vs 50.7 kg 28.7 vs 253 kg. 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

Traditional Model (from production to market) MARKETS

Farm Asociations

Tech transfer Loans Organization

(e.g. Cooperative)

P1

P2

P3

P4

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) Domestic Export

MARKETS

State support

Agribusiness (technical transfers)

P1

P2

P3

P4

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) Domestic Export

MARKETS

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

Contracts

P1

P2

P3

P4

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 High

Inclusive Business

Social benefits

Not sustainable in the long run

Not enough benefits to the community

Low Entrepreneurial philanthrophy without profit Source: SNV

Private benefits

Commercial ventures with profit goals

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

In LAC there are 42 Denominations of Origin, 16 Geografical Indications and 30 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)

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? Complejidad del Dispositivo de Políticas

Cambio Climático I&D

Estabilización de Precios

Excelencia Seguros Climáticos

Alta

Acuerdos Comerciales (TLC) Sellos de Calidad / Inocuidad Bienestar Animal Medio Ambiente Crédito, Asistencia Técnica Riego, Suelos, Capacitación

Baja Sanidad Investigación Agronómica/Zootécnica, Defensa Comercial

Tiempo

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 policymaking

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!