Capturing ‘the State of Smallholders in Agriculture’ in Latin America

Examining Latin America at the New Directions for Smallholder Agriculture Conference
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
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.

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 Rome on 24 and 25 January 2010.