TRENDS AND CHALLENGESIN LATIN AMERICAN AND CARIBBEAN

AGRICULTURE, FORESTRY AND FISHERIES

2004

The designation employed and the presentation of material do not imply theexpression of any opinion whatsoever on the part of the Food and AgricultureOrganization of the United Nations concerning the legal status of any country, cityor area, or of its authorities, or concerning the delimitation of its frontiers orboundaries. In some tables, the designations "developed countries" and "developingcountries" are intented for statiscal convenience and do not necessarily reflecta judgment of the stage reached by a particular country or area in the developmentprocess.

FOOD AND AGRICULTURE ORGANIZATION

OF THE UNITED NATIONS

TRENDS AND CHALLENGESIN LATIN AMERICAN AND CARIBBEAN

AGRICULTURE, FORESTRY AND FISHERIES

2004

FAO Regional Office for Latin America and the Caribbean

PREFACE

Every two years, the FAO Regional Office for Latin America and the Caribbean (FAO/RLC) prepares

a report entitled Trends and Challenges in Latin American and Caribbean Agriculture, Forestry and

Fisheries, to support the deliberations of the FAO Regional Conference. This exercise has been done

for the last four regional conferences held in 1998, 2000, 2002 and 2004.

In preparing this edition of the report, interaction with member countries has resulted in the

fact that the current document addresses two main orientations: firstly, to give a comprehensive

account of the variables that affect agricultural development and food security, considering

technical, economic and social aspects, and including an analysis of the international setting;

and secondly, to evaluate each country in relation to others and within the regional setting,

while also examining regional trends.

These two orientations—the broader range of topics to be analysed and the more detailed

treatment needed to take account of data at the country and subregional levels—entailed work

on a larger scale and required organization and management of information from a wide variety

of sources in addition to FAOSTAT, such as UNDP, WTO, IMF, UNCTAD, ECLAC and OECD.

This volume analyses trends and emerging issues in four main areas: (i) international context;

(ii) macroeconomic framework; (iii) development of the agricultural sector; and (iv) international

trade of agricultural products. A fifth chapter discusses policy orientations, and this is followed

by a statistical appendix.

Chapter I outlines the key transformations that have taken place in the international setting,

explaining changes in medium- and long-term trends and expectations for the next few years,

and comparing development patterns in Latin America and the Caribbean with those of other

parts of the world. It also identifies obstacles for the development and international participation

of the region—in particular, the protection and support given to agriculture in industrialized

countries.

Chapter II analyses the evolution of the macroeconomic framework and social conditions in

Latin American and Caribbean countries, characterizing the economic growth of the last few

decades and the forces driving it. It explains the behaviour of the main variables influencing

the external balance, and identifies structural problems affecting the region’s economies. Lastly,

it discusses trends in a number of social indicators, particularly those relating to poverty and

food security.

Chapter III describes agricultural trends in the region, in terms of regional averages and

differences between countries. It explains the trend of sectoral output, its participation in the

global economy, and the evolution of sectoral compared to overall productivity. The chapter

then goes on to examine the behaviour of agricultural output, making individual analyses of

crop-growing, livestock production, fishing, and forestry production. It then examines production

trends and attempts to explain the changes identified. It also highlights the differences in

trends between the main product groups and changes in their geographic distribution within

the region.6

Chapter IV analyses international trade of agricultural products, discussing trends in the balance

in Latin American and Caribbean countries, and the share of each productive subsector in exports,

imports, and the trade balance. It also estimates their share in the overall merchandise trade

balance, and analyses changes in the geographic distribution of exports and imports. The chapter

makes separate analyses of crops and livestock, fishery, and forestry products.

Chapter V depicts on the trends and challenges analysed in the four preceding chapters, in order

to draw lessons and propose policy orientations. It identifies the components of the economic

and social development strategy, and the role of agricultural and rural development in the

region’s development challenges; and it explains the characteristics of the new approach to

agricultural and rural development strategy. The chapter highlights the crucial role played in

this strategy by institution building—in the broad sense of the term—and the development of

social capital. It also gives several examples of new policy instruments in different areas, such

as: the construction of a new international framework; the development of markets, and

redefinition of property rights; the broad diversity of agricultural development programmes

and support for trade through pro-market instruments; the characteristics of new crop-livestock

technology systems, and possibilities for direct support. Lastly, it analyses institutional

requirements for implementing the new policy instruments.

In preparing this report, a database had to be developed in RLC which provides detailed,

comprehensive and consistent information about the 33 countries that comprise the Latin

American and Caribbean region. This consolidated database selects variables and cross-references

them for analytical purposes; it also specifies consistent conditions for their joint use, and

prepares time series or cross-section analyses. A CD containing a statistical appendix developed

from this database is included in this volume.

This work is a collective effort, coordinated in the Regional Office by the Policy Assistance

Branch under the leadership of Luis Gómez Oliver, with the collaboration of Carolina Lennon,

María José Montero and Patricia Morales. The various drafts and updates have been enhanced

by contributions from several specialists at the Regional Office as well as from FAO headquarters

in Rome. It has also been discussed, by electronic conference, with other experts, academics,

government representatives and social organizations of the countries of the region.

We hope this volume will contribute to collective reflection on the policy orientations needed

to foster agricultural and rural development in Latin American and Caribbean countries and

promote food security among their populations. In the ongoing process of enhancing policy

analysis and debate, your comments will be greatly appreciated.

7

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Gustavo Gordillo de Anda Mafa ChipetaDeputy Director-General of FAO, and DirectorRegional Representative for Latin Policy Assistance DivisionAmerica and the Caribbean

CONTENTS

Pages

Initials 10

Executive Summary 13

I. International setting 31

A. The new conditions in the world economy 32

B. The current economic situation and prospects for the next few years 35

C. Participation in production and trade 39

D. The development gap 42

E. Obstacles to development and trade participation 45

F. Protection and support for agriculture in developed countries 47

G. The costs of underdevelopment 52

II. Macroeconomic framework 57

A. GDP trends 58

B. Incidence of capital flows 62

C. External debt 70

D. Balance of payments 78

E. Inflation 82

F. Income distribution 83

G. Poverty 93

H. Food security 102

III. Agricultural sector development 113

A. Trend of sectoral GDP 114

B. Crop and livestock production 133

C. Crop production 138

D. Livestock production 165

E. Fishery production 189

F. Forestry production 212

IV. International trade in agricultural products 233

A. International trade in agriculture 234

B. Crop-producing subsector 245

C. Livestock sector 270

D. International trade of fishery products 289

E. International trade of forestry products 296

V. Conclusions and policy orientations 313

Bibliography 337

CD Statistical Annex CD

10

INITIALS

AIDS Acquired immunodeficiency syndrome

ANT Antigua and Barbuda

ARG Argentina

BAR Barbados

BHA Bahamas

BOL Bolivia

BRA Brazil

BZE Belize

CARICOM Caribbean Community and Common Market

CHI Chile

COL Colombia

COS Costa Rica

CUB Cuba

DMI Dominican Republic

DOM Dominica

EAP Economically Active Population

EAP (AGR) Economically Active Agricultural Population

ECLAC Economic Commission for Latin America and the Caribbean

ECU Ecuador

ELS El Salvador

EU European Union

FAO Food and Agriculture Organization of the United Nations

FAO/RLC FAO Regional Office for Latin America and the Caribbean

FAOSTAT FAO Statistical Databases

FDI Foreign Direct Investment

FISHSTAT FAO Fishing Statistical Database

GDP Gross Domestic Product

GDP (AGR) Agricultural Gross Domestic Product

GDPN Nominal Gross Domestic Product

GRN Grenada

GSSE General Services Estimate

GUA Guatemala

GUY Guyana

HAI Haiti

HIV Human immunodeficiency virus

OCDE Organización para la Cooperación y el Desarrollo Económico

OMC Organización Mundial del Comercio

ONG Organismo No Gubernamental

ONU Organización de las Naciones Unidas

PAN Panamá

PAR Paraguay

PEA (AGR) Población Económicamente Activa en la Agricultura

PEA Población Económicamente Activa

PER Perú

PIB Producto Interno Bruto

PIB (AGR) Producto Interno Bruto Agrícola

PIBN Producto Interno Bruto Nominal

PNUD Programa de Naciones Unidas para el Desarrollo

PPP Paridad de Poder de Compra

PROCAMPO Programa de Apoyos Directos al Campo

PSE Ayuda Estimada al Productor

RLCP Subdirección de Asistencia para las Políticas de FAO

SARS Neumonía Asiática

SIDA Síndrome de Inmuno Deficiencia Adquirida

SNTA Sistemas Nacionales de Tecnología Agropecuaria

SOFI El estado de la inseguridad alimentaria en el mundo

STK San Kitts y Nevis

STL Santa Lucía

STV San Vicente y las Granadinas

TCA División de Asistencia en Políticas

TIC Tecnologías de informática y comunicaciones

TNR Transferencia Neta de Recursos

TRI Trinidad y Tabago

TSE Ayuda Agrícola Total

UE Unión Europea

UNCTAD Conferencia de las Naciones Unidas sobre Comercio y Desarrollo

URU Uruguay

VEN Venezuela

WEO World Economic Outlook

11

EXECUTIVE SUMMARY

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The countries of Latin America and the Caribbean face major challenges as they strive for

food security and agricultural and rural development. In recent years, those challenges have

extended far beyond issues such as the relative scarcity of natural resources or vagaries of

climate, the difficulties facing small-scale producers, or the technical problems of primary

agricultural production.

Food insecurity in the region is not just a matter of production levels; it is also caused by

obstacles that prevent a large part of the population from gaining access to the food that is

available. These problems are originated mainly by poverty and exclusion. Both conditions affect

rural areas more than proportionally.

The basic components of any analysis of food security in the region therefore include the pace

and characteristics of economic growth, income distribution (both family and regional), the

fight against poverty, and a deliberate strategy of agricultural and rural development.

The increasing interdependence of national economic processes is reflected in business cycles

of global compass, involving major fluctuations in international capital flows and changing

conditions on international markets. Such disturbances increasingly affect the profitability of

productive activities, economic growth, and the financing conditions faced by developing

countries. Their impact on the potential for progress in Latin America and the Caribbean is

particularly significant.

Progress in agriculture, rural development, possibilities for poverty reduction and greater food

security in the region also depend on significant inter-relationships in the national development

framework .

Agricultural and rural development responds not only to variables within agriculture;

macroeconomic policy, the availability of infrastructure, access to services, the quality of

institutions and administrative efficiency, all have a decisive influence on possibilities for

progress in the rural domain.

Development of the sector depends not only on raising productivity in primary production; trading

conditions, production and consumption are also decisive factors in the profitability of agricultural

activity. The competitiveness that matters encompasses the whole production chain.

Rural development is not confined to agricultural production. In Latin America and the Caribbean

non-farm economic activities in the rural sector account for a large and growing share of

employment and generate nearly half of all income earned by the rural population. Farming and

non-farming rural activities are not mutually exclusive but positively related, since progress in

one favours development in the other.

Rural development requires a territorialy-based approach that encompasses all productive

possibilities in the various types of activities, and takes account of the synergies existing

between them, including urban-rural relations.

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Changes in the economic system

International trade currently accounts for 25% of world production; and the proportion is set

to increase further in the years to come.

Economic processes increasingly transcend national borders. World trade today no longer implies

buyers and sellers that are wholly separate; there is close transnational coordination of productive,

commercial and consumption processes, and also of their financing. In practice, competition

on international markets nowadays takes place between economic chains and systems, rather

than between factories or firms.

Competitiveness increasingly depends on partnerships based on the development and exploitation

of technological know-how. Intellectual capital is increasingly important and intangible; but

while it is also becoming more transferable, gaining access to it depends on the availability of

knowledge and human and social capital. This generates a cumulative dynamic in which

developing countries face major disadvantages.

The development gap

An increasingly homogeneous economic system does not mean lesser difference capacities and

living standards; the development gap is not narrowing but continues to widen. Per capita

income in developing countries is not converging, even slowly, on developed country levels; on

the contrary, the differences are becoming larger. In 1980, per capita income in Latin America

and the Caribbean was just over half of the developed countries average; today it is barely one

third. If current trends persist, this growing polarization will become even more accentuated

in the future.

Developing countries face enormous disadvantages in participating in the current global

economic dynamic. As well as lower productive and financing capacities, the region suffers from

major shortcomings in infrastructure, transport, communications, health, services and

institutional development.

Specific features of Latin America and the Caribbean

The early over-borrowing by Latin American countries has caused external debt conditions much

more onerous than in other regions. In the last five years, Latin America and the Caribbean, as

a whole, has spent 41% of its total export earnings on servicing external debt; in Argentina and

Brazil the figure amounted to over 70%.

Despite the economic liberalization and trade openness of the last few years, the economies of

Latin America and the Caribbean have the lowest coefficients of outward orientation: exports

represent just 21% of GDP, compared to 30% or 40% in other regions. The region also has the

largest inflow of foreign direct investment (FDI) in relation to GDP. These two features make

Latin America and the Caribbean the most vulnerable region in the world to changes in external

financing flows.

It is also the only developing region with a substantial surplus in agricultural trade. The fact

that agriculture, including agribusiness, is a strategic component of the region’s economic

development makes it more sensitive to changes in international agricultural markets, and more

affected by distortions in those markets.

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Subsidies and other forms of agricultural support provided in OECD countries are the main

cause of distortions on international markets for agricultural products. The global value of such

support exceeds US$ 320 billion. On average, farmers in OECD countries obtain 31% of their

total income from support (the figure is over 60% in Korea, Iceland, Japan, Norway and

Switzerland); and the domestic prices of agricultural products are 31% higher than prices on

the border (over 75% higher in the case of rice, sugar and milk).

Economic growth

The regional economy grew by 5.5% in 2004, the highest rate in 25 years, and international

conditions played a decisive role in this rapid progress. The world economy also expanded faster

than at any time in recent decades. International demand and commodity prices grew strongly,

driven by imports into the United States and China, thereby benefiting the region’s exporting

countries. On the other hand, several countries that have deficits in these goods, including a

number from Central America, endured severe difficulties this year.

The presence of a number of positive features in the region’s economies suggests the current

expansion could prove more durable than in previous growth cycles—in particular the healthier

macroeconomic framework prevailing in most countries, and the unprecedented current-account

surplus recorded for the second year running. From a medium and long-term standpoint, however,

the growth process in Latin America and the Caribbean over the last 25 years has been

characterized by weakness, instability, vulnerability, and a high degree of concentration.

Recurrent economic crises in Latin America and the Caribbean have generally been associated

with international upheavals: external debt in 1983, adjustment and hyperinflation in the late

1980s, the “tequila” crisis in 1994, the Asian crisis in 1997, and the stockmarket crash at the

turn of the millennium.

International financial conditions are beyond the control of the region’s countries, and the

most likely scenario for the future is that new international economic crises will continue to

occur. But the level of a country’s vulnerability and the intensity of the negative effects are

also influenced by domestic conditions and policies. In the next few years the countries of

the region will need to establish policies to improve a number of fundamentals: the current

account balance, the degree to which domestic saving finances development, the fiscal balance,

the quality of the financial system and bank supervision, the legal and juridical framework,

external debt conditions, macroeconomic stability, predictable exchange-rate policies and

clear regulations governing capital movements.

Equity

One of the most worrying features of the current economic paradigm, with negative effects on

both economic growth and equity, is the fact that a large part of the population is excluded from

development processes. While globalization eliminates borders and fosters multiple linkages

in economic growth, the region’s structural heterogeneity breaks these processes up, blocking

and distorting the use of resources and preventing numerous agents from participating in

economic circuits. Ultimately, this excludes a large part of the population from current streams

of progress.

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Latin America is the most unequal region in the world; and in recent decades, far from improving,

the region’s income distribution concentration has actually worsened. The prevailing growth

model is not leading Latin American countries towards the more equitably shaped income

distributions seen in developed countries; on the contrary, high levels of concentration in the

distribution of family income are being perpetuated and are spreading in the vast majority of

the region’s countries.

Economic heterogeneity and intergenerational transmission of poverty—since children in poor

families have less access to opportunities in terms of education, training and healthcare, and

they grow up in depressed economic environments, lacking in infrastructure and services—are

the main difficulties in overcoming the structural problems of underdevelopment and ensuring

widespread access for the population at large to minimum acceptable levels of well-being. It is

essential to achieve a development model that eliminates exclusion and generates employment

and income opportunities for the large mass of the population that lives in poverty, in order to

reverse the trend towards exclusion. This does not mean aiming at a homogeneous society,

which is totally unrealistic, but certainly much greater equality of opportunity than that which

prevails today.

Bottlenecks in human resources, and in physical and service infrastructure, cause heterogeneity

in production, economic polarization, environmental deterioration and social exclusion, with

the result that much of the population is excluded from the progress that economic growth

brings in its wake. Such constraints also hinder efficient exploitation of national resources,

prevent domestic saving from playing a larger role in the financing of development, and heighten

social tensions—thereby also generating a climate of political instability, social violence and

problems of governance, which undermine the potential for sustained economic growth.

From a medium- and long-term perspective, achieving greater equity is not negatively related

to the pace of economic growth; in fact the two processes are mutually stimulating. When

differences in access to assets, education, health, services, consumption and citizenship are

perpetuated from one generation to another, the economic growth process produces a polarizing

dynamic that diverges from equal opportunities and continuously widens economic and social

differences, thereby undermining the growth base.

Lasting economic progress requires sustainable use of resources and efficient participation by

the population through democratic institutional arrangements. Moreover, political democracy

needs to be sustained by social democracy; and this, in turn, is only possible in a solidarity-

based society, where equal opportunities contribute to social mobility and coexistence amidst

inevitable inequalities.

Far from being mutually exclusive, economic growth and equity reinforce each other. Resource

allocation alternatives that are exclusive in the short run are less important than complementarity

in the long term.

Poverty

Poverty is the main cause of food insecurity in Latin America and the Caribbean.

The absolute number of people living in poverty in the region has been growing continuously;

from a level of 110 million in 1960, the figure had risen to 136 million in 1980 and currently

stands at 226 million. The proportion of the total population who are poor has remained broadly

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unchanged, however, with just under half (44%) of the Latin American population currently

living below the poverty line.

In absolute terms, poverty is mostly an urban phenomenon, with urban areas accounting for

nearly two thirds of the total, and over half in the case of indigence. In relative terms, however,

poverty and indigence are both much more prevalent in the countryside: 62% of the rural population

is poor, and 38% indigent—proportions that have remained virtually static since 1990. On the

contrary the corresponding figures in the cities are 38% and 14%.

Broadly speaking, the rural area functions as a mechanism that absorbs unemployment and

underemployment, by providing modes of subsistence to population groups that are excluded

from the main dynamics of the current model of development. It thus serves as a stabilization

factor combining productive activities within the family unit and community life, allowing

adequate survival strategies based on very low monetary incomes.

The fragmentation of urban-rural development has been accompanied by gender segmentation.

Rural women suffer segregation in labour markets, in terms of systematically lower payment, and

they also face discrimination in access to credit and landownership.

Poverty is particularly severe among indigenous peoples; and the fact that such population

groups are also subject to exclusion to an even greater degree has rendered several traditional

communities economically unviable. As the ways of life and modes of organization of indigenous

communities are closely linked to the rural domain, poverty relief that continues to rely mainly

on migration to the cities is likely to entail the loss of cultural and social heritage among such

communities, and the vast diversity of ways of life in the Latin American and Caribbean

countryside will be diminished.

Deteriorating employment conditions are one of the major causes of poverty, which always

spreads in periods of crisis or recession. As poverty increases in the absence of viable strategies

to counteract the negative effects of economic downswings. Sustained economic growth is

necessary, though insufficient for reducing poverty.

A more equal income distribution is also essential for poverty reduction, and there are some population

groups that form nuclei of core poverty resulting from their exclusion from economic processes;

addressing such situations requires specially targeted measures.

Crop production

Viewed from a long-term perspective, the region’s agriculture has been growing slowly, mainly

because of low levels of sectoral investment stemming from lack of profitability. Since 1994,

however, growth has been stronger thanks to renewed expansion of harvested areas, which

probably reflects a revival of investment in response to higher returns.

Agricultural output growth is heavily concentrated in a few product lines and a small number

of countries. This basically reflects the explosive growth of soybean production in Argentina

and Brazil, based on a highly efficient economic model involving technological progress and

modern management methods responding to a very dynamic demand and soaring international

prices. Other crops are progressing much more slowly.

There are many reasons for the generally low profitability of regional agriculture, many of

which fall outside the bounds of primary production. These include failings throughout

19

productive chains, falling prices and the high transaction costs faced by the vast majority of

farmers. Prices remain relatively low on domestic markets because of sluggish growth and

the concentration of income, which do nothing to stimulate higher consumption among the

population at large. Further more, major distortions on international markets also help to

keep prices low.

Livestock production

Within the prevailing patterns of market integration and ever greater competition, livestock production

displays increasing differentiation and specialization, and this will probably tend to accentuate

in the coming years. In some product sectors, particularly poultry, the development of new

technologies has fuelled strong growth; other products, in contrast, have stagnated or declined.

The development and dissemination of more efficient technologies needs to embrace not only

production but also the processing and marketing stages. Health, quality control and safety

issues are also very important here.

International cooperation will be essential for progress in terms of animal health and better-

functioning markets.

Stronger economic growth is likely to generate greater demand along with more strict quality

requirements, which will pose major challenges both for producers and for systemic quality.

Fishery production

The fish catch has increased beyond the limits of resource sustainability, particularly in the

1980s; and weather patterns have also had a major impact on the development of this activity.

The future of fishery production is thus facing major challenges. It will be essential to develop

institutional forms (agents, mechanisms and market stimuli) that promote efficient and

sustainable activity.

The structure of fishery production in the region has changed significantly as a result of the

production of diadromous and freshwater fish in Chile. Over the last two decades, this country

has introduced and developed a productive process that has made it the world’s leading salmon

producer. Processes of this type, within a framework of environmental sustainability and respect

for biological diversity, need to be replicated over the next few years to respond efficiently to

current challenges.

Despite recent progress, aquaculture in Latin America and the Caribbean accounts for just 6.4%

of the world total and is a very small part of the region’s fishery production. Better technological

models need to be developed for this sector over the next few years.

Forestry production

Although Latin America and the Caribbean contain one quarter of all the world’s forests (956

million hectares), the region only has 12 million hectares of plantation forest—just 6% of the

world total.

The structure of forestry production in the region reveals its low level of development. Fuel

wood and logs continue to be the most heavily exploited products, whereas developed countries

tend to specialize in products such as pulp and fibres, along with paper and paperboard.

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The development of forestry resources and their sustainable exploitation require progress to

be made in the institutional and technological framework over the next few years, to promote

investment and sustainable patterns of exploitation.

Trade in forestry, crop, livestock and fishery products

Latin America and the Caribbean is the only developing region with a surplus in its agricultural

trade. This is essentially due to crop growing and fishery activities. Livestock and forestry

products generate very small trade balance (either positive or negative): a surplus in the bovine

meat and poultry segments is offset by a deficit in dairy products; while the deficit in paper

and paperboard far outweighs the surplus in other forestry products.

Forestry and fishing are the subsectors where trade is growing fastest, albeit on the basis of

absolute quantities that are smaller than crop and livestock trade. Crop exports are greatly

influenced by the behaviour of prices in a market that has great capacity to respond to price

stimuli. In the livestock sector, improvements in health conditions are likely to play a key role

in the future.

The fact that Brazil and Argentina are the region’s main exporters, with rapidly growing shares,

underscores the importance of developing specific niches for other countries of the region.

Brazil is the leading exporter of livestock products (48%); and together with the Southern Cone

countries, it accounts for over 80% of total regional exports. The leading importer is Mexico

(58% of total regional imports).

As much as 80% of forestry exports come from Brazil and Chile, while the region’s other countries

mostly run deficits.

Components of development policy

Simultaneous pursuit of the recovery of sustained economic growth and improvements in equity

require a complex strategy that includes the following: an economic policy designed to promote

inclusive development; a full range of social policies to reach universal coverage of basic services;

explicit incorporation of environmental sustainability criteria; human capital support programmes;

institutional development and strengthening of social capital; reduction of peoples exclusion;

and targeted support to address the most urgent and pressing needs.

The first requirement is to restore rapid and sustained economic growth, because without this,

there is no viable way to meet the region’s major development challenges and overcome the

poverty and exclusion that afflict much of the population.

Although rapid and sustained economic growth is necessary to reduce poverty and exclusion,

it is not sufficient. The current model is highly polarizing and causes income to become

increasingly concentrated in the economically most privileged segment of the population. In

such conditions, it is hard for corrective mechanisms, such as targeted public expenditure, to

offset the polarizing effects of income concentration from outside the economic process.

Government mechanisms to promote equity are futile if the production and distribution process

constantly intensifies concentration, and societies reproduce and strengthen polarization. One

priority component in the development strategy is therefore an economic policy design that

takes explicit account of variables affecting investment and employment.

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In addition to an economic policy which promotes inclusion, complementary social policies are

needed to reduce exclusion. Investments to improve education, health, training and the conditions

of social participation among population groups living in poverty (considering the family unit

as a whole in its community surroundings) are unquestionable priorities in such policies, along

with the development of programmes to expand coverage of social services. People living in

conditions of poverty also need assistance to broaden their access to productive resources.

Overcoming the challenges currently facing the region necessarily requires a long-term

perspective that encompasses conservation and expansion of the natural resource base and

preservation of the environment, within a sustainable development process. Development policy

should contain explicit guidelines on environmental sustainability.

Efficiency in policy design and implementation entails reorganizing productive and distributive

processes, to adapt them to the new development conditions. New types of stakeholder need to

be developed—both public and private—along with new forms of relationship and a better

regulatory framework. This institutional development means more efficient modalities for

gaining access to and using natural resources, markets, financing, and both formal and informal

standards.

Direct, targeted, temporary and transparent support can be provided to respond to current

urgencies, resolve the most serious deficiencies, and avoid cumulative deterioration among

poor families.

As development programmes (particularly consumption subsidies and programmes to alleviate

poverty through direct support) are inevitably temporary, programmes to develop productive

capacities need to be implemented to offer marginalized population groups an exit from social

support programmes.

The marginality suffered by low-income population groups is often more than economic; as well

as exclusion from goods and labour markets, such groups also tend to be excluded from social

programmes and suffer from a variety of other problems that prevent them from participating

normally in social life. Accordingly, citizenship rescue programmes are needed to help this

population group participate more fully in social policy decision making.

The agricultural and rural development policy approach

Although the task of rural development reaches far beyond the sphere of agricultural production,

agricultural policy nonetheless plays a fundamental role in any strategy. While rural development

implies a diversification of employment sources and greater vertical integration among economic

activities in rural areas, there is a direct relation—a positive dynamic—between agricultural and

non-farm rural incomes. Although the need persists to reallocate very low-productivity human

resources currently located in the rural area, the simplistic idea of expecting industry to generate

job opportunities and incomes has been superseded by an approach which, rather than seeing the

different sectors as antagonistic, stresses their links. The competitiveness that matters encompasses

the whole production-processing-trade-consumption chain. Such global systemic competitiveness

largely depends on the macroeconomic setting and degree of intersectoral coordination; it is not

a question of seeking relative advantages for isolated products. What is essential is to construct

and develop the competitiveness of the system as a whole, including various forms of intersectoral

integration and territorial coordination.

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The competitive capacity of agriculture, and the profitability of sectoral activities, do not depend

on indices of rural productivity alone. Agronomic progress is always desirable, and it is essential

to exploit the wide-ranging potential for returns if available technologies were to become more

widespread. But to achieve rapid and sustainable agricultural growth, it is essential to address

elements that fall outside the remit of agricultural technology and farmers’ capacities, such as

those caused by changes in the international setting and in the macroeconomic framework, or

shortcomings in infrastructure and services, among others.

Recently, rural development has once again been attracting the attention of national authorities

and international organizations, but for reasons other than the traditional arguments in defence

of agriculture that adduce the importance of certain specific products, or paternalistic arguments

relating to small-scale producers. The current emphasis on productivity and competitiveness,

reduction of the State’s field of action and the new international setting, have shifted the axes

of potential agricultural policy towards the creation of conditions to absorb technical and

productive capital, and the promotion of an urban-rural development process that aims to reduce

poverty by creating jobs and generating local incomes.

The new argument in favour of agricultural and rural development differs from earlier demands

on behalf of the rural sector and farming families—which at times were little more than rhetoric—

in two key respects: the scope of the new approach, and the role assigned to it within economic

and social development.

The new approach has several key dimensions:

(i) It supersedes the narrow sectoral view that was confined to primary agricultural production

alone, highlighting instead the importance of intersectoral coordination and the concept of the

agribusiness sector, emphasizing productive chains and product systems.

(ii) Rural development is no longer seen as depending on agricultural progress alone and; non-

farm economic activities have a key role to play. Rural development policy embraces all dimensions

of people’s lives and their subsistence strategy in a multiple livelihood approach.

(iii) Various forms of linkage between the rural and urban economies are highlighted.

(iv) The three elements mentioned above mean that policy agents and instruments will also be

different.

The way the role of agriculture is conceived has changed radically; instead of a narrow sectoral

view, inter-sectoral coordination and multifunctionality are now given the priority. The

performance of agriculture has effects that reach beyond sensitive product markets; in the

reality of the production chains prevailing in most of the region’s countries, agriculture is an

essential element in building systemic competitiveness and enhancing trade and agribusiness

integration. It also affects natural resources as the environmental basis of development, beyond

their directly productive potential; and it plays a major role in overcoming regional imbalances

and in the territorial organization of development. Agriculture is also fundamental in terms of

opportunities for progress among broad swathes of the population living in rural areas, and in

exploiting programmes to alleviate rural poverty.

The new approach highlights the influence of agriculture on important issues such as:

(i) Food supply and food security in addition to the key dimension of food availability, lower prices

benefit poor population groups in particular, since most of their spending goes on such goods.

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(ii) Real incomes, through food prices; and overall systemic competitiveness, through better

exploitation of the natural resource base, and its effect on wage and raw materials costs.

(iii) Job creation and income generation among population groups that tend to be excluded from

modern commercial circuits.

(iv) Poverty reduction, achievement of greater equity and progress towards more equal

opportunities.

(v) Incorporation of extensive zones that are currently excluded from the economic growth

process; overcoming regional imbalances and the territorial management of development.

(vi) Improvements in environmental sustainability and sustainable exploitation of natural

resources. Erosion, desertification, deforestation and loss of genetic wealth are closely linked

to poverty and exclusion in rural areas, and to the technological orientations of the corresponding

productive processes.

(vii) Recovery of cultural wealth, and its relation to the preservation of natural environments.

Institutional requirements for policy implementation

To respond to the new development orientations, agricultural policy needs to be highly

participatory and neutral with respect to relative prices. It should not be reduced merely to

promoting primary production, but should respond to market demand and the linkages and

ties with agribusiness and agricultural trade processes. Particular emphasis needs to be placed

on investment in human capital, reducing transaction costs for small-scale producers and

encouraging their participation in the rural (or urban-rural) development strategy, and on

addressing important differential needs. The complementary aspects of development also need

to be considered from the standpoint of the national-global dynamic. In particular, the new

approach highlights the building of new rural institutions (in the broad sense of the term), as

part of the process of strengthening social capital to underpin a new agricultural and rural

growth cycle.

New policy instruments represent significant institutional development in themselves. The

concept of institutional development is not limited to organizational changes in the public

sector, or to a mere shifting of responsibilities towards the private sector; it also encompasses

the rules and mechanisms of interaction that determine how social stakeholders interact.

The establishment of policies—and the laws and mechanisms that give them validity and

make them operational—thus represent a clear example of institution development.

Allocation of productive resources through market mechanisms, the new role of the State in

development and progress in administrative decentralization all require agricultural and rural

development policy to be highly participatory. The tasks of policy design, implementation and

evaluation need to be addressed jointly by public-sector bodies and private stakeholders.

The new instruments tend to involve highly participatory programmes, executed with a

decentralized perspective, consistent with the constraints of the macroeconomic framework

and the requirements of international participation, and with other efforts to achieve greater

inter-sectoral integration; they also provide a complementary basis of support for rural poverty

reduction programmes.

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Nonetheless, these new policy instruments also require specific institutional modalities and

developments, differing radically from those of traditional agricultural policy, which are very

important for achieving policy objectives. Just as important as obtaining funding for the new

instruments is the need to design mechanisms that attract widespread support and participation

from the various stakeholders involved, and which can reach the target population, while

respecting the established regulations and operating with low administrative costs.

Policy areas and instruments

The thesis of the State subsidiarity recognizes that there are important areas where State action

is irreplaceable; but it also argues that the State should only intervene in cases where the market

fails—public goods, externalities, natural monopolies, asymmetric information, economies of

scale, and so forth. In the last few years, this negative definition of the areas of State intervention—

by its exclusion from situations that the market can resolve on its own—has been enhanced by

a positive list of State activities that can help the market become more efficient. This has led

to the realization that areas of action exist where a proactive policy that is compatible and

consistent with market mechanisms—and not contrary to them—can achieve positive results.

The current approach, which has superseded the false State vs. market dichotomy, recognizes

the usefulness of the State in developing markets and making them more efficient. This is a

question of promoting development among the different agents and enriching the modes and

mechanisms in which they interrelate, through better rules and organizational forms.

Where the participation of economic agents is highly unequal, such as in the rural sector,

markets lose their competitiveness and their efficiency and capacity to resolve productive

problems; and they become mechanisms that increase polarization, requiring complementary

interventions to keep their outcomes within acceptable levels of equity. Recognition of the huge

inequality of opportunities endured by the rural population justifies a set of differential policies

to correct this situation.

An important area of agricultural and rural development policy for Latin American and Caribbean

countries concerns international agreements and multilateral negotiations to achieve more

favourable trading rules. There is a burgeoning agenda of priority agriculture and food issues that

transcend national boundaries, such as trade negotiations, agreements on investment, animal

health, plant protection, food safety and quality, and environmental sustainability. Systems of

rules and regulations need to be modified in a wide variety of areas, to bring them into line with

international standards and create coordination mechanisms at the corresponding levels. Political

and technical improvements for the elimination or meaningful reduction of subsidies and

commercial protection mechanisms in developing countries are also of prime importance.

Special efforts are also needed to develop analytical instruments for ex-ante and ex-post

estimation of the effects of economic and trade integration agreements. Such instruments would

make it possible to design programmes to exploit new opportunities, by lifting the various

barriers that restrict export potential. It would also make it possible to formulate policies and

programmes to minimize the economic and social costs of productive restructuring stemming

from trade openness.

At the national level, an initial sphere of action involves the development of markets for the

main factors of production: land, natural resources, labour, capital and technology—including

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steps to establish a clear framework of property rights over land, water, biodiversity, forests,

technological patents, and so forth. Conditions also need to be established to foster the

development of rural financial markets, and to regulate the rural labour market, since both

display special characteristics. The efficiency of these markets largely depends on institutional

development.

Recognition of the role of microeconomic policies assumes that the domain of productive

activities is the market economy—not defined by the theoretical paradigm of pure and perfect

competition, but understood as an objective reality, and as the most efficient mechanism for

allocating productive resources.

It also acknowledges that the role of the State is not only to fulfil non-economic functions and

take responsibility for the macroeconomic framework. The spontaneous effects of changes in

relative prices on agricultural production can be severely hampered by market failures and by the

unfavourable “climate” that persists in many of the region’s economies. The opportunity provided

by higher prices in several productive sectors is occurring at a time of serious economic difficulties

for producers, severe financing constraints and significant distortions in market operations. To

maximize the positive effects of trade liberalization and economic integration, it is essential to

develop an agricultural policy which assures that better prices are actually perceived by farmers,

and that these have capacity for productive response.

Agricultural policy—with the collaboration of all agents involved—thus needs to overcome the

bottlenecks that persist in credit, marketing, infrastructure, services, phytosanitary and

zoosanitary requirements, quality standards, management systems, market information, technical

assistance and input supply. Only within such a policy producers can profit from better relative

prices and harness the stimulus thus provided to raise productivity and increase production.

The reduction of public investment channelled into agriculture following crises and adjustment

processes, seriously impaired sectoral development. The impact was felt particularly in the rural

domain because public investment—in communications, electrification, basic services, and so

forth—also acted as a major stimulus to private investment. The simultaneous reduction in the

availability of public services compounded by financing difficulties discouraged investments

still further. In some areas, such as irrigation, the systems for operating and managing existing

infrastructure were also drastically altered. In Latin American and Caribbean countries the

State has traditionally played a key role in the development of productive infrastructure, for

example in irrigation, and in transport, communications and marketing infrastructure. Such

development does not necessarily have to be financed exclusively with public funds; but State

action is crucial in terms of stimulus, organization and financial support for these activities.

To promote the capitalization of agriculture, programmes could be designed for investments

that are co-financed between the State and farmers, in order to raise investment levels in targeted

areas. Generally speaking, this is a matter of establishing the possibility of subsidies or bonuses

within guidelines that are consistent with sector development priorities. A wide range of potential

new policy instruments exists in this area, consistent with the macroeconomic framework and

with the exigencies of international participation.

Even though the international setting and macroeconomic rules impose constraints on market

intervention, there is still considerable room for programmes that stimulate production, using

market-friendly, transparent and participatory mechanisms that enhance resource use and

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favour productivity growth. There are plenty of examples in the region of public funds being

used to stimulate private investment in a whole range of areas, including investments in

irrigation, reforestation programs, mechanization, genetic enhancement, promotion of priority

crops or payment for environmental services.

One of the most serious unresolved problems in the region’s agricultural development policy

concerns financing. The stabilization and adjustment policies of the 1990s undermined the

traditional mechanisms of agricultural credit operated by official development banks, which

were based on rediscount lines at negative interest rates, large nonperforming portfolios, and

frequent debt forgiveness. These mechanisms entailed heavy fiscal costs and had major negative

effects on efficiency, equity and transparency. A large percentage of rural producers were reliant

on informal sources of finance.

Many rural producers still continue to obtain financing through a variety of informal sources;

credit from suppliers has been growing rapidly, along with financing provided by agribusiness

and crop and livestock product dealers, remittances sent home by migrant workers, and other

sources. In several countries microfinancing systems have been developed, with operations

supported by NGOs.

Difficulties in developing efficient credit mechanisms are targeting the search on flexible

solutions that combine formalization of existing financing sources with a new regulatory

framework that supports efficiency and transparency, and incentives for microcredit and

complementary actions by development banks. More than an agricultural credit mechanism,

the aim is to develop rural financial systems that encompass credit, insurance and saving. The

inclusion of mechanisms to capture savings could open up better alternatives for channelling

remittances into productive investment, and would also allow for broader financial coverage

and better knowledge of customers. This, in turn, could reduce transaction costs and information

asymmetries, thereby increasing synergy in the different activities of the system. Progress in

the construction of such systems basically depends on institutional development that promotes

participatory mechanisms subject to clear regulations, with government support to foster the

necessary trust.

Progress in terms of the recognition and stability of property rights over land, subject to principles

of efficiency and equity in land tenure, are also important mechanisms for expanding access

to credit and developing rural financial markets.

Another major issue in agricultural policies concerns the basic design of crop and livestock

technology transfer and research systems, which require considerable institutional development.

The objectives here are as follows: open systems, where universities participate along with other

public- or private-sector bodies, either national or international, involved in agricultural research

and technology transfer; competitive systems, funded by the State and other financing agencies

(multilateral banks, regional research funds, international cooperation) on the basis of results

and achievement; dynamic systems, with capacity to respond to the challenges of domestic and

external competition; environmentally sustainable systems, i.e. with technological proposals

that help to stop the deterioration of natural resources; and decentralized systems that ensure

participation from producers and other private stakeholders and provide opportunities for them

to contribute to the financing and orientation of activities.

Moreover, to enable the rural poor population to access such services on a more widespread

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basis, specific modalities of rural technical assistance will be needed that differ significantly

from traditional agricultural extension activities. In general this population group lacks a

profitable and competitive agricultural project, and does not have the means to adopt pre-existing

technology packages. Moreover, peasant farming economies have very diverse forms of interaction

with the market, combining commercial production with self-consumption activities, together

with income generated outside the family farm. Although agricultural activities are a major

pillar of the system, their coexistence with numerous non-farm activities means that it is the

overall set of activities that gives the rationale to the survival strategy. Instead of trying to make

farmers aware of efficient technology that is already validated and available in the technology-

generation system, in the case of the low-income rural populations it is a matter of providing

technical assistance to enhance productivity in the various income-generating activities that

farming families and communities already engage in.

The development of rural extension modalities that are accessible to poor rural populations

requires support from the demand side of technical assistance; i.e. help for communities to

translate their knowledge of problems and assistance needs into specific technical assistance

demands. It also entails helping them to develop the means to finance such demands. On the

supply side, it is essential to strengthen capacities, in order to overcome the inertia that tends

to direct support towards agricultural technologies and neglect other possibilities. Technical

assistance capacity needs to match the diversity that exists in demand. Moreover, technical

support for agricultural production should not be restricted to primary production activities,

but should also emphasize marketing, value-added and management, among other aspects.

Consideration should also be given to demands for technical support in non-farm activities

(including linkages with activities outside the community that play a part in the population’s

survival strategy through remittances or services).

A priority requirement in operating technical assistance in this modality is community control,

which basically means that the beneficiaries themselves decide about the payment of the service.

The resources available to farming families often need to be complemented with subsidy

mechanisms (which should be partial, temporary and transparent). The community should have

decision-making power over how resources as a whole, including subsidies, are used.

Lastly, the emphasis on policy neutrality favours the use of direct transfers. The underlying justification

for direct support to agricultural producers is its capacity to promote income growth, sometimes on

a cumulative basis, while recognizing that the country-city polarization remains an expression of

unequal opportunities and a fundamental mechanism for intergenerational transmission of poverty.

Perhaps the best example in the region is the PROCAMPO programme (Programa de Apoyo Directos

al Campo) , in Mexico, which has channelled direct support amounting to some US$ 1 billion to around

3 million producers per year. There are also several important direct transfer programmes in Brazil.

Direct support has the advantage of raising living standards according to the exclusive criteria

of the beneficiaries themselves. Results achieved in terms of improving the family’s human

capital, capitalizing the family farm, or making some immediate productive use of the funds

received, stem from autonomous decisions.

These transfers do not distort trade; the amount of the support is not tied to production or to changes

in market prices, and they are fully funded from fiscal resources, without any transfer from consumers.

Accordingly, they comply fully with international commitments.

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The subsidies are targeted and transparent, and the fact that they are established with a known

time-limit allows decision making to take this into account.

The targeting of support requires a beneficiary register to be created, which raises the problem

of discrimination between different population groups and runs the risk of political cronyism.

The new policy instruments described above entail new requirements for institutional development.

The establishment of decentralized and participatory policy instruments, operating in support

of the market, clearly represents a major step forward from previous policies that tended to be

vertical, narrow, paternalistic, bureaucratic and inefficient. Although these new instruments no

longer spawn bureaucratic growth, they naturally require agent relationships that allow for

effective deconcentration of decision-making and genuine participation. Elimination of the

bureaucratic entity that embodied traditional policy thus forces the new policies to address the

social dimension and rebuild rural institutions.

In traditional agricultural policy a crucial role in policy implementation was usually played by

a government agency. These were specialized by field of action, type of support, or even branch

of production; and often exclusively oriented towards productive development. Their mode of

operation was essentially vertical—from the government body down to the beneficiaries. In such

circumstances, the internal regulations of the entity in question, and its administrative

procedures, resulted in policy decisions being made through a specialized technical team.

Efficiency in implementation, and consistency with other policies, was also the responsibility

of the government agency—a task that was made easier by its relatively narrow sectoral viewpoint.

In the new agricultural policy orientations, with instruments that are intended to enhance the

functioning of the market, policy goals are firmly anchored in economic relations themselves.

This requires policy to be designed on analytically very sound foundations, and shared with the

various stakeholders involved in policy implementation: central government, decentralized

government bodies, producer organizations, NGOs, etc. This setting, and the rationale of the policy

itself, requires a broader view of objectives that takes into account the inter-sectoral linkages

and consistency within the economic rationale of the various stakeholders. The need for governance

capacity on the part of the State is therefore much greater.

The fact that participatory programmes naturally tend to be highly decentralized requires

communication and dissemination systems, support for beneficiary organizations, administrative

rules and procedures governing interaction between the various categories of stakeholder and modes

of coordination that ensure policy consistency in the national domain.

By replacing policies that were based on paternalism and an overblown bureaucracy, the new

policy orientations allow the democratization of decision making and far more efficient resource

use. Nonetheless, elimination of the simple vertical relation between central government

institutions and passive beneficiaries, and its replacement by decentralized participatory

policies, no longer allows solutions that are merely administrative, but places heavy demands

on institutional development in the rural domain.

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I. INTERNATIONAL SETTING

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A. THE NEW CONDITIONS IN THE WORLD ECONOMY

The major global changes that occurred at the end of the last century have significantly increased

the influence of international conditions on the economic and social development of individual

nations. During these first few years of the new millennium, the countries of Latin America and

the Caribbean are striving to construct a style of development according with the new dynamic

conditions of the world economy, to take advantage of new opportunities and mitigate negative

impacts.

The tremendous progress achieved in information technology, new modes and possibilities in

telecommunications, technical developments in transport, greater control over natural resources,

achieved through biotechnology, genetic engineering and other significant technical advances that

have helped to pave the way for a spectacular reduction in the cost of international exchange, and

have encouraged greater standardization in products and processes.

This extraordinary progress has also spawned far-reaching institutional reforms to keep up the

pace with technical changes. A new institutional framework has been developed for world trade and

international economic relations, aimed at more effectively exploiting today’s technological

possibilities and facilitating the international movement of information, ideas, capital, goods,

services and people. Every year during the last decade, many countries amended their standards or

legislation in order to attract foreign direct investment (FDI). In 2001 alone, 71 countries introduced

208 legal amendments on foreign investment, of which 194 were intended to promote or facilitate

it. In addition, no less than 2,099 bilateral treaties on investments had been signed by 20011.

A process of renewal is currently unfolding among economic agents and their mechanisms of

relationship. Transboundary mergers between large firms have proliferated, especially in the

financial and telecom sectors, and these represent the apex of a global system that exerts

powerful feedback on the globalization of production and trade in all productive sectors. The

international socio-political framework is also tending toward greater standardization, under

a single pole of political and military hegemony and growing interdependence among the main

economic powers.

Productive processes increasingly ignore the constraints of national borders, as economic

globalization becomes ever deeper. The proliferation of international financial and technical links

strengthens the transnationalization of production-processing-consumption chains; and intra-

firm trade is particularly dynamic. International capital flows have fuelled exceptional growth in

physical investment and financial exchange; and transnational corporations (TNCs) are rapidly

expanding their share of world production and trade, both directly and through outsourcing.

According to estimates quoted recently by UNCTAD2, at the present time there are 65,000

transnational firms operating across the world, with some 850,000 foreign branches employing

54 million workers. The expansion of the TNC economy has been explosive; over the last two

1UNCTAD, World Investment Report 2002, “Transnational Corporations and Export Competitiveness” p. 23.http://www.unctad.org/sp/docs/wir2002overview_sp.pdf

2 UNCTAD, World Investment Report 2002 “Transnational Corporations and Export Competitiveness”

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decades (1982-2001) sales by foreign subsidiaries grew from US$ 2,541 billion to US$ 18,517

billion, and estimated output expanded from US$ 594 billion to US$ 3,495 billion, to account

for roughly one tenth of world GDP. In 2001, TNC exports reached a level of US$ 2,600 billion,

representing one third of the world total. If the activities of transnational enterprises that are

not linked by ownership but operate through licensing or subcontracting agreements are

included, then total TNC participation in the world economy is even greater (see table 1).

Transnational enterprises themselves are highly concentrated economic systems. More than

half of all sales in 2000, and over 50% of the workers employed during that year, were concentrated

in the 100 largest non-financial TNCs alone.

The cumulative world stock of FDI has multiplied tenfold since 1980, and currently amounts to

US$ 8,245 billion. Annual FDI flows, which at the beginning of the 1980s totalled US$ 55 billion,

had grown to over US$ 200 billion by 1990 and reached US$ 1,387 billion in 2000. Total FDI in

that year alone doubled the cumulative total up to 1980 (US$ 692 billion). In the last few years,

between 2001 and 2003, the stock market crisis and world economic recession cut the volume of

flows by more than half. Although recovery is possible in the next few years, FDI flows are unlikely

to regain the exceptional levels seen in 1999 and 2000 (see table 2).

THE ECONOMICS OF TRANSNATIONAL ENTERPRISESTable 1

Indicators of subsidiaries abroad 1982 1990 2001

(Billions of dollars)

Sales of subsidiaries abroad 2,541 5,479 18,517

Gross product of subsidiaries abroad 594 1,423 3,495

Total assets of subsidiaries abroad 1,959 5,759 24,952

Exports of subsidiaries abroad 670 1,169 2,600

World GDP (at current prices) 10,805 21,672 31,900

World exports 2,081 4,375 7,430

SOURCE: FAO/RLC based on UNCTAD 2004.

FDI FLOWS AND STOCK (Millions of dollars)Table 2

Region 1970 1980 1982 1990 1998 1999 2000 2001 2002 2003

World FDI inflows 13,032 54,986 59,304 208,646 690,905 1,086.750 1,387.953 817,574 678,751 559,576

FDI inward stock - 692,714 796,070 1,950.303 4,278.736 5,113.857 6,089.884 6,541.037 7,371.554 8,2450.74

Developed countries FDI inflows 9,477 46,530 32,031 171,109 472,545 828,352 1,107.987 571,483 489,907 366,573

FDI inward stock - 390,740 444,512 1,399.509 2,812.484 3,260.017 4,011.686 4,299.494 5,049.786 5,701.633

Developing regions FDI inflows 3,555 8,421 27,259 36,897 1,940.55 231,880 252,459 219,721 157,612 172,033

FDI inward stock - 301,974 351,558 547,965 1,371.887 1,745.553 1,939.926 2,071.979 2,093.569 2,280.171

Latin American and FDI inflows 1,681 7,494 8,295 9,615 82,491 107,406 97,537 88,139 51,358 49,722

Caribbean FDI inward stock - 50,412 64,239 116,866 374,626 441,706 512,455 608,694 581,939 647,678

Central and Eastern FDI inflows 0 35 14 640 24,305 26,518 27,508 26,371 31,232 20,970

Europe FDI inward stock - 0 0 2,828 94,365 108,287 138,271 169,564 228,199 263,270

SOURCE: UNCTAD 2004.

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Although the growth of international investment flows implies a rapid expansion of the

transnationalized economy, the true magnitude and scope of TNC economic systems are not

just a matter of increased investment. The rapid growth of capital flows has been accompanied

by an extraordinary development of supplier networks and a variety of non-equity linkages,

such as productive outsourcing or subcontracting, which involve large numbers of agents in a

wide variety of activities, including low-technology production, all incorporated into

transnationalized systems3.

Economic globalization, together with the establishment of large economic groupings worldwide,

subregional integration processes, rapid capital flows and the pace of technological development,

have all combined to alter deeply the structure and functioning of the international trading

system. They have also significantly increased their influence and effect on economic and social

development. The world trading system is now much more than an exchange of goods between

utterly different buyers and sellers. There is growing coordination between production and

processing activities and international trade, as well closer ties between financial and product

markets. The cycles of financial capital and productive processes unfold across national borders

and much of the international division of labour occurs within the transnational enterprise.

Competition on world markets nowadays takes place between whole production systems, rather

than between individual factories or firms. What is important is the competitiveness of the

system. Management strategy entails much more than the administration of production or

marketing processes in the conventional sense, but embraces a series of inter-enterprise

partnerships and relations between suppliers, producers and sellers that remain formally

independent but are connected to the system through franchises, licences, common technical

standards, subcontracting, marketing contracts, and business relations based on mutual

knowledge and trust.

These are the systems that generate the world value chain, which encompasses technological

development through to final distribution, with intermediate stages and relations that transcend

national borders. In many of these systems, TNCs tend to concentrate on the least tangible and

most knowledge-intensive functions, such as product and brand definition, innovation, research

and development activities, or marketing; while the productive process itself is contracted out

to numerous manufacturers. Moreover, partnerships to develop innovations are increasingly

being forged with universities and research laboratories, and even with competitors. Ownership

relations are thus enriched by cooperation networks and coordination or control structures

within the logic of the transnational system.

Productive capital itself is becoming less tangible, since it is increasingly founded on technological

knowledge. Unlike industrial technology, where capital is embodied in a machine, technology

nowadays tends to be easily transferable. Nonetheless, access to capital, and its ownership and

control, essentially require accumulated knowledge and intellectual and human capital. While

still important, previous comparative advantages based on cheap labour or abundant availability

of natural resources are giving way to the development of knowledge and intellectual capacities.

This poses a huge challenge for developing countries, which are forced to expand their human

capital rapidly to avoid becoming laggards in the onward march of global technological progress.

Human capital development and an emphasis on education, basic labour skills and technical

training, are likely to be key pillars of the development strategy over the next few years.3 UNCTAD, World Investment Report 2002 “Transnational Corporations and Export Competitiveness”.

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B. THE CURRENT ECONOMIC SITUATION AND PROSPECTS FOR THENEXT FEW YEARS

The evolution towards a globalized economy has been anything but a linear process. Within the

investment and business cycles that characterize contemporary economic growth, both productive

progress and global integration have fluctuated sharply. Successive crises in major economic

hubs, compounded by political or military conflicts and insecurity in stemming from situations

of violence, generate uncertainty and major turbulence in the evolution of the world’s economies.

The fact that capital flows have tended to behave procyclically has aggravated local problems,

making crises deeper than they otherwise would be and spreading their effects.

One manifestation of this cumulative logic is the fact that the factors driving growth in the

contemporary economy are themselves closely implicated in recent collapses. The key factors

explaining the slowdown in world output and trade between 2001 and 2003 include the

stockmarket collapse that followed the bursting of the financial bubble in the information and

communications technology (ICT) sector; erosion of confidence and credibility caused by the

accounting frauds detected in several large corporations; a retrenchment of investment by

many firms in developed countries—especially in the ICT sector, which had powered the expansion

of trade in manufactured goods since the second half of the 1990s and the boom in high-

technology investments; repercussions of the anti-terrorist campaign, particularly on businesses

involved in transport, tourism, insurance and finance; uncertainty surrounding the international

economy, stemming from the military conflict in Iraq and confusions surrounding the postwar

period; and, temporarily for a number of Asian countries, the impact of Asian pneumonia (SARS).

These factors, and their interaction with the cumulative conditions acting on macroeconomic

equilibria among world’s leading economies, caused a slowdown of activity in developed

countries, retrenchment in fixed capital investment in the real sector of the economy, curtailment

of investments in technology, and a fall in the prices of manufactured goods, especially those

produced by the ICT sector. The latter had enjoyed a spectacular boom during the closing years

of the last century, involving major technological innovations in fibre-optic connections,

computer software, Internet access and development of the mobile phone. Alongside a new

regulatory framework, there was exceptional growth in the demand for new services, which

attracted burgeoning investment and fuelled a wave of mergers and acquisitions at prices that

were subsequently shown to be excessive, especially in Europe. The backlash saw a curtailment

of investment flows and large projects with high levels of fixed assets that were proving

unprofitable, thereby triggering major financial imbalances. At the turn of the century, the ICT

boom gave way to a crisis that reversed the process of booming asset prices and speculation,

causing a stockmarket collapse of very major proportions. Between its peak in early 2000 and

the subsequent trough in late 2002, the stockmarket index for this subsector in the United

States shed 78% of its value.

In the medium term, however, the demand for telecom and information technology services

seems set to continue its rapid expansion, so once excess in-store capacity has been reabsorbed

and financial balances restored, investment growth is likely to resume. Technological innovation

has also remained extremely dynamic. Both the demand for ICT services and technological

developments in these products represent medium- and long-term forces, so these markets are

bound to recover.

36

Although the crisis in this sector was very deep, its small weight in the economy as a whole

(accounting for between 2% and 4% of output) meant that its global impact was relatively limited.

Nonetheless, backward linkages and coordination with other agents, especially equipment

suppliers and high-technology enterprises, are very significant.

One of the clearest expressions of the 2001-2002 crisis was the sudden stop of international

capital flows, following their exponential growth of the late 1990s. During the 1970s and first

half of the 1980s, the size of annual FDI inflows grew slowly, but expanded vigorously every

year thereafter. In the 1990s there was a major acceleration that culminated in the extraordinary

growth of FDI flows in 1999 and 2000, when annual inflows were doubled, from just under

US$ 700 billion in 1998 to US$ 1,387 billion in 2000. In 2002, with the world’s leading

economies in recession and a 50% decline in transboundary merger and acquisition activity,

FDI flows retreated to their earlier levels of US$ 678 billion, dropping to US$ 559 billion in

2003 (see figure 1).

The crisis in 2001-2002 also caused a major slowdown in international trade. World trade had grown

faster than output over the last few decades, thereby significantly increasing its relative size; exports

had already been growing at roughly twice the pace of GDP, but in the 1990s they grew nearly three

times as fast. In the 1970s, international trade represented just 14% of world output; in the 1980s

it grew to one fifth of the total and today international trade, in goods and services, accounts for one

quarter of global economic output (see figure 2).

Prior to the problems mentioned above, world trade had been expanding faster than output

(except in 1998), posting average annual growth of over 7% since 1993. In 2001, however, it

shrank by 0.5% in volume and by nearly 4% in value terms. The rebound in 2002 merely made

up for that, allowing a return to the levels of two years earlier.

INWARD FOREIGN DIRECT INVESTMENT 1970-2003 (Percentage)Figure 1

1970

Mill

ion

s of

do

llars

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

SOURCE: UNCTAD

World Developed countries Developing regions Latin America and Caribbean Central and Eastern Europe

37

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In 2003 there was a sharp upturn in the value of world exports (15.8%), mainly reflecting the

combination of recovery in the United States economy and explosive growth in the Chinese

economy, which served to reactivate markets and boost commodity prices. In volume terms,

worldwide exports expanded by 4.5% (see table 3).

EXPORTS, GDP AND SHARE OF EXPORTS IN WORLD OUTPUT (1970-2005)Figure 2S

har

e (P

erce

nta

ge)

2000

2002

2003

2004

2005

197019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

010

5.0

10.0

15.0

20.0

25.0

30.0

Index of GDP at current prices. Index of exports

Ind

ex o

f ex

po

rts

and

GD

P

SOURCE: FAO/RLC based on IMF, WEO, september 2004.

0

50

100

150

200

250

300

Share of exports in world output.

WORLDWIDE MERCHANDISE EXPORTS AND PRODUCTION, AND GROSS DOMESTICPRODUCT, 1950-03 (Annual percentage variation)

Table 3

SOURCE: WTOa/ Includes unspecified products.b/ Worldwide merchandise production differs from world GDP because it excludes services and construction.

a

Value Volume

World exports World exports Production World GDP

Total Total

1950-1960 7.8 7.7 5.1 4.5

1960-1970 9.2 8.6 6.0 5.4

1970-1980 20.4 5.2 3.8 4.0

1980-1990 5.4 4.0 2.5 3.2

1990 12.9 3.8 1.3 2.5

1991 1.5 3.7 0.4 0.8

1992 6.4 4.5 0.2 1.1

1993 -0.2 4.2 0.0 0.9

1994 13.6 9.2 2.7 2.2

1995 19.4 7.4 4.1 2.3

1996 4.3 4.9 3.6 3.2

1997 3.4 10.1 4.9 3.5

1998 -1.3 4.7 2.2 2.2

1999 3.9 4.6 3.2 2.9

2000 12.8 10.5 5.1 4.0

2001 -3.8 0.4 0.7 1.2

2002 4.5 3.1 0.8 1.17

2003 15.8 4.5 2.8 2.3

ab

38

The mix of factors prevailing in 2001-2002 slowed the pace of economic progress in those years.

In 2001, world GDP grew by just 1.2%, thereby bringing to an end the latest cycle of high growth

rates (of between 2.2% and 4.1%) that had been achieved during the second half of the 1990s.

This cycle was shorter, and growth was weaker, than in the previous case (1983-1990), when

annual rates of expansion ranged between 2.8% and 4.6%. Growth rates were also well below

the levels of around 5% per year achieved throughout the 1960s (see figure 3).

Following a second year of weak expansion in 2002 (1.7%), global economic growth recovered

slightly in 2003 (2.3%), but was unable to make up for the stagnation of the two years preceding

the crisis. Nonetheless, the acceleration of growth in the United States economy in 2004 (4.4%),

together with the sustained pace of expansion in China (above 9% per year until the third quarter)

mean that world economic growth in 2004 is likely to be the highest of recent years (around 4%).

Growth forecasts for the next few years are more cautious, however, especially given the

uncertainty arising from the major imbalances displayed by the United States economy, where

the fiscal deficit is estimated at around 4% of GDP, and the current-account deficit is equivalent

to 5.7% of GDP. This is largely being financed by capital flows from Asia (Japan and countries

from Southeast Asia), which are trying to prevent their currencies from appreciating4.

Just as the 2001-2002 recession affected the vast majority of countries—with the notable exception

of China and a few others—the recovery in 2003 and rapid growth in 2004 have also been very

widespread, albeit with significant differences, especially in the case of the European Union.

Growth of the United States economy is estimated at 4.4% (3.1% in 2003); in Japan, following

more than a decade of stagnation, the economy grew by 2.5% in 2003, and the rate is expected

to be above 4% in 2004. The European economy grew by just 0.8% in 2003, and the 2004 figure

REAL GDP GROWTH AND VOLUME OF EXPORTS (1951-2003)Figure 3

SOURCE: WTO.

195

119

52

195

319

54

195

519

56

195

719

58

195

919

60

196

119

62

196

319

64

196

519

66

196

719

68

196

919

70

197

119

72

197

319

7419

75

1976

197

719

7819

79

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

20

00

20

01

20

02

20

03

0

-5

-10

5

10

15

Gro

wth

%

Merchandise exports volume Real GDP

4 ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, December 2004.

39

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is set to be only modestly higher, at around 2.3%. Depreciation of the dollar against the euro,

and to a lesser extent against the yen—which at least partly reflects the external imbalance in

the United States economy—is reducing its capacity to galvanize other economies and pull them

along in its wake. The recovery of the United States economy is unlikely to be transmitted with

equal vigour to its external demand or to world economic growth; and under the new prevailing

conditions it may be unable to provide sufficient stimulus for the rest of the world’s economies.

Developing countries also felt the effects of weak demand and dwindling capital flows in 2001-2002,

which slowed their economic growth to a rate barely above 2%. When demographic variables are

taken into account, this means virtually no growth in per capita terms, and negative in many countries.

The most notable exception to this generally gloomy panorama is the Chinese economy, as mentioned

above. The transition economies also recorded relatively better results.

The negative impact of the 2001-2002 crisis affected developing countries more than

industrialized ones. According to the United Nations World Economic and Social Survey 20035,

of 24 developed countries considered, output per capita shrank in 2002 in just four cases (17%);

whereas in the developing world output per capita contracted in 33 countries out of 95 (35%).

Latin America was the worst hit region: of 24 countries considered, output per capita declined

in 14 cases (58%). The reasons for the relatively greater vulnerability of Latin America and the

Caribbean to external shocks will be analysed in chapter II.

The start of a new cycle of relatively faster growth starting in 2004, is tempered by fragility and

risks stemming from the imbalances prevailing in the United States economy. Moreover, the

countercyclical public policies that have helped cushion recessionary shocks have also left less

room for manoeuvre to expand government investment in the world’s leading economies, which

are currently constrained by fiscal deficits.

C. PARTICIPATION IN PRODUCTION AND TRADE

Despite the increasing homogeneity of the market economy system and the globalization of

economic processes, the gaps between individual economies are not narrowing. Although

national borders are increasingly permeable to economic forces, the productive capacities of

individual countries have generally not been converging.

The only region of the developing world to grow significantly faster than the industrialized

economies is Asia, thanks largely to the extraordinary sustained growth achieved by China. The

Middle Eastern economies display lower growth rates but still above those of developed countries.

In the economies of Africa and Latin America, GDP growth rates are generally no faster than

in developed economies, which means the output gap is being perpetuated (see figure 4).

To make the share of individual countries in world economic output more comparable, the

International Monetary Fund (IMF) publishes GDP data weighted by purchasing power6. In its

estimation of world growth shares, using purchasing power parity (PPP) rather than the market

exchange rate, differences between rich and poor countries are reduced somewhat because the

general level of prices tends to be lower in the latter countries.

World output shares based on GDP measured in purchasing power parity (PPP) terms have

changed significantly over the last two decades. In particular, the share of the Chinese economy

5 United Nations, World Economic and Social Survey 2003. Chapter I, p. 8.http://www.un.org/esa/analysis/wess/wess2003chap1.pdf

6 World Economic Outlook “Advancing Structural Reforms” April 2004.

40

has more than quadrupled, from under 3.2% in 1980 to nearly 13% in 2003. The other countries

of developing Asia also increased their share of world GDP, albeit at a much more modest pace,

rising from 7.3% to 11%. The countries of the Middle East are broadly maintaining their share

at around 4%; while the economies of Africa and Latin America have seen their decline, in the

first case from 3.8% to 3.2%, and in the case of Latin America, from 9.8% to 7.6%. There has also

been a sharp reduction in the share of world output produced by economies in transition.

Developed economies accounted for 61% of world GDP in 1980, and over two decades later, in

2003, they still contributed 56% (see figure 5).

INDEX OF REAL GDP GROWTH (1990=100)Figure 4

SOURCE: FAO/RLC based on IMF, WEO april 2004.

20

60

100

140

180

220

260

300

340

380

1980 1983 1986 1989 1992 1995 1998 2001 2004

China

Developing Asia(INCLUDE CHINA)

Middle East

World

Africa

Developingeconomies

Latin Americaand Caribbean

SHARE OF WORLD GDP (Percentage)Figure 5

SOURCE: IMF, WEO april 2004.GDP measured in PPP terms.

DevelopedEconomies

61%

Transitioncountries 11%

Latin Americaand Caribbean 10%

Middle Eastand Turkey 4%

Africa 4%

Developing Asiawithout China 7%

China 3%

1980

DevelopedEconomies

60%

Transitioncountries 10%

Latin Americaand Caribbean 8%

Middle Eastand Turkey 4%

China 6%

Developing Asiawithout China 9%

Africa 3% 1990

DevelopedEconomies

55%

Transitioncountries 6%

Latin Americaand Caribbean 8%

Middle Eastand Turkey 4%

China 13%

Developing Asiawithout China 11%

Africa 3%

2003

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Within the trends discussed above, there has also been a significant change in the shares of the

different developing regions in global GDP. Two decades ago, Asia’s share, estimated in PPP terms,

was similar to that of Latin America, while Africa and the Middle East between them accounted

for roughly another third of the developing world’s share. In purchasing power terms, the output

of the Latin American countries was more than three times that of the Chinese economy. In 2003,

however, the situation is very different; the share of the Asian economies far outweighs that of

all other developing countries combined, and is more than three times that of Latin America. The

combined share of the Latin American economies in world output is now equivalent to just 60%

of the share of the Chinese economy (see figure 6).

World trade is even more concentrated than GDP. Exports from developed countries account for

over 70% of the world total (in 1990 the figure was nearly 80%), and there is no discernible trend

suggesting greater participation by the developing world, except in the case of Asia. Following

a slump in exports from the Middle East and the transition economies at different times during

the 1980s, only Asia (mainly China) increased its share of world trade during the 1990s, while

exports from Africa are becoming increasingly marginal, and those from other regions are

barely holding their own—which represents a situation of relative stagnation considering their

small share (see figure 7).

Transition countries 6%

COMPOSITION OF WORLD OUTPUT 2003 (Percentage)Figure 6

SOURCE: IMF, WEO april 2004.

DevelopedEconomies56%

Developingcountries37%

China 13%

Middle Eastand Turkey 4%

Latin Americaand Caribbean8%

Asia withoutChina 11%

Africa 3%

42

D. THE DEVELOPMENT GAP

The trends discussed above do not paint a very optimistic picture in terms of the progress made

by developing countries in obtaining a more equitable share of world output, which would afford

them living standards more in line with the possibilities offered by present-day modernity.

Nonetheless, when demographic data and absolute levels of GDP per capita are considered, the

comparison reveals a dramatic process of polarization between the progress enjoyed by the

inhabitants of developed countries and that achieved by the rest of the world’s population.

Figures 8, 9 and 10 illustrate the rapid widening of the GDP-per capita gap between the developed

countries and developing regions as a whole (even when measured in PPP terms). In this case,

even the progress resulting from the vigorous growth of the Chinese economy seems totally

inadequate to catch up with industrialized countries. High percentage growth rates in Asia are

achieved on an extremely low initial base in per capita terms, whereas the smaller percentage

increases achieved in developed countries translate into very much larger increases in absolute

terms (see figures 8 through 10).

SOURCE: OMC.

SHARE IN WORLD EXPORTS (Percentage)Figure 7

Developedcountries

68%

Transitioncountries 7%

Latin Americaand Caribbean 5%

Middle Eastand Turkey 11%

China 1%

Developing Asiaexcluding China 3% Developing

Africa 5% 1980

Developedcountries

79%

Transitioncountries 3%

Latin Americaand Caribbean 4% Middle East

and Turkey 5%

China 2%Developing Asiaexcluding China 4%

DevelopingAfrica 3%

1990Developedcountries

71%

Transitioncountries 6%

Latin Americaand Caribbean 5%Middle East

and Turkey 4%

China 6%

DevelopingAsia excluding

China 6%

DevelopingAfrica 2%

2003

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SOURCE: FAO/RLC based on IMF, WEO april 2003.

GROWTH OF GDP PER CÁPITA MEASURES IN PPP (Dollars)Figure 8

0

4,000

8,000

12,000

16,000

20,00019

80

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

Africa

Developing Asia

Middle East and Turkey

Latin America and Caribbean

Developing economies

SOURCE: FAO/RLC based on IMF, WEO september 2003.

GDP PÉR CÁPITA (PPP) IN THE REGIONS OF THE WORLD (Dollars)Figure 9

AfricaDeveloping AsiaDevelopnig Economies Middle East and TurkeyLatin America and Caribbean

0

5,000

10,000

15,000

20,0001980

1985

19901995

2000

44

Figure 10, showing the trend of GDP per capita measured in PPP terms, also eloquently illustrates

the widening gaps in per capita GDP between developed countries and the rest of the world. As

mentioned above, only in Asia is GDP per capita (weighted by purchasing power) growing in

relation to the average of industrial countries, the ratio between the two having risen from 8.2%

in 1980 to 14.8% in 2001. In the other developing regions, however, the ratio is falling dramatically.

In 1980, Africa had a GDP per capita that was already very low in comparison to industrialized

countries (equivalent to just 16%); nonetheless, by 2001, far from having risen, it was now just

9.2% of the developed country average. In 1980, GDP per capita in the Middle East was equivalent

to one third (33.0%) of the average for developed countries, but by 2001 it was barely over one

fifth (21.3%). GDP per capita in Latin America was slightly over one half (53.3%) of the developed-

country average in 1980; but by 2001, it had declined to just over one third (36.4%). The fact

that this comparison is based on purchasing power parity, renders the acute economic polarization

that has obviously accompanied the globalization process (see figure 4 and table 10).

0

22,000

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

1980 1990 2001

6,539

3,483

2,158

1,046533

12,573

4,948

3,065

1483

1,280

19,893

7,232

4,237

2,948

1,835

SOURCE: FAO/RLC based on IMF, WEO september 2003.

TRENDS OF GDP PER CÁPITA, MEASURED IN PPP TERMS (Dollars)Figure 10

Developing economies Latin America and Caribbean Middle East and Turkey Africa Developing Asia

GROSS DOMESTIC PRODUCT PER CÁPITA, MEASURED IN PPP TERMS (Dollars)Table 4

Country 1980 1985 1990 1995 2000 2001

World 2,909 3,964 5,103 6,003 7,361 7,599

Developed economies 6,539 9,274 12,573 15,406 19,333 19,893

Developing countries 1,110 1,524 1,987 2,715 3,475 3,635

Africa 1,046 1,290 1,483 1,551 1,775 1,835

Developing Asia 533 860 1,280 2,022 2,766 2,948

Middle East and Turkey 2,158 2,687 3,065 3,458 4,172 4,237

Latin America and the Caribbean 3,483 4,195 4,948 6,113 7,128 7,232

Transition economies 4,212 5,980 7,478 5,423 6,529 7,032

SOURCE: GDP, IMF, WEO september 2003/ Population FAOSTAT.

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Acute economic polarization is also prevalent inside developing countries, where a large

proportion of income is concentrated in the hands of the few. The combined result of concentration

among countries and among population groups within developing countries, generates a vast

chasm separating them from people living in the developed world, and a small minority of the

inhabitants of developing countries who enjoy income and living standards that are far higher

and radically different from the daily grind of poverty faced by the vast majority of the world’s

population.

At the same time, the globalization process and the development of telecommunications are

causing lifestyles to become more similar, thereby making the contrasting capacities for

consumption and progress increasingly evident.

Given the near universal acceptance of the market economy as the only viable economic system

available, and the enormous effect that international, productive, commercial and financial

inter-relationships have on national economies, developing countries need to find solutions to

reverse this growing polarization. The lack of other alternatives shows that is not a matter of

more or less integration into the international economy, but of specific forms of relationship

in the inevitable deepening of their involvement. It is essential to make faster progress in

developing capacities to take advantage of opportunities and reduce the negative effects of

globalization, and to promote structural changes aimed at fostering greater national integration,

less exclusion and greater equity.

E. OBSTACLES TO DEVELOPMENT AND TRADE PARTICIPATION

The process of international relations is dominated by conditions prevailing in the developed

economies, both because of the importance of those economies in driving world demand and

because of their share in international capital flows. Currently there are major distortions in

both aspects that obstruct mechanisms of coordination with the world economy and the potential

for harnessing this to achieve greater economic and social development.

Firstly, financial flows to developed countries have reversed direction in the last few years, with

capital outflows related to earlier inflows now outweighing the inflow of new capital to developing

countries. This means that developing countries have to generate trade surpluses to finance the

capital outflow; so, notwithstanding their small share in world economic output, domestic absorption

in these countries needs to be below the income generated by their GDP.

The year 2003 marked the completion of seven consecutive years of net resource transfers from

developing to developed countries, with the outflow attaining a record level of US$ 247.5 billion

in that year. Apart from representing a reversal of the efficient flow that would direct capital

towards countries where it is lacking, in order to exploit their natural resources and abundant

labour supply, this financial transfer has exacerbated the difficulties that developing countries

have to face as a result of the problematic international setting. To make matters worse, total

development assistance flows shrank from US$ 53 billion in 1990 to US$ 51.3 billion in 2000,

declining from 0.33% to 0.22% of developed-country GDP (see table 5).

46

In addition, over the last few years, developing countries have had to set aside roughly one fifth of

their total export earnings simply to meet interest and amortization payments on their external

debt; yet the amounts destined for debt service and the debt itself both continue to rise. As will be

seen in the following chapter, this issue is particularly important in Latin America (see table 6).

Developing countries face major difficulties in participating on international markets. Generally

speaking, the structural conditions that represent the starting point for exploiting the

opportunities opened up by trade liberalization—and for meeting the concomitant competitive

challenges—are heavily biased against developing countries. Major differences exist in productive

capacities as well as in sanitary conditions and quality standards. Developing countries also

suffer from serious shortcomings in transport and communications infrastructure, which raise

production costs in large areas of the world; in contrast, these deficiencies have relatively less

effect on imports that reach the main cities and consumption centres. Developing countries

also often face higher financial costs, both as a result of their borrowing levels and difficult

access to external credit, and because of inflationary pressures and major rigidity in public

expenditure requirements, stemming from accumulated social deficits. This results in interest

rates that are substantially higher than those prevailing in developed countries. Less developed

institutions, public administration, services, domestic trade channels and regional markets

also imply lower levels of efficiency and competitiveness. The limited capacity of developing

countries to invest in research and development is another key factor worsening the competitive

asymmetry.

These differences in themselves pose a major challenge for developing countries to overcome

their structural disadvantages and compete on international markets. Yet they are compounded

NET TRANSFER OF FINANCIAL RESOURCES TO DEVELOPING AND TRANSITIONECONOMIES 1995-2003 (Billions of dollars)

Table 5

1995 1996 1997 1998 1999 2000 2001 2002 2003a

Developing economies 43.6 21.2 -3.4 -36.8 -122.8 -183.3 -151.3 -203.5 -247.5

Africa 6.6 -5.0 -4.31 15.9 6.0 -23.9 -11.8 -3.4 -15.8

Sub-Sahara (excluding Nigeria and South Africa) 7.7 5.7 7.6 12.2 9.0 3.2 8.3 6.6 6.6

East and South Asia 26.2 23.8 -28.7 -130.2 -134.1 -108.2 -107.9 -138.6 -144.6

Western Asia 11.9 0.4 4.7 31.3 -6.6 -51.0 -37.2 -30.3 -36.1

Latin America and the Caribbean -1.1 2.0 24.8 46.1 11.8 -0.2 5.5 -31.1 -51.1

Transition economies 3.3 0.7 17.2 16.8 -5.9 -32.6 -20.0 -17.6 -27.8

Heavily indebted poor countries 6.9 7.3 7.8 9.6 10.0 6.5 8.3 8.7 11

SOURCE: World Economic and Social Survey 2004 (United Nations publication).a/ Preliminarily estimated.

DEVELOPING COUNTRIES: EXTERNAL DEBT, DEBT SERVICE AND INDICATORS(Average 2001-2005)

Table 6

Region External Debt Interest Debt/ Service/ Debt/ Service/ Interest/

debt service GDP GDP Exp Exp Exp(Billions of US$) (Porcentage)

Developing countries 2,154.1 334.6 98.0 35.9 5.6 116.2 18.1 5.3

Latin American and Caribbean 742.8 156.9 47.2 40.7 8.6 195.5 41.4 12.5

Africa 269.5 27.4 9.8 51.2 5.3 151.1 15.6 5.6

Developing Asia 701.6 104.6 28.0 25.9 3.9 76.2 11.4 3.0

Middle East and Turkey 440.2 45.8 13.0 47.4 4.9 118.1 12.2 3.5

SOURCE: FAO/RLC based on IMF, WEO april 2004.

47

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by asymmetries that have been a prominent feature of multilateral trade liberalization in recent

decades. The differential treatment of sectors such as agriculture or textiles has imposed large

losses on developing countries. Another relevant issue concerns current arrangements in relation

to intellectual property rights.

Protectionist measures imposed by developed countries in the form of tariffs or non-tariff

barriers, together with policies that lead to the accumulation of surpluses and distort international

markets, further impede developing-country participation. Despite progress made on trade

liberalization following several multilateral negotiating rounds, the effects of industrial-country

policies continue to obstruct developing countries’ access to international markets.

F. PROTECTION AND SUPPORT FOR AGRICULTURE IN DEVELOPED COUNTRIES

The average bound tariff for non-agricultural products entering the European Union and the

United States is very low and would not represent a significant entry barrier to those markets.

Nonetheless, the tariff structures maintained by those countries are extremely heterogeneous,

including specific duties per physical unit and mixed tariffs, supported by seasonal quotas and

special regimes for several products. The maintenance of significant tariff peaks and a high degree

of escalation as a product’s processing level increases, undermines the effectiveness of efforts

made by developing countries to diversify their exports. Import requirements and formalities in

developed countries are also complex, involving compliance with demanding regulations on health

protection, safety and the environment, in addition to regulations on certification, labelling,

misleading publicity and consumer protection7.

However agricultural policies pursued by developed countries cause major distortions which

seriously hinder market access for developing countries. Progress made in reducing protection

in developed countries, and greater efforts to ensure international markets function efficiently

have been insufficient. The support provided to farmers is currently less than in the 1980s,

particularly when measured as a percentage of GDP; subsidy mechanisms have also been

reoriented towards less distorting policies. Nonetheless, overall levels of assistance to agriculture

continue unabated, averaging US$ 324 billion per year in 2001-2003 (US$ 304 billion per year

in 1986-1988). Producer support continues in the range of US$ 240 billion per year, most of

which (76%) continues to be linked to production levels, price support, payments per product

or input subsidies (see table 7).

AGRICULTURAL SUPPORT IN OECD COUNTRIESTable 7

1986-88 2001-2003

Total agricultural support (TSE) (millions of dollars) 303,720 324,053

Producer support (PSE) a 241,077 238,310

General services (GSSE) 40,946 57,849

Fiscal transfers to consumers 21,697 27,894

PSE (percentage) 37.2 31.2

Producer NPC 1.56 1.31

PSE per farmer 10 11b

PSE per hectare 183 182b

SOURCE: OECD, Agricultural Policies in OECD Countries, 2003.a/ Includes, among other things, subsidies granted on the basis of production level, planted area, number of animals, levels of inputs used, incomesand landownership titles.b/ 2000-2002.

7 ECLAC, Latin America and the Caribbean in the World Economy, 2001-2002.

48

The proportion of farmers’ incomes obtained from support measures varies from under 5% in

Australia and New Zealand to over 60% in Korea, Iceland, Japan, Norway and Switzerland. The price

supplements8 received by farmers over and above border prices also varies widely. In Australia and

New Zealand, producers receive border prices only; in most OECD countries the prices received by

farmers are between 10% and 20% above border prices; in the European Union the supplement reaches

as high as 33%; in Iceland and Japan, the prices received by farmers are more than double the level of

border prices; and in Korea, Norway and Switzerland nearly triple.

The average support provided to each farmer is under US$ 5,000 per year in eight countries

(Australia, Czech Republic, Hungary, New Zealand, Mexico, Slovakia and Poland); between US$

10,000 and US$ 30,000 per year in Canada, the United States, Iceland and Japan; and more than

US$ 30,000 per year in Switzerland and Norway.

The support provided per hectare of agricultural land is under US$ 100 per in Australia, Canada,

Iceland, Mexico and New Zealand; between US$ 100 and US$ 200 per hectare in the Czech

Republic, the United States, Hungary, Poland, Slovakia and Turkey; US$ 670 per hectare in the

European Union; over US$ 2,000 per hectare in Switzerland and Norway; and roughly US$

10,000 per year per hectare in Japan and Korea (see table 8).

8 Measured as the producer’s nominal protection coefficient (NPC) calculated by the OECD.

SOURCE: OECD.

AGRICULTURAL SUPPORT IN OECD COUNTRIESFigure 11

Others 14%Otros 12%

European Union37%

European Union36%

United States24%

United States29%

Japan 20%

Korea 6%Korea 5%

1986-1988Total support estimate for OECD

countries as a groupU$ 303,720 Millions

2001-2003Total support estimate for OECD

countries as a groupU$ 324,053 Millions

Japan17%

In 2001-2003 producer support accounted for 31% of farmers’ incomes in OECD countries (37% in

1986-1988), with farmers in those countries receiving prices that were 31% higher than border prices

(56% in 1986-1988). There are also major differences both between countries and between products.

The European Union and Korea have broadly maintained their 1980s share of agricultural

subsidies, in terms of both total assistance and producer support. In contrast, Australia, New

Zealand, Canada and Japan, among others, now account for a smaller share, whereas United

States’ share has increased (see figure 11).

49

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Over half of these subsidies continue to be channelled towards producers of milk, bovine meat

and cereals (rice, wheat and maize). Nonetheless, large and growing subsidies are also paid to

producers of pig meat and chicken (see table 9).

AGRICULTURAL SUPPORT BY COUNTRY 2001-2003Table 8

OECD 324,053 238,310 11 182 31 1.31

Australia 1,282 1,552 2 2 4 1.00

Canada 6,331 7,002 10 57 19 1.12

Korea 20,253 21,465 23 9,307 66 2.78

Czech Republic 1,091 32,058 5 196 23 1.17

United States 95,128 44,239 19 112 21 1.13

Hungary 1,846 391,932 5 205 24 1.15

Iceland 164 12,741 27 65 63 2.33

Japan 56,489 5,359 23 9,828 59 2.37

Mexico 8,050 72,005 1 71 22 1.21

New Zealand 221 221 1 5 1 1.01

Norway 2,857 20,741 38 2,254 68 2.70

Poland 2,129 7,379 1 114 15 1.17

Slovakia 389 14,005 3 127 21 1.12

Switzerland 5,483 7,586 30 2,958 73 2.91

Turkey 7,618 8,001.477 n.c. 125 18 1.19

European Union 114,720 102,708 15 670 35 1.33

PSE per full-time

farmer equivalent

(Thousands of dollars)

PSE per hectare of

agricultural land

(Dollars)

Total support

estimate

(Millions of dollars)

Producer

NPC

(%)PSE

(%)

Producer

support

(Millions of dollars)

SOURCE: OECD Agricultural Policies in OECD Countries, 2004.a/ Based on data OECD, Agricultural Policies in OECD Countries, 2003.

PERCENTAGE SUPPORT FOR AGRICULTURE BY PRODUCT (OECD countries)Table 9

Percentage PSE 2001-2003 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003a

Rice 77.8 82.0 81.7 78.5 76.8 78.3 77.5 80.5 82.9 79.2 81.5 75.6 72.6 74.2 78.9 82.1 80.8 78.2 74.3

Sugar 51.3 57.5 57.0 46.8 37.6 41.3 51.9 55.9 50.9 40.2 48.0 43.0 44.5 51.1 59.9 51.2 47.0 51.0 55.8

Milk 47.7 65.6 59.5 51.0 49.6 61.0 58.0 57.0 56.8 55.1 49.5 48.5 48.8 57.2 53.1 44.8 45.8 48.4 48.9

Other grains 40.9 56.9 59.1 38.5 32.6 45.2 47.6 46.0 53.2 54.5 41.8 33.8 37.9 53.4 52.4 42.8 40.5 41.3 40.9

Sheep meat 38.1 50.4 55.4 58.9 57.5 57.5 57.5 55.2 45.4 49.3 55.3 44.2 37.8 45.4 46.3 39.2 39.8 32.0 42.4

Wheat 36.8 49.8 52.3 39.8 25.0 37.2 49.6 38.7 42.5 40.6 28.5 26.7 29.6 40.4 45.7 39.9 36.7 36.3 37.5

Bovine meat 32.8 36.0 30.7 28.0 27.9 29.7 33.1 31.0 27.8 28.1 31.8 33.3 34.9 34.7 33.6 29.3 29.7 33.6 35

Others 25.7 30.4 29.4 26.9 25.5 26.5 30 28.8 30.1 28.9 26.6 24.6 23.3 26.3 27.8 26.4 24.9 25.5 26.7

Maize 24.3 43.0 44.5 31.8 24.9 28.0 27.4 30.2 28.7 23.3 15.2 13.8 18.2 28.8 34.3 34.9 28.0 23.4 21.4

Oilseeds 23.6 28.0 26.4 25.1 27.9 29.7 29.7 25.7 24.7 19.9 19.5 18.6 15.7 22.0 26.3 30.6 29.6 19.1 21.9

Pig meat 21.0 18.8 11.6 25.0 16.4 10.4 15.1 7.7 18.2 21.4 18.6 16.9 15.7 19.8 29.9 20.9 19.1 22.8 21.2

Poultry 17.0 15.5 23.8 19.6 18.1 21.0 20.3 23.0 21.5 22.1 22.4 20.0 16.8 15.0 16.4 17.1 15.3 19.1 16.6

Eggs 7.6 16.9 15.0 18.5 18.9 12.1 12.2 16.9 15.3 13.4 16.8 11.7 10.6 13.4 13.7 10.0 9.0 8.4 5.37

Wool 5.4 8.9 7.2 4.1 4.5 19.0 17.8 17.9 17.6 9.7 10.7 8.5 7.7 7.2 6.3 5.3 5.0 5.5 5.55

SOURCE: Agricultural Policies in OECD Countries, 2004.a/ Provisional data.

50

On average, farmers in OECD countries obtain a large percentage of their income in the form

of support. In some products, the proportion is relatively lower—roughly 5% of total income in

the case of wool and eggs, and between 16% and 26% for chicken, pork, maize and oilseeds. In

some products support varies between 35% and 40% (wheat, and bovine meat); in milk and

sugar it is roughly half; and in the case of rice producers, as much as 75% of their income comes

from support (see table 10 and figure 12).

PRODUCER SUPPORT BY PRODUCT (PSE) (Millions of dollars)Table 10

Product 1986-88 2001-2003

Total 241,077 238,310

Bovine meat 22,230 27,513

Eggs 2,638 1,377

Maize 12,693 9,694

Milk 48,107 43,393

Oil seeds 5,387 6,680

Other grains 11,197 8,208

Pigmeat 8,762 10,624

Poultry 4,893 6,514

Rice 26,932 22,254

Sheepmeat 4,677 3,842

Sugar 5,777 6,127

Wheat 18,664 15,173

Wool 287 113

Other 68,833 76,800

SOURCE: OECD, Agricultural Policies in OECD Countries, 2004

SOURCE: OECD, Agricultural Policies in OECD Countries, 2004.

OECD COUNTRIES: AGRICULTURAL SUPPORT BY PRODUCT (Average 2001-2003)Figure 12

Ric

e

Su

gar

Milk

Oth

er g

rain

s

Sh

eep

Mea

t

Wh

eat

Bov

ine

mea

t

Oth

ers

Mai

ze

Oils

eed

s

Pig

mea

t

Po

ult

ry

Eg

gs

Wo

ol

100

90

80

70

60

50

40

30

20

10

0

(Per

cen

tag

e)

P S E

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The difference between the average price received by farmers in OECD countries and the corresponding

border price also varies greatly from product to product. Wool producers receive the border price only;

in the cases of wheat, maize, eggs and sheep meat, income received is about 10% above the border price;

for producers of sheep and pig meat, chicken, and bovine meat, it is 20%. The largest differences are

in milk (80%), sugar (110%) and rice (333%) (see table 11 and figure 13).

As in the case of external debt, the negative impact of the asymmetries related to negotiations on

trade of agricultural products affect particularly Latin American countries severely (see chapter II).

PRODUCER NPC IN OECD COUNTRIES (Percentage)Table 11

Product 1986-88 2001-2003

Total 156.0 130.9

Rice 490.8 433.4

Sugar 233.1 211.5

Milk 269.9 182.4

Other 139.3 126.6

Bovine meat 141.0 126.4

Pigmeat 130.5 122.2

Sheepmeat 187.2 119.4

Poultry 133.2 116.9

Oilseeds 127.2 109.1

Wheat 169.5 107.2

Other grains 197.2 106.8

Maize 129.8 105.8

Eggs 122.3 105.7

Wool 100.9 101.1

SOURCE: OECD, Agricultural Policies in OECD Countries, 2004

SOURCE: OECD, Agricultural Policies in OECD Countries, 2004.

PRODUCER NPC IN OECD COUNTRIESFigure 13

Ric

e

Su

gar

Milk

Oth

ers

Bov

ine

mea

t

Pig

mea

t

Sh

eep

mea

t

Po

ult

ry

Oils

eed

s

Wh

eat

Oth

er g

rain

s

Mai

ze

Eg

gs

Wo

ol

500%

450%

400%

350%

300%

250%

200%

150%

100%

50%

0%

1986-88 2001-2003 100%

52

One out of every six adults living in developing countries is illiterate. There are also 115 million

children who are not receiving any educational programme. At current rates of progress, only

Latin America and the Caribbean in the developing world will achieve the goal of universal

primary education by 2015.

Two thirds of illiterate people are women, and three fifths of children without education are girls.

The Millennium Development Goals also propose closing the gender gap in education by 2015.

SOURCE: LAC update of FAO/RLC based on SOFI 2002.

PATH TOWARDS THE GOAL OF THE WORLD FOOD SUMMIT (Number of countries)Figure 14

Hunger increasing Progress too s low Progress suff ic ient

-35 -30 -25 -20 -15 -10 -5 0 5 10

Asia and the Pacific

Latin America and Caribbean

Near East andNorth Africa

Subsaharan Africa

783

7125

574

6239

Loosing ground Progress

G. THE COSTS OF UNDERDEVELOPMENT

The difficulties facing developing countries in achieving a level of participation in the

international economy that would allow sustained economic growth, serve to perpetuate living

conditions which are totally at odds with the possibilities generated by technological progress

and the living standards generally attained in developed countries. Much of the world’s population

continues to suffer on a daily basis from the effects of poverty, hunger, disease, illiteracy,

environmental degradation and multiple forms of discrimination.

According to the conclusions of the United Nations Millennium Summit, 1.101 billion people are currently

living on less than a dollar day and 2.733 billion live on less than two dollars a day. Up to 29% of the

population of low- and middle-income countries are living in poverty. The Millennium Development

Goals proposed halving this proportion (14.5%) by 2015. A recent World Bank study claims that for this

to actually happen, developing countries need to grow at an average rate of 3.6% per year. Yet, as noted

above, annual growth in the 1990s has been below 2.0%.

There are 852 million undernourished people in the world, of whom 96% live in developing countries.

The numbers of undernourished persons and underfed children in middle- and low-income countries

have both diminished during the past decade; but there are still 815 million undernourished people

in those countries, including 150 million children. Furthermore, the pace of progress has been

slowing, and, if current rates persist, it will be impossible to achieve the target of halving the number

of undernourished people by 2015 (see figure 14).

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Roughly 100 children out of every thousand live births in developing countries die before their

fifth birthday; and more than 10 million children die each year from preventable diseases. At the

present rate of progress, only Latin America and the Caribbean in the developing world look likely

to achieve the target of reducing the infant mortality rate by two thirds.

Over 500,000 women die during pregnancy or in childbirth every year; as much as 99% of maternal

mortality occurs in developing countries, and the vast majority of such deaths are the result of

infections, haemorrhaging or inadequately attended abortions. The target of reducing maternal

mortality by three quarters by 2015 is seen as feasible for Latin America and the Caribbean, but

progress in other regions of the world falls far short of the rate needed.

There are currently 42 million people in the world suffering from AIDS, of whom 39 million live

in developing countries (nearly 29 million in Africa). This pandemic has already caused 60

million deaths (13 million in Africa); 3.1 million people died from this cause in 2002 (2.4 million

in Africa). Nonetheless, the success achieved by Brazil and other countries, such as Senegal,

Thailand and Uganda, shows that it is possible to detain the spread of HIV and bring the epidemic

under control. Tuberculosis causes over 2 million deaths per year, mostly in Asia; malaria is an

endemic disease in over 100 countries, and infects 300 million people causing 1 million deaths

annually. The Millennium Development Goals propose to halt the growth and start reducing

propagation of the main infectious diseases by 2015.

Over 1 billion people in developing countries lack access to potable water, and 2.4 billion do not

have adequate sanitation services. The target of halving the percentage of people lacking drinking

water seems achievable for the world at large, except for Sub-Saharan Africa. In contrast, on

current trends, the goal of adequate sanitation for 100 million people is unlikely to be achieved

until after 2015 in most regions of the developing world.

Eradication of hunger and poverty, and sustained progress in terms of the quality of life for

most of the world’s population represents a huge challenge both for the economic-growth

strategies of developing countries and for the global institutional framework. The Millennium

Development Goals include an eighth goal: to create a global partnership for development, with

targets relating to assistance, trade, and debt relief (see figure 15).

SOURCE: UN Statistic Division 2004.

OFFICIAL DEVELOPMENT ASSISTANCE (Billions of dollars)Figure 15

1990 2001

60

50

40

30

20

10

0

To developing countries To least developed countries

53.0 52.3

14.411.8

54

MILLENNIUM GOAL N° 8. DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENTTable 12

GOALS

Target 12: Develop further an open trading and financial system that is rule-based, predictable and non-

discriminatory. Includes a commitment to good governance, development and poverty reduction—nationally

and internationally.

Target 13: Address the least developed countries’ special needs. This includes tariff- and quota-free access for

their exports; enhanced debt relief for heavily indebted poor countries; cancellation of official bilateral debt;

and more generous offic ial development assistance for countries committed to poverty reduction.

Target 14: Address the special needs of landlocked and small island developing States (through the Programme

of Action for the Sustainable Development of Small Developing Island States and the results of the Twenty-

Second Special Session of the United Nations General Assembly).

Target 15: Deal comprehensively with developing countries’ debt problems through national and international

measures to make debt sustainable in the long term.

Target 16: In cooperation with the developing countries, develop decent and productive work for youth.

Target 17: In cooperation with pharmaceutical companies, provide access to affordable essential drugs in

developing countries.

Target 18: In cooperation with the private sector, make available the benefits of new technologies—especially

information and communications technologies.

In a world order that is increasingly globalized and interdependent, it is essential to achieve

coordinated international action on priorities that have global scope. This has been clearly

acknowledged in several domains, and recently has been forcefully verified in the fight against

terrorism. Yet, compared to terrorism, poverty is responsible for many more deaths and has a

much larger health impact ; it generates greater difficulties for economic and social progress,

and provokes a form of violence which, albeit less spectacular, is no less serious in terms of

human cost. Reducing the number of poor people in the world requires coordinated global action

in the fight against poverty. Achievement of Goal 8 to create a global partnership for development

should be a key priority for the international community, in order to make progress in terms of

social justice, and lay more solid foundations for consolidating peace, in an ever more closely

knit and interactive form of coexistence (see table 12).

SOURCE: UN 2004.

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3

II. MACROECONOMIC FRAMEWORK

A. GDP TRENDS

Economic growth in Latin America and the Caribbean is estimated at 5.5 percent in 2004, the

highest rate in the last 25 years. Internacional conditions played a decisive role in this rapid

progress. The world economy also grew faster than at any time in the last few decades, mainly

driven by imports to the United States and China, wich boosted demand and pushed up commodity

prices, to the benefit of the region s exporting countries. On the other hand, the strong growth

rate reflects economic recovery in a number of Latin American countries after the 2001-2002

recession. Such progress, together with favourable though uncertain conditions in 2005, allows

for some optimism regarding the severe problems facing economic growth in the region.

From a medium and long-term standpoint, the stagnation of the Latin American and Caribbean

economies in 2001 and 2002, which continued during the first half of 2003, served to confirmed

three seriously negative features of the regional economic growth process over last few

decades: growth has been weak, unstable and highly vulnerable. A fourth characteristic, its

concentration, analysed below completes the troublesome panorama of recent economic

development in the region.

The recovery that began in the second half of 2003 and generated exceptional growth in 2004,

represents the start of the regional fifth economic growth cycle in the last 20 years. The drop

in the regional GDP registered in 2001, had cut short the fourth cycle of economic recovery after

a single year of relatively satisfactory growth (3.8% in 2000). Latin America and the Caribbean

did not manage to regain sustained economic progress since the external debt crisis of the early

1980s (see figure 16).

58

LAC: GROWTH OF GROSS DOMESTIC PRODUCT, CONSTANT PRICES 1970-2005(Annual growth rate)

Figure 16

0.0

-1.0

-2.0

1.0

2.0

3.0

4.0

5.0

6.0

-2.5

70s

SOURCE: FAO/RLC based on ECLAC.

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

197

0-8

0

198

1

198

2

198

3

20

04

20

05

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

The short-lived growth phase midway through that decade (1984-1987) was brought to an abrupt

halt by an episode of uncontrolled inflation affecting Argentina, Brazil, Nicaragua, Peru, among

other countries (representing the culmination of adjustment periods following the debt crisis),

which resulted in zero or negative growth between 1988 and 1990. The resumption of regional

economic growth in the first half of the 1990s was interrupted by the Mexican “tequila crisis”

of December 1994; after which the Asian crisis and the Russian moratorium resulted in falling

commodity prices and dwindling capital flows to the region, which in turn led to regional

economic stagnation in 1998 and 1999. Most recently, the growth alluded to in 2000 was

frustrated by the stock market crisis of 2001-2002.

The new period of regional economic growth that began in 2004 is set to continue in 2005,

possibly at a slower rate of around 4%. There are several grounds for hoping that this new cycle

of progress will be more sustained, including: the healthy macroeconomic framework prevailing

in most countries of the region; the current account surplus that should make it possible to

maintain growth without generating major tensions on external accounts; and a backlog of

consumer demand repressed by the most recent recession, the recovery of which could underpin

domestic demand over the next few years9.

Nonetheless, economic progress in Latin America and the Caribbean remains highly dependent

on trends in the international economy, where the recovery of the United States economy

plays a key role and several major risks persist. Imbalances in the United States economy are

greater than at any time in the last few decades. The fiscal deficit is thought to exceed 4%

of GDP, and the current account deficit is equivalent to 5.7% of GDP. Financing this deficit

relies mainly on official flows, since private capital flows are still relatively weak following

their surge in 2000. Transfers mainly stem from the Governments of Japan and other Asian

countries as they try to prevent their local currencies from appreciating. The depreciation

of the dollar against the euro and to a lesser extent against the yen, and the possibility that

the United States may have to tighten fiscal policy, which could take the momentum out of

the growth process, raises doubts about the extent to which the United Sates economy will

be able to continue stimulating world growth.

The overall medium-term results achieved by the Latin American and Caribbean economy, depicts

extremely weak progress that has now lasted for a quarter of a century. The stagnation of the

1980s (the “lost decade”), when GDP grew by just 1.1% per year, was followed by a period of modest

expansion between 1991 and 1997 (3.4% per year). Since then the annual rate has fallen back to

just 1.6%. Thus the average rate of growth over the last 25 years is just 2.2% — way below the levels

of 5.7% or higher that were recorded in earlier decades.

In addition to the slow pace of progress, its instability has significant negative effects, mainly

because job losses in bad years are not fully restored in good ones, so the effects on the quantity

and quality of employment, and on poverty, are even more severe.

Despite sometimes large differences among countries, the behaviour of most national economies

does not stray far from the average, as clearly illustrated by the widespread nature of stagnation

during the external debt crisis. Economic trends during the 1990s have also been highly

generalized. Although the recovery in the early years of the decade was slightly more concentrated

599 ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2004.

in several southern cone and Central American countries, the economic slowdown of recent

years has affected all Latin American countries, with only a few (mainly Caribbean) countries

immune (see figure 17).

SOURCE: FAO/RLC based on ECLAC.

Figure 17 LAC: AVERAGE GROWTH OF GDP (Percentage)

1990-97 1997-04

-4.0 -2.0 0.0 2.0 4.0 6.0 8.0

Uruguay

Argentina

Venezuela

Dominica

Haiti

Paraguay

Guyana

Saint Lucia

Suriname

Jamaica

Barbados

Colombia

Brazil

Ecuador

Bolivia

El Salvador

Saint Vincent and the Grenadines

Peru

Saint Kitts and Nevis

Grenada

Mexico

Honduras

Chile

Guatemala

Panama

Cuba

Antigua and Barbuda

Costa Rica

Nicaragua

Dominican Republic

Belize

Trinidad and Tabago

60

Output per capitaAs a result of regional GDP evolution, the growth per capita over the last decade is unsatisfactory.

Following the decline in the 1980s (negative growth of -0.5% per year), annual growth from 1990

to 2004 averaged just 1%, well below the 3% achieved before the debt crisis. Moreover, sharp

fluctuations also had negative consequences for the fight against poverty and produced an

economic environment marred by crises (see figure 18).

Within the generally slow and unstable growth achieved across the region over the last decade,

there have been significant differences between countries. Generally speaking, the Caribbean

countries grew more rapidly in per capita terms, whereas among the Latin American countries

only Chile expanded faster than 3% per year. In most Latin American countries, per capita

output remained virtually flat, and in four countries it actually declined over the decade (see

figure 19).

Despite these significant differences, economic growth faces broadly similar problems across

the region, firstly in historical-structural terms, and because the various countries share key

characteristics in terms of international participation; and secondly because of their

interdependence stemming from subregional integration and bilateral economic agreements.

The difficulties faced by the Latin American and Caribbean economies in achieving rapid and

sustained economic growth, and their disappointing performance of recent years, can thus

partly be explained by common factors, relating particularly to financial flows and the effects

of the changes taking place on international markets.

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

61

LAC: GROWTH OF GROSS DOMESTIC PRODUCT AT CONSTANT PRICES 1970-2005(Annual growth rate)

Figure 18

SOURCE: FAO/RLC based on ECLAC.

0.0

-1.0

-2.0

-3.0

1.0

2.0

3.0

4.0

5.0

-4.0

-5.0

197

0-8

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

70s

62

B. INCIDENCE OF CAPITAL FLOWS

Although the increasing globalization of economic processes has opened up new growth

possibilities for Latin American and Caribbean countries, it has also greatly increased the

influence exerted by the international setting over the pace of progress in the region’s economies.

This has generated significant procyclical forces. In periods of vigorous economic growth,

burgeoning world markets generate opportunities for profitable productive activities in the

countries of the region, which makes them more attractive to foreign capital, thereby generating

a process of greater investment and stronger growth. In contrast, when global economic activity

falters, export prices fall, the profitability of export activities declines and growth slows down.

In such conditions, the regional economies become less attractive to foreign investment, access

to financing dries up, and financial resources flow out; as a consequence, the cost of capital

rises and economic activity slows still further. This, in turn, generates less employment and

less domestic demand, thereby reinforcing the stagnation.

SOURCE: FAO/RLC based on ECLAC/FAOSTAT.

-2.0 -1.0 0.0 1.0 2.0 3.0 4.0

Guyana

Dominican Republic

Grenada

Saint Kitts and Nevis

Trinidad and Tabago

Chile

Antigua and Barbuda

Costa Rica

Saint Vincent and the GrenadinesPeru

El Salvador

Belice

Panama

Mexico

Bolivia

Barbados

Guatemala

Brazil

Nicaragua

Argentina

Uruguay

Colombia

Cuba

Saint Lucia

Dominica

Honduras

Ecuador

Suriname

Jamaica

Paraguay

Venezuela

Haiti

Figure 19 LAC: AVERAGE GROWTH OF GDP PER CAPITA (1990-04)

Capital flows, which have been a driving force in contemporary economic growth and were clearly

implicated in the widespread collapse of growth in 2001 and 2002, are concentrated mainly in the

developed world. Nonetheless, in relation to GDP, they are very important for a number of developing

countries, particularly in Latin America and the Caribbean.

Overall, between 75% and 80% of FDI flows were channelled to developed countries during the

1970s and 1980s; of the remainder, Latin America and the Caribbean received about half. Starting

in the 1990s, as the volume of investment began to expand, the annual variation has also

increased substantially, and developing countries have been receiving between 20% and 40%

of the total. The largest FDI flows to developing countries are currently going to Asia, with a

major increase in China in particular (see figure 20).

Nonetheless, Latin America and the Caribbean is the region in which FDI flows represent the

largest share of GDP. In 1970, foreign direct investment into the region amounted only up to

US$ 1.586 billion. During the following decades it grew, albeit with fluctuations, to reach nearly

US$ 10 billion by 1990, and by 1994 the figure stood at US$ 30 billion. From then onwards FDI

inflows grew exponentially before peaking in 1999 at over US$ 108 billion. The most recent

crisis caused a reduction of capital flows to the region, however, and levels over the three

following years fell back to US$ 49 billion in 2003 (see figure 21).

Whereas capital inflows represented about 1% of regional GDP during the 1980s, their relative

importance began to increase from 1994 onwards, climbing to 2.1% in that year before soaring to a

peak in 1999 equivalent to 6.1% of regional GDP. This clearly improved the possibilities of financing

development and economic growth in the region10 (see figure 22),

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

63

SOURCE: UNCTAD, december 2004.

INFLOWS OF FOREIGN DIRECT INVESTMEMT (1970-2003) (Millions of dollars)Figure 20

Mill

ion

s of

do

llars

1970 19

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

01

2002

2003

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1970 19

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

85

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

World Developed countries Developing regions Latin America and Caribbean Central and Eastern Europe

10 The figures cited are provided by UNCTAD. The ECLAC data used below for each country’s FDI/GDP ratio exclude FDIin Aruba, Anguilla and Montserrat, and also in financial havens.

64

In absolute terms, FDI flows into the region have been concentrated in a few countries, with the

majority of capital flows being channelled to Brazil and Mexico, followed by Argentina and Chile.

In relation to GDP, however, capital flows have also been significant in several other countries,

particularly in the Caribbean (see figures 23,24 and table 13).

SOURCE: FAO/RLC based on UNCTAD 2004 and WEO 2004.

LAC: FDI INFLOWS PER U$ 1,000 GDP (1980-2003)Figure 21

Latin Americaand el Caribbean

Developingregions

World

Developedcountries

Central and EasternEurope

0

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

10

20

30

40

50

60

70

-10

SOURCE: FAO/RLC based on UNCTAD 2004.

TREND OF FDI INFLOWS (1980-2003)Figure 22

Mill

ion

s of

do

llars

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

30.0

0.0

10.0

20.0

40.0

50.0

60.0

70.0

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Inflows of foreign direct investment FDI inflows / GDP

65

MA

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Figure 24 LAC: FDI INFLOWS IN RELATION TO GDP (Percentage)

SOURCE: GDP FAO/RLC; FDI UNCTAD 2004.

1999 2002

Saint Kitts and Nevis

Suriname

Paraguay

Haiti

Barbados

Panama

Guatemala

Uruguay

Argentina

Venezuela

El Salvador

Mexico

Honduras

Chile

Colombia

Peru

Saint Vincent and the Grenadines

Brazil

Costa Rica

Bahamas

Dominican Republic

Antigua and Barbuda

Ecuador

Saint Lucia

Belize

Dominica

Guyana

Jamaica

Nicaragua

Bolivia

Trinidad and Tabago

Granada

-150 -100 -50 -0 50 100 150 200 250

SOURCE: UNCTAD 2004.Based on total FDI inflows of U$69.644 billions.

LAC: FDI INFLOWS (Average 1999-2002)Figure 23

Brazil 36%

CARICOM 2%

Latin Caribbean 2%

Central America 3%

Andeancountries

12%

SouthernCone 21%

Mexico 24%

66

FDI INFLOWS PER US$1,000 GDP Table 13

Proj.a

1980 1990 2000 2001 2002 2003

Latin America and the Caribbean (FAO) 8.2 7.7 39.2 36.6 26.2 20.4

Latin America 7.9 7.3 39.0 36.2 25.7 n.d.

Brazil 12.8 2.1 54.6 44.1 36.7 20.4

Mexico 10.2 10.0 26.7 40.6 21.4 16.2

Southern Cone 5.0 13.8 40.5 22.3 15.0 n.d.

Argentina 3.2 13.0 41.0 11.9 10.8 11.0

Chile 9.1 19.7 48.6 65.4 23.8 35.1

Paraguay 6.7 14.6 13.5 13.9 -3.9 3.3

Uruguay 30.1 4.5 13.6 17.1 6.9 5.6

Andean countries 3.0 8.6 31.3 31.4 25.1 n.d.

Bolivia 13.1 13.8 86.5 81.9 67.5 34.0

Colombia 4.8 10.7 26.7 30.9 25.1 17.1

Ecuador 4.8 12.0 45.2 63.3 52.5 60.4

Peru 3.1 1.5 12.9 21.5 25.9 13.4

Venezuela 1.1 9.3 36.8 27.3 14.0 50.4

Central America 16.1 14.4 29.5 29.5 18.9 n.d.

Costa Rica 10.9 28.5 25.6 27.7 38.0 25.7

El Salvador 1.5 0.4 15.2 21.0 16.6 10.7

Guatemala 14.0 7.8 12.2 24.0 5.6 5.3

Honduras 2.3 14.3 46.8 30.5 21.7 31.6

Nicaragua 0.0 0.4 110.6 58.2 66.5 92.0

Panama 57.3 25.5 50.5 42.5 4.6 44.4

Latin Caribbean 12.9 16.7 40.1 42.9 39.1 n.d.

Cuba n.d n.d n.d n.d n.d n.d.

Haiti 9.2 3.6 3.4 1.2 1.6 n.d.

Dominican Republic 13.7 21.3 47.9 49.8 45.2 43.9

CARICOM 21.1 32.3 52.0 58.6 55.1 n.d.

Antigua and Barbuda 175.7 154.7 49.8 56.0 50.5 n.d.

Bahamas 2.8 -5.5 50.9 20.6 39.5 n.d.

Barbados 3.2 6.5 7.7 7.6 4.6 n.d.

Belize 0.0 47.2 23.7 47.4 54.9 n.d.

Dominica 0.0 77.6 40.0 44.7 56.8 n.d.

Grenada -0.1 57.8 92.0 122.8 99.0 n.d.

Guyana 0.7 22.6 94.2 78.9 61.5 n.d.

Jamaica 9.7 33.8 63.6 79.1 62.2 63.0

Saint Kitts and Nevis 20.8 306.5 292.4 255.4 226.8 n.d.

Saint Vincent and the Grenadines 18.6 38.8 87.0 60.3 52.7 n.d.

Saint Lucia 231.6 122.4 79.6 33.9 32.8 n.d.

Suriname 20.4 190.6 -109.2 -35.1 -89.1 n.d.

Trinidad and Tobago 29.7 21.6 57.5 74.9 78.6 69.6

SOURCE: GDP, FAO; FDI UNCTAD 2004.a/ Projections for 2003 obtained from ECLAC, Foreign Investment in Latin America and the Caribbean, 2003.

In the context of economic globalization, the structural reforms carried out in the Latin American

and Caribbean economies—especially capital-account liberalization, export orientation and

participation in wide-ranging subregional trade agreements—have provided a powerful stimulus

to external investment. Although such funds play a major role in financing development, their

costs are unduly variable, responding to circumstances that are beyond the control of the region’s

countries. In years of strong inflows, capital of this type makes possible to balance other outflows

and to finance the current account deficit; nonetheless, their volatile nature demands an alert

and careful management.

Fluctuations in the economic progress of Latin America and the Caribbean are highly correlated

with international capital flows. The net resource transfer abroad that was generated during

67

the debt crisis had been reversed in the region’s favour by 1991; but since 1999 the net flow has

again turned negative. In other words, as happened during the “lost decade”, the region is suffering

from the perverse effect of a resource flow from countries where capital is scarce toward those

where it is relatively more abundant; and 2004 marked the sixth consecutive year of net outflows.

Until 2001, the transfer out of the region as a whole was relatively small—under US$ 3 billion (the

resource transfer from Argentina alone amounted to nearly US$ 16 billion, but this was offset by

capital inflows into other countries). Nonetheless, in 2002, the net negative transfer totalled US$

41 billion, in 2003 there was a US$ 34 billion outflow (2% of GDP), and a further US$ 80 billion outflow

is forecast for 2004 (over 4% of GDP). Specially because of a US$ 65 billion deficit in the balance

of rents and payments.

During this last year, regional output growth has been accompanied by capital outflows. A

current account surplus for the second year running, reinforced by a significant improvement

in the terms of trade, allowed for domestic interest rates to be lowered, which discouraged capital

inflows (capital inflows declined). The cumulative drain of resources over the last five years is

equivalent to more than 5% of regional GDP, thereby placing a major constraint on financing

for development and economic growth (see figure 25)11.

In 2002 and 2003 net negative transfers became very large in several countries, especially Brazil,

Argentina and Venezuela; in other cases positive transfers were reduced, particularly in Mexico

(see figures 26 and 27).

Relative to GDP, positive transfers remain significant in some countries, especially Central

American ones (see figure 28).

MA

CR

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FR

AM

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LAC: NET RESOURCE TRANSFER AND GDP (1981 - 2005)Figure 25

SOURCE: FAO/RLC based on ECLAC, Economic Survey of Latin América and the Caribbean (2003-04).

Net resource transfer (Billions of dollars) Percetage change in GDP

0

-10

-20

-30

10

20

30

40

-40

-50

2.0

1.0

0

-1.0

3.0

4.0

5.0

6.0

-2.0

-3.0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

20

04

20

05

11ECLAC calculates the net resource transfer as the net capital inflow minus the balance on the income account (netprofit and interest payments).

68

Figure 26 LA: NET RESOURCE TRANSFER 2003 (Million of dollars)

SOURCE: FAO/RLC based on ECLAC.

-15,000 0-10,000 -5,000 5,000 10,000

Mexico

Guatemala

Uruguay

Nicaragua

El Salvador

Costa Rica

Paraguay

Haiti

Honduras

Bolivia

Peru

Panama

Ecuador

Colombia

Dominican Republic

Chile

Venezuela

Argentina

Brazil

Figure 27

SOURCE: FAO/RLC based on ECLAC.

1999-031991-98

-50,000 -40,000 -30,000 -20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000

Argentina

Venezuela

Brazil

Chile

Colombia

Ecuador

Dominican Republic

Peru

Costa Rica

Uruguay

Haiti

Bolivia

Panama

Paraguay

El Salvador

Honduras

Nicaragua

Guatemala

Mexico

LA: NET RESOURCE TRANSFER 1991-98 AND 1999-03 (Millions of dollars)

69

As indicated above, the trend of capital flows is not one-way traffic, but reflects complex processes

which depend largely on conditions outside the countries of the region. For example, a rise in

international interest rates -for reasons completely unrelated to the Latin American and

Caribbean economies- can significantly raise their financing costs and hence reduce investment

and undermine economic growth in the region. This, in turn, heightens credit risk, which pushes

interest rates even higher and raises additional obstacles to growth. Autonomous capital inflows

may also be discouraged, thus generating a vicious circle that makes it increasingly hard to

restore the growth process.

International financial conditions are beyond the control of the region’s countries, yet a stable

world growth process without frequent and relatively profound crises seems a remote prospect

in the current international situation. The most likely scenario is that external shocks will

continue to shake the Latin American and Caribbean economies for the foreseeable future.

Nonetheless, the degree of vulnerability and the intensity of the negative effects also depend

on domestic conditions and policies. Among others, these include the relative balance on the

current account, the share of domestic saving in development financing, the size of the fiscal

deficit, the quality of the financial system and bank supervision, exchange-rate policies,

regulations on capital inflows and the macroeconomic policy framework. These elements, along

with the size of the external debt and its conditions, may imply very different capacities in each

country to cope with the effects of international crises.

MA

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Figure 28 LAC: NRT IN RELATION TO GDP 1999-2003 (Percentage)

SOURCE: FAO/RLC based on ECLAC and WEO 2004 figures.

-10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Venezuela

Ecuador

Argentina

Dominican Republic

Chile

Colombia

Uruguay

Brasil

Costa Rica

Peru

Bolivia

Panama

Haiti

El Salvador

Mexico

Paraguay

Honduras

Guatemala

Nicaragua

70

The traditional focus on production for the domestic market, and the weak outward orientation

of growth that dominated the Latin American development strategy for several decades (and

still persists in comparison to other regions of the developing world), was a significant factor

aggravating the region’s external vulnerability. While in Africa and the Middle East exports

accounted for about 30% of GDP until the 1980s, in Latin America and the Caribbean, and in

Asia, the proportion was below 15%. During the 1990s the situation in Asia changed, however,

as its exports expanded to over 30% of GDP; but in Latin America and the Caribbean, the low share

of exports persisted until 1998, and they currently account for just 21% of GDP, reflecting in

particular the small share of foreign trade in the South American economies, apart from Chile

(see figure 30).

In the international domain, discussion is taking place on a number of alternatives for mechanisms

to discourage speculative currency movements and promote stability on financial markets and

in exchange rates. There are major problems in designing an efficient, non-distorting mechanism,

however, let alone in putting one into practice12.

C. EXTERNAL DEBT

The regional external debt is a major cause of the vulnerability of economic growth in Latin

America and the Caribbean, which puts heavy pressure on economic balances vis-à-vis the rest

of the world. The size of the debt in relation to macroeconomic variables and the conditions

agreed, the regional external debt continues to be a major constraint on possibilities for

economic and social progress.

Changes in Latin America and the Caribbean international financial relations during the 1970s

and 1980s, which led to the external debt crisis, triggered the first and most dramatic of the

external shocks that have hit the region since then. The rapid process of foreign borrowing by

relatively closed economies was more intensive in Latin American and some Caribbean ones,

than in other regions of the world (see figure 29).

EXTERNAL DEBT 1980-2005 (Billions of dollars)Figure 29

198

0

198

119

82

198

319

84

198

519

86

198

719

88

198

919

90

199

119

92

199

319

94

199

519

96

199

719

98

199

920

00

200

120

02

200

320

05

0

200

400

600

800

SOURCE: FAO/RLC based on IMF, WEO april 2004.

Africa

Developing Asia

Middle East and Turkey

Latin America and Caribbean

12 The so-called “Tobin tax” is one of the initiatives that has been most widely discussed in recent months, althoughtechnical objections now seem to be directing the search towards other mechanisms.

71

The total foreign debt of Latin America and the Caribbean amounts to US$ 742 billion (measured

as an average for the last five years) and is the highest of all developing regions. In relation to

GDP, however, the region’s indebtedness is broadly in line with the developing country norm.

Taking the average of recent years, the region’s external debt represents 41% of GDP—higher than

in Asia (26%), but below the level in Africa and the Middle East 50%). The external debt of Latin

America and the Caribbean represents almost twice the value of its annual exports—a higher ratio

than any other region. In 1986 the debt reached a level equivalent to four years’ exports, and even

in the early years of the 1990s it amounted to nearly three years’ export earnings— coefficients

that far outstrip those of other developing regions (see figure 31, 32 and table 14)13.

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

SOURCE: FAO/RLC based on IMF, WEO april 2004.

EXPORTS / GDP IMF (1980-2005)Figure 30

Asia enDesarrollo

Africa

Latin Americaand the

Caribbean

Middle Eastand Turkey

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

50

5

10

15

20

25

30

35

40

45

50

DEBT IN RELATION TO GDP 1980-2005 (Percentage)Figure 31

0

10

20

30

40

50

60

70

80

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

220

03

200

5

SOURCE: FAO/RLC based on IMF, WEO april 2004.

Africa

Developing Asia

Middle East and Turkey

Latin America and Caribbean

Developing countries

13 Average indicators for the last five years (1999-2003).

72

Moreover, this greater vulnerability, compounded by the region’s relative development level and

various crises and restructurings, partly explain why the borrowing conditions imposed on

Latin America and the Caribbean are also more severe than for other regions, which means that

debt service ratios in relation to export earnings are also much higher. Considering the average

for the last five years, interest paid by the countries of the region has accounted for roughly

12.5% of exports (over 30% at start of the 1980s), whereas in Africa, Asia and the Middle East

the figures range between 3% and 5.6%. Latin America and the Caribbean has also had to allocate

about 40% of its export earnings to service its external debt, whereas the figure in other regions

varies between 11% and 16% (see again table 14 and figures 33 and 34 ).

DEVELOPING COUNTRIES: EXTERNAL DEBT, DEBT SERVICE AND INDICATORS(Average 2001-2005)

Table 14

Region External debt Debt service Interest GDP Exports

(Billions of US$)

Developing countries 2,154.1 334.6 98.0 6,059.0 1,894.3

Latin American and the Caribbean 742.8 156.9 47.2 1,832.2 382.6

Africa 269.5 27.4 9.8 538.1 181.4

Developing Asia 701.6 104.6 28.0 2,749.5 954.4

Middle East and Turkey 440.2 45.8 13.0 939.2 375.9

Region Exp/ Service/ Interest/ Debt/ Service/ Debt/ Service/ Interest/

GDP Debt Debt GDP GDP Exp Exp Exp

(Percentage)

Developing countries 31.1 15.5 4.6 35.9 5.6 116.2 18.1 5.3

Latin American and the Caribbean 20.9 21.1 6.4 40.7 8.6 195.5 41.4 12.5

Africa 33.9 10.2 3.7 51.2 5.3 151.1 15.6 5.6

Developing Asia 34.4 14.9 4.0 25.9 3.9 76.2 11.4 3.0

Middle East and Turkey 40.1 10.4 3.0 47.4 4.9 118.1 12.2 3.5

SOURCE: FAO/RLC based on IMF, WEO april 2004.

África

Asia en desarrollo

Medio Oriente y Turquía

América Latina y el Caribe

SOURCE: IMF based on WEO, april 2004.

DEBT IN RELATION TO EXPORTS 1980-2005 (Percentage)Figure 32

0

50

100

150

200

250

300

350

400

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

220

03

200

5

Africa

Developing Asia

Middle East and Turkey

Latin America and Caribbean

73

Early over-borrowing of Latin American and Caribbean countries, compounded by difficulties in

achieving more outward-oriented growth, have made the region’s external debt a much heavier

burden than elsewhere in the developing world. This also heightens the region’s vulnerability to

changes in the world economic context.

Although the external debt crisis has been overcome, and most countries of the region now have

access to financing on international markets, the level of debt and borrowing conditions remain

a source of vulnerability given the uncertainty and variability of external conditions. During the

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

SOURCE: IMF, WEO, april 2004.

INTEREST IN RELATION TO EXPORTS 1980-2005 (Percentage)Figure 33

30

25

20

0

5

10

15

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

220

03

200

5

35

Africa

Developing Asia

Middle East and Turkey

Latin America and Caribbean

SOURCE: IMF, WEO, april 2004.

DEBT SERVICE IN RELATION TO EXPORTS 1980-2005 (Percentage)Figure 34

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

220

03

200

5

30

20

0

10

40

50

60

70

Africa

Developing Asia

Middle East and Turkey

Latin America and Caribbean

74

SOURCE: FAO/RLC based on IMF, WEO database, april 2004.

LAC: EXTERNAL DEBT INDEX (1995=100)Figure 35

Exports

Debt

GDP at currentprices

Debt Service

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

520

40

60

80

100

120

140

160

180

200

Figure 36 LAC: DEBT INDEX (1990=100)

SOURCE: FAO/RLC based on IMF,  WEO april 2004.

0 100 200 300 400 500 600 700 800 900

Nicaragua

Guyana

Jamaica

Trinidad and Tobago

Venezuela

Dominica

Bolivia

Costa Rica

Ecuador

Panama

Honduras

Peru

Paraguay

Haiti

Brazil

Dominican Republic

Mexico

Guatemala

Uruguay

El Salvador

Antigua and Barbuda

Colombia

Chile

Argentina

Barbados

Saint Vincent and the Grenadines

Grenada

Saint Lucia

Suriname

Belize

Saint Kitts and Nevis

1995 2004

75

1990s, the relative weight of debt service grew strongly, and borrowing levels increased, especially

in a number of Caribbean countries. Only six countries saw their total debt shrink during the

decade: Nicaragua, Guyana, Jamaica, Trinidad and Tobago, Dominican Republic and Venezuela

(see figures 35 and 36).

Although regional average debt indicators are considerably stronger now than in the 1980s,

several countries still display indices that could indicate overborrowing pressure. Measured

as the average for the last five years, external debt is equivalent to over half of gross national

product in 13 countries, and in nine countries it accounts for over two years’ exports. During

the last few years, Brazil and Argentina have had to allocate about 70% of their export earnings

to debt service, with interest payments accounting for over a fifth of this (see table 15 and

figures 37, 38, 39, 40).

MA

CR

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NO

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FR

AM

EW

OR

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LAC: EXTERNAL DEBT INDICATORS (Average 2001-2005)Table 15

Country Debt Debt Debt/ Debt/ Service/ Interest/

service GDP Exports Exports Exports

(Billions of dollars) (Ratio)

Latin America and the Caribbean 741.0 156.9 40.7 196.3 41.6 12.5

Latin America 729.6 155.3 40.7 202.3 43.1 12.9

Brazil 204.9 55.6 39.8 260.8 70.1 19.9

Mexico 170.7 40.5 26.5 140.6 33.5 9.1

Southern Cone 195.5 32.3 79.6 301.1 50.2 15.3

Argentina 139.2 24.1 96.8 421.2 73.2 22.0

Chile 40.5 6.4 52.7 155.2 24.9 5.8

Paraguay 2.5 0.3 39.6 96.5 10.6 5.3

Uruguay 13.3 1.5 100.2 418.1 48.4 31.3

Andean countries 123.4 22.8 44.5 196.3 36.2 12.9

Bolivia 4.3 0.2 49.8 240.9 13.5 5.1

Colombia 39.0 8.6 46.4 250.9 55.3 16.8

Ecuador 14.5 2.3 55.6 203.8 31.7 19.4

Peru 29.0 3.8 47.6 271.8 36.2 15.1

Venezuela 36.6 7.9 38.2 133.1 28.7 8.8

Central America 27.2 2.5 37.3 117.6 10.9 6.4

Costa Rica 3.6 0.8 20.1 44.8 9.3 3.5

El Salvador 4.0 0.4 30.6 100.0 9.0 5.7

Guatemala 3.8 0.6 19.6 94.9 16.0 7.1

Honduras 4.7 0.4 67.6 173.7 15.3 4.9

Nicaragua 4.5 0.1 167.9 445.3 14.5 7.1

Panama 6.6 0.9 50.3 189.1 27.4 14.1

Latin Caribbean 7.9 1.0 35.3 82.2 10.0 3.6

Haiti 1.3 0.04 30.2 242.1 7.3 2.6

Dominican Republic 6.6 0.9 36.9 73.1 10.2 3.6

CARICOM 11.4 1.6 36.1 67.9 9.5 4.8

Antigua and Barbuda 0.7 0.1 88.8 120.3 9.2 6.7

Barbados 1.3 0.2 51.8 95.3 12.3 10.0

Belice 0.8 0.1 81.1 143.8 26.4 10.1

Dominica 0.1 0.01 32.7 66.4 10.5 4.5

Grenade 0.2 0.02 56.6 118.4 12.0 4.6

Guyana 1.2 0.05 171.6 182.9 7.3 3.7

Jamaica 3.5 0.69 44.3 93.7 18.5 8.6

Saint Kitts and Nevis 0.3 0.04 77.7 160.0 19.3 9.2

Saint Vincent and the Grenadines 0.1 0.01 36.6 76.7 7.7 3.8

Saint Lucia 0.3 0.04 37.3 69.6 9.4 3.8

Suriname 0.4 0.05 40.6 66.0 7.7 2.0

Trinidad and Tobago 2.0 0.23 19.2 36.7 4.3 2.4

SOURCE: FAO/RLC based on IMF, WEO april 2004.

76

Figure 37 LAC: DEBT IN RELATION TO GDP (2003-2004)

SOURCE: FAO/RLC based on IMF, WEO abril 2004.

0 20 40 60 80 100 120 140 160 180

BahamasTrinidad and Tobago

Costa RicaGuatemala

MexicoHaiti

El SalvadorDominica

BrazilVenezuela

Saint Vicente and the GrenadinesParaguay

Saint LuciaSurinameJamaica

ColombiaPeruChile

Dominican RepublicEcuadorPanamaBolivia

BarbadosGrenada

HondurasBelice

Saint Kitts and NevisAntigua and Barbuda

ArgentinaUruguay

NicaraguaGuyana

SOURCE: FAO/RLC based on IMF, WEO april 2004.

0 50 100 150 200 300 350 400 450

BahamasTrinidad and Tobago

Costa RicaSurinameDominica

Saint LuciaDominican Republic

Saint Vincent and the GrenadinesJamaica

ParaguayEl Salvador

BarbadosGuatemalaVenezuela

Antigua and BarbudaGrenada

ChileBelice

MexicoSaint Kitts and Nevis

EcuadorHonduras

PanamaGuyana

HaitiBrazil

PeruBolivia

ColombiaNicaraguaArgentina

Uruguay

Figure 38 LAC: DEBT IN RELATION TO EXPORTS ( 2003-2004)

250

2003 2004

2003 2004

77

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

Figure 39 LAC: DEBT SERVICE IN RELATION TO EXPORTS ( 2003-2004)

SOURCE: FAO/RLC based on IMF, WEO april 2004.

2003 2004

BahamasGuyana

SurinameHaiti

Trinidad and TobagoSaint Vincent and the Grenadines

NicaraguaSaint Lucia

Dominican RepublicCosta Rica

GrenadaAntigua and Barbuda

ParaguayDominica

BoliviaBarbados

GuatemalaEl Salvador

ChileJamaica

HondurasBelice

Saint Kitts and NevisPanamaEcuadorMexico

PeruVenezuela

UruguayColombiaArgentina

Brazil

0 10 20 30 40 50 60 70 80 90

Figure 40 LAC: DEBT INTEREST IN REALATION TO EXPORTS (2003-2004)

SOURCE: FAO/RLC based on IMF, WEO april 2004.

2003 2004

0 5 10 15 20 25

BahamasSuriname

GuyanaTrinidad and Tobago

HaitiDominican Republic

Costa RicaChile

Saint Vincent and the GrenadinesParaguayDominica

Saint LuciaBolivia

HondurasGrenada

NicaraguaAntigua and Barbuda

GuatemalaMexicoBelize

JamaicaVenezuela

Saint Kitts and NevisBarbadosArgentina

PeruPanamaEcuador

ColombiaBrazil

Uruguay

30 35

78

SOURCE: OMC 2004.

LAC: EXPORTS OF GOODS AND SERVICE (Millions of dollars)Figure 41

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Service exports Good exports

D. BALANCE OF PAYMENTS

Exports of goods and services from Latin America and the Caribbean posted a new record of US$

432 billion in 2003, i.e. almost two and a half times the value exported in 1990. Preliminary estimates

show that exports will have again recorded strong growth in 2004, amounting to 19.8% in nominal

terms14 and 14.4% in real terms. These figures mark a major recovery, since in 2001 and 2002 export

volumes had faltered as a result of deteriorating international demand and economic problems in

several of the countries of the region (see figure 41).

14 ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2004.15 Estimates published at the end of 2004, too late for inclusion in this text, show that the rapid growth of the worldeconomy, and particularly imports into China and the United States, has meant a sharp increase in international demandfor commodities, wich, in turn, boosted their prices. This led to substantial regional export growth in 2004 and asignificant improvement in the terms of trade.

Within the instability and weakness of regional economic growth, exports have been a relatively

more buoyant element over the last decade, driven both by international demand during years of

rapid growth of world economy, and by changes in the regional international participation. Subregional

integration processes in Latin America and the Caribbean have also played a role here, especially

the close ties between Mexico (and to a lesser extent Central America) and the United States; and

development of the intra-regional market, especially among the MERCOSUR countries.

Between 1986 and 1987, exports expanded quite vigorously (averaging 10% per year), as a result

of efforts made by individual countries and favourable conditions in the world economy. Later,

when these conditions deteriorated, firstly following the Asian crisis and financial moratoria,

and then in the general recession of the last few years, the rate was halved. Between 1997 and

2003, the regional exports grew by just 5% per year. In 1998 and 1999 the slower expansion was

largely due to the drop in prices, while export volumes continued to grow more or less at the

same pace as before. In recent years, however, the lower export value has reflected both weaker

prices and scant increase in the volume of goods shipped15.

79

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

SOURCE: WTO 2004.

LAC: SHARE IN EXPORTS OF GOODS AND SERVICES (Percentage)Figure 42

1990 2003

Brazil 21% Brazil 19%

Mexico 29%Mexico 41%

SouthernCone 17%

SouthernCone 15%

Andeancountries 21%

Andeancountries 13%

Central America 4%

Latin Caribbean 2%CARICOM 6% CARICOM 4%

Latin Caribbean 3%

Central America 5%

16 This figure is based on merchandise imports amounting to US$ 361.8 billion and services imports of US$ 64.9 billion.

Export growth during the early years of the decade was quite widespread among Latin

American and Caribbean countries and particularly buoyant in Central America and Mexico;

in the latter case, the high rate of growth on a relatively broad export base at the start of the

period produced a substantial expansion of Mexico’s share of the region’s exports (and of its

imports) (see figure 42).

In an eloquent illustration of the influence exerted by the international context on the countries

of the region, the slowing of export growth since 1997 has been more or less widespread throughout

the region. In some cases, mainly among the southern cone countries and the Caribbean, the total

amount exported actually declined (see figure 43).

The change in the international trade context had an even greater effect on imports. These had

grown rapidly following the debt crisis, reflecting the increasing participation of Latin America

and the Caribbean in the world economy; between 1990 and 1997 the annual average growth

rate was 13%. From 1997 onward import growth faltered in response to the changing international

context and recession among the regional economies; but, following recovery in 2000, they

climbed to a new peak of US$ 450 billion. In the ensuing years slower economic growth caused

imports to fall back once more, and in 2003 they were estimated at US$ 427 billion16. As in the

case of exports, the reduction was widespread throughout the region; the southern cone countries

experienced a very large reduction in absolute terms, reflecting the sharp contraction suffered

by those economies.

Following deficits between 1992 and 2001 as a result of the rapid import growth, the balance

of trade in goods and services has reversed in recent years. In 2002, a surplus stood at of US$

10 billion, and in 2003 this widened to US$ 28 billion. Although economic recovery is bound to

mean renewed import growth, exports are expected to expand faster, on the back of more

competitive exchange rates and an increasingly widespread outward orientation to growth.

80

17 ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2003.18 Ibid.

Figure 43 LAC: EXPORTS OF GOOD AND SERVICES (Average annual rate)

SOURCE: FAO/RLC based on WTO 2004.

-10 -5 0 5 10 15 20

Uruguay

Suriname

Dominica

Saint Kitts and Nevis

Antigua and Barbuda

Barbados

Saint Lucia

Paraguay

Honduras

Jamaica

Haiti

Argentina

Nicaragua

Colombia

Saint Vincent and the Grenadines

Chile

Dominican Republic

Ecuador

Guatemala

Costa Rica

Venezuela

Peru

Bolivia

Grenada

El Salvador

Belize

Brazil

Panama

Mexico

Bahamas

Trinidad and Tobago

90-97 97-03

International price trends in 2003 generated more favourable conditions in the external market

for Latin American and Caribbean products, as the average price of the region’s exports rose by

15.9%. If oil is excluded, the increase is smaller but nonetheless still significant at 5.9%. The slow

deterioration of terms of trade, which between 1998 and 2002 declined by 3.3% (14.9% for non-

oil countries) stooped in 2003 showing an improvement of 1.3%.17.

Recent months have seen a significant rise in mineral prices, particularly copper and gold,

thereby improving the terms of trade for several of the countries of the region. The prices of

soybeans, which have recently become a leading export product in several parts of Latin America,

have also continued to rise strongly. In addition, the prices of coffee and sugar show upward

trend , though from historically very low levels18.

1980 1990 1997 2000 2001 2002 2003

I. BALANCE ON CURRENT ACCOUNT -29,882 -1,025 -64,552 -46,666 -52,915 -14,268 5,604

Exports of goods f.o.b. 91,590 136,997 286,527 358,638 342,948 346,478 374,921

Imports of goods f.o.b. -92,461 -105,259 -299,755 -355,326 -346,947 -323,069 -333,328

Merchandise balance -870 31,738 -13,228 3,312 -3,999 23,409 41,592

Services (Credit) 15,274 25,032 40,679 49,402 47,985 46,608 49,515

Services (Debit) -27,135 -33,213 -59,572 -66,319 -67,199 -60,910 -63,151

Balance of goods and services -12,731 23,557 -32,121 -13,605 -23,213 9,106 27,956

Income (Credit) 12,384 11,832 23,538 27,484 22,994 16,536 15,102

Income (Debit) -31,280 -45,096 -68,708 -77,896 -77,649 -67,945 -71,752

Balance of income -18,895 -34,188 -47,666 -53,503 -54,655 -51,410 -56,650

Balance of current transfers 1,745 9,605 15,235 20,442 24,953 28,034 34,298

II. BALANCE ON CAPITAL ACCOUNT 21 43 1,067 1,009 660 1,073 1,102

III.BALANCE ON FINANCIAL ACCOUNT 30,936 -4,857 92,288 56,179 43,928 -5,108 2,534

Net foreign direct investment 5,744 6,722 57,599 67,459 64,127 38,733 28,413

Total financial assets -19,294 -17,328 -12,313 -11,716 -21,106 -3,860 -16,520

Total financial liabilities -31,011 5,749 47,002 436 908 -40,164 -9,359

IV. ERRORS AND OMISSIONS -17,2 8 -435 -3,998 3,474 -8,885 -9,751 1,522

V. OVERALL BALANCE -652,169 -6,632 24,804 13,998 -17,211 -28,055 10,764

VI. RESERVES AND RELATED ITEMS 652,169 6,631 -24,804 -13,998 17,211 28,055 -10,764

SOURCE: ECLAC based on figures provided by the IMF; since 1996 by national institutions.a/ Excluding components classified in Group VI categories.

LATIN AMERICA: BALANCE OF PAYMENTS (Millions of dollars)Table 16

81

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

19 ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2003.20 Late-2004 estimates show that the current account surplus has been repeated this year.

In the balance recorded breakdown of 2003 the balance of payments by components, the merchandise

trade account posted a surplus of US$ 41.5 billion, offsetting a US$ 13.6 billion deficit on trade in

services. Private transfers, consisting essentially of remittances from workers abroad, amounted

to US$ 34 billion . These are important sources of external financing for several countries, especially

in Mexico and Central America19.

In contrast, significant resources will continue to flow out of the region on the income account,

consisting mainly of profits, amortization and interest payments. In 2003, this balance amounted

to US$ 56 billion.

The net outcome of these accounts produces a surplus on the current account, which is unprecedented

in the region20.

The capital accounts of the balance of payments in Latin America and the Caribbean remained

broadly neutral in 2003. Whereas financial accounts recorded an outflow of US$ 25.5 billion,

the region received foreign direct investment amounting to US$ 28 billion, thus producing a

surplus of US$ 3.5 billion. Nonetheless, FDI continues in rapid decline. In 2003, capital inflows

in this category were US$ 10 billion less than the amount received in 2002, and under half those

entering the region annually between 1997 and 2001 (see table 16).

82

E. INFLATION

In contrast to the instabiñity and vulnerability shown by the external balance , the region has

made consistent progress toward domestic price stability. The vast majority of countries have

kept the growth of the general price level under control, even in recent years when exchange-rate

vicissitudes generated powerful inflationary pressures in several cases.

Since 1995, which was the first year without hyperinflation in any Latin American country, the

average inflation index for the region fell continuously for seven years until 2001 (dropping

from 36.8% to 6.0%). Progress achieved on the inflation front was very widespread: in 2001, in

clear contrast to the regional historical inflationary tradition, 27 out of the 33 countries posted

inflation in single digits (see figure 44)21.

In 2002 and 2003 the rate of increase in the general level of prices accelerated slightly, as a

result of disturbances on foreign-exchange markets that affected the southern cone countries

particularly, and because of the expansionary policies pursued by a number of countries to

alleviate the recessionary impact of the problematic international situation. Nonetheless, private

expenditure remained generally depressed, which eased upward pressure on prices from the

demand side. Numerous countries in the region have recognized the need to control inflation

as a policy priority, and in several cases the achievement of annual targets has been made a

central bank responsibility. In 2004, the inflation index fell once again as a regional average

(6.2%) and also in the majority of countries individually. A new historical low inflation index

(5.6%) is expected to be reached in 2005 (see figure 45)22.

21 In 2001, only Costa Rica, Ecuador, Haiti and Venezuela recorded price rises above 10%. No information is availablefor Cuba or Suriname.22 ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2004.

SOURCE: IMF, WEO april 2004.

LAC: INFLATION RATE 1980-2005 (Percentage)Figure 44

1980

200

300

400

500

600

100

01980 1980 1980 1980 1980 1980 1980 1980 1980 1980 1980 2004

Per

cen

tag

e

199

5

199

6

199

7

199

8

199

9

20

00

200

1

200

2

200

3

200

4

200

5

05

1015

2025303540

Figure 45 INFLATION RATE (2003-2004)

SOURCE: IMF, WEO april 2004.

2003 2004

0 5 10 15 20 25 30

Saint Lucia

Panama

Chile

Sainy Kitts and Nevis

Saint Vincent and the Grenadines

Dominica

Barbados

Peru

Antigua and Barbuda

Belize

Grenada

Bahamas

El Salvador

Trinidad and Tobago

Ecuador

Bolivia

Mexico

Guyana

Guatemala

Nicaragua

Colombia

Brazil

Latin America and the Caribbean

Argentina

Jamaica

Honduras

Paraguay

Uruguay

Costa Rica

Suriname

Haiti

Dominican Republic

Venezuela

83

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

F. INCOME DISTRIBUTION

Latin America and the Caribbean region has the most unequal income distribution of any region

in the world: 40% of total income is received by the wealthiest 10% of the population, and 25%

is received by the top 5% alone. These indicators represent the highest concentration of income

among developing regions, and are almost double those prevailing in developed countries,

where, on average, the wealthiest 5% of the population receive 13% of total income23. The flipside

of this is that the poorest 30% of the population in Latin America and the Caribbean receive

just 7.5% of total income—less than in any other region in the world, and just half the figure in

developed countries (14%). As a result Latin America has the largest gap between rich and poor

population in the world (see table 17 and figure 46).

23 According to IDB calculations, based on Deininger and Squire (1996a).

SOURCE: IDB calculations based on Deininger and Squire (1996a).IDB 1998, "América Latina frente a la Desigualdad".

INCOME DISTRIBUTIONTable 17

Income received by

Region Wealthiest 5% Poorest 30%

% of total income

Latin America and the Caribbean 25.0 7.5

Africa 24.0 10.2

Southeast Asia 16.0 12.0

Developed countries 13.0 14.0

84

The degree of economic polarization can also be expressed in terms of the Gini coefficient24.

Among the regions for which information is available, Latin America and the Caribbean have

the highest Gini coefficient at over 50, compared to Asia (a coefficient of 40) and the countries

of the OECD and Eastern Europe which have Gini coefficients close to 30 (see table 18).

24 The most widely used indicator for measuring the concentration of income is the Gini coefficient, which summaritedthe income shares of all population groups into a statistic that takes values between zero and one. A perfectly equaldistribution would produce a coefficient of zero, while the value 1 indicates maximum concentration; an increase inthe coefficient thus reflects greater income concentration. In reality, countries with the best income distributiondisplay indices ranging from 0.25 to 0.30; Latin America has a Gini coefficient of about 0.5 or 0.6. For ease of expression,the coefficient is sometimes multiplied by 100.

SOURCE: IDB based on Deininger and Squire (1996a).

INCOME DISTRIBUTIONFigure 46

25.0

20.0

15.0

10.0

5.0

0.0

Latin America and Caribbean

Africa

Southeast Asia

Developed countries

Wealthiest 5% Poorest 30%

GINI COEFFICIENT BY REGIONTable 18

Region 1970s 1980s 1990s average

Latin America and the Caribbean 48.8 50.8 52.2 50.5

Asia 40.2 40.4 41.2 40.6

OECD 32.3 32.5 34.2 33

Eastern Europe 28.3 29.3 32.8 30.1

Changes 70-80s 80-90s 70-90s

Latin America and the Caribbean 2.4 1.3 3.7

Asia 0.2 0.8 1.1

OECD 0.2 1.7 1.9

Eastern Europe 1.0 3.5 4.5

Differences in Gini points relative to LAC

Asia 8.3 10.4 10.9 9.9

OECD 16.1 18.3 18 17.5

Eastern Europe 20.2 21.6 19.4 20.4

SOURCE: Based on WIDER 2000.

85

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

Economic concentration in the region is not diminishing. Over the last three decades, the Gini

coefficient has increased by more than in any other region, except Eastern Europe following

the change of economic and social system in those countries. Income concentration in Latin

America and the Caribbean thus persists or is even growing compared to other regions (see

again table 18).

Within the general economic polarization of the region, there are different situations both

among countries and in the population segments where polarization is most accentuated (i.e.

the richest or the poorest).

From the standpoint of differences between countries, Latin American ones display the greatest

inequality, while income distribution in the Caribbean is more moderate.

In terms of the nature of the concentration, in some cases polarization is due to the fact that

the highest income group receives a particularly large proportion of total income. This can be

seen in the income share received by the last decile, i.e. the wealthiest 10% of the population.

In other cases, polarization reflects the negligible proportion received by a large group of people

living in poverty; this is revealed in the income share received by the first four deciles (the

poorest 40% of the population).

The highest concentration of income in the last decile is seen in Brazil (47% of total income),

followed by Argentina, Bolivia, Nicaragua, and Chile (between 40% and 42%). Between 1990 and

2002, the concentration of income received by the wealthiest 10% increased in most countries;

decreasing only in Mexico, Uruguay, Colombia, Guatemala, Honduras and Panama. Uruguay is

the country with the least concentrated wealth in the region.

The smallest total income shares received by the poorest 40% of the population correspond to

Bolivia (9.5%), followed by Brazil (10.2%), Honduras (11.3%), Colombia (11.9%) and Nicaragua (12.2%).

Between 1990 and 2002, the income share of the poorest 40% rose slightly in half of the region’s

countries, while shrinking even further in the other half (see table 19).

Overall

LA: DISTRIBUTION OF HOUSEHOLD INCOME,A NATIONWIDE TOTAL, 1990 – 2002(Percentages)

Table 19

Share of total income received by:

Country 1990 2002

Poorest 40% Wealthiest 10% Poorest 40% Wealthiest 10%Brazil 9.5 43.9 10.2b 46.8b

Mexico 15.8h 36.6h 15.7 33.2

Southern Cone

Argentinad 14.9 34.8 13.4b 42.1b

Chile 13.2 40.7 13.8c 40.3c

Paraguay 18.6g 28.9g 12.9b 37.3c f

Uruguayf 20.1 31.2 21.6 27.3

Andean countries

Bolivia 12.1e h 38.2e h 9.5 41.0

Colombia 10.k 41.8k 11.9c f 39.1 c f

Ecuadorf 17.1 30.5 15.4 34.3

Peru 13.4l 33.3l 13.4 33.5

Venezuela 16.7 28.7 14.3 31.3

Central America

Costa Rica 16.7 25.6 14.5 30.2

Salvador 15.4 32.9 13.4b 33.3b

Guatemala 11.8e 40.6e 14.2 36.8

Honduras 10.1 43.1 11.3 39.4

Nicaragua 10.4j 38.4j 12.2b 40.7b

Panama 12.5i 35.9i 14.2 32.7

Latin Caribbean

Dominican Republic 14.5l 36l 12.0 38.3

SOURCE: FAO/RLC based on ECLAC 2004 figures, based on tabulations made from household surveys in the respective countries.a/ Households nationwide ranked by per capita income.b/ Data correspond to 2001.c/ Data correspond to 2000.d/ Greater Buenos Aires.e/ Eight main cities and El Alto.f/ Urban total.g/ Metropolitan area of Asunción.h/ Data correspond to 1989.i/ Data correspond to 1991.j/ Data correspond to 1993.k/ Data correspond to 1994.l/ Data correspond to 1997.

86

When the two measures of income concentration combine, the result is a wide income gap between

economically privileged groups and population segments that live in poverty. In this respect Brazil

is the most unequal country in the region, with wealth highly concentrated at the top of the

distribution alongside wide-ranging mass poverty. Uruguay has the region’s least unequal

distribution; but still highly concentrated compared to patterns prevailing in developed countries

(see figure 47).

In recent decades, the historically high concentration of income in the region has been aggravated

by inflationary processes; and during austerity programmes to restore macroeconomic

equilibrium, the sacrifices have generally been borne more than proportionately by the poor,

thereby accentuating polarization still further. On the contrary, during periods of economic

recovery, the benefits have tended to be concentrated among the higher-income groups, which

find more effective ways of participating in the new economic expansion. Inequality in the

distribution of income represents a major rigidity in Latin America, and in some countries it

is worsening.

Between 1990 and 2002, the concentration of income, measured by the Gini coefficient, declined

in eight countries (Uruguay, Honduras, Colombia, Guatemala, Mexico, Peru, Nicaragua and

Panama). In the other 10 countries for which the information is available polarization accentuated

further (see figure 48).

SOURCE: FAO/RLC based on ECLAC, Social Panorama 2003; UNDP Human Development Report.

LAC: CHANGES IN GINI COEFFICIENTFigure 48

0.45

0.5

0.55

0.6

0.65

0.7

0.45

0.4 0.5 0.55 0.60 0.65 0.7

200

2

1990

CosVen

Ecu ELS

Dmi

Par

Arg

Chi

Bol

Nic

Gua

Hon

PanPer

Mex

Uru

Countries with moreunequal income ditributionthan in 1990

Countries with lessunequal incomedistribution than in 1990.

Bra

Col

87

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

SOURCE: FAO/RLC based on ECLAC 2004a/ Greater Buenos Aires.b/ Urban total.

LAC: INCOME DISTRIBUTION IN 1990 AND 2002Figure 47

Poorest 40% in 2002 Wealthiest 10% in 2002Poorest 40% in 1990 Wealthiest 10% in 1990

Argentina a

Bolivia

Brazil

Chile

Colombia

Costa Rica

Ecuador f

Salvador

Guatemala

Honduras

Mexico

Nicaragua

Panama

Paraguay

Peru

Dominican Republic

Uruguay b

Venezuela

0

10

20

30

40

50

88

Improvements in the income distribution are closely linked to employment conditions. Labour

incomes, consisting mainly of wages and salaries, form the largest component of family income,

accounting for over 80% of the total in most Latin American countries25. Another important

income source, transfers, consists largely of retirement pensions, which are also related to

employment conditions. Property income generally accounts for a relatively small share, although

it may be highly concentrated. Over half of all incomes earned from the labour market come in the

form of wages, so, while public transfer policies may be important for poverty relief, the chances

of consistently improving the income distribution depend on job creation and improvements in

productivity. Education and labour training, together with conditions for expanding productive

investment, are the essential foundation for improving equity.

On the other hand, the labour market itself displays significant peculiarities and glaring asymmetries,

which makes it essential for the economic model to support growth that generates greater demand

for labour. Labour markets need flexibility to avoid the rigidities that inhibit employment growth;

this should not simply mean precariousness, however; flexibility therefore needs to be complemented

with unemployment protection and job security policies.

Urban and rural income

Another dimension of inequity in the income distributions of Latin American and Caribbean

countries is urban-rural polarity. Differences between the countryside and the city remain a

basic source of social inequality and an expression of economic polarization. To a large extent,

the rural domain acts as a safety valve by absorbing unemployment and underemployment, and

providing means of subsistence to a large fraction of the population that is excluded from the

main dynamic of the current development model.

In all countries of the region, income per capita is higher in the cities than in rural areas.

Although the differences are very considerable in monetary terms, their effect is mitigated

because the countryside offers viable survival strategies that combine productive activities

with the household economy and community support, thereby making it possible to achieve

minimal living standards on less income.

In addition, the particular features of each social milieu generate differences in the structure

and composition of consumption, which generally also make it possible to obtain the essential

conditions of life at lower monetary cost in rural areas.

Nonetheless, even when incomes in the cities and in the countryside are weighted to make them

comparable, rural incomes are still substantially lower. In all countries, the urban poverty line26

is significantly higher than its rural counterpart; yet average urban income is further above the

urban poverty threshold than its rural counterpart. In other words, in most countries, the rural

population generally lives closer to a state of poverty (see table 20).

25 This includes incomes earned in the “employer” category, which are higher but pertain to a small segment of thepopulation only.26 The value of the poverty line is obtained by multiplying the indigence line by a constant factor that takes accountof basic non-food expenses: for urban areas this corresponds to the cost of the food basket. Calculation of thesethresholds took account of differences in food prices between metropolitan areas, other urban areas and rural zones.(ECLAC, Social Panorama 2000-2001, box 1.2).

Table 20

RURAL URBAN

Country 1990 2002 2002

Argentina (Greater Buenos Aires) n.d. n.d. 6.40 4.70

Bolivia 1.3 a 1.20 4.2d 3.20

Brazilc 2.00 1.7f 4.70 4.3f

Chile 4.90 5.3g 4.70 7.2g

Colombiai 3.1b 2.90 2.9b 3.00

Costa Rica 5.10 6.20 5.20 6.50

El Salvador 2.4c 2.4f 3.4c 3.9f

Guatemala 2.5d 1.70 3.50 2.90

Honduras 1.70 1.40 2.80 2.30

Mexico 3.0d 3.00 4.4d 4.10

Nicaragua 2.2e 1.9f 3.5e 3.2f

Paraguay 2.20 1.8f 3.40 3.4f

Peru 1.60 1.40 3.30 3.2h

Dominican Republic 3.70 3.50 4.60 4.70

Venezuela j 3.80 3.40 4.50 3.30

Panama n.d. 4.50 5.b 6.40

Ecuador n.d. n.d. 2.80 3.50

Uruguay n.d. n.d. 4.30 4.30

Paraguay (urban) n.d. n.d. n.d. n.d.

1990

LA: AVERAGE INCOME OF THE EMPLOYED ECONOMICALLY ACTIVE POPULATIONBY LABOUR MARKET PARTICIPATION, RURAL AND URBAN ZONES 1990 – 2002.(In multiples of the respective per capita poverty lines)

SOURCE: FAO/RLC based on ECLAC, Social Panorama.Rural figures include domestic servants. Figures for Brazil (1990), Chile (1990, 1994 and 1998), Colombia (1991 and 1994), Mexico (1989) and Nicaragua(1998) include wage-earners in the public sector.Urban figures for Argentina (except 1999), Brazil (1990), Chile (1990, 1994 and 1998), Mexico (1989) and Nicaragua (1998) include wage-earners inthe public sector. In addition, figures for Chile (1996), El Salvador, Panama, Dominican Republic, Uruguay (1990) and Venezuela include establishmentswith up to four employees in the case of non-professional non-technical workers. In cases where information on establishment size of is not availableno figures are provided for workers employed in low-productivity sectors.a/ Data correspond to 1997.b/ Data correspond to 1991.c/ Data correspond to 1995.d/ Data correspond to 1989.e/ Data correspond to 1993.f/ Data correspond to 2001.g/ Data correspond to 2000.h/ Data correspond to 1999.i/ From 1993 onwards, the geographic scope of the survey was widened to encompass virtually all the country's urban population. Until 1992,thesurvey covered about half of that population, except in 1991, when a nationwide survey was conducted.j/ From 1997 onwards, the sample design does not allow for an urban-rural breakdown. The figures therefore correspond to the nationwide total.

89

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In 1990, among countries with information available, only in Colombia, Costa Rica and Chile

the average income among rural population, measured as a multiple of the rural poverty line,

was similar to that received by the urban population in relation to its poverty line (in the first

of the countries mentioned the average income in the cities was quite close to the poverty

threshold). In all other countries, average income in the cities is further above the corresponding

poverty threshold. In Brazil and Honduras average income in the countryside was just twice its

poverty-line level (see figure 49).

In 2002, per capita income in rural and urban areas showed similar surpluses relative to the

respective poverty lines in Venezuela and Colombia. In the other countries, average urban

income is further above the poverty line than its rural counterpart. With the exception of Costa

Rica, the gap in favour of urban income is equivalent to at least one poverty line income. The

largest difference is in Brazil, where the average income per capita in the cities is 4.5 times the

poverty line income, while in the countryside it is less than double the respective threshold.

Nonetheless, as it will be shown below, this situation needs to be weighted, to take account of

the acute concentration of urban income in Brazil (see figure 50).

90

SOURCE: FAO/RLC based on ECLAC 2004.

LAC: AVERAGE INCOMES OF THE ECONOMICALLY ACTIVE POPULATION 1990(In multiples of the respective per capita poverty lines)

Figure 49

0.0

1.0

2.0

3.0

4.0

5.0

6.0Bolivia

Brazil

Chile

Colombia

Costa Rica

El Salvador

Guatemala

Honduras

Mexico

Nicaragua

Paraguay

Peru

Dominican Republic

Venezuela

Rural 1990 Urban 1990

LAC: AVERAGE INCOMES OF THE ECONOMICALLY ACTIVE POPULATION 2002(In multiples of the respective per capita poverty lines)

Figure 50

SOURCE: FAO/RLC based on ECLAC 2004.

Rural 2002 Urban 2002

Bolivia

Brazil

Chile

Colombia

Costa Rica

El Salvador

Guatemala

HondurasMexico

Nicaragua

Paraguay

Peru

Dominican Republic

Venezuela

Panama

0.0

2.0

4.0

6.0

8.0

SOURCE: FAO/RLC based on ECLAC 2004.

LAC: GINI COEFFICIENT IN RURAL AND URBAN AREAS (1990)Figure 51

0.45

0.5

0.55

0.6

0.65

0.45

0.4 0.5 0.55 0.60 0.65

RU

RA

L G

INI

URBAN GINI

Par

Countries with moreunequal incomedistribution in the cities.

Countries with moreunequal incomedestribution in thecountryside.

CosVen

ElsPer

Dmi

Mex

PanNic

Gua

Chi

Bol

HonCol

Bra

SOURCE: FAO/RLC based on ECLAC 2004.

LAC: GINI COEFFICIENT IN RURAL AND URBAN AREAS (2002)Figure 52

0.45

0.5

0.55

0.6

0.65

0.45

0.4 0.5 0.55 0.60 0.65

RU

RA

L G

INI

URBAN GINI

Countryside with moreunequal incomedistribution in the cities.

Countries with moreunequal incomedistribution in thecountryside.

Per

Els

Mex

Cos

Par

Pan

Gua Dmi

ChiHon Nic

Col

Bol

Bra

91

MA

CR

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CO

NO

MIC

FR

AM

EW

OR

K

Distribution of rural and urban income

In most countries inequality is worse in the city than in the countryside; in 1990, income

inequality was greater in rural areas than in the cities only in Bolivia, Paraguay and Chile. Costa

Rica displayed the most equal income distribution in both rural and urban areas (see figure 51).

By 2002, while there had been significant redistributive progress in rural areas in Chile, the

situation had worsened in Mexico and Costa Rica. Rural income in Brazil is also highly

concentrated, but the concentration in urban areas is greater still.

Although this aggregate analysis does not bring out the complexity of rural development and

equity problems in each country, the situation as outlined may not be unrelated to the problems

of governance and social unrest that have broken out in some of these countries in support of

rural demands (see figure 52).

SOURCE: FAO/RLC based on ECLAC 2004.

LAC: CHANGE IN GINI COEFFICIENT IN URBAN AREAS (1990-2002)Figure 53

0.5

0.55

0.6

0.65

0.45

0.4

200

2

PerELS

MexCos

Par Pan Gua

Dmi

Chi

Hon

Nic ColBol

Bra

0.45 0.5 0.55 0.60 0.65

Countries with lessunequal incomedistribution than in 1990.

Countries with moreunequal incomedistribution thanin 1990.

Uru

Ecu

1990

Arg

SOURCE: FAO/RLC based on ECLAC 2004.

LAC: CHANGE IN GINI COEFFICIENT IN RURAL AREAS (1990-2002)Figure 54

0.5

0.55

0.6

0.65

0.45

200

2

Bra

Par

PanNic

0.45 0.5 0.55 0.60 0.65

Countries with less unequalincome distribution than in1990.

Countries with moreunequal incomedistribution than in1990.

1990

ColChi

Hon

Bol

GuaDmi

Mex

ELS

Per

Cos

0.4

92

Over the last decade, urban income concentration increased in most of the countries of the

region for which information is available, diminishing only in Honduras, Mexico, Colombia,

Guatemala and Panama (see figure 53).

Unlike income concentration in the cities, the distribution of rural income improved during

the last decade in nine out of 14 countries for which information is available. Concentration

worsened in five countries: Brazil, Mexico, Costa Rica, El Salvador and Peru (see figure 54).

93

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OR

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In urban zones, Brazil displays a much greater concentration of income than the other countries,

and the situation has continued to worsen in recent years. Uruguay has the least unequal

distribution in the region. In terms of rural income, the greatest concentration occurs in Bolivia,

followed by Brazil, while Peru is the least unequal in this regard.

Income concentration in Latin America is more acute than in other regions of the developing

world, and also in comparison to industrialized countries. Far from diminishing, income

distribution has continued to be polarized over the last few decades in most of the region’s

countries.

Following the “Changing production patterns with social equity” proposal, developed by ECLAC

in the 1990s, numerous in-depth studies have been made of the relationship between growth

and distribution. These have shown that, far from being mutually exclusive or competing

alternatives, growth and equity are mutually empowering. The huge degree of income

concentration in Latin America is not just a problem of ethics or morals, or of politics or

governance, it also acts as a major constraint on the region’s ability to regain rapid and sustained

economic growth.

The Latin American development model needs to include elements which reduce exclusion and

facilitate progress toward equal opportunities, while remaining consistent with the demands of

the international context and functional to the development of the market economy. This condition

is essential for achieving growth with equity, and moving the income distribution toward the more

equitable patterns that prevail in developed countries.

G. POVERTY27

The number of people living in poverty28n Latin America and the Caribbean has been growing

continuously. In 1960, there were 110 million, but since then the number has climbed steadily

to a total of 225 million today (the only year in which the number of poor people fell was 2000;

but in 2001 it rose again to overtake the 1999 figure).

In relation to total population, the number of people living in poverty declined steadily from 51%

to 40% between 1960 and 1980. During the “lost decade” of the external debt crisis, the proportion

of the population living in poverty rose again to reach 48% by 1990. During the following decade,

the proportion resumed its downward trend, dropping to 42% by 2000; but in the first few years

of the new millennium, in the wake of the recession that began in 2001, the figure has risen again

and currently stands at 44% (see table 21 and figure 55).

27 This chapter analyses poverty trends in the Latin American and Caribbean countries for which information wasavailable.

28 Estimates of the magnitude of poverty were obtained from ECLAC, based on calculations of the cost of satisfyingbasic needs and poverty lines. The poverty line for each country and geographic zone is estimated in terms of the costof a basket of basic food items. The value of this basket is added to an estimate of the resources needed to satisfy basicnon-food needs.The indigence line corresponds to the cost of the food basket, and the indigent (or extremely poor) are defined as personsliving in households whose incomes are so low that, even if used entirely to purchase food, they would be insufficientto satisfy the nutritional needs of all family members.The value of the poverty line is obtained by multiplying the indigence line by a constant factor that takes account ofbasic non-food expenses; for urban areas this corresponds to 2, and in rural zones to about 1.75 (ECLAC, Social Panorama2000-2001, box I.2).Calculation of these thresholds took account of differences in food prices between metropolitan areas, other urbanareas and rural zones. Generally speaking, the prices considered for other urban zones and rural areas are some 5%and 25% lower, respectively, than those prevailing in metropolitan areas.

LA: MAGNITUDE OF POVERTY AND INDIGENCEa (1970-2004)Table 21

Year Population living in povertyb Population living in indigence

(Thousand people)       (Percentage) (Thousand people) (Percentage)

1970d 112,800 42.0 60,000 22.0

1980 135,900 40.5 62,400 18.6

1986 170,200 43.3 81,400 20.7

1990 200,200 48.3 93,400 22.5

1994 201,500 45.7 91,600 20.8

1997 203,800 43.5 88,800 19.0

1999 211,400 43.8 89,400 18.5

2000 206,600 42.5 88,400 18.1

2001 213,600 43.2 91,700 18.5

2002 221,400 44.0 97,400 19.4

2003c 226,000 44.2 100,000 19.6

2004c 224,000 43.2 98,000 18.9

SOURCE: FAO/RLC based on ECLAC 2003 figures.a/ Estimation based on 19 of the region's countries.b/ Includes population living in conditions of indigence.c/ Projections.d/ Figures for 1970 obtained from ECLAC, Social Panorama 1994.

SOURCE: FAO/RLC based on ECLAC 2004.

LA: MAGNITUDE OF POVERTY AND INDIGENCE (Thousand of people)

1970 19801990 2000 2004

100,000

200,000

300,000

400,000

500,000

600,000

Figure 55

Poor population

Indigent population

Total population

94

The region’s indigent population has also been expanding, rising from 60 million people in 1970

to 100 million in 2003. The number of indigent people only declined between 1990 and 1997, and

again in 2000. A further reduction is expected in 2004, bringing the figure down to 98 million.

Indigence affects almost one fifth of Latin America’s total population, and it has so far proven

impossible to achieve a sustained reduction in this fraction. The proportion of the population

living in conditions of indigence declined slowly until 1980, when it stood at 18.6%. During the

“lost decade”, the figure rose to 22.5% by 1990. In the 1990s, the indigence rate declined slowly

but steadily, falling to 18.1% by 2000; but since then it has risen again to reach 19.6% in 2003.

In 2004 it is forecast to drop to 18.9% (see figure 56).

SOURCE: FAO/RLC based on ECLAC 2004.

LAC: INDEX OF PER CAPITA GDP AND PÔVERTY (1970-2004)Figure 57

85

90

95

100

105

110

36

38

40

42

44

46

48

50

1970 1980 1986 1990 1994 1997 1999 2000 2001 2002 2003 2004

Index of per capita GDP Poverty (%)

Ind

ex 1

99

5 =

10

0 Pe

rcen

tag

e (%

)

95

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

Poverty and indigence rates in relation to the total population tend to ease somewhat during

economic upswings, and the percentages tend to rise again during recession phases. This is clearly

illustrated by a comparison of changes in the percentage of the population living in poverty and

the index of per capita output, which depends essentially on the pace of economic expansion,

since demographic growth trends are very stable (see figure 57).

SOURCE: FAO/RLC based on ECLAC.

LA: POOR AND INDIGENT POPULATION (Thousand of people)Figure 56

Non poor

600,000

500,000

400,000

300,000

200,000

100,000

01970 1980 1986 1990 1994 1997 1999 2000 2001 2002 2003 2004

Poor (non indigent) Indigent

PROYECTION

SOURCE: FAO/RLC based on ECLAC 2004.For Caribbean countries the GDP figure is adjusted to the poverty survey year shown in the appendix.

Figure 58 LAC: POVERTY RELATIVE TO GDP PER CAPITA (2001)

Per

cen

tag

e (%

)

GDP per capita

0

10

20

30

40

50

60

70

80

90

1.000 2.000 3.000 4.000 5.000 6.000 7.000

HaiHon

Nic Bol

Sur

ParGua

Ecu

SalColPer

STVBel

Dmi

Jam

Dom

STL PanGra

Ven

CosTri

BraMex

SKN

ChiUru

AntBar

ArgGuy

96

The relative reduction of poverty in Latin America thus shows a clear and logical direct correlation

with economic growth. Although this relation implies other factors that also have a significant

effect, the spread of poverty during the numerous economic crises experienced by the region

in recent years shows that sustained economic growth is a necessary, although insufficient,

condition for reducing it.

Moreover, while it is clear that countries with lower per capita incomes have higher poverty

indices, some countries with a better income distribution, such as Uruguay or Costa Rica (or

with high income concentration at the very top of the distribution, such as Chile) have lower

poverty indices than one would expect from their per capita income levels. The effect of economic

growth on poverty may vary greatly, depending on the variables that affect the distribution,

especially employment conditions (see figure 58).

On the other hand, a substantial proportion of the indigent population consists of groups that

suffer from severe degrees of economic exclusion, which means that growth alone is unlikely

to reduce indigence directly. In some countries, however, economic growth may improve

possibilities for financing policies and programmes to reduce indigence, which would also have

a positive effect on these population groups (provided such policies and programmes are actually

effectively implemented).

The incidence of poverty varies widely among the countries of the region29. Several CARICOM

countries (the Bahamas, Antigua and Barbuda, Barbados and Jamaica) display poverty indices

of below 20%. In Latin America, Uruguay currently has the smallest proportion of poor (11.4%)

and indigent (2.4%) people in the total population, while the significant economic and social

progress achieved by Chile over the last decade ranks it second, with less than 20% of its

population classified as poor. Trinidad and Tobago and Costa Rica are also close to that level

(22%). Of the remaining countries, the poor represent between 25% and 50% of the total population

in 15 cases, and there are nine countries where the proportion of the population living in poverty

is between 50% and 75% (see table 22 and figure 59a and 59b).

29 Information is only available for 18 countries.

SOURCE: FAO/RLC based on ECLAC figures.From 2000 to 2001 microsimulations are projected on household surveys carried out in the respective countries.a/ Urban area only.b/ The figure shown for 1999 corresponds to the 1998 measurement. The figure shown for 2000 is based on household surveys.c/ The figure shown for 1999 corresponds to the 1998 measurement.d/ The figure shown for 1999 corresponds to the 1997 measurement.e/ The figure shown for1994 corresponds to the urban area.f/ Totals in millions for LA differ from the sum of the individual countries because the latter are obtained from ECLAC, Social Panorama 2001-2002.n.a.: not available.

MAGNITUDE OF POVERTY AND INDIGENCE IN LATIN AMERICA (1990-2002)Table 22

1990 1999 2000 2001 2002

Poverty Indigence Poverty Indigence Poverty Indigence Poverty Indigence Poverty Indigence

(Percentages of population)

Argentinaa 28.5 8.2 19.7 4.8 24.7 7.2 30.3 10.2 n.d. n.d.

Bolivia 64.2 39.5 60.6 36.5 60.6 36.5 61.2 37.3 62.4 37.1

Brazil 48 23.4 37.5 12.9 36.5 12.3 37.5 13.2 n.d. n.d.

Chileb 38.6 12.9 21.7 5.6 20.6 5.7 20 5.4 n.d. n.d.

Colombia 56.1 26.1 54.9 26.8 54.8 27.1 54.9 27.6 n.d. n.d.

Costa Rica 26.2 9.8 20.3 7.8 20.6 7.9 21.7 8.3 20.3 8.2

Ecuadora 62.1 26.2 63.6 31.3 61.3 31.3 60.2 28.1 n.d. n.d.

Salvador 60.2 27.7 49.8 21.9 49.9 22.2 48.9 22.1 n.d. n.d.

Guatemalac 69.1 41.8 60.5 34.1 60.1 33.7 60.4 34.4 59.9 30.3

Honduras 80.5 60.6 79.7 56.8 79.1 56 79.1 56 77.3 54.4

Mexicob 47.8 18.8 46.9 18.5 41.1 15.2 42.3 16.4 39.4 12.6

Nicaragua 77.6 51.4 69.9 44.6 67.5 41.4 69.3 42.3 n.d. n.d.

Panama 45.7 22.9 30.2 10.7 30 10.7 30.8 11.6 34 17.4

Paraguaye 63 35 60.6 33.9 61.7 35.7 61 33.2 n.d. n.d.

Peru 56 25 48.6 22.4 48 22.2 54.8 24.4 n.d. n.d.

Dominican Republic n.a. n.a. n.a. n.a. 46.9 22.1 n.a. n.a. 44.9 20.3

Uruguaya 17.8 3.4 9.4 1.8 10.2 2 11.4 2.4 n.d. n.d.

Venezuela 40 14.6 49.4 21.7 48.8 21.2 48.5 21.2 48.6 22.2

Latin America 48.3 22.5 43.8 18.5 42.5 18.1 43.2 18.5 44 19.4

(Thousand people)

Argentinaa 9,270 2,667 7,206 1,756 9,147 2,666 11,359 3,824 n.d. n.d.

Bolivia 4,220 2,596 4,934 2,972 5,047 3,040 5,212 3,176 5,437 3,233

Brazil 71,019 34,622 63,092 21,704 62,198 20,960 64,710 22,778 n.d. n.d.

Chileb 5,057 1,690 3,259 841 3,133 867 3,080 832 n.d. n.d.

Colombia 19,618 9,127 22,729 11,095 23,074 11,410 23,499 11,814 n.d. n.d.

Costa Rica 799 299 798 307 829 318 892 341 852 344

Ecuadora 6,374 2,689 7,893 3,885 7,752 3,958 7,754 3,619 n.d. n.d.

Salvador 3,077 1,416 3,066 1,348 3,133 1,394 3,130 1,414 n.d. n.d.

Guatemalac 6,046 3,657 6,709 3,782 6,842 3,837 7,059 4,020 7,185 3,634

Honduras 3,920 2,951 4,988 3,555 5,076 3,594 5,201 3,682 5,214 3,669

Mexicob 39,781 15,646 45,660 18,011 40,636 15,029 42,456 16,460 40,128 12,833

Nicaragua 2,967 1,966 3,452 2,202 3,423 2,099 3,609 2,203 n.d. n.d.

Panama 1,096 549 849 301 857 306 893 336 1,004 514

Paraguaye 2,658 1,477 3,247 1,816 3,391 1,962 3,438 1,871 n.d. n.d.

Peru 12,079 5,392 12,262 5,652 12,318 5,697 14,299 6,367 n.d. n.d.

Dominican Republic n.a. n.a. n.a. n.a. 3,927 1,850 n.a. n.a. 3,883 1,755

Uruguaya 553 106 311 60 340 67 383 81 n.d. n.d.

Venezuela 7,801 2,847 11,711 5,144 11,795 5,124 11,947 5,222 12,195 5,571

Latin America (ECLACf) 200.2 93.4 211.4 89.4 206.6 88.4 213.6 91.7 221.4 97.4

97

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AM

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LAC: POVERTY AND INDIGENCE 2001 (Percentage)Figure 59a

Indigence Poverty

Bah Uru

An

t

Bar

Jam C

hi

Tri

Co

s

Slu

Arg

Pan

SK

N

Gra Be

Gu

y

Bra

SV

G

Do

m

Mex

Dm

i

Ven Per Els

Co

l

Ecu

Gu

a

Bo

l

Par Nic

Su

r

Ho

n

Hai

90

80

70

60

50

40

30

20

10

0

SOURCE: FAO/RLC based on ECLAC 2004.For the Caribbean countries the figure is adjusted to the poverty survey year shown in the appendix.

98

Despite fluctuations in the alleviation of poverty, its incidence has declined in most of the

region’s countries over the last decade. Although the extent of progress varies considerably, it

was particularly significant in Chile, and to a lesser extent also in Panam and Brazil . Among

the 17 countries for which information is available, the proportion of poor people increased only

in Argentina and Venezuela.

Recent estimates by ECLAC30 show that poverty indicators in Latin American countries have

generally varied by small amounts in recent years (2002 and 2003). Argentina, and to a lesser

30 Síntesis Panorama Social de la CEPAL, 2002-2003.

SOURCE: FAO/RLC based on ECLAC.

LAC: POOR AND INDIGENT POPULATIONS 1990-2001 (Percentage)Figure 59b

90

80

70

60

50

40

30

20

10

0

Uru Chi Cos Arg Pan Bra Mex Ven Per Els Col Ecu Gua Bol Par Nic Hon

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

199

020

01

< 25%

25 - 50%

50 - 70% > 75%

Indigence Poverty

LA: MAGNITUDE OF POVERTY AND INDIGENCEa (1970-2002)Table 23

year Povertyb Indigence

Urban Rural Urban Rural

(Thousand people) (Porcentage) (Thousand people) (Porcentage) (Thousand people) (Porcentage) (Thousand people  ) (Porcentage

1970c 41,600 27.0 71,200 63.0 18,700 12.0 41,300 37.0

1980 62,900 29.8 73,000 59.9 22,500 10.6 39,900 32.7

1986 94,400 35.5 75,800 59.9 35,800 13.5 45,600 36.0

1990 121,700 41.4 78,500 65.4 45,000 15.3 48,400 40.4

1994 125,900 38.7 75,600 65.1 44,300 13.6 47,400 40.8

1997 125,700 36.5 78,200 63.0 42,200 12.3 46,600 37.6

1999 134,200 37.1 77,200 63.7 43,000 11.9 46,400 38.3

2000 131,800 35.9 75,300 62.5 42,800 11.7 45,600 37.8

2001 138,700 37.0 75,200 62.3 45,800 12.2 45,900 38.0

2002 146,700 38.4 74,800 61.8 51,600 13.5 45,800 37.9

Source: FAO/RLC based on ECLAC 2003 figures.a/ Estimation based on 19 of the region's countries.b/ Includes population living in conditions of indigence.c/ Figures for 1970 obtained from ECLAC, Social Panorama 1994.

99

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

extent Uruguay, were among the exceptions that saw their living standards deteriorate

substantially in 2002. ECLAC projections for 2003 saw poverty rates rising slightly in the region

as a whole, caused largely by a lack of growth in per capita GDP. Poverty conditions are likely

to remain unchanged in most countries, except in Venezuela where the proportion of the

population classified as poor could increase significantly, and in Argentina where the restoration

of economic growth can be expected to reduce it.

Urban and rural poverty

Relations between economic growth and poverty also display significant peculiarities that distinguish

between poverty and indigence in the urban and rural domains.

Until 1980 most poor people lived in the countryside; but during the 1980s, the impact of the

debt crisis, in conjunction with a vigorous urbanization process, caused urban poverty indices

to worsen substantially. Between 1980 and 1990 the number of poor people living in the cities

doubled, whereas in the countryside the increase was just 8%. Since then, and given that the

total rural population has remained broadly constant as a result of emigration, most poor people

now live in the cities (see table 23).

Following a surge in the number of poor and indigent people in the cities during the 1980s. Since

1990 the number of people living in poverty or indigence has been increasing at a lower pace than

the over all trend in demografhic growth. In 1990 and 2000, the proportion of the population classified

as poor in urban areas fell from 41.4% to 35.9%, while those defined as indigent declined from 15.3%

to 11.7%. In the two following years, however, the figures increased again, reaching 38.4% in the case

of poverty, and 13.55% in the case of indigence (see figure 60).

100

As a result of scant and intermittent progress in reducing poverty, compounded by the

urbanization process, most poor and indigent people now live in the cities. Urban poverty

accounts for nearly two thirds of the total, poverty and over half of indigent population. In

absolute terms, poverty is mostly located in urban areas.

In relative terms, however, poverty and indigence are much more prevalent in the countryside: of

the rural population, 62% is poor and 38% indigent—figures that are virtually unchanged since 1990.

In contrast, the corresponding percentages in the cities are 38% and 14% (see figures 60, 61 and 62).

SOURCE: FAO/RLC based on ECLAC.The first column is divided in poverty and indigence.

LAC: POOR AND INDIGENT POPULATION IN CITIES 1990-2002 (Thousand of people)Figure 60

250,000

200,000

150,000

100,000

50,000

1970

Po

or

No

n p

oo

r

1980 1986 1990 1994 1997 1999 2000 2001 2002

SOURCE: FAO/RLC based on ECLAC.The first column is divided into poverty and indegence.

LAC: POOR INDIGENT POPULATION IN THE COUNTRYSIDE 1990-2002(Thousand of people)

Figure 61

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

1970 1980 1986 1990 1994 1997 1999 2000 2001 2002

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

Po

or

No

n p

oo

r

101

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

Poverty remains a widespread feature of rural life in Latin American and Caribbean countries,

and efforts to combat it are not achieving positive results. In fact rural poverty relief has relied

more on high levels of emigration than on closing the gap between living standards in the

countryside and those in the city. Moreover, a large proportion of poor people living in the cities

are of immediate or recent rural origin. The number of poor and indigent people in rural areas

tends to be sustained over time, and represents part of the hard core of structural poverty that

responds little to changes stemming from overall economic growth.

Slow progress in reducing poverty and indigence, compounded by fluctuations in the pace of

expansion, partly reflects the obstacles facing economic growth in the region. In each episode

of economic crisis or recession, poverty tends to increase. Sustained economic growth is therefore

an necessary condition for reducing it—necessary but not sufficient. A more equitable income

distribution is also essential to enable growth to contribute to poverty reduction; but there are

also population nuclei which, through marginality, represent hard cores of poverty that can

only be tackled through specifically targeted measures.

The challenge is to speed up the pace of growth, emphasizing the quality of jobs and social

protection systems, together with productivity increase, in order to continue reducing poverty

on a sustained basis in a process that also helps to reduce inequality.

Studies conducted by the United Nations Development Programme (UNDP), in collaboration

with ECLAC and IDB, show that the factor that most explains changes in poverty levels and

inequality is economic-policy design. The most effective tool for combating poverty, along with

its intergenerational reproduction and inequality, is therefore the design of economic policy

itself. This needs to incorporate explicit targets for reducing poverty and inequality, and for

expanding quality job opportunities for population sectors in which poverty levels are high.

SOURCE: FAO/RLC based on CEPAL 2004.

LAC: POOR AND INDIGENT POPULATION (Thousand of people)Figure 62

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

1970

UR

BA

N

RU

RA

L

1980 1986 1990 1994 1997 1999 2000 2001 2002

Indigent Poor (non indigent) Non Poor

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

UR

BA

N

RU

RA

L

102

In the fight against poverty it is essential to establish social policies that benefit excluded population

groups, bearing in mind that measures to combat poverty should not conflict with the principles

that underpin stability and economic growth. Policies favouring intensive use of labour in poverty-

stricken areas contribute as much to growth as to poverty relief.

Universal coverage of basic social services is another of the most effective tools for overcoming

poverty, backed by improvements in access to and coverage of rural services aimed at boosting

rural productivity. Access to public utilities—health, education, water, electricity, and so forth—

and coverage for the poorest need to be expanded in coordinated and comprehensive fashion

to avoid duplication of effors.

Unequal access to public resources and decision making, for a large proportion of the population,

underlies economic inequality in the region. There is a need to strengthen institutions and

reduce the economic, social and political exclusion from which much of the population suffers.

More open social and political institutions should be developed to afford minorities and excluded

groups greater involvement and more active participation in society.

The priorities are to significantly strengthen efforts in education, culture, training and human

capital investment; to develop more efficient institutions and reduce polarization in power relations.

H. FOOD SECURITY

“Food security exists when all persons at all times have physical and economic access to

sufficient safe and nutritious foods to meet their dietary needs and food preferences for an

active and healthy lifestyle.31“

If the condition described above depended on productive capacities alone, it could easily be

attained. Current technological developments make it possible to produce more than enough

to feed the world’s entire population. Nonetheless, at the start of the third millennium, there

were 852 million undernourished people in the world, the vast majority of whom (815 million)

were living in developing countries (see figures 63 and 64)32.

SOURCE: FAO/RLC based on SOFI 2004.

PREVALENCE OF UNDERNUTRITION (Percentage of total developing population)Figure 63

Subsaharan Africa 20%Near East andNorth Africa 3%

Latin Americaand Caribbean 7%

Subsaharan Africa 25%Near East andNorth Africa 5%

Latin Americaand Caribbean 6%

Asia and the Pacific 64%Asia and the Pacific 69%

1990-1992 2000-2002

31 FAO definition adopted by the Heads of State and Government or representatives at the World Food Summit 13-17November 1996, Rome Declaration on World Food Security.32 FAO estimates show that there were 852 million undernourished people in the world in 2000-2002: 9 million inindustrialized countries, 28 million in transition countries, and 815 million in developing countries. FAO, “The Stateof Food Insecurity in the World 2003”.

103

MA

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OR

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In Latin America and the Caribbean, even more so than in the world as a whole, the main cause

of undernutrition and the slow progress in reducing it, is not a lack of capacity to produce

sufficient food; the region produces a comfortable surplus in its international trade in food.

Moreover, the vast majority of the region’s countries produce food surpluses individually. The

few that do not include several major oil exporters or tourist destinations, with sufficient

external purchasing power to complement their domestic food supply through imports.

The main problem in achieving food security concerns access possibilities. In other words, there

are population groups that have insufficient income to gain access to the food that is available

on the market, or to resources enabling them to produce it in a subsistence system. In other words,

food insecurity is a problem of poverty in the vast majority of cases.

Nonetheless, there are also factors caused by the isolation of certain areas, and emergencies

arising from natural disasters or situations of social conflict have sometimes been partly to blame.

Economic upheavals can also aggravate undernutrition; economic crises and recessions have

increased food insecurity significantly in several countries. On the other hand, social protection

networks can help limit the effects of climate, social or economic disturbances on food security,

and reduce undernourishment and child malnutrition among poor population groups.

The undernourished population in Latin America and the Caribbean shrank from 59.5 million

during the early 1990s to 52.9 million by the start of the following decade, i.e. from 13% to 10%

of the total population. Reflecting the size of their populations, the largest numbers of

undernourished people are in Brazil (15.6 million), followed by Colombia (5.7 million), Mexico

(5.2 million), Venezuela (4.3 million) and Haiti (3.8 million) (see table 24 and figure 65).

SOURCE: FAO/RLC based on SOFI 2004.

PREVALENCE OF UNDERNUTRITION (Percentage of the total population of the region)Figure 64

40

35

30

25

20

15

10

5

0

Asia and the Pacific Latin America and Caribbean Nearest and NorthAfrica

Subsaharan Africa

1979-1981 1990-1992 2000-20021995-1997 1999-2001

PREVALENCE OF UNDERNUTRITION IN DEVELOPING COUNTRIESTable 24

SOURCE: SOFI 2004.The countries periodically review their official statistics, both past and present; and this is also true of United Nations population data. Wheneverthis happens, FAO revises its undernourishment estimates.The figures that follow the country name are prevalence categories (proportion of the population undernourished in 2000–2002), as follows[1] < 2.5% population undernourished.[2] 2.5-4% population undernourished.[3] 5-19% population undernourished.[4] 20-34% population undernourished.[5] 35% population undernourished.

COUNTRIES Number of people undernourished Number of people undernourished Proportion of totalpopulation undernourished

1979-81 1990-1992 1995-1997 1999-2001 2000-2002 1980-1991 1991-1996 1996-01 1991-01 1979-81 1990-1992 1995-1997 1999-2001 2000-2002

[Undernutrition category] (Mill ions) (Percentage change) (Percentage)

Latin America and the Caribbean 45.9 59.5 54.8 53.4 52.9 2.4 -1 .6 -0.5 -1 .2 13.0 13.0 11 .0 10.0 10.0

Brazil [3] 18.1 18.5 16.5 15.6 15.6 0.2 -2.3 -1 .1 -1 .7 15.0 12.0 10.0 9.0 9.0

Mexico [3] 3.0 4.6 5.0 5.2 5.2 4.0 1 .7 0.8 1 .2 4.0 5.0 5.0 5.0 5.0

Argentina [1] 0.3 0.7 0.4 0.4 0.6 8.0 -10.6 0.0 -1 .5 1 .1 2.1 1 .1 1 .1 1 .6

Chile [2] 0.7 1 .1 0.7 0.6 0.6 4.2 -8.6 -3.0 -5.9 7.0 8.0 5.0 4.0 4.0

Paraguay [3] 0.4 0.8 0.7 0.7 0.8 6.5 -2.6 0.0 0.0 13.0 18.0 13.0 13.0 14.0

Uruguay [2] 0.1 0.2 0.1 0.1 0.1 6.5 -12.9 0.0 -6.7 3.0 6.0 4.0 3.0 4.0

Bolivia [4] 1 .4 1 .9 1 .9 1 .8 1 .8 2.8 0.0 -1 .1 -0.5 26.0 28.0 25.0 22.0 21.0

Colombia [3] 6.1 6.1 5.1 5.7 5.7 0.0 -3.5 2.2 -0.7 22.0 17.0 13.0 13.0 13.0

Ecuador [2] 0.9 0.9 0.6 0.6 0.6 0.0 -7.8 0.0 -4.0 11 .0 8.0 5.0 4.0 4.0

Peru [3] 4.9 9.3 4.6 2.9 3.4 6.0 -13.1 -8.8 -9.6 28.0 42.0 19.0 11 .0 13.0

Venezuela [3] 0.6 2.3 3.5 4.4 4.3 13.0 8.8 4.7 6.5 4.0 11 .0 16.0 18.0 17.0

Costa Rica [2] 0.2 0.2 0.2 0.2 0.2 0.0 0.0 0.0 0.0 8.0 6.0 5.0 6.0 4.0

El Salvador [3] 0.8 0.6 0.8 0.8 0.7 2.6 5.9 0.0 1.6 17.0 12.0 14.0 14.0 11 .0

Guatemala [4] 1 .2 1 .4 2.2 2.9 2.8 1 .4 9.5 5.7 7.2 18.0 16.0 21.0 25.0 24.0

Honduras [4] 1 .1 1 .1 1 .2 1 .3 1 .5 0.0 1.8 1 .6 3.2 31.0 23.0 21.0 20.0 22.0

Nicaragua [4] 0.8 1 .2 1 .5 1 .5 1 .4 3.8 4.6 0.0 1.6 26.0 30.0 33.0 29.0 27.0

Panamá [4] 0.4 0.5 0.6 0.7 0.8 2.0 3.7 3.1 4.8 21.0 21.0 23.0 26.0 26.0

Cuba [2] 0.4 0.8 1 .9 1 .3 0.4 6.5 18.9 -7.3 -6.7 4.0 8.0 18.0 11 .0 3.0

Haití [5] 2.6 4.6 4.5 4.0 3.8 5.3 -0.4 -2.3 -1 .9 48.0 65.0 59.0 49.0 47.0

Dominican Republic [4] 1 .4 1 .9 2.0 2.1 2.1 2.8 1 .0 1 .0 1 .0 25.0 27.0 26.0 25.0 25.0

Guyana [3] 0.1 0.2 0.1 0.1 0.1 6.5 -12.9 0.0 -6.7 13.0 21.0 12.0 14.0 9.0

Jamaica [3] 0.2 0.3 0.3 0.2 0.3 3.8 0.0 -7.8 0.0 10.0 14.0 11 .0 9.0 10.0

Suriname [3] 0.1 0.1 0.04 0.04 0.04 0.0 -16.7 1 .9 -7.9 18.0 13.0 10.0 11 .0 11 .0

Trinidad and Tobago [3] 0.1 0.2 0.2 0.2 0.2 6.5 0.0 0.0 0.0 6.0 13.0 15.0 12.0 12.0

104

105

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

During the last decade the total number of undernourished people decreased in 12 of the region’s

countries; in four other countries the number remained unchanged from the start of the decade;

and in nine countries it has increased (see figure 66).

SOURCE: SOFI 2004.a/ CARICOM includes only Guyana, Jamaica, Suriname and Trinidad and Tobago.

LAC: PERSONS UNDERNOURISHED, 2000-2001a(Percentage of a total population of 52,9 millions)

Figure 65

Brazil 29%

Mexico 10%

Colombia11%

Venezuela8%

Guatemala 5%

Peru6%

Haiti(5)7%

Trinidad and Tobago 0.4%

Suriname 0.08%

Jamaica 1%

Dominican Republic 4%

Cuba 1%

Panama 2%

Nicaragua 3%

Honduras 3%

El Salvador 1%

Costa Rica 0.4%

Ecuador 1%Bolivia 3%

Paraguay 2%

Chile 1%

Argentina 1%

Figure 66 LAS: NUMBER OF PEOPLE UNDERNOURISHED (Growth rate 1991-2001)

SOURCE: SOFI 2004.

-10 -8 -6 -4 -2 0 2 4 6 8

Peru [3]Suriname[3]

Cuba [2]Guyana [3]

Uruguay [2]Chile [2]

Ecuador [2]Haiti [5]

Brazil [3]Argentina [1]Colombia [3]

Bolivia [4]Costa Rica [2]

Jamaica [3]Paraguay [3]

Trinidad and Tobago [3]Dominican Republic [4]

Mexico [3]Nicaragua [4]

El Salvador [3]Honduras [4]

Panama [4]Venezuela [3]Guatemala [4]

Proportion of the populationundernourished in 1998-2000:

(1) <2.5% of population undernourished.(2) 2.5-<4% of population undernourished.(3) 5-<19% of population undernourished.(4) 20-<34% of population undernourished.(5) 35% of population undernourished.

106

Proportion of population undernourished

The number of undernourished people in relation to total populations in the region is especially

high in the Latin Caribbean (except Cuba) and in Central America (excluding Costa Rica). The

largest percentage is in Haiti, where undernutrition affects 47% of the population. In another six

countries (Nicaragua, Panama, Dominican Republic, Guatemala, Bolivia and Honduras), between

20% and 30% of the total population are undernourished. In most countries of the region (11) the

percentages range between 5% and 19%, while in just six countries undernourishment afflicts

less than 4% of the national population: Argentina (under 1%), Cuba (3%), and Chile, Ecuador and

Uruguay and Costa Rica (4%) (see figure 67).

During the past decade (1990-1992 to 2000-2002), the proportion of the population suffering from

undernourishment decreased in 20 of the region’s 24 countries for which information is available. The

largest reduction as a proportion of the population was achieved in Peru, followed by Cuba, Guyana,

Chile and Ecuador. The incidence of undernutrition worsened in three countries (Venezuela, Guatemala

and Panama), while remaining unchanged at 5% in Mexico (see figure 68).

During the first half of the decade, between 1990 and 1996, although most countries were able

to reduce the incidence of undernutrition, seven were not (Cuba, Venezuela, Guatemala, El

Salvador, Nicaragua, Panama, and Trinidad and Tobago). Of these, Cuba achieved a sharp

reduction in undernutrition between 1996 and 2001, while Nicaragua and Trinidad and Tobago

also managed a reduction; but in Venezuela, Guatemala and Panama, the situation continued

to worsen. In this latter period, conditions of undernutrition also deteriorated in Costa Rica,

Guyana and Suriname (see figure 69).

SOURCE: FAO 2004. For 1979-1981 data SOFI 2002.

LAC: PROPORTION OF POPULATION UNDERNOURISHED (Percentage)Figure 67

70

60

50

40

30

20

10

0

Arg

enti

na

Cu

ba

Ch

ile

Ecu

ado

r

Uru

guay

Cos

ta R

ica

Mex

ico

Gu

yan

a

Bra

zil

Jam

aica

Su

rin

ame

El S

alva

dor

Trin

idad

an

d To

bago

Per

u

Co

lom

bia

Par

agu

ay

Ven

ezu

ela

Bo

livia

Ho

ndu

ras

Gu

atem

ala

Do

min

ican

Rep

ubl

ic

Pan

ama

Nic

arag

ua

Hai

ti

1979-1981 1990-1992 2000-20021995-1997 1999-2001

2.5 a 4%

5 a 19%

20 a 30%

> 45%

107

MA

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OE

CO

NO

MIC

FR

AM

EW

OR

K

Key factors explaining these changes are economic growth and poverty relief; but these are not

exclusive, nor do they involve a simple linear relation in which economic growth leads automatically

to poverty reduction and hence to less undernutrition. There is a clear relation between economic

growth and poverty reduction, but it is mediated by several factors, particularly the state of the

income distribution. Poverty reduction is also a significant factor in reducing undernourishment;

but again the relation is neither clearly defined nor linear.

Figure 68 LAC: PROPORTION OF POPULATION UNDERNOURISHED (Growth rate 1991-2001)

SOURCE: SOFI 2004.

-12 -10 -8 -6 -4 -2 0 2 4 6

Peru [3]Cuba [2]

Guyana [3]Chile [2]

Ecuador [2]Uruguay [2]

Costa Rica [2]Jamaica [3]

Haiti [5]Brazil [3]

Bolivia [4]Argentina [1]Colombia [3]Paraguay [3]Suriname [3]

Nicaragua [4]El Salvador [3]

Trinidad and Tabago [3]Dominican Republic [4]

Honduras [4]Mexico [3]

Panama [4]Guatemala [4]Venezuela [3]

Proportion of the populationundernourished in 1998-2000:

(1) <2.5% of population undernourished.(2) 2.5-<4% of population undernourished.(3) 5-<19% of population undernourished.(4) 20-<34% of population undernourished.(5) 35% of population undernourished.

SOURCE: FAO/RLC based on SOFI 2004.

Figure 69 LA: CHANGE IN UNDER NUTRITION PREVALENCE 1990-2001(Annual average rate)

Ch

ang

e in

un

der

nu

trit

ion

19

96

-20

01

5

0

5

10

15

5 10 15 20 25 30-5-10-15

Per

Jam

Arg

ChiUru

HaiBolBra

Par

Hon

Col

SurGuy

Cos

Dmi

Mex

Pan

Els

Nic

Tri

GuaVen

Cub

Change in undernutrition 1990-1996

SOURCE: FAO/RLC based on ECLAC 2004 y SOFI 2004.

Figure 70 LA: CHANGE IN PROPORTION OF POVERTY AND UNDERNUTRITION (1991-2001)

Change in Poverty

3

2

1

0

-1

-2

-3

-4

-5

-6

-7

2 4 6-2-4-6-8-10-12

Arg

Cos

Bra

Nic

Sal

ColBol Par Hon

Mex

Uru

Chi

Ecu

Per

Pan

Gua

Ven

Ch

ang

e in

pov

erty

108

Figure 70 shows that in most countries where poverty has decreased, the prevalence of

undernutrition has also declined (bottom left-hand quadrant); nonetheless, there were two

countries where poverty decreased but undernutrition increased (Guatemala and Panama). Only

in Argentina did poverty increase while undernutrition declined, whereas in Venezuela, both

poverty and undernutrition have increased (see figure 70).

Average food availability is also a relevant factor, but this does not bear a direct linear relation

to the prevalence of undernutrition, or to other indicators of the population’s nutritional

status. Brazil and Mexico, for example, have greater food availability per person than most

countries in the region, but the prevalence of undernutrition and child malnutrition are more

serious than elsewhere. This suggests the need to analyse variables relating to distribution,

equity and social exclusion. Peru and Jamaica, in contrast, have relatively less food availability

per person than other countries, but they have better undernutrition indices than the regional

average (see table 25).

AVAILABILITY OF FOOD, DIVERSIFICATION OF DIET, INFANT MORTALITY, CHILDNUTRITIONAL STATUS, EDUCATION AND URBANIZATION

Table 25

SOURCE: SOFI 2004.NOTE: Non starchy foods: all FES sources, except cereals, root crops and tubers.- Under-fives mortality rate: Likelihood that a newborn child will die before reaching five years of age, if exposed to current age-specific mortalityrates. The probability is expressed as a rate per 1,000 live births.- Under-fives with weight deficiency: Proportion of children under five years of age whose weight in relation to their age is two percentage pointsor more below average. The dates of the surveys vary.- Literacy rate: Percentage of population between 15 and 24 years of age who can read, write and understand a short simple sentence about dailylife.- Urbanization: Percentage of population living in urban zones midway through the annual reference period.LEGENDn.a. Information not availableSOURCES: Undernutrition categories, Availability of food, and Diversification of diet: FAO.Infant mortality: UNICEF.Child nutritional status: WHO.Education: UNESCO.Urbanization: United Nations Population Division, Population Prospects, 2003 revision.

UNDERNUTRITION PREVALENCE Availabil ity of Diversification Infant Mortality Nutritional status Education Urbanization CATEGORY food of diet status of children

ON TOTAL POPULATION Food Proportion Rate of under ProportionIN 2000–2002 Energy of non-starchy mortality five of population

Supply foods among children with weight Literacy living in urban(FES) n total FES under five deficiency index areas

1990–1992 2000–2002 1979–1981 2000–2002 1990 2002 1990 2000 1990 2003 1990 2000

COUNTRY kcal /day/ person % per 1000 % % %live births

LESS THAN 2.5% OF POPULATION UNDERNOURISHED

Argentina 2990 3070 67 65 28 19 2 5 98 99 87 89

2.5% - 4% OF POPULATION UNDERNOURISHED

Chile 2610 2850 51 56 19 12 2 1 98 99 83 86

Costa Rica 2710 2860 62 65 17 11 3 n.a. 97 99 54 59

Cuba 2720 3000 58 63 13 9 n.a. 4 99 100 74 75

Ecuador 2510 2740 65 66 57 29 17 14 96 98 55 60

Uruguay 2660 2830 62 59 24 15 4 n.a. 99 99 89 92

5% - 19% OF POPULATION UNDERNOURISHED

Brazil 2810 3010 57 66 60 37 7 6 92 96 75 81

Colombia 2440 2580 59 59 36 23 10 7 95 97 69 75

El Salvador 2490 2550 44 48 60 39 15 10 84 89 49 58

Guyana 2350 2710 50 50 90 72 18 14 100 100 33 36

Jamaica 2500 2670 58 60 20 20 7 4 91 95 51 52

Mexico 3100 3160 52 53 46 29 14 8 95 97 72 75

Paraguay 2400 2560 56 59 37 30 4 n.a. 96 97 49 55

Peru 1960 2550 46 46 80 39 11 7 95 97 69 73

Suriname 2530 2630 52 56 48 40 n.a. 13 n.a. n.a. 65 74

Trinidad and Tobago 2640 2730 59 62 24 20 7 6 100 100 69 74

Venezuela 2460 2350 63 60 27 22 8 4 96 98 84 87

20% - 34% OF POPULATION UNDERNOURISHED

Bolivia 2110 2250 52 50 120 71 11 8 93 97 56 62

Dominican Republic 2260 2320 65 67 65 38 10 5 88 92 55 58

Guatemala 2350 2190 40 48 82 49 33 24 73 81 41 45

Honduras 2310 2350 46 54 59 42 18 17 80 86 40 44

Nicaragua 2220 2280 52 49 68 41 11 10 68 73 53 56

Panama 2320 2240 61 61 34 25 n.a. 8 95 97 54 56

35% OR MORE OF POPULATION UNDERNOURISHED

Haiti 1780 2080 49 45 150 123 27 17 55 67 29 36

109

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Child malnutrition

A serious indicator of nutritional shortcomings is the number of underweight children.

Undernutrition among children is caused by insufficient consumption of the calories needed to

meet their biological needs; undernourished mothers who give birth to underweight children; and

illnesses that exhaust those nutrients. In addition, some diets are lacking in essential nutrients.

110

32 The difference between these two ways of expressing the same general goal stems from their consideration ofdemographic growth. The World Food Summit pledge is more ambitious since it aims to halve the absolute number ofundernourished people in the world, irrespective of whether the number of people who do enjoy food security increases.In contrast, the Millennium Goal is expressed in terms of halving the ratio between the two groups.

In Latin America and the Caribbean, the percentage of undernourished children under five years

of age fell from 11% in 1990 to 8% in 2000. In the latest period for which data is available (2000-

2002), six countries show figures of 5% or lower; in twelve countries the population of under

five that is underweight for their age varies between 5% and 15%; and in three countries

(Guatemala, Haiti and Honduras) the figure is close to or above 25%. Child undernutrition

continues to be a problem that mainly affects low-income countries and the poorest regions of

middle-income countries (see figure 71).

The most severe manifestation of hunger and extreme poverty among children is chronic

undernourishment, which causes growth retardation and small size in relation to age. The

seriousness of this problem stems from the irreversible nature of its sequels, since it occurs at

the most critical age for children’s psycho-motor development. It thus becomes one of the main

mechanisms for transmitting poverty from one generation to the next.

The pledge of the World Food Summit

The World Food Summit pledged to halve the number of people suffering from hunger by 2015.

A similar objective was included among the Millennium Development Goals; in the latter case,

the proposal is to halve the proportion of the population suffering from undernourishment33

Despite progress made in reducing the percentage of undernourished people in Latin America

and the Caribbean, as described above, in absolute terms the number of undernourished persons

fell by just 6.6 million between 1990 and 2001 (from 59.5 million to 52.9 million), i.e. by about

SOURCE: FAO/RLC based on SOFI 2004. FAO SOFI 2003.

CHILDREN UNDER FIVE WITH WEIGTH DEFINCIENCY (Percentage)Figure 71

35

30

25

20

15

10

5

0

1990 2000

Ch

ile

Cu

ba

Jam

aica

Ven

ezu

ela

Arg

enti

na

Rep

. Do

min

ican

a

Trin

idad

an

d Ta

bago

Bra

zil

Co

lom

bia

Per

u

Pan

ama

Mex

ico

Bo

livia

El S

alva

dor

Nic

arag

ua

Su

rin

ame

Ecu

ado

r

Gu

yan

a

Ho

ndu

ras

Hai

ti

Gu

atem

ala

111

MA

CR

OE

CO

NO

MIC

FR

AM

EW

OR

K

SOURCE: FAO/RLC based on SOFI 2004.

LAC: SITUATION IN RELATION TO THE TARGET OF THE WORLD FOOD SUMMIT ANDTHE MILLENNIUM DEVELOPMENT GOAL ON FOOD SECURITY

Figure 72

10

5

0

-5

-10

-15

Per

u

Cu

ba

Gu

yan

a

Ch

ile

Ecu

ado

r

Uru

guay

Cos

ta R

ica

Jam

aica

Hai

ti

Bra

zil

Bo

livia

Arg

enti

na

Co

lom

bia

Par

agu

ay

Su

rin

ame

Nic

arag

ua

El S

alva

dor

Trin

idad

an

d To

bago

Do

min

ican

Rep

ubl

ic

Ho

ndu

ras

Mex

ico

Pan

ama

Gu

atem

ala

Ven

ezu

ela

Rate of change in proportion of population undernourished between 1991 and 2001

Rate needed to have already achieved the food security.

Rate needed to achieve the food security goal.

Rate of change in population undernourished between 1991 and 2001

600,000 people per year. This is far below the annual rate of 1.19 million people needed to reduce

the number of undernourished people by 29.75 million before 2015. To achieve the target of the

World Food Summit, the annual rate of reduction would need to rise to 1.65 million during the

last 14 years of the period (2001 to 2015).

The situation in the individual countries of the region is quite varied in this respect. Some have

already met the target for 2015, and others are well on the way to doing so; but there are other

countries that are laggards, and some cases that have even regressed from their starting point.

Peru, Cuba, Guyana, Chile and Ecuador have already managed to comply with the MDG food

security goal. Another seven countries (Uruguay, Costa Rica, Jamaica, Haiti, Brazil, Bolivia and

Argentina) are reducing undernutrition at rates that should enable them to meet the target before

2015. Eight more (Colombia, Paraguay, Suriname, Nicaragua, El Salvador, Trinidad and Tobago,

Dominican Republic and Honduras) are reducing the prevalence of undernutrition at a rate that

should allow them to halve the proportion of undernourished people by 2015. In Mexico there has

been no change, and in Panama, Guatemala and Venezuela the proportion of undernutrition in

the total population is actually increasing (see figure 72).

III. AGRICULTURAL SECTOR DEVELOPMENT

114

A. TREND OF SECTORAL GDP

Agricultural output in Latin America and the Caribbean grew by 4.1% in 2003, the highest rate

since 1999, thereby confirming the relatively faster sectoral growth trend that has prevailed

since 1994. Nonetheless, a longer-term view reveals a continuation of the slow pace of expansion

that has characterized the regional sector development over the last few decades. The average

annual growth rate between 1990 and 2003 was 2.7%, slightly above the 2.4% achieved in the

1980s, but significantly lower than the 3.4% recorded in the preceding decade. In the most

recent period, modest rates have not been accompanied by the wide fluctuations that occurred

in the 1980s (see figure 73).

More than the vagaries of climate or abrupt changes in market conditions, the slow pace of

sectoral growth over the last two decades reflects the persistence of fundamental problems of

competitiveness and profitability, compounded by the inadequacy of agricultural development

policies.

Explanations for this poor performance are partly structural, such as the existence of extensive

isolated rural areas, lacking basic services, without productive or transport infrastructure, and

population groups that are subject to severe levels of exclusion. Such problems are hard to

surmount in the short or medium term through specific policies; and overcoming them should

be viewed more as an outcome of cumulative national development than as a condition for

agricultural growth. While it is very important to take these issues into account when designing

the model of development, the capacity to influence annual growth rates by making structural

improvements is limited.

Figure 73

SOURCE: ECLAC.Nota: Cuba, Belize, Dominica y Grenada, included as from 1989.

LAC: GROWTH OF AGRICULTURAL GDP (1971-2003)

-2

-4

0

2

4

6

8

197

1

197

2

197

3

1974

197

5

1976

197

7

1978

197

9

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

20

00

20

01

20

02

20

03

115

AG

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AL

SE

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LOP

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NT

Although such conditions certainly reduce the agricultural development base, the sluggish

growth of the last 23 years also reflects problems of a different type, namely an inability to

exploit the margin of productive progress made possible by current growth levels. Low profitability

stemming from difficult access to financing, and a significant deterioration of research and

technology transfer systems in many of the region’s countries, are two of the supply-side factors

that do most to restrict the pace of agricultural growth in the region.

Another set of factors that influence trends in agricultural output involve conditions prevailing

outside the sphere of primary production in Latin American and Caribbean countries. Although

natural resources, labour supply and technology development are still very important, global

changes and new conditions on agricultural markets have also increased the influence of factors

that are exogenous to the agriculture and livestock sector per se, such as vertical integration,

the macroeconomic framework and conditions on national and international markets. These

three groups of factors have a powerful effect on agricultural competitiveness and profitability.

Profitability depends not only on the competitiveness of primary production, but on the whole

production-processing-consumption chain, mediated by the prevailing economic “climate”.

Ensuring that agriculture is a profitable activity requires more than efficient production on

the farm; the competitiveness of the system as a whole needs to be strengthened. Nowadays

this is not a question of discovering comparative advantages in natural resources, but of

building systemic competitiveness. To make Latin American agriculture profitable requires

increasing technical progress in agriculture with better management systems, and the

development of conditions that foster efficiency in the agro-food system, encompassing entire

production-processing-marketing chains. Weakness in these chains, resulting from a failure

to develop the physical, institutional and human capital needed to maintain and develop the

corresponding linkages, is one reason for the inefficient integration of primary production

within the agro-food system.

The exchange rate, interest rates, and uncertainty surrounding external conditions have also

acted as constraints on productive investment in the agrifood system, and in primary production

particularly. In addition to basic macroeconomic tools, productive investment in agriculture is

also affected by other important elements in the overall environment, such as the efficiency of

financial systems and services; international positioning, market information and marketing

services; physical infrastructure, not only productive, but also commercial and processing; the

availability, regularity and cost of energy, communications and transport services; economic

regulations and the organization of productive agents; the quality and integrity of public

administration; education, labour skills and living standards among the population, and so forth.

Distortions on international markets for agricultural products, mainly caused by agricultural

subsidies in developed countries, force the decline of the prices of important exportable products,

thereby undermining the potential for sectoral growth. Moreover, various forms of non-tariff

and para-tariff protectionist barriers have arisen in recent years, which further aggravate the

problematic international context facing the region’s agricultural exports, and are a major cause

of the weak sectoral growth rate.

The failure of agricultural growth in Latin America and the Caribbean to achieve a rapid takeoff

since the introduction of reforms as part of the new development model is discouraging.

Nonetheless, to a greater or lesser extent, conditions do exist to overcome the difficulties

116

mentioned, since the differences between the various countries reflect different degrees of

progress in overcoming them.

In general terms, the evolution of agricultural output of Latin American and Caribbean countries

over the last decade bears a direct relation to global economic growth; countries with faster

growing economies overall also have faster agricultural growth. This relationship is affected,

firstly, by agriculture’s contribution to economic growth. This exceeds its direct share of GDP,

because, in many countries of the region, crop and livestock production forms the basis of much

of their commercial and industrial activities and has a major impact on the overall

competitiveness of the system. Faster economic growth, in turn, means stronger domestic

demand, stimulus for vertical integration and greater support for agricultural productivity.

Between 1990 and 2003, the economy of Latin America and the Caribbean grew at an average

annual rate of 2.6%, while agriculture grew at a similar rate of 2.7% per year (see the axes in

figure 74). The fastest agricultural growth in the region was the 5.8% recorded by Belize, which

also posted a relatively high overall growth rate of 4.1%. Other countries with high growth rates

in agriculture, such as Peru and Guyana, also display above-average overall total rates.

Reciprocally, the Dominican Republic posted the highest overall growth rate (5.6%), and displayed

an agricultural growth rate of 4.1%, while Chile also achieved strong growth in both cases: 4.6%

in terms of sectoral output and 5.0% in terms of overall GDP. At the other end of the scale, Haiti

registered the lowest total economic growth and also the smallest agricultural expansion; in

fact it was the only country where both rates were negative (see figure 74 and table 26).

SOURCE: FAO/RLC based on ECLAC.

Figure 74 LAC: GROWTH OF GDP AND AGRICULTURAL GDP 1990-2003(Average annual rate)

Ag

ricu

ltu

ral G

DP

8

6

4

2

0

-2

-4

-6

-8

-1 1 2 3 4 5 6

DomCubHai

VenUru

Par

Bar

Arg

Ecu

Col

Bra

Mex

HonBol

Pan

NicPer

Bel

Gra

Stv

ElsStkAnt

Tri

Guy

CosDmi

Stl

Jam

GDP

117   

AG

RIC

ULT

UR

AL

SE

CT

OR

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VE

LOP

ME

NT

During the period under consideration, most countries of the region maintained or improved

upon the agricultural growth rates they had achieved in the previous decade, the main exceptions

being Colombia, Haiti, Jamaica, Venezuela, and Trinidad and Tobago. Growth also slowed in

Chile, Ecuador, Honduras and Paraguay, although to a lesser extent; while, the Caribbean

countries generally posted very low or negative rates, except Belize and Guyana (see figure 75).

LAC: GROWTH OF GDP AND AGRICULTURAL GDP (Percentage)Table 26

GDP GDP

Country 1990-03 1990-03

Latin American and the Caribbean 2.6 2.7

Latin America 2.6 2.7

Brazil 2.5 3.3

Mexico 3.0 1.9

Southern Cone 2.7 2.9

Argentina 2.1 2.5

Chile 5.0 4.6

Paraguay 1.5 2.6

Uruguay 1.3 1.6

Andean countries 2.2 2.3

Bolivia 3.4 2.7

Colombia 2.3 1.3

Ecuador 1.9 4.0

Peru 3.9 5.1

Venezuela 0.8 0.8

Central America 3.9 2.7

Costa Rica 4.6 3.5

El Salvador 3.8 0.8

Guatemala 3.8 2.6

Honduras 3.0 2.2

Nicaragua 3.9 4.7

Panama 3.6 3.7

Latin Caribbean 1.8 -0.1

Cuba 0.9 -2.1

Haiti -0.1 -1.3

Dominican Republic 5.6 4.1

CARICOM 2.5 0.5

Antigua and Barbuda 3.3 1.1

Bahamas n.a. n.a.

Barbados 1.5 -0.3

Belize 4.1 5.8

Dominica 0.9 -2.2

Grenada 3.2 -0.1

Guyana 4.4 5.1

Jamaica 0.7 -0.1

Saint Kitts and Nevis 3.9 0.9

Saint Vincent and the Grenadines 2.7 -1.7

Saint Lucia 1.2 -6.6

Suriname 0.5 n.a.

Trinidad and Tobago 4.2 -0.3

SOURCE: FAO/RLC based on ECLAC.

Agricultural

118

Agricultural output in Latin America and the Caribbean was 41% higher in 2003 than in 1990,

and 81% greater than in 1980. At the same time, the cumulative growth differential since 1990

has entailed major changes in each country’s contribution to the region’s agricultural output.

Brazil’s share grew by most, from 39% to 44%, while Cuba and Mexico suffered the largest

relative reductions (see figures 76 and 77).

Figure 75 LAC: AVERAGE GROWTH OF AGRICULTURAL GDP (Percentage)

SOURCE: FAO/RLC based on ECLAC.For some Caribbean countries there is no information before 1990.For Bahamas and Suriname there is no information available.

-7.0 -5.0 -3.0 -1.0 1.0 3.0 5.0 7.0

Saint LuciaDominica

CubaSaint Vincent and the Grenadines

HaitiBarbados

Trinidad and TobagoJamaicaGrenada

El SalvadorVenezuela

Saint Kitts and NevisAntigua and Barbuda

ColombiaUruguay

MexicoHondurasArgentinaParaguay

GuatemalaBoliviaBrazil

Costa RicaPanamaEcuador

Dominican RepublicChile

NicaraguaGuyana

PeruBelize

1980-90 1990-03

AG

RIC

ULT

UR

AL

SE

CT

OR

DE

VE

LOP

ME

NT

Figure 77 LAC: AGRICULTURAL GDP (Millions of 1995 dollars)

SOURCE: FAO/RLC based on ECLAC.

1990 2003

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Saint Kitts y Nevis

Antigua and Barbuda

Saint Lucia

Grenada

Saint Vincent and the Grenadines

Dominica

Trinidad and Tabago

Barbados

Guyana

Jamaica

Haiti

Panama

Nicaragua

Honduras

BoliviaEl Salvador

Uruguay

Costa Rica

Dominican Republic

Paraguay

Cuba

Guatemala

Venezuela

Ecuador

Chile

Peru

Colombia

Argentina

Mexico

Brazil

0 50 100 150 200 250 300

Saint Kitts and Nevis

Antigua and Barbuda

Saint Lucia

Grenada

Saint Vincent andthe Grenadines

Dominica

Trinidad and Tabago

Barbados

Guyana

119

SOURCE: FAO/RLC based on FAOSTAT.a/Excluding Cuba in 1980.

LAC: SHARE IN REGIONAL AGRICULTURAL GDP (Percentage)Figure 76

Latin Caribbean 6%CARICOM 0.9%

Central America 6%

Andeancountries

19%

SouthernCone14%

Mexico15%

Brazil39%CARICOM 0.6%

Latin Caribbean 3%

Central America 6%

Andeancountries

18%Brazil44%

Mexico13%

SouthernCone15%

Latin Caribbeana 2%CARICOM 0.8%

Central America 7%

Andeancountries

19%

SouthernCone15%

Brazil39%

Mexico17%

1980 1990

2003

120

Share of agriculture in global GDP

Over the last two decades, the share of agriculture in the GDP of Latin America and the Caribbean

has remained broadly between 7% to 8% range; but in 2003 it rose to 8.1%, which implies a

relative slowdown in the declining trend of agriculture in relation to GDP that is a normal of

development processes.

Two reflections are relevant when considering the share of agricultural output in the overall

economy. Firstly, this coefficient alone is inadequate to express agriculture’s importance, or to

measure its contribution to national development. Secondly, the significance of the trend needs

to be considered from a development perspective.

Agriculture’s strategic signifcance is more important than its share of GDP. In many of the region’s

countries of the region crop and livestock production provide the basis for a large proportion of

their commercial and industrial activities, which means that sectoral trends are very important

for overall systemic competitiveness. The vertical integration of agriculture and coordination

within a complex agro-food system usually does not diminish as development proceeds. On the

contrary, in industrialized countries, the aggregate output of the agro-food system tends to multiply

the value of primary agricultural output eight or tenfold, whereas in Latin American and Caribbean

countries this coefficient varies between 3 and 6. The importance of the agro-food sector will tend

to grow in relation to primary production. Moreover, given its role in food consumption, agriculture

has a major effect on the incomes and real wages of the population as a whole. The sector continues

to be a major generator of foreign exchange; and in several of the region’s countries, it is the

leading source of purchasing power abroad. Lastly, agricultural development also has a decisive

effect on key development issues such as poverty relief, regional balance, land management and

environmental sustainability (see figure 78 and table 27).

SOURCE: FAO/RLC based on data provided by ECLAC.

LAC: SHARE OF AGRICULTURAL GDP IN TOTAL GDP (Percentage)Figure 78

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

37.0

8.2

8.0

7.8

7.6

7.4

7.2

121

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A lower share of agriculture in gross domestic product is a characteristic of more developed

countries. For Latin America and the Caribbean, figure 79 eloquently illustrates how the agricultural

share of national output is higher among the poorer countries, and tends to decline among the

more developed ones—including those where agriculture is more efficient—to approach the 1% -

4% levels prevailing in industrialized countries (see figure 79).

SHARE OF AGRICULTURAL GDP IN TOTAL GDP (Percentage)Table 27

Country 1980 1990 2000 2001 2002 2003

Latin America and the Caribbean 7.1 7.9 7.4 7.6 7.9 8.1

Latin America 7.1 7.9 7.4 7.6 7.9 8.1

Brazil 7.2 8.0 8.2 8.6 8.9 9.4

Mexico 5.4 5.1 4.2 4.4 4.4 4.5

Southern Cone 5.1 6.6 5.8 6.2 6.7 6.6

Argentina 4.5 5.8 5.1 5.4 5.9 5.8

Chile 4.6 6.4 5.7 6.0 6.2 6.0

Paraguay 23.4 25.6 25.6 27.6 28.1 29.3

Uruguay 8.6 8.2 7.6 7.3 8.8 9.8

Andean countries 9.5 11.2 10.9 10.8 11.1 11.3

Bolivia 12.9 15.4 14.1 14.5 14.2 14.7

Colombia 16.4 15.1 13.9 13.8 13.6 13.4

Ecuador 14.7 18.7 23.3 22.1 22.9 22.7

Peru 5.7 8.2 9.3 9.1 9.1 8.9

Venezuela 5.0 5.9 5.2 5.2 5.6 6.1

Central America 16.9 17.4 15.2 15.1 14.9 14.9

Costa Rica 11.6 12.7 11.6 11.6 11.0 11.1

El Salvador 17.7 16.5 12.1 11.6 11.4 11.1

Guatemala 22.0 23.0 20.2 20.0 19.9 20.1

Honduras 19.7 20.5 19.4 18.8 19.3 19.0

Nicaragua 28.5 31.6 34.8 34.5 34.7 35.0

Panama 7.5 8.9 8.0 8.4 8.4 8.4

Latin Caribbean 17.5 10.3 8.7 8.4 7.9 7.8

Cuba 0.0 9.0 6.9 6.2 5.6 5.6

Haiti 19.7 19.7 18.6 18.9 18.3 18.2

Dominican Republic 16.3 13.4 11.4 12.0 11.8 11.5

CARICOM 6.1 7.3 6.7 6.32 6.2 6.4

Antigua and Barbuda n.a. 4.2 3.5 3.39 3.4 3.4

Bahamas n.a. n.a. n.a. n.a. n.a. n.a.

Barbados 9.4 6.7 5.7 5.4 5.3 5.3

Belize n.a. 18.8 22.1 21.0 20.9 26.9

Dominica n.a. 21.6 15.8 14.7 15.6 15.1

Grenada n.a. 12.3 7.4 7.4 9.0 8.7

Guyana 39.8 40.8 45.6 46.2 48.5 47.0

Jamaica 8.8 7.4 7.3 7.5 6.9 7.3

Saint Kitts and Nevis n.a. 5.9 4.1 4.6 5.1 4.4

Saint Vincent and the Grenadines n.a. 19.3 10.9 10.0 7.9 7.7

Saint Lucia n.a. 16.2 8.3 6.7 9.4 8.3

Suriname n.a. 15.4 13.4 n.a. n.a. n.a.

Trinidad and Tobago 1.5 1.4 1.4 1.3 1.3 1.0

SOURCE: FAO/RLC based on ECLAC.Data for Cuba included as from 1989.

122

From the point of view of the development theory, the share of agriculture in the total economy

can be expected to decline because of the faster growth of other sectors that are subject to higher

income elasticity of demand. Nonetheless, in the recent evolution of Latin America and the

Caribbean, stability (rather than a reduction) in agriculture’s share of the region’s GDP is more

the result of sluggish overall economic growth than of a rapid expansion in agriculture. This

can be clearly seen in the increased share of agriculture during the “lost decade” of the 1980s,

and also during the recession of the late 1990s and first few years of the new millennium (see

again figure 78).

The relative importance of economic stagnation or agricultural growth, in keeping the share of

agriculture in GDP stable, varies significantly between the different countries of the region.

Broadly speaking, in South American countries agriculture is increasing its share of GDP, while

in Central America,Mexico and the Caribbean it is declining (see figure 80).

The share of agriculture in gross domestic product varies sharply between subregions; the

largest shares are seen in Central America (around 15%), while Mexico displays the smallest

share of just 4% (see figure 81).

SOURCE: FAO/RLCP based on WEO and ECLAC 2004.

Figure 79 LAC: NOMINAL GDP PER CAPITA AND SHARE OF AGRICULTURE IN THEECONOMY (2003)

GD

P (

N) pe

r ca

pita

Share of agricultural GDP in total GDP

5 10 15 20 25 30 35 40

4,000

6,000

8,000

10,000

12,000

2,000

0

Bar

SKN

Mex

Tri

Chi

Arg

VenJam

Pan

SLuGra Cos

SVG Uru

BraEls

DmiPer Col

Bol

Dom

HaiHon

GuaEcu

ParNic

AyB

123

AG

RIC

ULT

UR

AL

SE

CT

OR

DE

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LOP

ME

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The share of agriculture in GDP also varies widely between countries considered individually. The

largest shares in 2003 were reported by Guyana (47%), followed by Nicaragua (35%), Paraguay (29%),

Belize (27%) and Ecuador (23%). In these countries the agricultural share of GDP has also grown in

the last few decades. The smallest shares of agriculture in GDP were in Trinidad and Tobago (1%);

Antigua and Barbuda, Saint Kitts and Nevis, and Mexico (4%); Barbados (5%); Cuba, Argentina, Chile

and Venezuela (6%). The share of agriculture has been declining over the last decade in these countries

apart from Argentina and Venezuela (see figure 82).

SOURCE: FAO/RLC based on ECLAC.CARICOM figures, ares not for 1989 and 2000.

LAC: SHARE OF AGRICULTURAL GDP IN TOTAL GDP, BY SUBREGION (Percentage)Figure 80

1980 2003

0

2

46

8

10

12

14

16

18Brazil

Mexico

Southern

Andean countriesCentral America

CARICOM

Latin Caribbean

SOURCE: FAO/RLC based on ECLAC.

LAC: SHARE OF AGRICULTURAL GDP IN TOTAL GDP, BY SUBREGION (Percentage)Figure 81

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

30 Mexico

Southern Cone

CARICOM

Latin Caribbean

Brazil

Andean countries

Central America

2

4

6

8

10

12

14

16

18

20

a

a/ In 1989 the information of Cuba begins to be included.

124

Other interesting information is contained in the differences between each country’s share of

regional GDP (agricultural and total), as shown in figure 83. In Mexico, the southern cone (except

Paraguay) and half of the Caribbean countries, agriculture has a smaller weight than in the regional

average. On the other hand, Central American and Andean countries (except Venezuela), along

with Paraguay and half of the Caribbean countries, are relatively more agricultural than the

regional average. The fact that Brazil is in this second group, despite its industrial base and the

development of services, indicates the importance of agriculture in that country (see figure 83).

Figure 82 LAC: SHARE OF AGRICULTURAL GDP IN TOTAL GDP BY COUNTRY (Percentage)

SOURCE: FAO/RLC based on ECLAC 2004. The figure shown for Suriname in 2003 is actually for 2000.

0 5 10 15 20 25 30 35 40 45 50

Trinidad and Tabago

Antigua and Barbuda

Saint Kitts and Nevis

Mexico

Barbados

Cuba

Argentina

Chile

Venezuela

Jamaica

Saint Vincent and the Grenadines

Saint Lucia

Panama

Grenada

Peru

Brazil

Uruguay

El Salvador

Costa Rica

Dominican Republic

Suriname

Colombia

Bolivia

Dominica

Haiti

Honduras

Guatemala

Ecuador

Belize

Paraguay

Nicaragua

Guyana

1980 1990 2003

a

a/ For Cuba there is no information available for 1990.

125

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Population economically dependent on agriculture.

Changes in agricultural GDP shares have been accompanied by changes in the proportion of

the economically active population engaged in agricultural activities. The combination of the

two variables affects the average productivity of agricultural employment. In many countries

of the region, agricultural productivity growth reflects progress in reducing rural

underemployment.

In Latin America and the Caribbean, the economically active population engaged in agriculture

peaked at 45 million people in the mid-1980s, since when it has been slowly contracting and

was estimated at 43.5 million people in 2003. During this period (between 1985 and 2003) the

region’s total economically active population (EAP) has grown from 150 million to 234 million

people. In other words, the overall expansion of the labour force has been entirely absorbed by

other sectors. Agriculture therefore accounts for a declining share of the EAP: from 35% of all

workers in 1980, it had shrunk to 25% in 1990 and currently stands at 19% (see figure 84).

Figure 83 LAC: SHARE IN TOTAL AND AGRICULTURAL GDP 2003(Millions of dollars at constant 1995 prices)

SOURCE: FAO/RLC based on ECLAC data.

0 10 20 30 40 50

Share of agricultural GDP Share of total GDP

Dominica

Saint Kitts and Nevis

Saint Vincent and the Grenadines

Grenada

Saint Lucia

Antigua and Barbuda

Guyana

Suriname

Belize

Barbados

Nicaragua

Haiti

Honduras

Jamaica

Trinidad and Tabago

Bolivia

Paraguay

Panama

El Salvador

Costa Rica

Uruguay

Dominican Republic

Guatemala

Ecuador

Cuba

Venezuela

Peru

Chile

Colombia

Argentina

Mexico

Brazil

0.0 0.1 0.2

Dominica

Saint Kitts and Nevis

Saint Vincente ylas Granadinas

Granada

Saint Lucia

Antigua and Barbuda

Guyana

Suriname

Belize

Barbados

126

LAC: SHARE OF AGRICULTURE IN GDP AND THE ECONOMICALLY ACTIVE POPULATION(Percentage)

Table 28

Country 1980 1990 2000 2001 2002 2003 2004

EAP(AGR) / EAP 34.5 25.6 20.0 19.5 19.0 18.6 18.1

Agricultural GDP as a percentage 7.1 7.9 7.4 7.6 7.9 8.1 n.dof total GDP

SOURCE: FAO/RLC based on ECLAC.EAP(AGR): Economically active population in agriculture .EAP: Economically Active Population.

In future, the proportion of the population that is economically dependent on agriculture can be

expected to continue shrinking, to correct the imbalance that still exists between agricultural 7%

to 8% contribution to GDP and its 19% share of the economically active population (see table 28).

SOURCE: FAOSTAT.

LAC: SHARE OF AGRICULTURE IN THE ECONOMICALLY ACTIVE POPULATION(Percentage)

Figure 84

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

198

0

198

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198

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198

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198

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198

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198

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198

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199

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199

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199

9

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0

200

1

200

2

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3

200

4

Economically active population in agriculture Economically active population outside agriculture

The extent of this imbalance varies from country to country. Guyana and Nicaragua are the only

countries where the sector’s contribution to GDP outweighs the proportion of the population

that is economically dependent on it; in other words, agricultural productivity surpasses average

productivity in the economy as a whole. The most extreme cases in the other direction are Haiti,

Guatemala and Bolivia, where the proportions of the population whose main economic activity

is agriculture (60%, 44% and 43%, respectively) are among the highest, yet agricultural

contribution to overall output is very small (18%, 20% and 15%, respectively (see figure 85).

127

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Figure 85

5

10

15

20

25

30

35

40

45

50

10 20 30 40 50 60 70

Guy

Nic

Ecu

Bel

Par

Hon

Dom

Gua

Bol

Els

Per

Col

CosDmi

GraStl

StvJam

PanChi

MexAntStk

Bar Ven

Arg

Uru

Bra

Cub

Tri

Hai

55

60

65

70

0

Ag

ricu

ltu

ral G

DP

/ T

ota

l GD

P

EAP(AGR)/EAP

LAC: SHARE OF AGRICULTURE IN GDP AND THE ECONOMICALLY ACTIVEPOPULATION (2003)

SOURCE: FAO/RLC based on ECLAC.1) EAP(AGR)/EAP vs GDP(AGR) / GDP

The reduction in size of the population that is economically dependent on agriculture should not

mean the abandonment of the countryside, but instead a reappraisal of the rural domain involving

both coordination of agricultural activities with other productive endeavours in the rural area,

and greater linkage between rural development and small urban centres. A wide variety of economic

activities are possible in this regard, mostly involving commercial and service activities, construction

materials, handicraft, agribusiness and various combinations of waged employment for individual

members of rural families in the towns.

The share of employment in non-farm activities in the rural area is growing rapidly; and as this type

of work tends to be more productive and better paid, the proportion of rural income obtained from

non-farm activities is increasing even faster. In the coming years such activities are bound to grow

in importance, and linkages between the rural economy and urban centres should also strengthen.

Over the last few years, the trend towards diversification of economic activities in rural areas

has begun to be reflected in the region al population statistics. During the decades preceding

1980, agricultural population trends were similar to those of the rural population; in the early

years of the 1980s, the rural population amounted to approximately 126 million people, and was

practically synonymous with the “agricultural population”34. Since then, while the rural population34 Defined as the population in which agriculture is the main economic activity of the head of the family.

128

Nonetheless, one should not lose sight of the dynamic of the various economic activities carried

out in rural areas linked to specifically agricultural development. Employment in non-farm

activities in rural areas is growing faster and more equitably in places where agriculture is also

growing strongly—in other words where there is agricultural output to process and distribute,

inputs to sell and equipment to repair, and where cash incomes are spent on local goods and

services. This multiplier effect of the increase in agricultural income—through linkages in

production, expenditure or investment—is very important in the design of the rural development

strategy, and is essential for overcoming exclusion nationwide35.

Although Rural development implies a diversification of job sources and greater vertical

integration among economic activities in rural areas, there is a direct relation—a positive

dynamic—between agricultural and non-farm rural incomes. Moreover, in many cases the starting

point that enables today’s rural population to participate actively in development based on the

land depends largely on its capacity to generate incomes from farming activities. There can be

little doubt that progress in small-scale agricultural production would improve the chances for

small-scale producer families to participate in an inter-sectoral and territorially-based rural

development strategy; on the other hand, in circumstances where crop and livestock activity is

deteriorating, the difficulties of rural development tend to multiply, significantly increasing

the risk of exclusion and the abandonment of rural areas. Agricultural development alone is not

sufficient to achieve rural development; but, under the current circumstances, it is impossible

to establish a rural development process in the absence of vibrant agricultural growth.

From this standpoint—while recognizing that in the long-term it is normal for the share of

agriculture in GDP to decline—the need to tackle poverty and incorporate excluded regions into

the development process makes it essential to achieve faster rates of growth in agricultural

SOURCE: FAOSTAT.

LAC: AGRICULTURAL AND RURAL POPULATION (Thousand of people)Figure 8619

60

196

3

196

5

196

7

196

9

1971

1973

1975

1977

1979

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3100,000

Total estimated rural population Estimated agricultural population

130,000

125,000

120,000

115,000

110,000

105,000

35 FAO, The State of Food and Agriculture, 1998.

has stabilized in absolute terms (while declining relatively as a result of urban demographic

growth) the population dependent on agriculture has been shrinking and currently amounts to

about 104 million. The population living in the countryside is thus expanding, but it is working

in activities other than agriculture (see figure 86).

129

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production, in order to keep pace with national economic growth driven by other sectors, and

reduce the social costs arising from gradual productive restructuring of the rural population

towards more diversified activities.

Under current conditions, potential economic activities at the country side are far from profitable

and competitive all over Latin American and Caribbean . The combination of large numbers of

rural poor, without training, education or minimum conditions for subsistence, and the absence

of a policy committed to the environmental sustainability of development, has generated in many

areas a negative dynamic in which poverty and loss of productive potential are becoming increasingly

serious across extensive areas, resulting in a disintegration of the national development base. It

is essential to reverse this longstanding process of deterioration. To enable many of these regions,

in the medium and long-term, to participate efficiently in crop and livestock, forestry, fishing or

agribusiness activities, in conjunction with commerce and services and other productive activities,

requires a major effort and long-term commitment. But the cost of failure would be enormous, in

terms of territorial disintegration of the economic system, loss of productive potential and exclusion

of a very large part of the population from the benefits of development. If the new development

model is to help overcome problems of mass poverty and exclusion, it must make progress in

incorporating the rural population into the economic growth process.

The economically active population engaged in agriculture has declined in all sub-regions, the

process has been particularly acute in Brazil, where the fraction of the EAP engaged in agriculture

declined from 37% in 1980 to 15% in 2003. The change has been smallest in the southern cone

countries, where the proportion of the population engaged in agriculture was already relatively

low in 1980 (16% and currently stands at 13%) (see figure 87).

SOURCE: FAO/RLC based on ECLAC.

LAC: SHARE OF AGRICULTURE IN THE ECONOMICALLY ACTIVE POPULATION,BY REGION (Percentage)

Figure 87

1980 1990 2003

15

0

5

10

20

25

30

35

40

45

50Brazil

Mexico

Southern Cone

Andean countriesCentral America

Latin Caribbean

CARICOM

130

The differences between the region’s countries in terms of agricultural productivity and

demographic pressure on agriculture cause wide dispersion in the average sectoral income of

the agricultural population. While several countries of the southern cone and Brazil have the

highest levels, the lowest levels generally correspond to the countries of lowest overall per capita

income, or those whose agriculture is very slow in relation to its development level (see figures

88 and 89).

Figure 88 AGRICULTURAL GDP PER CAPITAa (2003)

SOURCE: FAO/RLC based on ECLAC.a/ Agricultural GDP / Agricultural population.b/ Barbados is the country that has the largest agricultural GDP per capita, at US$ 6,498 in 1990 and US$ 9,607 in 2003. It is excluded fromthis figure for reasons of scale.

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

Haiti

Bolivia

Honduras

El Salvador

Guatemala

Saint Lucia

Jamaica

Peru

Trinidad and Tobago

Nicaragua

MexicoSaint Vincent and the Grenadines

Paraguay

Granada

Panama

EcuadorSaint Kitts and Nevis

Antigua and Barbuda

Dominican Republic

Cuba

Colombia

Venezuela

Dominica

Guyana

Costa Rica

Chile

Belize

Brazil

Argentina

Uruguayb

1990 2003

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Productivity in agriculture is normally lower than in other sectors. In the English-speaking

Caribbean, only Guyana has higher agricultural productivity than the average for its economy

as a whole. In Belize, Dominica, Saint Vincent and Grenadines, and Grenada, the gap between

agricultural and overall productivity is narrower than the CARICOM average. The largest

difference between the two measures corresponds to Antigua and Barbuda, Trinidad and Tobago,

and Saint Kitts and Nevis (see figure 90).

SOURCE: FAO/RLC based on data provided by ECLAC.

Figure 89 AGRICULTURAL PRODUCTIVITY IN RELATION TO GLOBAL PRODUCTIVITY (Percentage)

1980 1990 2003

0 50 100 150 200 250

Saint Vincent and the Grenadines

Antigua and Barbuda

Barbados

Trinidad and Tobago

Mexico

Grenada

Haiti

Peru

Bolivia

Belize

Chile

El Salvador

Cuba

Panama

Suriname

Guatemala

Saint Kitts and Nevis

Saint Lucia

Costa Rica

Brazil

Argentina

Honduras

Colombia

Uruguay

Venezuela

Paraguay

Ecuador

Jamaica

Dominican Republic

Nicaragua

Guyana

For Bahamas and Dominica there is no information available.For Barbados, Belize and Cuba there is no information available for 1980.

132

Nicaragua is the only Latin American country where agriculture achieves a productivity per

asset that exceeds the productivity of the economy overall; while Mexico shows the largest gap

between the two productivity measures (see figure 91).

SOURCE: FAO/RLC based on ECLAC.

AL: AGRICULTURAL PRODUCTIVITY vs. GLOBAL PRODUCTIVITY (Dollars)Figure 91

Ag

ricu

ltu

ral p

rod

uct

ivit

y

Global productivity

Nic

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

2,000

4,000

6,000

8,000

10,000

Hon

BolHai

Els

Gua

Par

EcuDmi

Col

Ven

Per

Pan

CubAL

Cos

Bra

Uru

Mex

Chi

SOURCE: ECLAC.

CARICOM: AGRICULTURAL PRODUCTIVITY vs. GLOBAL PRODUCTIVITY (Dollars 2003)Figure 90

Ag

ricu

ltu

ral P

rod

uct

ivit

y

Global Productivity

GuyDom

Bel

Stv

Gra

CARICOM

Jam Stl Tri

Stk

Ant

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

2,000

4,000

6,000

8,000

For Bahamas, Barbados and Suriname there is no information available.

133

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B. CROP AND LIVESTOCK PRODUCTION36

The value of crop and livestock production during the last two decades (1980 to 2003) has grown

at annual rate of 2.7%, broadly similar to that of the broader sectoral output. Nonetheless, the

details reveal several significant variations.

Regional gross crop and livestock production has expanded more rapidly since 1994. Whereas

the average growth rate was 2.2% per year between 1980 and 1993, since then up to 2003 the

growth has averaged 3.3%37.

The change is less pronounced in the trend of sectoral product (value-added), where growth rates

rose from 2.4% to 2.8%, suggesting that increases in the value of production have been achieved by

making relatively greater use of inputs (intermediate consumption)38. Rapid growth in the consumption

of some of the most important industrial inputs for agricultural production also support this

explanation. Between 1993 and 2001 (the latest year for which data are available), the consumption

of fertilizers in the region increased by an average of 5% per year. Pesticide consumption grew even

faster, at 21% per year. Input use thus seems to be comfortably outpacing output.

Over the last decade the growth has become stronger in both the crop and the livestock subsectors,

but the acceleration from 1993 onwards is more marked in crop production (see figure 92).

36 This section only covers crop and livestock production, because the information needed to include forestry andfishery production was not available.

37 The acceleration from 1994 onwards partly reflects the earlier slump in Cuban production.

38 The difference between the trends of sectoral GDP and crop and livestock production may also be partly explainedother activities included in sectoral GDP, as well as statistical issues or temporary mismatches.

SOURCE: FAO/RLC based on FAOSTAT.

LAC: VALUE OF AGRICULTURAL AND LIVESTOCK PRODUCTION (Billions of dollars)Figure 92

198

0

198

119

82

198

319

84

198

519

86

198

719

88

198

919

90

199

119

92

199

319

94

199

519

96

199

719

98

199

920

00

200

120

02

200

3

20

0

40

60

80

100

120

140

160

180

Livestock

Crop production

Crop and Livestock

134

The crop-producing sub-sector displays larger annual variations than livestock production;

nonetheless, in the medium term the relative shares of crop and livestock products in the value

of the region’s agricultural output change very slowly. In the mid-1980s, the share of the livestock

component had begun to expand relatively, increasing from 38% of total agricultural output in

1985 to 43% in 1993. Since then onwards, however, growth rates in both subsectors have been

similar, so the relative share of both in overall agricultural production has tended to stabilize:

58% crops and 42% livestock products (see figure 93).

SOURCE: FAOSTAT.

LAC: CROP AND LIVESTOCK PRODUCTS IN GROSS AGRICULTURAL PRODUCTION(Billions of dollars)

Figure 93

Crop production Livestock

The crop-growing component generally accounts for a majority of agricultural output; but

livestock production accounts for over half of the total in five of the region’s countries (Uruguay,

Antigua and Barbuda, Barbados, Venezuela and Panama). In Mexico, Nicaragua and Brazil, the

livestock sub-sector accounts for nearly half of all agricultural output (47%, 46% and 44%,

respectively). By contrast, in 10 Caribbean countries, crops account for over 80% of overall

agricultural production (see figure 94).

190

170

150

130

110

90

70

50

30

10

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

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1

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2

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3

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LAC: GROWTH OF AGRICULTURAL PRODUCTION BY SUBREGIONS (Percentage)Table 29

1980-1993 1993-2003 Difference

Latin America and the Caribbean 2.2 3.3 1.0

Brazil 3.2 4.0 0.8

Mexico 1.4 2.6 1.2

Southern Cone 1.5 2.7 1.2

Andean countries 2.4 2.7 0.3

Central America 1.8 3.0 1.2

Latin Caribbean -0.0 2.9 2.9

CARICOM 0.8 0.3 -0.5

SOURCE: FAO/RLC based on FAOSTAT.

LAC: RATIO CROP GROWING VERSUS LIVESTOCK (Percentage)Figure 94

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Sai

nt

Lu

cia

Gu

yan

a

Sai

nt

Vin

cen

t an

d th

e G

ren

adin

es

Gre

nad

a

Hai

ti

Do

mic

a

Cu

ba

Sai

nt

Kit

ts a

nd

Nev

is

Bel

ize

Su

rin

ame

Gu

atem

ala

Cos

ta R

Ica

Par

agu

ay

Per

u

Jam

aica

Arg

enti

na

Bo

livia

Ho

ndu

ras

Ch

ile

Bah

amas

Ecu

ado

r

El S

alva

dor

Co

lom

bia

Do

min

ican

Rep

ubl

ic

Trin

idad

an

d To

bago

Bra

zil

Nic

arag

ua

Mex

ico

Pan

ama

Ven

ezu

ela

Bar

bado

s

Ant

igu

a an

d B

arbu

da

Uru

guay

LivestockCrop production

The faster pace of expansion over the last decade (1993-2003), following weak growth in the

1980s, is very widely distributed across the different sub-regions. The largest increases in the

average rate between the two periods were achieved by countries of the Latin Caribbean. Only

in CARICOM countries the growth rate was slower than in the previous decade. In both decades

Brazil presented the highest rate of growth (3.2% and 4.0%). (see table 29 and figure 95).

SOURCE: FAO/RLC based on FAOSTAT.

136

SOURCE: FAO/RLC based on FAOSTAT.

LAC: GROWTH OF AGRICULTURAL PRODUCTION BY SUBREGIONS (Percentage)Figure 95

1980-1993 1993-2003

Brazil

Mexico

Southern Cone

Andean countriesCentral America

Latin Caribbean

CARICOM

-1

0

1

2

3

4

SOURCE: FAO/RLC based on FAOSTAT.

LAC: ANNUAL GROWTH IN GROSS CROP AND LIVESTOCK PRODUCTION (Percentage)Figure 96

198

0-1

99

3

1993 - 2003

0

7.0-1.0-2.0-3.0-4.0 1.0 2.0 3.0 4.0 5.0 6.0

1.0

2.0

3.0

4.0

5.0

-1.0

-2.0

-3.0

-4.0

Dom

Stl

Stv

Col

Ant

Jam

PanDmi

UruEls

Hon

Chi

Ecu

Par

Bze

Bol

Gua

Ven

Mex

Arg

Bha Hai

CubNic

Per

Cos

GuyGrnTri

Stk

Sur

Bar

Bra

Some of the region’s countries have maintained relatively high positive rates in both periods

(1980-1993 and 1993-2003); these include Peru, Costa Rica, Belize, Brazil, Bolivia and Paraguay.

In contrast, more than half of the CARICOM countries posted negative growth in 1993-2003;

Saint Kitts and Nevis, Grenada, and Trinidad and Tobago registered negative average rates in

both decades (see figure 96).

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SOURCE: FAO/RLC based on FAOSTAT.

Figure 97 LAC: VALUE OF CROP AND LIVESTOCK PRODUCTION IN 1990 AND 2003BY COUNTRY (Billions of dollars)

1990 2003

10 20 30 40 50 60 70 80 90

Panama

El Salvador

Nicaragua

Haiti

Honduras

Dominican Republic

Costa Rica

Guatemala

Bolivia

Uruguay

Cuba

Paraguay

Ecuador

Venezuela

Chile

Peru

Colombia

Mexico

Argentina

Brazil

Antigua and Barbuda

Saint Kitts and Nevis

Grenada

Bahamas

Dominica

Barbados

Saint Lucia

Trinidad and Tobago

Suriname

Belize

Guyana

Jamaica

- 0,1 0,2 0,3 0,4 0,5

Saint Vincent andthe Grenadines

In Brazil, vigorous growth over a 23-year period based on a large initial volume of agricultural

production has caused a rapid increase in this country’s share in the regional total agricultural

output (see figure 97).

Changes in the various subregional and country shares of crop and livestock output of various

sub-regions and countries in 1980-2003, are naturally similar to the pattern seen in their shares

of the broader sectoral output. As in the case of overall output, the most notable change has been

the eight percentage point rise in Brazil’s share (from 37% to 45%). Nonetheless, the trend of the

Brazilian share in the crop and livestock components is different.

138

In crop production, Brazil’s share has grown relatively less, albeit still significantly, from 40%

to 43%. In this subsector, the share accounted for by the Southern Cone countries has also

increased, from 19% to 22%. The sharpest fall was experienced by Mexico, where the share of

regional agriculture declined from 15% in 1980 to 12% in 2003. The shares of Cuba and Central

American countries also dropped.

In livestock production, the expansion in Brazil has far outpaced the regional average, and its

share has risen accordingly. In 1980, this country contributed one third of the total (33%),

whereas in 2003 it was already producing nearly half of the region’s total livestock production

(48%). The relative share of all other subregions is declining, without exception, the sharpest

fall being recorded in the Southern Cone countries, which in 1980 contributed 30% of livestock

production, but currently account for 19% (see figure 98).

C. CROP PRODUCTION

Note: The analysis of the explanatory factors of the crop production growth, presented inthis section (page 138 a 142), considers informations up to 2002.

A historical analysis of crop production in Latin America and the Caribbean shows that the

growth rates recorded over the last two decades are significantly lower than those achieved

previously. Between 1980 and 2002, regional crop production grew at an average annual rate

of just 2.3%, compared to an expansion of between 3% and 4% per year in earlier decades.

Nonetheless, more detailed analysis reveals a change in this trend in 1993. Between 1980 and

1993, the region’s crop production expanded by less than 2% per year (1.96%), whereas since

1993 to 2002, the annual average growth rate rose to 3.4%.

SOURCE: FAO/RLC based on FAOSTAT.

LAC: SHARE OF THE VALUE PRODUCTION (Percentage)Figure 98

CARICOM 1%

Latin Caribbean 5%CentralAmerica 5%

Andeancountries14%

SouthernCone19%

Mexico 15%

SouthernCone29% Mexico 16%

Andeancountries14%

CentralAmerica 4%

Latin Caribbean 3%

CARICOM 1%

SouthernCone23% Mexico 15%

Andeancountries14%

AmericaCentral 5%

Latin Caribbean 4%

CARICOM 1%

CARICOM 1%

Latin Caribbean 2%AmericaCentral 5%

Andeancountries13%

SouthernCone22%

Mexico 12%

CARICOM 0,4%

Latin Caribbean 2%AmericaCentral 3%

Andeancountries13%

SouthernCone19%

Mexico 15%

CARICOM 1%

Latin Caribbean 3%AmericaCentral 4%

Andeancountries13%

SouthernCone21%

Mexico 13%

CROP PRODUCTION LIVESTOCK CROP AND LIVESTOCK

CROP PRODUCTION LIVESTOCK CROP AND LIVESTOCK

Brazil40%

Brazil33%

Brazil37%

Brazil43%

Brazil48%

Brazil45%

139

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The main factor explaining the general growth slowdown over the last two decades, and also its relative

recovery within this trend from 1993 onwards, is the behaviour of area cultivated (see figure 99)39.

39 When a large number of simultaneous yet different situations take place inside a global variable (crop production in LA/C),such as outcomes that increase in some countries and diminish in others,shifts in production that may be more importantin some countries than in others and, basically, casual factors with positive or negative changes in differentcrops and countries, it is useful to use an aggregated approach to find the relative importance of each of the inmediateexplanatory factors and thus organize the search for explicative variables in productions changes. For example, althoughthere are casual factors that act simultaneously through the changes in cultivated area as well as through land productivityand the composition of the crop production (a typical case in irrigation, that allows a larger sown area, better yieldsand the selection of economically intensive products), usually harvested area increases are more related to the expansion ofthe agriculyural frontier, better prices for agricultural products, increased land usage derived from investment incentives,agrarian reform, larger profitability in agriculture activities, among others. In contrast, if the growth in the agriculturalproduct is mainly originated in better yields, the explanation may be found mainly in technological changes, new seed varieties,changes of the price of inputs, improvements in credit access and credit conditions, technological transference systems, andothers. If the growth is because of a change in agriculturae production composition, it may be due to changes in the relativeprices, changes in international markets conditions and others.

The quantifications of explanatory factors in the changes of agricultural growth responds to the fact that any function thatis the product of two variables (in this case: output is a function of harvested area and land productivity). The growth rate ofthe function is always the same as the sum of the growth rate of the two variables plus the product of them. Also, the productivityeffect is calculated in two components, the change in the average yields by hectare (which is the progress in the average productivity by hectare in each crop) and the change in the monetary yield obtained by changes in the proportion of crops more or less intensive economically.

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF CROP FORPRODUCTION (1950-2002)

Figure 99

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

1950-1963 1963-1970 1970-1980 1980-1993 1993-2002

Period

Per

cen

tag

e

Structure effect Combined effectArea effect Yield effectProduction

In the 1950s and early 1960s, total harvested area grew by 2.9% per year, which, combined with

modest annual growth of 1.0% in the yield index, allowed crop production to expand at an annual

rate of 3.8%.

In the 1960s and 1970s, cultivated areas expanded more slowly (by about 2.0% per year), but yields

per hectare improved by roughly 1.4% annually. Consequently, output continued to grow quite

strongly by some 3.2% per year. The rate of output growth was slightly less than the sum of the

two effects (land area and yield), because of the relative expansion of economically less intensive

crops, which resulted in lower monetary yield per hectare; in other words, changes in crop structure

had a negative effect amounting to roughly -0.2% per year.

Between 1980 and 1993, expansion of the area cultivated came to a virtual standstill (growth

of just 0.05% per year). Consequently, although hectare yields rose at least as fast as in the

earlier periods (by 1.45% per year), this was not enough to generate rapid growth in crop

production. As the standstill in cultivated area was most pronounced in basic crops, several

more intensive crops increased their shares, and the change in the composition of output had

140

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF CROP PRODUCTION(Percentage)

Table 30

1950-1963 1963-1970 1970-1980 1980-1993 1993-2002

Rate of growth of production 3.80 3.11 3.20 1,96 3.35

Area effect 2.86 1.93 2.15 0.05 1.73

Yield effect 0,99 1.47 1.26 1.45 1.65

Crop structure effect -0,08 -0.29 -0.23 0.44 -0.12

Combined effect 0.03 0.02 0.02 0.00 0.03

SOURCE: FAO/RLC based on FAOSTAT.

AC: EXPLANATORY FACTORS FOR CROP PRODUCTION GROWTH BETWEEN 1980AND 1993, BY REGIONS (Percentage)

Table 31

Brazil Mexico countries Cone America Caribbean CARICOM

Rate of growth of production 2.28 1.25 2.11 2.68 0.99 1.42 0.94

Area effect -0.41 0.04 1.14 0.30 0.88 0.02 0.87

Yield effect 1.93 0.83 0.38 2.42 0.78 1.14 0.59

Crop structure effect 0.77 0.37 0.58 -0.05 -0.66 -0.31 -0.52

Combined effect -0.01 0.00 0.01 0.01 0.00 0.00 0.00

SOURCE: FAO/RLC based on FAOSTAT .

Andean Southern LatinCentral

a slightly positive effect (0.44%). Nonetheless, the lack of expansion in the area cultivated

seriously limited overall output growth and, as mentioned above, the resultant annual rate of

increase was just 2.0%.

Since 1993 onward, the cultivated area began to expand once more at an average annual rate

of 1.73%. The positive effect of this factor was combined with additional progress in terms of

average yields, which grew by 1.65% per year—productivity growth that outpaced that achieved

in any of the preceding periods. Changes in the structure of production had a slightly negative

effect because the expansion of areas cultivated was concentrated in basic products, which earn

less income per hectare. This factor slightly reduced the rate of output growth (-0.12% per year).

As a result of these changes, regional crop production grew at an annual rate of 3.35% in the

1993-2002 period (see again figure 99 and table 30).

The slowdown in the expansion of cultivated areas between 1980 and 1993 affected practically

all sub-regions; only the Andean countries registered a relatively favourable growth rate of 1.14%

per year, while the other subregions expanded by a few tenths of a percentage point annually,

and in Brazil the figure was negative. This degree of generalization clearly points to the existence

of common factors, transcending problems arising from weather patterns or specific constraints

in the different countries.

On the other hand, Brazil, and especially the Southern Cone countries, achieved a sharp increase

in productivity per hectare during this period, which enabled them to grow slightly faster, by

just over 2% per year. The Andean countries recorded a slightly lower rate, thanks to the larger

area cultivated, as mentioned above.

In Mexico, Central America and the CARICOM countries, the stagnation in output was very

profound, with annual growth of no more than 1.0%; and in the Latin Caribbean the figure was

negative (see table 31 and figure 100).

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The change that occurred from 1993 onward was also widespread throughout the region. With the

single exception of the Latin Caribbean, in all other subregions the area cultivated grew during

the period. In the Southern Cone countries, the area harvested expanded by 3.65% per year,

reflecting above all a larger cultivated area in Argentina—and also in Paraguay, albeit on a smaller

scale. In addition, yield growth per hectare has been positive in all sub-regions without exception.

Physical productivity per hectare is growing at 2.06% per year in Brazil, and the rate is slower,

1.56% and 1.67% in the Southern Cone and in the Andean countries, respectively. Productivity

growth per hectare is considerably weaker in Mexico, Central America, the Latin Caribbean and

the CARICOM countries (see table 32 and figure 101).

EXPLANATORY FACTORS FOR CROP PRODUCTION GROWTH BETWEEN 1993AND 2O02 BY REGION

Table 32

Brazil Mexico Countries Cone America Caribbean CARICOM

Rate of growth of production 3.52 2.21 2.94 4.62 1.99 -0.33 0.75

Area effect 1.48 1.19 1.03 3.65 0.36 -1.03 0.67

Yield effect 2.06 0.95 1.56 1.67 0.97 0.81 0.34

Crop structure effect -0.04 0.05 0.33 -0.73 0.65 -0.11 -0.26

Combined effect 0.03 0.01 0.02 0.03 0.01 -0.01 0.00

SOURCE: FAO/RLC based on FAOSTAT.

Andean Southern Central Latin

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF CROP PRODUCTION BYREGION (1980-1993)

Figure 100

Period

Per

cen

tag

e

Area effect Yield effect Structure effect Combined effectProduction

3.0

2.0

1.0

0.0

-1.0

-2.0

Mexico Andeancountries

SouthernCone

LatinCaribbean

Brazil CentralAmerica

CARICOM

142

The trend in harvested area has had a decisive impact on the expansion of crop production in

Latin America and the Caribbean over recent decades. The behaviour of cultivated area is

influenced by many factors, including the availability of natural resources, the pace of development

of infrastructure works, access to financing, productive technologies, natural disasters, and so

forth. These and other factors—and the causal problems behind each one—are important in

explaining the behaviour of cultivated area in countries of the region. Nonetheless, the broad

and sustained increase in the growth rate throughout the region largely reflects changes in

agricultural competitiveness and profitability. Price changes and higher productivity are key

direct factors in explaining the faster pace of growth.

Harvested area

In early 1980s, the area annually harvested in Latin America and the Caribbean totalled 105.6

million hectares. The sluggish expansion of this variable is confirmed by the fact that in 1993 the

total harvested area was still just 105.6 million hectares. The recovery of the growth rate of harvested

area from this year onwards raised the total to 129.4 million hectares by 2003 (see figure 102).

Stagnation of the area cultivated during the 1980s in particular reflected weak performance in

terms of areas sown with cereal crops, which even contracted in absolute terms by roughly 9%.

The cotton growing area also shrank dramatically, by nearly two thirds; and, as mentioned above,

the area cultivated with other product groups was growing only slowly. These three factors again

suggest that the causes of the stagnation of cultivated area need to be sought in problems arising

from low profitability.

The recovery that began since 1993 onwards, although encompassing most product lines (except

cotton, tobacco and other relatively less important products), is highly concentrated in the

expansion of land areas devoted to oilseeds and, in particular, the explosive increase of roughly

13 million hectares of soybean. Zero tillage technology, complemented by the use of herbicide-

resistant transgenic varieties of soybean, has made it possible to generalize a low-cost high

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF CROP PRODUCTION BYREGION (1993-2002)

Figure 101

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0Period

Per

cen

tag

e

Production Area effect Yield effect Structure effect Combined effect

Mexico Andeancountries

Brazil CARICOMSouthernCone

CentralAmerica

LatinCaribbean

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yield technological setup, which increased profitability substantially and made it feasible to

give a new and profitable response to the very buoyant demand for protein sources in the

production of feed for poultry and pigs. The spectacular success of this production demonstrates

the existence of potential to restore agricultural expansion. Needless to say, there are many

technical and institutional requirements that have to be satisfied on this particular road to

progress, as on any other.

Although cereal crops continue to absorb the largest share of the total cultivated area, their

relative share has been declining, from 46% in 1980 to 39% in 2003. In contrast, the area sown

with oilseeds expanded from 16% to 29% in that period. Another notable aspect is the minimal

share of areas sown with cotton, which previously was very large (see table 33 and figure 103).

SOURCE: FAO/RLC based on FAOSTAT.

LAC: HARVESTED AREA BY MAIN PRODUCTS (Millions of hectares and percentages)Table 33

1980 1993 2003

Area % Area % Area %

Total 105.6 100.0 105.7 100.0 129.4 100.0

Cereals 49.0 46.4 46.2 43.7 51.0 39.4

Oilcrops 17.1 16.2 20.6 19.5 37.5 29.0

Fruit 5.7 5.4 7.5 7.1 8.4 6.5

Green vegetables 5.6 5.3 5.8 5.5 6.1 4.7

Pulses 8.2 7.8 7.6 7.2 8.0 6.2

Coffee, tea, cacao and spices 7.2 6.9 7.8 7.4 7.6 5.9

Sugar 6.3 6.0 7.5 7.1 8.6 6.6

Plant fibres and rubber 5.8 5.5 2.1 2.0 1.6 1.2

Tobacco 0.6 0.6 0.6 0.6 0.6 0.4

SOURCE: FAOSTAT.

LAC: TREND OF ANNUAL HARVESTED AREA (Hectares)Figure 102

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

120

02

200

3

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

Oilcrops

Cereals

Total

144

The concentration of increases in harvested area in countries with the largest cultivated areas,

especially the expansion of soybean cultivation in Argentina and Brazil, also led to greater

concentration of agricultural activity in these countries. The increase in Paraguay is significant

in percentage terms, but based on a small area.

As a regional average, the harvested area grew by 22% between 1993 and 2003, but this largely

reflected the sharp increase in two countries, Argentina and Brazil. With a lesser impact on the

regional average figures, the harvested area also increased strongly in Paraguay, Bolivia, Peru

and Nicaragua. In the Southern Cone, the index of area harvested, was 48% greater in that year

than in 1993; in Brazil, the increase was of 23%. In all the other sub-regions, the increase in land

area is relatively modest, between 5% and 11%. In the Latin Caribbean and the CARICOM countries

the cultivated area declined (-3% and -10% respectively).

Despite the positive trend in harvested area across the region since 1993, the annually harvested

area is still shrinking in 16 countries, especially in the Caribbean, Colombia, El Salvador, Paraguay

and Panama. By contrast, the largest relative increase occurred in Southern Cone countries (Argentina)

and also in Nicaragua, Bolivia and Peru (see figure 105).

The largest percentage increases in area harvested occurred in regions and countries that already

had relatively large areas of cultivation, which means that the share of agricultural production

will tend to concentrate still further (see figures 106 and 107).

SOURCE: FAOSTAT.

LAC: HARVESTED AREA PER YEAR BY MAIN PRODUCT CATEGORIES (Millions of hectares)Figure 103

1980 1993 2003

10

20

30

40

50

60

Plant fibres and rubber

Green vegetables

Coffee, tea, cacao and spices

Sugar

FruitCereals

Oilcrops

Pulses

Tobacco

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Figure 105 LAC: CHANGE IN HARVESTED AREA BY COUNTRY IN 2003 (INDEX 1993=100)

-60 -40 -20 0 20 40 60 80

SOURCE: FAO/RLC based on FAOSTAT.

Dominican Republic

Saint Vincent and the Grenadines

Trinidad and Tobago

Saint Lucia

Belize

Suriname

Colombia

El Salvador

Grenada

Cuba

Barbados

Panama

Saint Kitts and Nevis

Haiti

Guatemala

Jamaica

Dominica

Ecuador

Honduras

Venezuela

Costa Rica

Chile

Antigua and Barbuda

Mexico

Uruguay

Bahamas

Brazil

Guyana

Peru

Argentina

Bolivia

Nicaragua

Paraguay

150

SOURCE: FAO/RLC based on FAOSTAT.

80

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

90

100

110

120

130

140

Latin Caribbean

LAC: INDEX OF HARVESTED AREA BY SUBREGION (1993=100)Figure 104

Andean countries

Brazil

Southern Cone

Mexico

Central America

CARICOM

145

146

SOURCE: FAOSTAT.

LAC: TREND OF HARVESTED AREA PER YEAR BY SUBREGION (Millions of hectares)Figure 106

1980 1993 2003

10

20

30

40

50

60

Brazil

Mexico

Southern Cone

Andean countriesCentral America

Latin Caribbean

CARICOM

Figure 107 LAC: TREND IN ANNUAL HARVESTED AREA BY COUNTRY (Millions of hectares)

SOURCE: FAOSTAT.

1993 2003

Dominican Republic

Costa Rica

El Salvador

Uruguay

Honduras

Nicaragua

Haiti

Chile

Guatemala

Venezuela

Cuba

Bolivia

Ecuador

Peru

Paraguay

Colombia

Mexico

Argentina

Brazil

- 10 20 30 40 50 60

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35

Antigua and Barbuda

Saint Kitts and Nevis

Bahamas

Barbados

Saint Vincent and the Grenadines

Grenada

Dominica

Saint Lucia

Trinidad and Tobago

Suriname

Belize

Jamaica

Guyana

Panama

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Trends in crop production

The acceleration in the expansion of crop production after 1993, which raised the growth rate

from 2.0% to 3.3%40, was quite widespread among the different crop groups, but concentrated

particularly among oilseeds. Since the previous decade (1980-1993), the annual growth rate

of oilseed production (4.3% per year) was the highest among the various crop groups, and

practically doubles the average of all crops (2.0%). Between 1993 and 2002, however, oilseed

production grew exceptionally vigorously by 7.9% per year. The main cause for this was a

5.6% expansion of the harvested area of these crops, plus a 2.5% contribution from productivity

per hectare.

Growth in the area sown with oilseed crops, especially soybeans, is the main explanation for

the increase in the total harvested area in Latin America and the Caribbean. In all other product

lines or product groups, the harvested area continues to grow weakly or else shrink. This

situation firstly demonstrates the capacity of technical market-based responses to regain the

pace of growth, as it was the case of soybean cultivation in Argentina and Brazil; but it also

calls for a note of caution, because the growth of soybean has an enormous weight in the recovery

achieved in regional agriculture. This represents a problem of concentration, increases

vulnerability and highlights the fact that the rest of agriculture continues to suffer from lack

of competitiveness and low profitability (see table 34).

40 These rates may differ slightly from those estimated in connection with the explanatory factors (area, yield and cropstructure effects), because in that case the method uses data specifically from the start and end of the period, whereasin the rest of this chapter growth rates are calculated by linear regression over the whole series.

SOURCE: FAO/RLC based on FAOSTAT .a/ Calculated by linear regression.b/ Calculated at constant average 1999-2001 prices; The variation depends on the physical yields of the differentcrops and changes in the composition of crops within the same group.

LAC: GROWTH OF CROP PRODUCTION BY MAIN PRODUCT CATEGORIES(Annual average percentage ratea)

Table 34

Area Yieldb Productionb

1980-1993 1993-2003 1980-1993 1993-2003 1980-1993 1993-2003

Total crops 0.3 1.4 1.7 1.8 2.0 3.3

Cereals -0.7 0.3 1.6 2.3 1.0 2.6

Oilcrops 2.5 5.6 1.7 2.4 4.3 7.9

Fruit 2.3 1.0 0.3 1.1 2.6 2.1

Green vegetables 0.2 0.7 1.5 2.6 1.7 3.3

Coffee, tea, cocoa and spices 1.2 0.0 0.3 2.6 1.4 2.6

Pulses -0.2 -1.1 1.2 2.1 1.0 1.1

Sugar 1.7 1.0 0.5 1.2 2.2 2.1

Plant fibres and rubber -5.2 -4.9 3.8 5.1 -1.4 0.3

Tobacco -0.7 -0.1 2.0 1.4 1.3 1.3

Animal feed 2.4 0.5 -2.7 -2.0 -0.4 -1.5

Between 1993 and 2003, the cereal production increased 2.6% per year, following the weak

growth of just 1.0% achieved in the 1980s. The slowdown in the decrease in area cultivated,

which turned fall of 0.7% per year into positive growth of 0.2%, was the main factor behind the

recovery of growth in this crop category compared to the previous period. The rise in prices in

1995 and 1996 played a major role in achieving a positive rate of growth of the area harvested

during the period. This change was complemented by an increase in monetary productivity per

hectare in cereal crops.

148

Fruit production continued to expand (2.1% per year), although at a slightly slower rate than

in the 1980s (2.6%). The corresponding causal factors also changed: in the 1980s, production

was basically driven by an area expansion of 2.3% per year, while monetary yields per hectare

declined; in contrast, during 1993-2003, areas expanded by less, but monetary yields per hectare

dedicated to fruit growing intensified.

In the cases of coffee, vegetables and cotton, output growth strengthened compared to the

previous decade.

The recovery of crop production over the last 10 years is based on a renewed expansion of

harvested areas and faster productivity growth per hectare than in any other period in the last

decades. Nonetheless, improvements in productivity are being achieved on the basis of more

intensive production and increasing input use, thereby pushing up costs without solving

problems of low profitability in regional agriculture. This seems to be confirmed by various

indicators on input use. The consumption of pesticides grew eightfold in the past decade; and,

albeit to a lesser extent, the annual growth of fertilizer use (5%) is also way above the rate of

growth of production.

A large fraction of the expansion in cultivated area and growth in the regional crop production

reflects the exceptional expansion of soybean cultivation in Argentina, Brazil and a few other

countries, while general development of crops as a whole remains weak.

Composition of crop production

The composition of crop production in Latin America and the Caribbean has changed significantly

over the last two decades. In the 1980s, the expansion of fruit production had gained this group

first place in terms of output value, overtaking cereals which had traditionally been the region’s

most important crop group. Explosive growth of soybean production over the last few years,

however, has meant that oilseeds now account for the largest share of regional crop production

values, surpassing fruit and cereals. In 2003, each one of these three groups accounted for near

21% of the value of the region’s total crop production,

During the period, the value of green vegetable, sugar and coffee production also continued to grow,

while that of cotton and tobacco has stalled (see figure 108 and 109).

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SOURCE: FAOSTAT.

LAC: GROWTH OF CROP PRODUCTION BY MAIN PRODUCT CATEGORIES(Billions of dollars, at 1999-2001 prices)

Figure 108

1980 1993 2003

5

10

15

20

25Sugar

Coffee, tea, cocoa and spices

Cereals

Plant fibres and rubber

FruitsGreen vegetables

Pulses

Oilcrops

Tobacco

SOURCE: FAO/RLC based on FAOSTAT.The animal feed category is omited given its minor importance.

LAC: COMPOSITION OF CROP PRODUCTION (Percentage)Figure 109

1980

Tobacco 2%

Sugar 13%

Coffee, tea, cocoaand spices 6%

Oilcrops12%

Pulses3%

Greenvegetables

14%

Vegetal fibresand rubber 5%

Fruits23%

Cereals22%

1993

Tobacco 3%

Sugar 13%

Oilcrops14%

Pulses3%

Greenvegetables

13%Vegetal fibres

and rubber 2%Fruits24%

Cereals22%

2003

Tobacco 2%

Sugar 12%

Oilcrops21%

Pulses3%

Green vegetables13%

Vegetal fibresand rubber 2% Fruits

21%

Cereals21%

Coffee, tea, cocoaand spices 6%

Coffee, tea, cocoaand spices 5%

150

LAC: GROWTH OF CEREAL PRODUCTION, 1993-2003(Percentagea)

Table 35

Area Yieldb Productionb

Total LAC 0.3 2.3 2.6

Brazil -0.3 2.9 2.6

Mexico 0.1 1.1 1.2

Southern Cone 1.6 1.8 3.4

Andean countries 0.4 2.8 3.2

Central America -0.9 0.9 0.0

Latin Caribbean 1.5 4.3 5.8

CARICOM -0.6 0.6 0.0

SOURCE: FAO/RLC based on FAOSTAT .a/ Calculated by linear regression.b/ Calculated at constant average 1999-2001 prices; The variation depends on the physical yields of the differentcrops and changes in the composition of crops within the same group.

LAC: GROWTH OF OILSEED PRODUCTION, 1993-2003 (Percentagea)Table 36

Area Yieldb Productionb

Total LAC 5.6 2.4 7.9

Brazil 4.9 2.6 7.5

Mexico -3.8 0.7 -3.1

Southern Cone 6.7 2.5 9.2

Andean countries 5.8 -0.6 5.2

Central America 1.0 2.6 3.6

Latin Caribbean -0.6 0.3 -0.3

CARICOM -4.6 1.7 -2.9

SOURCE: FAO/RLC based on FAOSTAT .a/ Calculated by linear regression.b/ Calculated at constant average 1999-2001 prices; The variation depends on the physical yields of the differentcrops and changes in the composition of crops within the same group.

The resumption of growth in cereal production starting in 1993 has been concentrated largely

in Southern Cone and Andean countries. Production also increased in the Latin Caribbean,

significantly in relative terms, albeit on a lower base. In all three cases the key factor driving

the recovery was the achievement of higher yields combined with a halt to the decline of harvested

areas. Growth was slower in the CARICOM countries, and in Brazil and Mexico; while in Central

America output decreased in absolute terms (see table 35).

Most of the increase in oilseed production between 1993 and 2003 was heavily concentrated

in the Southern Cone (mainly Argentina) and in Brazil. In the Southern Cone, annual growth

in this category climbed to 9.2%, and in Brazil it reached a level of 7.5%. The production of

oilseed crops also grew in Andean countries and Central America albeit at a slightly slower rate

of 5.2% and 3,6% respectively. In the other regions, production of this crop category either

diminished . In all cases of stronger growth, the key factor has been an increase in the area

harvested, while productivity per hectare has only grown significantly in Brazil, the Southern

Cone and Central America (see table 36).

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The production of fruit and green vegetables has continued to expand, but at relatively modest

rates (2.1% in the case of fruit, and 3.3% among vegetables). In this last group of products a huge

increment in green vegetables production in the Latin Caribbean aroused because of the

extraordinary increment of production per hectarea in Cuba (tomatoes and others). Mexico recorded

the fastest growth, as a positive outcome of its free trade agreement with the United States and

Canada. In the Andean countries, fruit and green vegetable production also grew strongly, linked

to the expansion of exports. In these two cases, the increase in output value resulted from a

combination of larger areas and higher productivity per hectare, with both factors playing a

significant role. Central America also displayed relatively high growth rates in these product

groups, particularly in the case of vegetables (see table 37).

LAC: GROWTH OF FRUIT PRODUCTION, 1993-2003(Percentagea)

Table 37

Area Yieldb Productionb

Total LAC 1.0 1.1 2.1

Brazil 0.3 1.3 1.6

Mexico 2.0 1.2 3.2

Southern Cone 1.4 0.7 2.1

Andean countries 1.7 0.4 2.2

Central America 1.9 -0.1 1.8

Latin Caribbean -0.1 2.9 2.8

CARICOM -0.9 1.3 0.4

LAC: GROWTH OF VEGETABLE PRODUCTION, 1993-2003(Percentagea)

Area Yieldb Productionb

Total LAC 0.7 2.6 3.3

Brazil -0.8 2.2 1.4

Mexico 1.8 2.9 4.7

Southern Cone 0.5 0.9 1.4

Andean countries 1.9 2.2 4.0

Central America 3.6 0.7 4.3

Latin Caribbean 1.4 11.3 13.3

CARICOM -0.6 -1.0 -1.5

SOURCE: FAO/RLC based on FAOSTAT .a/ Calculated by linear regression.b/ Calculated at constant average 1999-2001 prices; The variation depends on the physical yields of the differentcrops and changes in the composition of crops within the same group.

Regional distribution of crop productionThe developments described above have also caused a significant change in the composition

of crop production in the different regions. In general, changes in the structure of output are

tending towards greater specialization, with growth concentrated in a small number of product

lines. This seems consistent with the higher degree of integration in agricultural markets and

the role of exports in driving agricultural production in the region.

Brazil diverges from this trend, however, by maintaining extensive diversification in its crop

production, partly reflecting its great wealth of natural resources and the scope of its domestic

market. Nonetheless, the explosive growth of oilseed production between 1993 and 2003 meant

that the value of production of this crop pattern line virtually doubled, clearly accelerating away

from other product groups.

Until 1993, oilseed production had been roughly at the same level as that of fruit and cereals.

Over the last decade, however, the two latter groups have continued to grow, but considerably

less than oilseeds, and also less than sugar cane and coffee. Output in the other groups (green

152

vegetables, plant fibres, pulses and tobacco) hardly expanded at all. Consequently, in 2003,

oilseeds accounted for 26% of Brazil’s total crop production, while the other groups contributed

much smaller proportions: cereals 20%, sugar cane 18% and fruit 14% (see figure 110).

The fastest expanding crop categories in Mexico are fruit and green vegetables. These were

already buoyant in the 1980s, but have been further boosted by the free trade agreement with

United States and Canada. Cereal production also continues to expand, and it remains very

important within the country’s overall crop production, but less so than previously. In 2003, the

production of fruit and cereals each accounted for roughly 30% of the country’s total crop

production, with green vegetables contributing another 19%. Pulse production was also significant

(6%)—a feature that is exclusive to Mexico and Central America, as a result of bean production.

Both oilseeds and cotton have declined in importance since the 1980s (see figure 111).

The Southern Cone countries sharply increased their specialization in oilseeds, thanks to

increased soybean cultivation in Argentina and, to a lesser extent, in Paraguay. The previous

polygon formed by cereals, fruit, green vegetables and oilseeds has been greatly stretched, as

expansion of the oilseed group has intensified. In 2003, oilseed crops already accounted for 42%

of the sub-regional total crop production, far outpacing cereals (24%), fruit (18%), and green

vegetables (10%) (see figure 112).

SOURCE: FAOSTAT.

BRAZIL: GROWTH OF CROP PRODUCTION BY MAIN PRODUCTS CATEGORIES(Billion of dollars at 1999 - 2001 prices)

Figure 110

Sugar

Coffee, tea, cocoa and spices

Cereals

Fruits

Vegetal fibres and rubberGreen vegetables

Pulses

Oilcrops

Tobacco

2

4

6

8

10

12

1980 1993 2003

153

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The three most important crop groups in the agricultural production of Andean countries are

fruit, green vegetables and cereals. As these groups were also the fastest growing, specialization

clearly accentuated during the reporting period. Fruit and green vegetables accounted for over

half (54%) of the value of the sub-regional crop production in 2003, with cereals contributing

18% of the total (see figure 113).

SOURCE: FAOSTAT.

MEXICO: GROWTH OF CROP PRODUCTION BY MAIN PRODUCTS CATEGORIES(Billion of dollars at 1999 - 2001 prices)

Figure 111

Sugar

Coffee, tea, cocoa and spices

Cereals

Fruits

Vegetal fibres and rubberGreen vegetables

Pulses

Oilcrops

Tobacco

SOURCE: FAOSTAT.

SOUTHERN CONE: GROWTH OF CROP PRODUCTION BY MAIN PRODUCTS CATEGORIES(Billion of dollars at 1999 - 2001 prices)

Figure 112

Sugar

Coffee, tea, cocoa and spices

Cereals

Fruits

OilcropsGreen vegetables

Pulses

Vegetal fibres and rubber

Tobacco

1

2

3

4

1980 1993 2003

-1

1

3

5

7

9

11

1980 1993 2003

154

In Central America, fruit is the leading crop category in value terms, and as it was also the

fastest growing, specialization increased. Other sectors posting strong growth are coffee and

sugar. Following the demise of cotton production, the reduction in cereal production also helped

increase the level of specialization (see figure 114).

SOURCE: FAOSTAT.

ANDEANS COUNTRIES: GROWTH OF CROP PRODUCTION BY MAIN PRODUCTSCATEGORIES (Billion of dollars at 1999 - 2001 prices)

Figure 113

Sugar

Coffee, tea, cocoa and spices

Cereals

Fruits

Vegetal fibres and rubberGreen vegetables

Pulses

Oilcrops

Tobacco

1980 1993 2003

1

2

3

4

5

SOURCE: FAOSTAT.

CENTRAL AMERICA: GROWTH OF CROP PRODUCTION BY MAIN PRODUCTSCATEGORIES (Billion of dollars at 1999 - 2001 prices)

Figure 114

Sugar

Coffee, tea, cocoa and spices

Cereals

Fruits

Vegetal fibres and rubberGreen vegetables

Pulses

Oilcrops

Tobacco

1980 1993 2003

0,5

1,0

1,5

2,0

2,5

155

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SOURCE: FAOSTAT.

LATIN CARIBBEAN: GROWTH OF CROP PRODUCTION BY MAIN PRODUCTSCATEGORIES (Billion of dollars at 1999 - 2001 prices)

Figure 115

2.0

Sugar

Coffee, tea, cocoa and spices

Cereals

Fruits

Vegetal fibres and rubberGreen vegetables

Pulses

Oilcrops

Tobacco

1980 1993 2003

2,0

1,5

1,0

0,5

Latin Caribbean production patterns reveal a steep drop in the production of sugar cane, and

a trend towards new specialization in fruit and green vegetables (see figure 115).

In 1993, the leading crop groups in the CARICOM countries were fruit and green vegetables.

Both of these have experienced negative growth rates, the most serious being the case of green

vegetables. As sugar production also declined, cereals were the only product group to record a

significant growth (see figure 116).

SOURCE: FAOSTAT.

CARICOM: GROWTH OF CROP PRODUCTION BY MAIN PRODUCTSCATEGORIES (Billion of dollars at 1999 - 2001 prices )

Figure 116

Sugar

Coffee, tea, cocoa and spices

Cereals

Fruits

Vegetal fibres and rubberGreen vegetables

Pulses

Oilcrops

Tobacco

1980 1993 2003

0,1

0,2

0,3

0,4

0,5

0,6

156

Figure 117 LAC: GROWTH OF CROP PRODUCTION BY COUNTRY (Billions of dollars)

SOURCE: FAOSTAT.

1993 200319800 5 10 15 20 25

33 Antigua and Barbuda32 Saint Kitts and Nevis

31 Bahamas30 Saint Vincent and the Grenadines

29 Dominica28 Grenada

27 Saint Lucia26 Barbados

25 Belize24 Trinidad and Tobago

23 Suriname22 Guyana

21 Jamaica20 Nicaragua

19 Panama18 Uruguay

17 Costa Rica16 Honduras

15 Haiti14 El Salvador

13 Bolivia12 Paraguay

11 Dominican Republic10 Guatemala

9 Venezuela8 Ecuador

7 Peru6 Chile5 Cuba

4 Colombia3 Argentina

2 Mexico1 Brazil

- 5 10 15 20 25 30

33 Antigua and Barbuda32 Saint Kitts and Nevis

31 Bahamas30 Grenada

29 Barbados28 Saint Lucia

27 Dominica26 Saint Vincent and the Grenadines

25 Belize24 Trinidad and Tobago

23 Suriname22 Guyana

21 Jamaica20 Nicaragua

19 Panama18 Uruguay

17 El Salvador16 Honduras

15 Haiti14 Bolivia

13 Costa Rica12 Dominican Republic

11 Guatemala10 Venezuela

9 Paraguay8 Ecuador

7 Peru6 Chile5 Cuba

4 Colombia3 Mexico

2 Argentina1 Brazil

- 10 20 30 40 50

33 Antigua and Barbuda32 Saint Kitts and Nevis

31 Grenada30 Bahamas29 Barbados

28 Saint Lucia27 Dominica

26 Saint Vincent and the Grenadines25 Trinidad and Tobago

24 Suriname23 Belize

22 Guyana21 Jamaica20 Panama

19 El Salvador18 Nicaragua17 Honduras16 Uruguay

15 Haiti14 Dominican Republic

13 Bolivia12 Costa Rica11 Guatemala10 Venezuela

9 Paraguay8 Ecuador

7 Cuba6 Chile5 Peru

4 Colombia3 Mexico

2 Argentina1 Brazil

Recent changes in the geographic distribution of crop cultivation in the region have made it

more concentrated. In 1980, output in Brazil alone accounted for 40% of the regional total; and

production by Brazil, Mexico and Argentina combined accounted for 69%. By 1993, concentration

had intensified further, with Brazilian production accounting for 42% and the three countries

together, 70%. But the expansion of soybean cultivation and other products in Brazil and

Argentina over the last decade has meant that Brazilian production accounted for 44% of the

regional total in 2003, while the three countries between them contributed 73% (see figure 117).

157

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This pattern of concentration is also present, albeit to a lesser extent, in terms of product lines,

especially oilseeds (see figures 118, 119, 120, 121, 122, 123, 124, 125, 126).

1993 2003

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

Costa Rica

- 2 4 6 8 10

Figure 118 LAC: GROWTH OF CEREAL PRODUCTION BY COUNTRY (Millions of dollars)

Dominican Republic

Suriname

Haiti

Panama

Honduras

El Salvador

Guyana

Nicaragua

Guatemala

Paraguay

Cuba

Bolivia

Ecuador

Uruguay

Venezuela

Chile

Peru

Colombia

Mexico

Argentina

Brazil

Grenada

Saint Kittsand Nevis

Saint Lucia

Antigua and Barbuda

Dominica

Barbados

Bahamas

Saint Vincent and theGrenadines

Jamaica

Trinidad and Tobago

Belize

SOURCE: FAOSTAT.

158

Figure 119 LAC: GROWTH OF OILCROPS PRODUCTION BY COUNTRY (Millions of dollars)

SOURCE: FAOSTAT.

1993 2003

- 2,000 4,000 6,000 8,000 10,000 12,000

Honduras

Costa Rica

Nicaragua

Peru

Venezuela

Guatemala

Uruguay

Ecuador

Colombia

Mexico

Bolivia

Paraguay

Argentina

Brazil

- 5 10 15 20 25 30

Bahamas

Antigua and Barbuda

Saint Kitts and Nevis

Barbados

Saint Vincent and the Grenadines

Belize

Grenada

Suriname

Dominica

Saint Lucia

Trinidad and Tobago

Panama

Guyana

El Salvador

Chile

Cuba

Jamaica

Haiti

Dominican Republic

159

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Figure 120 LAC: GROWTH OF FRUIT PRODUCTION BY COUNTRY (Millions of dollars)

SOURCE: FAOSTAT.

1993 2003

Paraguay

Uruguay

Panama

Honduras

Bolivia

Dominican Republic

Cuba

Guatemala

Haiti

Venezuela

Costa Rica

Peru

Ecuador

Colombia

Chile

Argentina

Mexico

Brazil

1,000 2,000 3,000 4,000 5,000 6,000 7,000

20 40 60 80 100

Saint Kittsand Nevis

Barbados

Antigua and Barbuda

Grenada

Bahamas

Saint Vincent andthe Grenadines

Dominica

Trinidad andTobago

Suriname

Guyana

Saint Lucia

Nicaragua

Belize

El Salvador

Jamaica

Figure 121 LAC: GROWTH OF GREEN VEGETABLES PRODUCTION BY COUNTRY (Millions of dollars)

SOURCE: FAOSTAT.

1993 2003

DominicanRepublic

Haiti

Ecuador

Guatemala

Bolivia

Venezuela

Paraguay

Chile

Colombia

Cuba

Argentina

Peru

Mexico

Brazil

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Saint Kitts and Nevis

Antigua and Barbuda

Grenada

Saint Lucia

Belize

Saint Vincent and the Grenadines

Barbados

Suriname

Dominica

Bahamas

Trinidad and Tobago

Guyana

Nicaragua

El Salvador

Panama

Honduras

Costa Rica

Uruguay

Jamaica

20 40 60 80 100

160

Figure 122 LAC: GROWTH OF COFFEE, TEA, CACAO AND SPICES PRODUCTION BY COUNTRY(Millions of dollars)

SOURCE: FAOSTAT.

1993 2003

500 1,000 1,500 2,000 2,500

Haiti

Paraguay

Jamaica

Nicaragua

El Salvador

Venezuela

DominicanRepublic

Honduras

Ecuador

Argentina

Guatemala

Peru

Mexico

Costa Rica

Colombia

Brazil

Chile

Uruguay

Antigua andBarbuda

Bahamas

Barbados

Saint Kittsand Nevis

Suriname

Belize

Dominica

Saint Vincent andthe Grenadines

Saint Lucia

Trinidad andTobago

Guyana

Grenada

Panama

Cuba

Bolivia

5 10 15 20 25 30

161

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162

Figure 123 LAC: GROWTH OF PULSES PRODUCTION BY COUNTRY (Millions of dollars)

SOURCE: FAOSTAT.

1993 2003

Saint Vincent and the Grenadines

Antigua and Barbuda

Saint Lucia

Dominica

Suriname

Bahamas

Saint Kitts and Nevis

Grenada

Guyana

Barbados

Jamaica

Trinidad and Tobago

Uruguay

Belize

Panama

Costa Rica

Venezuela

Bolivia

Dominican Republic

Chile

Ecuador

Haiti

Paraguay

Honduras

El Salvador

Guatemala

Peru

Cuba

Colombia

Nicaragua

Argentina

Mexico

Brazil

200 400 600 800 1,000 1,200 1,400 1,600

163

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Figure 124 LAC: GROWTH OF SUGAR PRODUCTION BY COUNTRY (Millions of dollars)

SOURCE: FAOSTAT.

1993 2003

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

Paraguay

Nicaragua

Costa Rica

Honduras

El Salvador

Chile

Bolivia

Dominican Republic

Ecuador

Venezuela

Peru

Guatemala

Argentina

Cuba

Colombia

Mexico

Brazil

10 20 30 40 50 60 70

Antigua andBarbuda

Saint Lucia

Saint Vincent andthe Grenadines

Dominica

Grenada

Bahamas

Suriname

Uruguay

Saint KittsNevis

Barbados

Trinidad andTobago

Haiti

Belize

Panama

Jamaica

Guyana

SOURCE: FAOSTAT.

1993 2003

200 400 600 800 1,000 1,200 1,400

5 10 15 20 25 30

Venezuela

Figure 125 LAC: GROWTH OF VEGETAL FIBRES AND RUBBER PRODUCTION BY COUNTRY(Millions of dollars)

Antigua and Barbuda

Uruguay

Panama

Bahamas

Barbados

Belize

Dominica

Guyana

Saint Vincent and the Grenadines

Saint Lucia

Suriname

Trinidad and Tobago

Saint Kitts and Nevis

Grenada

Dominican Republic

Jamaica

Costa Rica

Honduras

Haiti

El Salvador

Nicaragua

Chile

Cuba

Venezuela

Ecuador

Guatemala

Bolivia

Colombia

Peru

Paraguay

Argentina

Mexico

Brazil

164

SOURCE: FAOSTAT.

200 400 600 800 1,000 1,200 1,400

Brazil

1993 2003

Argentina

Cuba

Colombia

Mexico

Guatemala

Dominican Republic

Peru

Paraguay

Chile

Ecuador

Venezuela

Honduras

Uruguay

Panama

Nicaragua

Jamaica

El Salvador

Bolivia

Haiti

Costa Rica

Trinidad and Tobago

GuyanaSaint Vincent and

the GrenadinesSuriname

Saint Lucia

San Kitts and Nevis

Grenada

Dominica

Belize

Barbados

Bahamas

Antigua and Barbuda

40302010

LAC: TOBACCO PRODUCTION (Millions of dollars)Figure 126

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D. LIVESTOCK PRODUCTION

Livestock production in Latin America and the Caribbean grew by just 2.4% in 2003, having

averaged around 2% over the last eight years, with higher rates recorded only in 1999, 2000,

and 2002 (6.2%, 3.3% and 4,1%). As a result, the average rate of growth in 1995-2003 period was

3.0% per year, compared to 4.2% in the first half of the 1990s. The factors impeding stronger

growth include problems affecting livestock production in the Southern Cone, mainly in Argentina

and Uruguay, arising from market conditions, compounded by health problems and the effects

of drought.

Despite this uneven performance, over the last decade livestock production (1990-2003) has grown at

3.4% per year, compared to just 2.2% per year in the 1980s (see table 38).

In an eloquent illustration of the intensification of competition on livestock production markets,

the growth rates of the different product categories are tending to accelerate, but also to diverge

increasingly one from another. During the 1980s, the fastest growing category, chicken meat, grew

by 40%, while the slowest growing product line was pig meat, which declined by 10%. The difference

between the trend of the indices of the two products widened to 50 percentage points, with relatively

smaller gaps appearing in the other product lines (see figure 127).

Between 1990 and 2003, variations in the indices were much wider. Production of poultry meat

almost tripled (an increase of 184%) and pig meat production doubled (a 100% increase), while

wool production declined by 48%. Other products that experienced rapid growth and achieved

significant increases compared to their 1990 production levels, were eggs (46%) and milk (45%).

Production of bovine meat and goat meat grew more moderately (32% and 18% respectively),

while sheep meat production declined in absolute terms (13%). The changes in this latter period

have been much more rapid, and the divergence between production categories has widened

significantly (see figure 127).

LAC: GROWTH OF LIVESTOCK PRODUCTION, ANNUAL RATE (Percentage)Table 38

SOURCE: FAO/RLC based on FAOSTAT.

1980-90 1990-03 1990-95 1995-03

Latin American & Caribean 2.2 3.4 4.2 3.0

Brazil 3.7 4.8 6.4 4.3

Mexico 1.4 3.5 5.0 3.5

Southern Cone 0.6 1.2 2.4 0.3

Andean countries 2.5 2.9 2.0 2.8

Central America 2.1 3.2 3.6 2.6

Latin Caribbean 1.6 0.3 -3.3 1.3

CARICOM 1.6 1.0 -2.2 2.2

30

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

80

130

180

230

280

SOURCE: FAO/RLC based on FAOSTAT.

LAC: INDEX OF LIVESTOCK PRODUCTION BY PRODUCT CATEGORY (1990=100)Figure 127

Eggs: 146

Pig meat: 200

Poultry meat: 285

Milk: 145

Bovine meat: 132

Other meats: 119

Goat meat: 118

Sheep meat: 87

Animal fibre: 52

166

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Composition of livestock production

Bovine livestock products (meat and milk) account for a large majority of the total value of

livestock production in Latin America and the Caribbean; consequently, relatively lower growth

rates in this product category still mean substantial increases in absolute terms, within the

total value. For that reason, despite the widely differing rates of expansion in the different

livestock categories, the composition of output remains quite stable. Between 1990 and 2003,

the key change was the increase in the share of chicken meat, as a result of the successful

development of production in Brazil, which expanded from 12% to 22%, just overtaking the value

of milk output, which also accounted for 21% of the total. As a counterpart, the share of bovine

meat production fell from 49% to 41%. With minor variations, production in the other categories

maintained roughly the same proportions as in 1990.

Bovine meat remained the regional leading livestock product, but with downward trend. Chicken

meat is on the second place, with a value similar to that of milk, which is now in third place.

Apart from these three products, pig meat (8%) and eggs (6%) also attain significant levels in

the total value of livestock production (see table 39 and figure 128).

SOURCE: FAO/RLC based on FAOSTAT.

LAC: COMPOSITION OF LIVESTOCK PRODUCTION BY PRODUCT CATEGORY (Percentage)Figure 128

1990

Animal fibre2%

Eggs 6%Other meats 1%

Milk23%

Poultrymeat 15%

Pig meat 7%Bovine meat44%Goat meat 0.4%

Sheep meat 1%

Poultry meat 22%

Milk21%

Bovinemeat42%

Eggs 6%

Animal fibre0.4%

Other meats 0.5%

Pig meat 8%

Goat meat 0.3%

Sheep meat 1%

2003

SOURCE: FAO/RLC based on FAOSTAT.

LAC: VALUE OF LIVESTOCK PRODUCTION BY PRODUCT CATEGORY(Billions of dollars and percentage)

Table 39

1980 1990 2003

MUS$ % MUS$ % MUS$ %

Total livestock 38.3 100 48.0 100 75.2 100

Poultry meat 3.7 9.6 5.8 12.2 16.6 22.1

Bovine meat 18.3 47.8 23.3 48.5 30.7 40.8

Goat meat 0.1 0.4 0.2 0.4 0.2 0.3

Pig meat 3.2 8.4 2.9 6.1 5.8 7.7

Sheepmeat 0.5 1.4 0.6 1.3 0.6 0.7

Animal fibre 0.6 1.5 0.6 1.2 0.3 0.4

Other meats 0.3 0.8 0.3 0.6 0.4 0.5

Milk 9.3 24.4 11.1 23.1 16.0 21.3

Eggs 2.2 5.8 3.2 6.6 4.6 6.1

168

3.0

2.5

2.0

1.5

1.0

0.5

0.0

-1.0

1990 - 20021980 - 1990

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF BOVINE MEAT PRODUCTION(1980-2002)

Figure 129

SOURCE: FAO/RLC based on FAOSTAT.

Change in production (in %) Stock effects Yield effects

LAC: BOVINE PRODUCTION (Million of dollars and percentage)Table 40

SOURCE: FAO/RLC based on FAOSTAT.

1980 1990 2002 1980-1990 1990-2002

US$ % US$ % US$ % % %

LAC 20,767 100 24,714 100 33,404 100 2.4 2.0

Brazil 6,670 32.1 9,619 38.9 16,542 49.5 3.9 4.2

Mexico 1,816 8.7 3,244 13.1 3,464 10.4 6.4 0.6

Southern Cone 8,092 39.0 8,864 35.9 8,245 24.7 0.1 -0.4

Andean countries 2,848 13.7 3,538 14.3 3,817 11.4 1.5 1.5

Central America 775 3.7 822 3.3 846 2.5 0.7 0,9

Latin Caribbean 517 2.5 569 2.3 434 1.3 1.2 -1.0

CARICOM 49 0.2 59 0.2 55 0.2 1.6 -1.5

Period

Production trends by products graps

Note: The analysis of the explanatory factors of livestock production growth ( pages 168 to174) considers information up to 2002.

Bovine meat

Over the past decade (including the first few years of the new millennium, i.e. 1990-2002) the

production of bovine meat grew slowly, by just 2.2% per year. As this followed an annual expansion

averaging 2.3% per year during the 1980s, there have now been 22 years of weak growth. The

livestock herd grew by as little as 1.1% in the 1980s, and even more slowly (0.9%) during the

more recent period (1990-2002). The yield index, measured as the trend rate of extraction and

changes in average weight per animal, has increased at the same rate in both decades, 1.2% per

year (see figure 129)

This average growth is the net result of situations that differ widely among countries and subregions.

In 1990-2002, production in Brazil grew rapidly (4.6% per year), mainly because of an increase in

the extraction rate, which allowed for a 3.1% annual increase in yields. This higher productivity

was complemented by growth of 1.5% in the livestock herd (see table 40 and figure 130).

169

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SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF BOVINE MEAT PRODUCTIONBY SUBREGION (1990-2002)

Figure 130

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

-3.0Period

Stock effects Yield effects

MexicoBrazil CentralAmerica

LatinCaribbean

Andeancountries

Southern Cone

Change in production (in %)

CARICOM

Milk

Milk production increased substantially between 1990 and 2002, and annual growth was stronger

than in the 1980s (3.1% per year compared to 1.8%). In both periods, the livestock herd expanded

a similar rates, 1.1% in the 1980s and 1.0% in the 1990s; but yields grew faster in the latter period

(2.1% per year) than in the 1980s (0.7%) (see figure 131).

Milk production increased in most sub-regions, but the strongest growth was seen in Brazil,

Central America and Mexico (3.8%, 3.7% and 3.5%, respectively). In the two latter cases, the

expansion was based on stronger yields, 4.2% in Central America and 3.9% in Mexico. Although

yields increased more slowly in Brazil, production grew by more, reflecting an increase in the

number of animals.

Although at slower rates than in Brazil, bovine meat production in Mexico also expanded during

the same period. Annual growth averaged 2.2% and was based exclusively on a higher extraction

rate, as the number of head of cattle declined by 0.4% per year.

The Southern Cone, however, experienced stagnation that actually caused production to

decline slightly (-0.3% per year). Both the livestock herd and yields maintained their levels.

The number of animals increased by 0.3% per year, but this was offset by a reduction (-0.6%)

in the extraction rate.

Bovine meat production in the other sub-regions was either static or declined. In the Andean

countries, the effect of 1.3% annual expansion in the livestock herd was reduced by a drop in

the extraction rate of 0.5%. In Central America, slow growth in yields (0.6% per year) was offset

by a 0.5% annual reduction in the number of animals. Output declined as result of lower yields

in the Latin Caribbean and the CARICOM countries.

170

MILK PRODUCTION (Millions of dollars and percentage)Table 41

1980 1990 2002 1980-1990 1990-2002

US$ % US$ % US$ % % %

LAC 8,867 100 10,607 100 15,231 100 1.8 3.2

Brazil 3,075 34.7 3,841 36.2 5,984 39.3 2.5 3.8

Mexico 1,786 20.1 1,629 15.4 2,459 16.2 -0.9 3.5

Southern Cone 1,904 21.5 2,277 21.5 3,126 20.6 1.8 2,7

Andean countries 1,360 15.3 2,048 19.3 2,750 18.1 4.2 2.5

Central America 342 3.9 408 3.9 634 4.2 1.8 3.7

Latin Caribbean 373 4.2 365 3.4 274 2.0 -0.2 -2.4

CARICOM 23 0.3 34 0.3 26 0.2 -2.4 -1.9

SOURCE: FAO/RLC based on FAOSTAT .

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF MILK PRODUCTION (1980-2002)Figure 131

Change in production tonnage (in %) Stock effects Yield effects

In the Southern Cone and in the Andean countries, the production increased more modestly, by

2.7% and 2.5% per year respectively. In the first of these sub-regions, growth largely reflected

higher yields, while in the second, the positive effect of higher yields was combined with an

increase in the number of animals.

The trend of milk production among the Caribbean countries diverged from the pattern in the

rest of the region. In the Latin Caribbean and in the CARICOM countries output diminished

between 1990 and 2002, mainly as a result of lower average yields (see table 41 and figure 132).

4.0

3.0

2.0

1.0

0.0

-1.0

1990 - 20021980 - 1990

Period

171

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Poultry meat

The production of chicken meat has increased at an extraordinary rate over the last few decades—

5.1% per year in the 1980s and accelerating to 8.2% per year in the 1990s. The number of birds

increased by 5.6% per year, and faster turnover has also meant higher yields (2.4% per year)

(see figure 133).

5.0

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

-3.0

Brazil Mexico Southern Cone CARICOM

Figure 132

SOURCE: FAO/RLC based on FAOSTAT.

Andeancountries

CentralAmerica

LatinCaribbean

Change in production tonnage (in %) Stock effects Yield effects

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF MILK PRODUCTIONBY SUBREGIONS (1990-2002)

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF POULTRY MEAT PRODUCTION(1980-2002)

Figure 133

10

9

8

7

6

5

4

3

2

1

01990 - 20021980 - 1990

Change in production tonnage (in %) Stock effects Yield effects

Period

Period

172

The growth of chicken production was widespread across the region, though relatively at a

slower rate in the Caribbean. The strongest annual growth occurred in the Southern Cone (9.3%

per year), followed by Brazil (9.1%), Mexico (8.1%), Central America (7.7%) and the Andean

countries (6.6%). The high growth rates achieved by Brazilian production during the past decade,

based on a large initial volume, meant a substantial increase in absolute quantities. In all cases,

increases in the number of birds had a greater effect on output than variations in yields.

Nonetheless, the relation between the two factors differed in each subregion. In the Southern

Cone, better yields generated nearly half of the production expansion; in Brazil, yields explained

nearly one third; in Mexico and Central America, yields only accounted for 20% of output growth;

and in the Andean countries, nearly all the increase in production was the result of a larger

number of birds, with yields remaining virtually unchanged (see figure 134 and table 42).

POULTRY MEAT PRODUCTION (Millions of dollars and percentage)Table 42

1980 1990 2002 1980-1990 1990-2002

US$ % US$ % US$ % % %

LAC 3,763 100 6,187 100 15,785 100 4.58 7.82

Brazil 1,681 44.7 2,891 46.7 8,174 51.8 4.62 8.77

Mexico 489 -13.0 918 14.8 2,343 14.8 6.04 8.16

Southern Cone 517 -13.7 610 9.9 1,765 11.2 1.57 8.55

Andean countries 678 18.0 1,122 18.1 2,387 15.1 5.06 5.85

Central America 116 3.1 250 4.0 585 3.7 7.37 6.78

Latin Caribbean 175 4.7 254 4.1 332 2.1 4.43 3.57

Caricom 104 2.8 139 2.2 196 1.2 1.87 3.39

SOURCE: FAO/RLC based on FAOSTAT.

SOURCE: FAO/RLC based on data FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF POULTRY MEAT PRODUCTIONBY SUBREGIONS (1990-2002)

Figure 134

10

9

8

7

6

5

4

3

2

1

0Brazil Mexico Southern Cone Andean

countriesCentralAmerica

CARICOMLatinCaribbean

Change in production tonnage (in %) Stock effects Yield effects

Pig meat

In a clear recovery from the reduction suffered in the 1980s (-0.9% per year), the production

of pig meat in Latin America and the Caribbean grew by 4.0% per year between 1990 and 2002.

The main factor was progress stemming from quicker turnover, which boosted yields by 3.2%

per year. The total number of animals also increased by 0.9% annually (see figure 135).

173

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LAC: PIG MEAT PRODUCTION (Millions of dollars and percentage)Table 43

1980 1990 2002 1980-1990 1990-2002

US$ % US$ % US$ % % %

LAC 4,238 100 3,866 100 6,152 100 -1.20 3.80

Brazil 1,315 31.0 1,409 36.4 2,684 43.6 1.70 5.50

Mexico 1,678 39.6 1,013 26.2 1,448 23.5 -7.00 2.90

Southern Cone 567 13.4 542 14.0 960 15.6 0,00 4.40

Andean countries 449 10.6 594 15.4 624 10.1 3.50 0.20

Central America 94 2.2 100 2.6 135 2.2 0.30 2.50

Latin Caribbean 106 2.5 180 4.7 273 4.4 6.60 4.40

CARICOM 27 0.6 26 0.7 24 0.4 -0.60 0.10

SOURCE: FAO/RLC based on FAOSTAT .

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF PIG MEAT PRODUCTION(1980-2002)

Figure 135

5

4

3

2

1

0

-1

-2

1990 - 20021980 - 1990

Change in production tonnage (in %) Stock effects Yield effects

From 1990 to 2002, the strongest growth in the production of pig meat occurred in Brazil (6.0%).

This is entirely explained by better yields (7.0% per year), as the number of animals actually fell

(-1.0% per year). The Southern Cone countries also achieved strong growth averaging 4.3% per

year. In this case, the chief expansionary factor was a 3.6% annual increase in the number of

animals.

In Mexico, Central America and the Latin Caribbean, pig meat production grew at very similar

rates (2.9%, 2.8% and 2.6%). The first two cases are explained by a combination of a larger

number of animals and better yields, although the latter accounted for a larger share in Central

America. In the Latin Caribbean, production grew because of an increase in the number of

animals.

In the Andean countries, production expanded slowly (1.1% per year), because yields decreased

despite the number of animals increasing (2.4% annually). In the CARICOM countries, the production

of pig meat failed to expand during the decade; a small reduction in the number of animals (-0.9%

per year) was offset by a 0.7% annual increase in yields (see table 43 and figure 136).

Period

174

Other products

Output growth has been relatively slower in the “other products” category. Between 1990 and

2002, regional egg production expanded by 3.1% per year, slightly less than in the 1980s when

it had grown at an average rate of 3.5%. The pace of growth is roughly similar in all subregions,

except the Caribbean, where production actually diminished (-1.5% per year in the Latin

Caribbean, and -0.5% in CARICOM).

Over the past decade (1990-2002), the production of goat meat grew by just 0.8% per year,

while sheep meat production dropped by an annual 1.1%. Wool output declined drastically by

5.7% per year.

Composition of livestock production in each subregion

The changes discussed above meant significant alterations in the structure of the region’s

livestock output—the most notable being the increased production of chicken meat, which

helped to diversify from the previous heavy concentration in the bovine category (meat and

milk) (see figure 137).

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXPLANATORY FACTORS FOR THE GROWTH OF PIG MEAT PRODUCTIONBY REGIONS (1990-2002)

Figure 136

8

9

7

6

5

4

3

2

1

0

-1

-2Brazil Mexico Southern Cone Andean

countriesCentralAmerica

CARICOMLatinCaribbean

Change in production tonnage (in %) Stock effects Yield effects

175

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SOURCE: FAOSTAT.

LAC: CHANGES IN THE STRUCTURE OF LIVESTOCK PRODUCTION(Billions of dollars at constant 1999-2001 prices)

Figure 137

1980 1993 2003

5

10

15

20

25

30

35Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

SOURCE: FAOSTAT.

BRAZIL: CHANGES IN THE STRUCTURE OF LIVESTOCK PRODUCTION(Billions of dollars at constant 1999-2001 prices)

Figure 138

Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

2

4

6

8

10

12

14

16

1980 1990 2003

The change in the structure of livestock production in Brazil was very similar to the pattern in Latin America

and the Caribbean as a whole (partly reflecting that country’s share in the regional averages). Nonetheless,

the structure of output in Brazil also reflects a significant expansion in the production of bovine meat,

relatively slower growth in milk production and an exceptional increase in the production of poultry meat.

Although this latter category recorded the fastest growth, the bovine meat segment also expanded

significantly during the decade, reflecting greater participation in markets, based on better technical

responses in solving production problems, supported by more dynamic marketing (see figure 138).

176

SOURCE: FAOSTAT.

MEXICO: CHANGES IN THE STRUCTURE OF LIVESTOCK PRODUCTION(Billions of dollars at constant 1999-2001 prices)

Figure 139

1980 1990 2003

Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

0.5

1.0

1.5

2.0

2.5

3.0

3.5

In Mexico, the bovine meat share is less than the regional average, having hardly grown at all

during the decade. In contrast, there is significant output of pig meat. (Egg and chicken

production has also increased very fast (see figure 139).

The Southern Cone used to be highly specialized in bovine meat, but it has recently become

relatively more diversified as a result of increased production of chicken meat, albeit on a small

initial base. Nonetheless, bovine meat specialization could expand as a result of little change

in other comodity groups, and the drastic decline in wool production (see figure 140).

SOURCE: FAOSTAT.

SOUTHERN CONE: CHANGES IN THE STRUCTURE OF LIVESTOCKPRODUCTION (Billions of dollars at constant 1999-2001 prices)

Figure 140

1980 1990 2003

Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

1

2

3

4

5

6

7

8

177

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SOURCE: FAOSTAT.

CENTRAL AMERICA: CHANGES IN THE STRUCTURE OF LIVESTOCK PRODUCTION(Billions of dollars at constant 1999-2001 prices)

Figure 142

Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

1980 1990 2003

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

As in other regions, production in the Andean countries is diversifying as a result of increased

output of poultry meat. In contrast, egg production remains relatively small. (see figure 141).

In Central America, chicken and egg production are both expanding strongly; as, to a lesser extent,

is milk output. In contrast, bovine meat is growing relatively more slowly (see figure 142).

SOURCE: FAOSTAT.

ANDEAN COUNTRIES: CHANGES IN THE STRUCTURE OF LIVESTOCKPRODUCTION (Billions of dollars at constant 1999-2001 prices)

Figure 141

1980 1990 2003

Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

0.5

1.0

1.5

2.0

2.5

3.0

3.5

178

Livestock production in Latin Caribbean countries slumped badly during the past decade, with

the bovine meat segment in particular mainly because of a drastic decline in Cuba and Dominican

Republic. Milk output has also fallen sharply, though to a lesser extent. Pig meat was the only

category to increase substantially, and this already held a major share in 1990. Eggs also

accounted for a large share in that year, but production of eggs did not fail to expand during

the decade. There were no major changes in poultry meat or milk production (see figure 143).

Over the past decade (1990-2003) livestock production in the CARICOM countries stagnated

seriously. Poultry was the only segment to record positive growth, thanks to the strong

specialization since 1990 (see figure 144).

SOURCE: FAOSTAT.

LATIN CARIBBEAN: CHANGES IN THE STRUCTURE OF LIVESTOCK PRODUCTION(Billions of dollars at constant 1999-2001 prices)

Figure 143

Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

1980 1990 2003

7.0

0.1

0.2

0.3

0.4

0.5

0.6

179

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SOURCE: FAOSTAT.

CARICOM: CHANGES IN THE STRUCTURE OF LIVESTOCK PRODUCTION(Billions of dollars at constant 1999-2001 prices)

Figure 144

Poultry meat

Bovine meat

Goat meat

Pig meat

Sheep meat

Animal fibre

Milk

Eggs

SOURCE: FAOSTAT.

LAC: GEOGRAPHIC DISTRIBUTION OF BOVINE MEAT PRODUCTION(Billions of dollars)

Figure 145

Brazil

Mexico

Southern Cone

Andeans countriesCentral America

Latin Caribbean

CARICOM

1980 1990 2003

0.01

0.04

0.09

0.14

0.19

1980 1990 2003

2

4

6

8

10

12

14

16

Geographic distribution of livestock production

During the last decade (1990-2003) the most significant change in the location of bovine meat

production has been the extraordinary expansion of output in Brazil, in contrast to relative

stagnation in the other subregions (see figures 145 and 146).

180

LAC: GEOGRAPHIC DISTRIBUTION OF BOVINE MEAT PRODUCTION BY COUNTRY(Millions of dollars)

Figure 146

1990 2003

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000

El Salvador

Haiti

Honduras

Panama

Cuba

Guatemala

Costa Rica

Dominican Republic

Nicaragua

Peru

Bolivia

Chile

Paraguay

Ecuador

Uruguay

Venezuela

Colombia

Mexico

Argentina

Brazil

0 10 20 30 40

Bahamas

Saint Kitts and Nevis

Grenada

Saint Vincent andthe Grenadines

Barbados

Antigua and Barbuda

Saint Lucia

Dominica

Trinidad and Tobago

Guyana

Belize

Suriname

Jamaica

SOURCE: FAOSTAT.

The geographic distribution of milk production in Latin America and the Caribbean in 2003 was

similar to the pattern prevailing in 1990, although with greater concentration in Brazil, and a

reduction in the Caribbean (see figures 147 and 148).

Over the past decade (1990-2003), poultry meat production has been heavily concentrated in

Brazil; while output has grown by more than in the previous decade in all subregions, apart from

CARICOM, the increase in Brazil has been much greater than in the other subregions (see figures

149 and 150).

181

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LAC: GEOGRAPHIC DISTRIBUTION OF MILK PRODUCTION BY COUNTRY(Millions of dollars)

1,000 2,000 3,000 4,000 5,000 6,000 7,000

Guatemala

Nicaragua

Bolivia

Paraguay

El Salvador

Dominican Republic

Honduras

Cuba

Costa Rica

Peru

Venezuela

Uruguay

Chile

Ecuador

Colombia

Argentina

Mexico

Brazil

Figure 148

SOURCE: FAOSTAT.

1990 2003

20 40 60

Saint Kitts and Nevis

Grenada

Saint Lucia

Saint Vincent and the Grenadines

Bahamas

Belize

Antigua and Barbuda

Dominica

Barbados

Suriname

Trinidad and Tobago

Jamaica

Guyana

Haiti

Panama

SOURCE: FAOSTAT.

LAC: GEOGRAPHIC DISTRIBUTION OF MILK PRODUCTION (Billions of dollars)Figure 147

1980 1990 2003

Brazil

Mexico

Southern Cone

Andeans countriesCentral America

Latin Caribbean

CARICOM

1

2

3

4

5

6

7

182

SOURCE: FAOSTAT.

LAC: GEOGRAPHIC DISTRIBUTION OF POULTRY MEAT PRODUCTION (Billions of dollars)Figure 149Brazil

Mexico

Southern Cone

Andeans countriesCentral America

Latin Caribbean

CARICOM

1980 1990 2003

9

8

7

6

5

4

3

2

1

LAC: GEOGRAPHIC DISTRIBUTION OF POULTRY MEAT PRODUCTION BY COUNTRY(Millions of dollars)

Figure 150

SOURCE: FAOSTAT.

1990 20030 2,000 4,000 6,000 8,000 10,000

Cuba

Uruguay

Paraguay

Nicaragua

El Salvador

Costa Rica

Honduras

Jamaica

Panama

Colombia

Bolivia

Guatemala

Dominican Republic

Ecuador

Chile

Peru

Venezuela

Argentina

Mexico

Brazil

0 10 15 20 25 30

Antigua and Barbuda

Saint Kitts and Nevis

Dominica

Saint Vincent andthe Grenadines

Grenada

Saint Lucia

Haiti

Suriname

Bahamas

Guyana

Barbados

Belize

Trinidad and Tobago

183

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SOURCE: FAOSTAT.

LAC: GEOGRAPHIC DISTRIBUTION OF PIG MEAT PRODUCTION (Billions of dollars)Figure 151

1980 1990 2003

Brazil

Mexico

Southern Cone

Andeans countriesCentral America

Latin Caribbean

CARICOM

0.5

1.0

1.5

2.0

2.5

3.0

3.5

The fastest growth in the production of pig meat over the last decade (1990-2003) occurred in

Brazil. As a result, while output is broadly maintaining its 1990 distribution, concentration in

Brazil is increasing (see figures 151 and 152).

184

LAC: GEOGRAPHIC DISTRIBUTION OF PIG MEAT PRODUCTION BY COUNTRY(Millions of dollars)

Figure 152

1990 2003

SOURCE: FAOSTAT.

0.0 500 1,000 1,500 2,000 2,500 3,000 3,500

Jamaica

Nicaragua

El Salvador

Honduras

Uruguay

Panama

Guatemala

Haiti

Costa Rica

Dominican Republic

Peru

Cuba

Bolivia

Colombia

Venezuela

Ecuador

Paraguay

Argentina

Chile

Mexico

Brazil

0 1 2 3 4

Bahamas

Antigua and Barbuda

Grenada

Saint Kitts and Nevis

Dominica

Guyana

Saint Vincent and

the Grenadines

Saint Lucia

Belize

Suriname

Barbados

Trinidad and Tobago

185

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SOURCE: FAOSTAT.

LAC: GEOGRAPHIC DISTRIBUTION OF EGGS PRODUCTION (Billions of dollars)Figure 153

1980 1990 2003

Brazil

Mexico

Southern Cone

Andean countriesCentral America

Latin Caribbean

CARICOM

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

Mexico recorded the region’s largest increase in egg production between 1990 and 2003

period, while production also expanded strongly in the Andean countries and Brazil (see

figures 153 and 154).

186

LAC: GEOGRAPHIC DISTRIBUTION OF EGGS PRODUCTION BY COUNTRY(Millions of dollars)

Figure 154

1990 2003

SOURCE: FAOSTAT.

Nicaragua

Panama

Bolivia

Uruguay

Honduras

Costa Rica

El Salvador

Paraguay

Ecuador

Cuba

Dominican Republic

Guatemala

Chile

Venezuela

Peru

Colombia

Argentina

Brazil

Mexico

200 400 600 800 1,000 1,200 1,400 1,600 1,800

2 4 6 8

Saint Kitts and Nevis

Dominica

Antigua and Barbuda

Saint Lucia

Saint Vincent and

the Grenadines

Bahamas

Grenada

Belize

Guyana

Barbados

Suriname

Trinidad and Tobago

Haiti

Jamaica

187

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LAC: GEOGRAPHIC DISTRIBUTION OF SHEEP MEAT PRODUCTION BY COUNTRY(Millions of dollars)

Figure 155

1990 2003

SOURCE: FAOSTAT.

Barbados

DominicanRepublic

Guyana

Haiti

Guatemala

Venezuela

Paraguay

Cuba

Colombia

Ecuador

Chile

Bolivia

Mexico

Peru

Uruguay

Argentina

Brazil

50 100 150 200

0.1 0.15 0.2 0.25 0.3

Panama

Jamaica

Costa Rica

Belize

Nicaragua

Dominica

Bahamas

Trinidad and Tobago

Suriname

El Salvador

Antigua and Barbuda

Saint Vincent and the Grenadines

Saint Kitts and Nevis

Grenada

Honduras

Saint Lucia

The Southern Cone is the region with largest production of sheep meat. Nonetheless, during

1990-2003, production in this sub-region contracted sharply, while there were significant

increases in Mexico and in the Andean countries (see figure 155).

188

LAC: GEOGRAPHIC DISTRIBUTION OF GOAT MEAT PRODUCTION BY COUNTRY(Millions of dollars)

Figure 156

1990 2003

SOURCE: FAOSTAT.

Antigua and Barbuda

Honduras

Guyana

Guatemala

Paraguay

Dominican Republic

Ecuador

Jamaica

Cuba

Venezuela

Bolivia

Peru

Colombia

Haiti

Chile

Argentina

Brazil

Mexico

0 10 20 30 40 50 60 70

0 0.05 0.10 0.15

Panama

Uruguay

Belize

Costa Rica

Saint Vincent andthe Grenadines

Grenada

Suriname

Barbados

Nicaragua

Dominica

Trinidad and Tobago

Saint Lucia

Bahamas

Saint Kitts and Nevis

El Salvador

The production of goat meat is highly concentrated in Mexico and Brazil. Despite the slow

growth of this product in the region generally, over the past decade (1990-2003) there were

significant increases in the Southern Cone countries, thereby expanding the geographic

diversification of production. Output also increased in Mexico and Brazil (see figure 156).

189

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VOLUME OF FISHERY PRODUCTIONTable 44

Category 1980 1990 2001 1980-90 1990-01 1980-01

Metric tons Rate of growth %

Pelagic fish 6,967,236 12,507,230 12,845,172 7.3 - 1.0 3.2

Demersal fish 1,200,510 1,526,509 1,624,314 3.0 1.0 2.7

Diadromousa and freshwater fish 322,725 517,617 1,283,077 4.5 8.0 5.4

Crustaceans 281,865 382,296 562,739 3.1 3.0 2.9

Cephalopods 44,848 89,552 437,939 7.5 15.0 14.5

Molluscs 211,582 301,545 368,007 4.9 3.5 2.3

Aquatic animals and mammals 39,034 35,516 54,488 4.3 4.4 3.4

Aquatic plants 124,321 295,386 352,266 4.6 3.8 3.5

Other marine products 485,725 1,000,565 713,890 7.4 -2.0 1.8

SOURCE: FAO/RLC based on FISHSTAT plusa/ Salmons.

The production of animal fibres is highly concentrated in the Southern Cone, as a result of wool

production in Argentina and Uruguay, although there is also significant production in Brazil and

the Andean countries. The dramatic collapse of wool production in Argentina, Uruguay and Brazil

has drastically reduced the importance of this product in the region.

E. FISHERY PRODUCTION

The regional main fishery zone is the eastern Pacific, where fish catches have varied between

9.5 million and 21.5 million tons per year. In the western Atlantic, annual landings have amounted

to between 1 million and 2 million tons, representing about 20% of the world’s total fish catch.

In inland waters, production varies between 0.7 and 1.4 million tons.

Catch volumes fluctuate widely from year to year, mainly depending on weather conditions.

Over 60% of the total catch consists of small pelagic species, which are mostly sent to the

fishmeal industry; while the second largest category consists of demersal fish (hake and similar

species), which produce between 0.8 and 1.6 million tons per year.

In Latin America and the Caribbean, as in the rest of the world generally, fishery activity is

causing an alarming overexploitation of stocks. Unlike crop and livestock production, increases

in fishery output are not always good news. In some cases, lower production levels may improve

long-term sustainability.

In the 1980s, output grew rapidly in all product categories. Although this meant higher incomes

for fishermen and greater availability of food and fishery products, the rate of growth of the fish

catch far outstripped the limits of resource sustainability under current management conditions.

Following the reduction in landings in 1998 imposed by the El Niño weather pattern, the growth

rate of catches has recovered, albeit more moderately (see table 44).

The pelagic species catch grew strongly from 1980 to 1990, when the total volume virtually

doubled reaching levels of 12.5 millions tons ; but production levels since 1990 have remained

virtually unchanged. The bulk of the region’s fish catch consists of pelagic species in 2001 total

landings in this category amounting to nearly 12.5 million tons . Volumes in other categories

are very small by comparison (see figure 157).

190

SOURCE: FISHSTAT plusa/ Salmons.

LAC: VOLUME OF FISHERY PRODUCTION (Thousand of metric tons)Figure 157

Other marine products

Demersal fish

Diadromousa and freshwater fish

Pelagic fish

Aquatic plantsAquatic animals and mammals

Cephalopods

Crustaceans

Mollusc

SOURCE: FISHSTAT plusa/ Salmons.

LAC: VOLUME OF FISHERY PRODUCTION EXCLUDING PELAGIC(Thousand of metric tons)

Figure 158

1980 1990 2001

Other marine products

Demersal fish

Diadromousa and freshwater fish

Aquatic plants

Aquatic animals and mammals

Cephalopods

Crustaceans

Mollusc

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1980 1990 2001

2,000

4,000

6,000

8,000

10,000

12,000

14,000

On a different scale, and excluding pelagic species, the structure of fishery production in LatinAmerica and the Caribbean has changed significantly over the last decade as a result of increasedproduction of diadromous fish, mainly caused by the rapid rise of salmon farming in Chile. Thecephalopod segment (squid and octopus) is actually growing even faster, but from a very incipientbase, which means smaller absolute volumes. There has also been an increase in the productionof crustaceans (shrimp) (see figure 158).

191

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LAC: VOLUME OF AQUACULTURE PRODUCTION (Metric tons)Table 45

Product 1980 1990 2001 1980-90 1990-01 1980-01

(Tons) (Growth rates %)

Pelagic fish 0 1000 532 n.a. -13.4 n.a.

Demersal fish 0 3 2,224 n.a. 62.9 n.a.

Diadromousa and freshwater fish 14,054 80,595 831,499 14.5 20.6 19.8

Crustaceans 10,992 102,628 193,751 21.9 5.0 12.6

Aquatic animals and mammals 0 140 848 n.a. 19.6 n.a.

Aquatic plants 1,455 38,122 65,578 34.3 0.7 19.3

Molluscs (excl. cephalopods) 1,873 7,343 83,316 11.3 23.7 17.5

Others 0 484 25 -5.2 -36.3 -26.2

SOURCE: FAO/RLC based on FISHSTAT plusa/ Salmons.

Aquaculture

Aquaculture accounts for a very small share of total fishery production. Although it has been

growing very rapidly in recent years, the initial base is small, so rapid percentage increases are

often modest in absolute terms. In global terms, where aquaculture is also growing rapidly, the

region’s contribution was just 2.8% in 1984. The rapid growth of aquaculture production in the

region in recent years had raised its share to 6.4% of the world total by 2001 (see table 45).

The main species farmed in Latin America and the Caribbean are salmon and shrimps, which

between them account for 95% of the total value of aquaculture production in the region. In

addition, tilapia, carp and a number of other relatively less important species are also farmed.

During the past decade (1990-2001) shrimp production virtually doubled, while salmon production

multiplied tenfold, thanks essentially to the successful development of the production and

marketing system in Chile.

In Latin America and the Caribbean, production is highly concentrated in a few countries. Until the

late 1980s the leading product was shrimp, which was produced mainly in Ecuador and accounted

for nearly 80% of the total value of the regional aquaculture. Nonetheless, the extraordinary

development of salmon production since 1988—particularly in Chile, and in other countries indicates

that this product now contributes to the most of the value of the region’s aquaculture: 64% compared

to the 31% share of shrimp production (see figures 159 and 160).

192

SOURCE: FISHSTAT plus.

LAC: VALUE OF AQUACULTURE PRODUCTION (Millions of dollars)Figure 159

1984 1990 2001

Colombia

Mexico

Ecuador

Brazil

Chile

Others

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

SOURCE: FISHSTAT plusa/ Salmons.

LAC: VALUE OF AQUACULTURE PRODUCTION OF DIADROMOUSa AND FRESHWATERFISH (Millions of dollars)

Figure 160

1980 1990 2001

1.700

1.500

1.300

1.100

900

700

500

300

100

-100

Brazil

ChileOthers

193

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ULT

UR

AL

SE

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OR

DE

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LOP

ME

NT

SOURCE: FISHSTAT plusa/ Salmons.

LAC: VALUE OF AQUACULTURE PRODUCTION OF DIADROMOUSa AND FRESHWATERFISH (Thousands of tons)

Figure 161

1984 1990 2001

Mexico

Cuba

Colombia

Brazil

Chile

Others

-50

50

150

250

350

450

550

At the same time, aquaculture production of crustaceans has undergone strong regional

diversification. Although Ecuadorian production is still the largest, other countries have rapidly

increased their shares, mainly as a result of sharp increases in production in Mexico in Brazil,

and to a lesser extent in Colombia and Honduras (see figure 161).

194

Figure 162 LAC: VALUE OF AQUACULTURE PRODUCTION (Millions of dollars)

SOURCE: FISHSTAT plus.

1990 2001

Saint Kitts and Nevis

Saint Lucia

Trinidad and Tobago

Dominica

Uruguay

Bahamas

Paraguay

Bolivia

Guyana

El Salvador

Suriname

Argentina

Panama

Jamaica

Guatemala

Nicaragua

Belize

Costa Rica

Peru

Venezuela

Cuba

Honduras

Colombia

Mexico

Ecuador

Brazil

Chile

Republica

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

Despite this relative diversification, the region’s aquaculture remains concentrated in just a

few countries—chiefly Chile, given the huge development of salmon production in that country

(see figures 162, 163 and 164).

195

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Figure 163 LAC: VALUE OF PRODUCTION OF DIADROMOUSa AND FRESHWATER FISH(Millions of dollars)

SOURCE: FISHSTAT plusa/ Salmons.

1990 2001

0 200 400 600 800 1,000 1,200 1,400 1,600

Saint Lucia

Dominica

Trinidad and Tobago

Uruguay

El Salvador

Suriname

Paraguay

Bolivia

Guyana

Honduras

Panama

Dominican Republic

Ecuador

Argentina

Guatemala

Peru

Jamaica

Venezuela

Costa Rica

Mexico

Cuba

Colombia

Brazil

Chile

196

0 50 100 150 200 250 300 350

Saint Kitts and Nevis

Dominica

Jamaica

Bahamas

Argentina

Guyana

El Salvador

Suriname

Peru

Cuba

Dominican Republic

Panama

Guatemala

Costa Rica

Nicaragua

Belize

Venezuela

Honduras

Colombia

Brazil

Mexico

Ecuador

LAC: VALUE OF PRODUCTION OF CRUSTACEANS (Millions of dollars)Figure 164

SOURCE: FISHSTAT plus.

20011990

Trends in fishery production

Between 1990 and 2001, the largest relative increases occurred in the capture of cephalopods

(15% per year); but this was based on very small initial quantities, so the increases in absolute

terms are modest. Diadromous fish production also grew rapidly (8%), while the pelagic fish

capture is holding steady slightly below the level achieved in 1990 (see figure 165).

AG

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197

In Brazil, diadromous and freshwater fish account for the most important fishery product in

volume terms, and were also fastest-growing over the last decade (5.2% per year), followed by

demersal and pelagic species and crustaceans. The pelagic fish capture declined sharply in the

1980s, and only managed a partial recovery in the 1990s. The production of demersal fish and

crustaceans expanded very slowly (see figure 166).

Fishery production in Mexico is widely diversified. The leading category in volume terms consists

of pelagic fish, but there is also significant production of demersal and diadromous species,

crustaceans, cephalopods and other molluscs. During the past decade, the capture of pelagic

fish revived from stagnation in the 1980s to grow by 3.9% per year. Shrimp production also grew

rapidly during the decade (4.5% per year). The fastest growth occurred in cephalopod production

(14.8% per year), but based on a small initial quantity (see figure 167).

In the Southern Cone, fishery production has become more diversified over the last decade.

Pelagic fish account for the largest volumes, but captures in this category declined during

the period, mainly because of smaller captures in Chile. In contrast, the production of

diadromous fish grew at an exceptional rate of 17.4% yearly, thus reflecting the increase in

Chilean production. Based on small volumes, cephalopod and crustaceans both expanded very

vigorously in percentage terms (18.0% and 8.1%, respectively). Seaweed production also

attained significant volumes, growing rapidly during the decade (5.9%). However demersal

fish production stalled, however (see figure 168).

SOURCE: FAO/RLC based on FISHSTAT plusa/ Salmons.

LAC: INDEX OF FISHERY PRODUCTS (1990=100)Figure 165

0

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

100

200

300

400

500

600

700

Aquatic animalsand mammals

Diadromousa andfreshwater fish

Cephalopods

Crustaceans

Molluscs

Aquatic plants

Demersal fish

Pelagic fish

Other products

198

SOURCE: FISHSTAT plusa/ Salmons.

MEXICO: VOLUME OF FISHERY PRODUCTION (Thousands of metric tons)Figure 167

Other marine products

Demersal fish

Diadromousa andfreshwater fish

Pelagic fish

Aquatic plantsAquatic animals and mammals

Cephalopods

Crustaceans

Molluscs

1980 1990 2001

100

200

300

400

500

600

700

800

3

SOURCE: FISHSTAT plusa/ Salmons.

BRAZIL: VOLUME OF FISHERY PRODUCTION (Thousands of metric tons)Figure 166

1980 1990 2001

Other marine products

Demersal fish

Diadromousa andfreshwater fish

Pelagic fish

Aquatic animals and mammals

Cephalopods

Crustaceans

Molluscs

50

100

150

200

250

300

350

400

199

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SOURCE: FISHSTAT plusa/ Salmons.

SOUTHERN CONE: VOLUME OF FISHERY PRODUCTION (Thousands of metric tons)Figure 168

1980 1990 2001

Other marine products

Demersal fish

Diadromousa andfreshwater fish

Pelagic fish

Aquatic plantsAquatic animals and mammals

Cephalopods

Crustaceans

Molluscs

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

In the Andean countries, the structure of fishery production in volume terms is highly

concentrated in pelagic fish destined for the manufacture of fish meal, which absorbs almost

the entire catch (see figure 169).

Apart from pelagic species, the production of demersal and diadromous fish is also important

for the fishery industry in Andean countries, along with crustaceans, cephalopods and other

molluscs. The strongest growth occurred in the production of cephalopods (11.7% per year) and

other molluscs (6.0%) (see figure 170).

In Central American countries, pelagic species generate the largest volume, while crustacean

production is also significant. Both categories grew relatively fast between 1990 and 2001, at

3.3% and 4.4%, respectively (see figure 171).

In the Latin Caribbean, fishery production declined sharply during the decade, as a result

of a drastic slump in fishing activities in Cuba. The only product category of any significance

is diadromous fish, production of which grew by 9.7% per year (see figure 172).

200

SOURCE: FISHSTAT plusa/ Salmons.

ANDEAN COUNTRIES: VOLUME OF FISHERY PRODUCTION (Thousands of metric tons)Figure 169

1980 1990 2001

Diadromousa andfreshwater fish

Other marine products

Demersal fish

Pelagic fish

Aquatic plantsAquatic animals and mammals

Cephalopods

Crustaceans

Molluscs

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

SOURCE: FISHSTAT plusa/ Salmons.

ANDEAN COUNTRIES: VOLUME OF FISHERY PRODUCTION EXCLUDING PELAGIC(Thousands of metric tons)

Figure 170

1980 1990 2001

Other marine products

Demersal fish

Diadromousa andfreshwater fish

Aquatic plants

Aquatic animals and mammals

Cephalopods

Crustaceans

Molluscs

100

150

200

250

300

50

201

AG

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ULT

UR

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SE

CT

OR

DE

VE

LOP

ME

NT

SOURCE: FISHSTAT plusa/ Salmons.

CENTRAL AMERICA: VOLUME OF FISHERY PRODUCTION (Thousands of metric tons)Figure 171

1980 1990 2001

Other marine products

Diadromousa andfreshwater fish

Pelagic fish

Aquatic animals and mammals

Crustaceans

Molluscs

50

100

150

200

250

SOURCE: FISHSTAT plusa/ Salmons.

LATIN CARIBBEAN: VOLUME OF FISHERY PRODUCTION (Thousands of metric tons)Figure 172

1980 1990 2001

Other marine products

Demersal fish

Diadromousa andfreshwater fish

Pelagic fishAquatic animals and mammals

Cephalopods

Crustaceans

20

40

60

80

100

120

202

SOURCE: FISHSTAT plusa/ Salmons.

CARICOM: VOLUME OF FISHERY PRODUCTION (Thousands of metric tons)Figure 173

1980 1990 2001

Other marine products

Demersal fish

Diadromousa andfreshwater fish

Pelagic fishAquatic animals and mammals

Crustaceans

Molluscs

10

20

30

40

50

60

70

Fishery activity in the CARICOM countries expanded rapidly during the last decade, but based

on very small volumes. The two categories contributing the largest volumes are pelagic fish

and crustaceans; both categories grew at very high annual rates during the decade (20.5% and

11.8%, respectively) (see figure 173).

Geographic distribution of fishery production

The pelagic species capture in 1990 almost doubled the 1980 figure, mainly due to increases

in Peru, and to a lesser extent in Chile. These two countries account for most production in this

fish. The catch declined substantially in the wake of the “El Niño” event, but has since stabilized

relatively. Levels in 2001 were similar to those in 1990; only Peru saw new increases in the size

of the catch, and these were partially offset by a reduction in landings in Chile. Production in

the other sub-regions is much smaller, and has remained virtually flat during the last two

decades. The trend described above has resulted in heavy concentration of pelagic fish capture

in Peru (see figures 174 and 175).

203

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SOURCE: FISHSTAT plus.

LAC: VOLUME OF PELAGIC FISH PRODUCTION (Thousands of metric tons)Figure 174

1980 1990 2001

LAC: VOLUME OF PELAGIC FISH PRODUCTION (Thousands of metric tons)Figure 175

SOURCE: FISHSTAT plus.

20011990

1 2 3 4 5 6 7

Bahamas

Dominica

Honduras

Bolivia

Saint Lucia

Grenada

Dominican Republic

Uruguay

Barbados

Trinidad and Tabago

Cuba

Argentina

Costa Rica

Saint Vincent and the Grenadines

Colombia

Brazil

Panama

Venezuela

Ecuador

Mexico

Chile

Peru

-1,500

3,500

8,500

Brazil

Mexico

Southern Cone

Andean countriesCentral America

Latin Caribbean

CARICOM

204

SOURCE: FISHSTAT plus.

LAC: VOLUME OF DEMERSAL FISH PRODUCTION (Thousands of metric tons)Figure 176

1980 1990 2001

Brazil

Mexico

Southern Cone

Andean countries

Latin Caribbean

CARICOM

100

200

300

400

500

600

700

800

900

1,000

The demersal fish catch is highly concentrated in the southern cone countries; Moreover,

concentration accentuated still further since this was the only subregion in which landings

grew significantly over the last decade (see figures 176 and 177).

205

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LAC: VOLUME OF DEMERSAL FISH PRODUCTION (Thousands of metric tons)Figure 177

SOURCE: FISHSTAT plus.

20011990

100 200 300 400 500 600

Dominican Republic

Barbados

Guatemala

Grenada

Honduras

Saint Vincent and the Grenadines

Bahamas

C o l o m b i a

Trinidad and Tobago

Ecuador

Cuba

Costa Rica

Panama

Venezuela

Uruguay

Mexico

Peru

Brazil

Chile

Argentina

Since the late 1980s , production of diadromous fish has grown tremendously in Chile,

with the result that regional production is now heavily concentrated in this country.

Until the 1990s, Brazil was the main producer, and output there continued to grow

rapidly, although not as fast as in Chile; these two countries thus account for the vast

majority of regional output (see figures 178 and 179).

206

SOURCE: FISHSTAT plus.a/ Salmons.

LAC: VOLUME OF PRODUCTION OF DIADROMOUSa AND FRESHWATER FISH(Thousands of metric tons)

Figure 178

1980 1990 2001

Brazil

Mexico

Southern Cone

Andeans countriesCentral America

Latin Caribbean

CARICOM

200

400

600

LAC: VOLUME OF PRODUCTION OF DIADROMOUSa AND FRESHWATER FISH (Metric tons)Figure 179

SOURCE: FISHSTAT plus.a/ Salmons.

20011990100,000 200,000 300,000 400,000 500,000

Saint Lucia

Dominica

Trinidad and Tobago

Suriname

Uruguay

Haiti

Nicaragua

Honduras

Panama

Guyana

El Salvador

Dominican Republic

Jamaica

Bolivia

Ecuador

Costa Rica

Guatemala

Argentina

Paraguay

Venezuela

Peru

Cuba

Colombia

Mexico

Brazil

Chile

207

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SOURCE: FISHSTAT plus.

LAC: VOLUME OF CRUSTACEAN PRODUCTION (Thousands of metric tons)Figure 180

1980 1990 2001

Brazil

Mexico

Southern Cone

Andean countriesCentral America

Latin Caribbean

CARICOM

-10

10

30

50

70

90

110

130

The geographic distribution of crustacean production has changed greatly over the last two

decades. In the early 1980s, the largest production volumes were achieved by Mexico and Brazil,

but rapid growth in Ecuador during the 1980s then made this country the leading producer. In

2000, a steep fall in production in Ecuador (and also in Peru, albeit based on a smaller volume),

caused by the serious incidence of diseases that have impaired shrimp production, alongside

an increase in production in Mexico, and the exceptional increase in Argentina, Guyana,

Suriname and other CARICOM countries, have once again altered the distribution of production

in this category (see figures 180 and 181).

208

LAC: VOLUME OF CRUSTACEAN PRODUCTION (Thousands of metric tons)

20,000 40,000 60,000 80,000 100,000 120,000 140,000

Grenada

Saint Lucia

Saint Kitts and Nevis

Antigua and Barbuda

Haiti

Jamaica

Trinidad and Tobago

Dominican Republic

Uruguay

El Salvador

Guatemala

Costa Rica

Belize

Peru

Bahamas

Suriname

Panama

Honduras

Nicaragua

Cuba

Colombia

Chile

Venezuela

Guyana

Ecuador

Argentina

Brazil

Mexico

Figure 181

SOURCE: FISHSTAT plus.

20011990

The production of cephalopods grew rapidly in Argentina, especially before until or, 1997, making

this country the region’s leading producer. Otherwise, output only grew significantly in the two

other countries that were already major producers in 1990, namely Mexico and Peru. Production

is thus heavily concentrated in the three countries mentioned (see figures 182 and 183).

209

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LAC: VOLUME OF CEPHALOPOD PRODUCTION (Thousands of metric tons)Figure 182

SOURCE: FISHSTAT plus.

1980 1990 2001

Latin Caribbean

Andean countries Southern Cone

Mexico

Brazil250

200

150

100

50

The production of molluscs grew rapidly in Southern Cone countries during the last decade,

particularly in Argentina and Chile, while decreasing in Mexico and, to a lesser extent, in Peru.

The geographic distribution of mollusc production is consequently heavily concentrated in the

Southern Cone (see figures 184 and 185).

LAC: VOLUME OF CEPHALOPOD PRODUCTION (Thousands of metric tons)Figure 183

SOURCE: FISHSTAT plus.

20011990

50 100 150 200

El Salvador

Costa Rica

Colombia

Ecuador

Dominican Republic

Guatemala

Saint Vincent and the Grenadines

Brazil

Venezuela

Chile

Uruguay

Peru

Mexico

Argentina

210

LAC: VOLUME OF MOLLUSC PRODUCTION (Thousands of metric tons)Figure 184

SOURCE: FISHSTAT PLUS.

1980 1990 2001

170

150

130

110

90

70

50

30

10

-10

Brazil

MexicoCARICOM

Latin Caribbean

Central America Andean countries

Southern Cone

LAC: VOLUME OF MOLLUSC PRODUCTION (Thousands of metric tons)Figure 185

20 40 60 80 100 120 140

SOURCE: FISHSTAT plus.

20011990

Jamaica

Ecuador

Saint Lucia

Haiti

El Salvador

Panama

Uruguay

Brazil

Argentina

Mexico

Chile

Venezuela

Peru

Cuba

Belize

DominicanRepublic

Bahamas

Colombia

Antigua andBarbuda

Grenada

211

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Fisheries are a major productive sector in Latin America and the Caribbean, creating income

and employment, and making a significant contribution to food security and the generation of

foreign exchange. Nonetheless, production needs to take place in a framework of sustainable

resource management; and recent efforts to achieve effective management of fishing and

aquaculture activity need to be continued. Modernization of the legal and institutional framework,

and an efficient system of monitoring, control and surveillance of fishery activities are crucial.

In particular, it is essential to create a framework that stimulates the conservation of fishery

resources and related ecosystems, ensure diversified use of resources, generate greater value

added, and develop coastal fisheries and aquaculture.

Over 95% of the output of the region’s marine fisheries is obtained in coastal habitats. One of

the features of fishery communities in such zones tends to be strong competition for scarce

resources, often in the absence of regulatory mechanisms. In some countries, conflicts are

starting to arise with small-scale fishing activities and indigenous community groups, whose

opportunities to fish in areas that in practice were once their exclusive preserve are now being

restricted.

Some of the region’s leading fishing countries have tried to introduce the individual-transferable-

quota system within a fishery resource management regime that grants “property rights”, allowing

purchase, sale or rental of the right to participate in a regulated fishery area. This system assumes

that those who hold the right to use a fishery should also be concerned to ensure that it is correctly

managed, since the economic value of their right depends directly on the performance of the

fisheries. Nonetheless, efforts to introduce this quota system have been opposed by small-scale

fishermen, labour organizations, boat owners and fish processors. Efforts to reach consensus

need to be continued, however, based on detailed multidisciplinary technical knowledge covering

the various environmental, social and economic aspects of the activity.

Integrated management measures for coastal zones are being adopted in the region; and in several

countries fishery resource allocation systems are being implemented by defining exclusive zones

for small-scale fishing activity, concessions granting exclusive use of fishery resources by certain

groups of fishermen, and establishment of fishery management areas guaranteeing exclusive

rights for small-scale operators. This management process requires a number of new mutual

concessions between different alternative and exclusive uses, together with a transparent

consultation process in which users and potentially affected groups participate. Supervision of

the subsequent effects on development is also essential.

The problem of low-volume fish capture, which means that small-scale fishermen currently

participate under unfair commercial conditions, could be partially overcome if existing organizations

were to expand their functions in terms of product marketing and financing. Various association

modalities could be developed that would allow for economies of scale and at the same time

encourage the establishment of social protection networks.

Alongside efforts to modernize the institutional framework of fishing activity, there is also

a need to modernize fishing fleets, improve on-board preservation systems and hygiene,

guarantee the quality of products in processing plants, and develop more efficient distribution

channels. Policies to promote diversified use of fishery products also include actions to

increase exploitation for direct human consumption of the large quantities of raw materials

that are used in fish meal and fish oil production, and to increase exploitation of the attendant

212

fauna, which is thrown put back into the sea after being caught in shrimp fisheries and other

trawl-based fishing activities.

In some countries of the region, serious problems are developing as a result of pollution of coastal

marine environments, including industrial effluents and agro-chemicals caused by human activity.

This requires urgent action to address the underlying causes.

The use of bottom trawling techniques and explosives, and lack of care when anchoring vessels

are examples of fishing practices which have a negative impact in aquatic habitats. Sometimes

these cause harm to the fauna of seabed, as well as to underwater meadows and coral reefs. A

number of aquaculture practices have also caused the destruction of mangroves, excessive

accumulation of organic material and nutrients in the water and on the seabed, the introduction

of harmful exotic species, and the escape of genetically modified cultivated species into the

wild. Ecological groups also claim that the expansion of salmon farming is harming the marine-

coastal environment.

In recent years, shrimp and salmon production has been hit by a series of diseases that have

caused major damage. Special care needs to be taken to prevent these from spreading.

F. FORESTRY PRODUCTION

Forestry area

Latin America and the Caribbean contain 956 million hectares of forests, i.e. roughly one quarter

of the world’s total, and the largest proportion among developing regions. In contrast, there are

only 11.7 million hectares of forest plantations in the region, representing just 6% of the world’s

total (see table 46).

This difference between the relative abundance of natural resources and scarce investment in

forest plantations is a first sign that in this subsector, possibly more than in crop and livestock

production, productive development problems include a major supply-side component, where

investment, competitive technology, vertical integration, and the legal and administrative

framework all have key roles to play.

Forests are widely distributed throughout the region. The Amazon basin contains over 750

million hectares of tropical forest, three quarters of which are located in Brazil. Central America

and Mexico account for just over 67 million hectares, 80% of which are in Mexico. In the

Southern Cone, there are 71 million hectares of cold and subtropical forests, half of them in

Argentina. Lastly, the Caribbean countries contain over 36 million hectares, half of which are

located in Guyana (see figure 186).

In the case of planted forests, while Brazil again has the largest share (43%), Chile also accounts

for a significant fraction (18%). Argentina, Venezuela, Uruguay, Peru and Cuba also have sizeable

areas of forest plantations (see figure 187).

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FORESTRY AREATable 46

Total Forest Forest plantations

Country/Area forests plantations as a percentage of

(Thousand Ha.) (Thousand Ha.) total forest area

Latin America and the Caribbean 956,040 11,742 1.2

Brazil 543,905 4,982 0.9

Mexico 55,205 267 0.5

Southern Cone 74,848 3,592 4.8

Argentina 34,648 926 2.7

Chile 15,536 2,017 13.0

Paraguay 23,372 27 0.1

Uruguay 1,292 622 48.1

Andean countries 227,947 1,857 0.8

Bolivia 53,068 46 0.1

Colombia 49,601 141 0.3

Ecuador 10,557 167 1.6

Peru 65,215 640 1.0

Venezuela 49,506 863 1.7

Central America 16,476 459 2.8

Costa Rica 1,968 178 9.0

El Salvador 121 14 11.6

Guatemala 2,850 133 4.7

Honduras 5,383 48 0.9

Nicaragua 3,278 46 1.4

Panama 2,876 40 1.4

Latin Caribbean 3,812 532 14.0

Cuba 2,348 482 20.5

Haiti 88 20 22.7

Dominican Republic 1,376 30 2.2

CARICOM 33,847 53 0.2

Antigua and Barbuda 9 0 0.0

Bahamas 842 n.a. n.a.

Barbados 2 0 0.0

Belize 1348 3 0.2

Dominica 46 n.s. n.s.

Grenada 5 n.s. n.s.

Guyana 16,879 12 0.1

Jamaica 325 9 2.7

Saint Kitts and Nevis 4 0 0.0

Saint Lucia 9 1 11.1

Saint Vincent and the Grenadines 6 0 0.0

Suriname 14,113 13 0.1

Trinidad and Tobago 259 15 5.8

SOURCE: "State of the World's Forests, 2003" (SOFO). FAO 2003.n.s.: Not significantn.a.: Not available

214

SOURCE: "State of the World Forest 2003” (SOFO), FAO 2003.

LAC: FOREST AREA 2000 (Percentage)Figure 186

CARICOM 4%

Brazil56%

Latin Caribbean 0.4%

Central America 2%

Andeanscountries

24%

Southern Cone 8%

Mexico 6%

SOURCE: “State of the World´s Forest 2003” (SOFO). FAO 2003.Out of a total area of 11,742 thousands hectares.

LAC: AREA OF FOREST PLANTATIONS 2000 (Percentage)Figure 187

Otros 3%

Brazil43%

Chile18%

Cuba 4%

Guatemala 1%

Costa Rica 2%

Venezuela 7%

Peru 5%

Ecuador 1%Colombia 1%

Uruguay 5%

Argentina 8%

Mexico 2%

Forestry production

The structure of forestry production in Latin America and the Caribbean reflects the regional

low development level. Fuel wood is by far the leading product in terms of volume , with

roundwood next in terms of importance. Even taking account of the logical differences in

volumes, since these are distinct economic goods, output of sawn wood and panels, along with

processed products (pulps and fibres, and paper and paperboard), is still very small as a regional

average. The situation has been improving slowly in recent years, however (see table 47).

Both forestry production and its rate of growth have been increasing over the last few decades;

rates of expansion are positive and rising in all the main products. Nonetheless, there are major

differences in the evolution of the different product categories

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During the 1980s, only processed forest products recorded robust growth. Over the past decade,

however, positive rates have been maintained, with paper and paperboard growing at 3.5% per

year, and pulps and fibres at 4.8%; but several categories of primary forest products are also

now growing more vigorously, mainly panels (5.9% per year) and, to a lesser extent, sawn wood

(2.4%) and roundwood (2.6%). Panel production has grown exceptionally fast in percentage

terms since 1998, reflecting an increase in Brazil in particular.

The more widespread growth of forestry production in the region is stimulating the sector as a

whole. Production levels for the different product categories in 2002 show a significant advance

on their 1990 figures. Panel production has more than doubled (211%); pulp and fibres are up by

79%, and increases among the other product categories range from 34% to 48% (see figure 188).

SOURCE: FAO/RLC based on FAOSTAT 2004.

LAC: INDEX OF FORESTRY PRODUCTION (1990=100)Figure 188

50

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

70

90

110

130

150

170

190

210

230

Pulp and fibres

Wood Base Panels

Fuel wood

Sawn wood

Paper and

Industrial round

paperboard

wood

LAC: VOLUME OF FORESTRY PRODUCTIONTable 47

Product 1980 1990 1998 2002 1980-90 1990-02

(Production in millions) (Growth %)

Primary products:

Sawn wood (m3) 25.84 28.86 34.99 38.66 1.6 2.4

Wood-based panels (m3) 4.33 4.93 6.82 10.39 1.5 5.9

Industrial roundwood (m3) 96.41 121.04 141.69 166.43 2.8 2.6

Fuel wood (m3) 206.62 235.21 257.37 272.57 1.3 1.2

Processed products:

Pulp and fibres(ton) 4.77 6.52 10.51 11.65 3.8 4.8

Paper and paperboard (ton) 7.73 10.77 13.67 15.97 4.6 3.5

SOURCE: FAOSTAT 2004.

216  

Changes in processes and productive outcomes have been associated with major technical

transformations supported by conceptual and institutional development. Some countries have

progressed toward a model involving using plantations to supply productive forestry processes,

such as sawmills, and board and cellulose plants. Southern Cone countries (Chile, Argentina,

Uruguay) in particular have moved in this direction, along with a number of countries from the

Amazon basin, such as Venezuela and Peru, and several in Central America, such as Costa Rica.

This process has been substantially boosted by legislation to explicitly promote forest plantations,

which over half of the region’s countries now have in place. Other countries, such as Brazil,

which have no forestry development legislation, provide incentives linked to the financial sector

to improve their forestry base.

The sustainable forestry management paradigm has been consolidating in the region. The

system has developed from a process of forest exploitation with little or no care for its

conservation, to one of harvesting different ecosystems, such as tropical forests. An example

of this is the massive concessions programme implemented by a number of Amazon countries,

including Bolivia, Peru, Ecuador and Brazil, and by subtropical countries such as Paraguay.

Linked to the concept of sustainable forestry management, a strict certification process has

begun implementation in the harvesting of tropical forests in Bolivia, Brazil, Colombia, Peru

and elsewhere; and has also been extended to the forest plantations of Chile, Argentina, Uruguay,

Brazil and Venezuela.

Most of the countries of the region have decided to locate their forestry services and administrations

within environmental departments or ministries. This shift of strategic focus from the agricultural

sector towards the environmental authority reflects the fact that forestry services in the different

countries are increasingly concerned with environmental issues, and in many cases form part of

a complex environmental management system.

From the institutional and political standpoint, the United Nations Forest Forum (UNFF) was

recently created as an outcome of international dialogue on forests conducted under United

Nations auspices, and it will make use of national forestry programmes as a reference framework

for sustainable forestry development in the various countries.

Composition of forestry production

Despite these important relative changes, the structure of forestry production remains highly

concentrated in fuel wood and logs, the production of which displays the largest absolute

increases in volume, although not in percentage terms. Positive growth rates help to alter the

structure of production, but this is a slow process given the average levels currently prevailing.

The example provided by certain countries of the region shows that there are possibilities for

more rapid transformation of forestry production, to take better advantage of productive potential

(see table 48 and figure 189).

217

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LAC: GROSS PRODUCTION VOLUME FORESTRYTable 48

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 4,329,500 4,934,600 10,390,100 1.5 5.8

Pulp and fibres 4,772,100 6,519,400 11,649,000 3.8 4.8

Paper and paperboard 7,730,100 10,773,200 15,969,400 4.6 3.5

Sawn wood 25,840,400 28,856,600 38,655,700 1.6 2.4

Fuel wood 206,620,704 235,211,681 272,572,034 1.3 1.2

Industrial roundwood 96,410,999 121,037,123 166,433,800 2.8 2.6

SOURCE: FAO/RLC based on FAOSTAT.

LAC: VOLUME OF FORESTRY PRODUCTION (Millions de m3)Figure 189

SOURCE: FAOSTAT 2004.

1980 1990 2002

Pulp and fibresIndustrial round wood

Wood base panels

Paper and paperboardFuel wood

Sawn wood

300

250

200

150

100

50

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

218

Despite a number of positive steps, the structure of forestry production in Latin America and

the Caribbean compares very unfavourably to the pattern prevailing in developed countries.

Figures 190 and 191 show the structure of forestry production in the United States and Canada,

and in Norway and Sweden (see figure 190 and 191).

DEVELOPED COUNTRIES: VOLUME OF THE PRODUCTION 2002 (Millions)Figure 191

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

Norway Sweden

Industrial round wood

Wood based panels

Paper and paperboardFuel wood

Sawn Wood

65

55

45

35

25

15

5

-5

Pulp and fibres

DEVELOPED COUNTRIES: VOLUME OF THE PRODUCTION 2002 (Millions)Figure 190

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

Canada United States

Industrial round wood

Wood based panels

Paper and paperboardFuel wood

Sawn wood

410360310

2602101601106010

-40

Pulp and fibres

219

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BRAZIL: VOLUME OF FORESTRY PRODUCTION (Millions of m3)Figure 192

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

1980 1990 2002

Pulp and fibresIndustrial round wood

Wood based panels

Paper and paperboardFuel wood

Sawn wood

140

120

100

80

60

40

20

BRAZIL: GROSS PRODUCTION VOLUME FORESTRYTable 49

SOURCE: FAO/RLC based on FAOSTAT.

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 2,482,000 2,892,000 6,283,000 1.8 6.9

Pulp and fibres 3,089,000 4,307,000 7,436,000 3.7 4.4

Paper and paperboard 3,361,000 4,844,000 7,354,000 4.9 3.6

Sawn wood 14,881,000 17,179,000 21,200,000 1.5 1.4

Fuel wood 105,716,475 120,300,536 134,473,063 1.2 0.9

Industrial roundwood 61,722,000 74,277,024 102,994,000 2.4 2.8

In Brazil, while the productive structure is still similar to the average of the region (partly

reflecting its own weight in the regional total), the production polygon is starting to open up,

particularly in the sawn wood category. In addition, the production of panels and processed

products (pulps and fibres, and paper and paperboard) are attaining significant levels in both

volume and growth rate terms (see table 49 and figure 192).

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

220

MEXICO: GROSS PRODUCTION VOLUME FORESTRYTable 50

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 604,000 553,000 518,000 - 0.4 - 2.8

Pulp and fibres 447,000 523,000 334,000 2.5 1.0

Paper and paperboard 1,979,000 2,873,000 4,056,000 5.8 4.0

Sawn wood 1,991,000 2,366,000 3,387,000 3.4 2.8

Fuel wood 29,524,675 34,371,305 37,912,958 1.6 0.9

Industrial roundwood 6,345,200 7,580,000 7,420,000 2.3 1.2

SOURCE: FAO/RLC based on FAOSTAT.

Forestry production trends in Mexico over the last 12 years have been hampered by major

problems. In all categories except panels, production growth rates are below those of the 1980s—

and even then they were already relatively modest, except in the paper and paperboard category.

The growth slowdown of the last decade has produced very little change in the structure of

production, apart from a relative expansion achieved in the paper and paperboard segment (see

table 50 and figure 193).

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

MEXICO: VOLUME OF FORESTRY PRODUCTION (Millions of m3)Figure 193

1980 1990 2002

40

35

30

25

20

15

10

5

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

Industrial round wood

Wood based panels

Wood pulp

Paper and paperboardFuel wood

Sawn wood

221

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SOUTHERN CONE: GROSS PRODUCTION VOLUME FORESTRYTable 51

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 652,700 744,300 2,401,500 2.0 9.6

Pulp and fibres 1,095,300 1,435,000 3,400,000 4.0 6.3

Paper and paperboard 1,134,400 1,426,000 2,617,000 3.4 4.7

Sawn wood 3,897,000 4,734,000 9,343,000 3.6 5.9

Fuel wood 15,689,296 18,611,946 26,117,160 1.8 2.5

Industrial rounwood 14,925,000 25,552,000 36,702,000 5.8 2.3

SOUTHERN CONE: VOLUME OF FORESTRY PRODUCTION (Millions of m3)Figure 194

1980 1990 2002

40

35

30

25

20

15

10

5

Pulp and fibresIndustrial round wood

Wood based panels

Paper and paperboardFuel wood

Sawn wood

The expansion of forestry production in Southern Cone countries has accelerated sharply over

the last decade, with faster growth than in the 1980s in all categories, apart from roundwood.

Processed forestry products, panels and sawn wood all display high production figures between

1990 and 2002. The structure of production is much more diversified than the regional average.

The main product, and the fastest growing one in volume terms, consists of roundwood, but

higher percentage changes among other products are leading to increasing intensification and

diversification of forestry production (see table 51 and figure 194).

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.SOURCE: FAO/RLC based on FAOSTAT.

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

222

ANDEAN COUNTRIES: GROSS PRODUCTION VOLUME FORESTRYTable 52

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 442,300 500,000 850,000 1.1 0.9

Pulp and fibres 136,300 250,000 469,200 8.4 7.0

Paper and paperboard 1,084,300 1,415,500 1,553,400 3.0 0.2

Sawn wood 3,046,400 3,255,600 2,543,000 1.3 0.0

Fuel wood 19,427,538 21,308,319 28,087,706 1.3 2.7

Industrial roundwood 8,140,400 9,596,700 13,289,500 2.9 1.4

SOURCE: FAO/RLC based on FAOSTAT.

ANDEAN COUNTRIES: VOLUME OF FORESTRY PRODUCTION (Millions of m3)Figure 195

1980 1990 2002

30

25

20

15

10

5

Pulp and fibresIndustrial round wood

Wood based panels

Paper and paperboardFuel wood

Sawn wood

Forestry production in the Andean countries has stalled badly over the last decade. During the 1980s

relatively rapid growth occurred only among processed products, pulps and fibres, and paper and

paperboard. Between 1990 and 2002, however, only pulp and fibre production posted high growth

rates, based on small initial volumes (see table 52 and figure 195).

The past decade has seen very fast relative growth in the production of processed forestry

products in Central America. Nonetheless, the incipient volume means that high percentage

changes do not yet signify much in absolute terms, nor therefore in the structure of production

(see table 53 and figure 196).

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

223

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CENTRAL AMERICA: VOLUME OF FORESTRY PRODUCTION (Millions of m3)Figure 196

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

1980 1990 2002

40

35

30

25

20

15

10

5

Pulp and fibresIndustrial round wood

Wood based panels

Paper and paperboardFuel wood

Sawn wood

Between 1990 and 2002, paper and paperboard was the only forestry category to post a high rate

of production growth in Latin Caribbean countries. This situation has actually persisted since the

1980s, when rapid growth of panels was based on production that was just starting up, so the high

percentage increases again did not mean large volumes (see table 54 and figure 197).

CENTRAL AMERICA: GROSS PRODUCTION VOLUME FORESTRYTable 53

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 116,500 89,800 135,500 - 3.3 2.1

Pulp and fibres 4,500 4,400 9,800 5.6 12.3

Paper and paperboard 79,700 78,400 202,000 - 2.9 10.3

Sawn wood 1,669,500 975,400 1,751,000 - 4.5 4.2

Fuel wood 30,274,793 33,875,101 38,974,733 1.1 1.1

Industrial roundwood 3,729,099 2,490,299 4,135,000 - 3.3 4.7

LATIN CARIBBEAN: GROSS PRODUCTION VOLUME FORESTRYTable 54

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 5,700 149,000 149,000 28.2 0.0

Pulp and fibres - - - - -

Paper and paperboard 81,700 132,600 187,000 6.3 7.4

Sawn wood 126,100 143,900 203,800 1.6 2.9

Fuel wood 4,318,738 4,771,399 5,343,969 0.4 - 2.0

Industrial roundwood 756,300 856,300 1,053,300 1.5 1.4

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.SOURCE: FAO/RLC based on FAOSTAT.

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.SOURCE: FAO/RLC based on FAOSTAT.

224

LATIN CARIBBEAN: VOLUME OF FORESTRY PRODUCTION (Millions of m3)Figure 197

SOURCE: FAOSTAT 2004."Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.

1980 1990 2002

6

5

4

3

2

1

Pulp and fibresIndustrial round wood

Wood based panels

Paper and paperboardFuel wood

Sawn wood

In the CARICOM countries, forestry production is almost exclusively concentrated in roundwood

and sawn wood. In both cases, production is growing very slowly (see table 55 and figure 198).

CARICOM: GROSS PRODUCTION VOLUME FORESTRYTable 55

Category 1980 1990 2002 1980-90 1990-02

m3 Growth (%)

Panels 26,300 6,500 53,100 - 15.3 21.2

Pulp and fibres - - - - -

Paper and paperboard 10,000 3,700 - - 17.4 -

Sawn wood 229,400 202,700 227,900 - 0.4 1.5

Fuel wood 2,164,189 2,529,075 2,218,445 1.8 - 0.4

Industrial roundwood 793,000 684,800 840,000 0.5 2.4

"Pulp and fibres" and "Paper and paper board" measured in metric tons, otherwise m3.SOURCE: FAO/RLC based on FAOSTAT.

225

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CARICOM: VOLUME OF FORESTRY PRODUCTION (Millions of m3)Figure 198

SOURCE: FAOSTAT 2004.

1980 1990 2002

Sawn woodIndustrial round wood

Fuel wood

Wood based panels

3.0

2.5

2.0

1.5

1.0

0.5

LAC: VOLUME OF PRODUCTION OF PAPER AND PAPERBOARD (Millions of tons)Figure 199

SOURCE: FAOSTAT 2004.

1980

Brazil

Mexico

CARICOM

Latin Caribbean

Southern Cone

Andean countries

Central America

1990 2002

8

7

6

5

4

3

2

1

Regional distribution of forestry production

Paper and paperboard are made essentially from fibres of trees obtained from planted or natural

forests, including tropical ones. Production is increasingly concentrated in Brazil, which now

generates nearly half of the regional total (48%); Mexico produces about one quarter (27%) and

the rest is shared out in similar amounts between Andean and Southern Cone countries (see

figures 199 and 200).

226

LAC: VOLUME OF PRODUCTION OF PAPER AND PAPERBOARD (Millions of tons)Figure 200

1 2 3 4 5 6 7 8

SOURCE: FAOSTAT 2004.

20021998

Paraguay

Costa Rica

Guatemala

El Salvador

Cuba

Peru

Uruguay

Ecuador

Honduras

Dominican Republic

Venezuela

Colombia

Chile

Argentina

Mexico

Brazil

0,05 0,10 0,15

Costa Rica

Guatemala

El Salvador

Peru

Uruguay

Ecuador

Honduras

DominicanRepublic

Cuba

Paraguay

The location of pulp production is quite well defined in Latin America and the Caribbean, with

Brazil producing two thirds of the regional total, based essentially on eucalyptus. This is a short

fibre that is used in high-whiteness and quality papers. In second place, with rapidly growing

production, is Chile, which produces long-fibre pulp from pine, mainly for use in lower-quality

paper and paperboard, including newsprint. Eucalyptus production is located mainly in southern

Brazil and Uruguay, but has potential for expansion into areas of the Brazilian northeast. The

production of pine cellulose is located in the Southern Cone, especially in the south of Chile

and in the Argentine “Mesopotamia” (see figures 201 and 202).

227

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LAC: VOLUME OF PRODUCTION OF WOOD PULP AND FIBRES (Millions of tons)Figure 202

SOURCE: FAOSTAT 2004.

20021990

2 4 6 8

Costa Rica

Uruguay

Co lombia

Venezuela

Mexico

Argentina

Chile

Brazil

LAC: VOLUME OF PRODUCTION OF WOOD PULP AND FIBRES (Millions of tons)Figure 201

1980

8

7

6

5

4

3

2

1

1990 2002

SOURCE: FAOSTAT 2004.

Southern cone

Andean countries Central America

Mexico

Brazil

Panel production in Brazil and Chile is growing rapidly; Brazil currently produces 60% of the

regional total, and Chile 15%. This same regional concentration is repeated in the sawn wood

and log categories. Brazil and Mexico are the largest consumers of fuel wood (see figures 203,

204, 205, 206 and 207).

2SOURCE: FAOSTAT 2004.

200219901 2 3 4 5 6 7

LAC: VOLUME OF PRODUCTION OF WOOD BASED PANELS (Millions of m3)Figure 204

Suriname

Uruguay

Panama

Nicaragua

Honduras

Bolivia

Guatemala

Costa Rica

Peru

Cuba

Paraguay

Colombia

Ecuador

Venezuela

Mexico

Argentina

Chile

Brazil

0,02

Suriname

Uruguay

Panama

Nicaragua

Honduras

Bolivia

Guatemala

Costa Rica

0,04 0,06 0,08

228

LAC: VOLUME OF PRODUCTION OF WOOD BASED PANELS (Millions of m3)Figure 203

SOURCE: FAOSTAT 2004.

1980

Brazil

MexicoSouthern Cone

CARICOM Central America

Andean countriesLatin Caribbean

1990 2002

7

6

5

4

3

2

1

AG

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229

LAC: VOLUME OF PRODUCTION OF SAWN WOOD (Millions of m3)Figure 205

SOURCE: FAOSTAT 2004.

1980

Brazil

Mexico

Andean countries

1990 2002

25

20

15

10

5

0

Southern Cone

CARICOM Central America

Latin Caribbean

LAC: VOLUME OF PRODUCTION OF INDUSTRIAL ROUND WOOD (Millions of m3)Figure 206

SOURCE: FAOSTAT 2004.

1980

Brazil

Mexico

Andean countries

1990 2002

120

100

80

60

40

20

Southern Cone

CARICOM Central America

Latin Caribbean

2230

SOURCE: FAOSTAT 2004.

20021990

LAC: VOLUME OF PRODUCTION OF INDUSTRIAL ROUND WOOD (Millions of m3)Figure 207

Dominican Republic

Bahamas

Trinidad and Tobago

Belize

Nicaragua

Panama

Suriname

Haiti

Guyana

Jamaica

Guatemala

El Salvador

Cuba

Ecuador

Honduras

Peru

Venezuela

Costa Rica

Uruguay

Colombia

Paraguay

Argentina

Mexico

Bolivia

Chile

Brazil

20 40 60 80 100

2 4 6

Dominican Republic

Bahamas

Trinidad and Tobago

Belize

Nicaragua

Panama

Suriname

Haiti

Guyana

Jamaica

Guatemala

El Salvador

Cuba

Ecuador

Honduras

Peru

Venezuela

Costa Rica

Uruguay

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231

IV. INTERNATIONAL TRADE IN AGRICULTURALPRODUCTS

234

A. INTERNATIONAL TRADE IN AGRICULTURE

Latin America and the Caribbean is the only region of the developing world with a significant

agricultural trade surplus. This has two direct consequences. Firstly, progress in agriculture

plays a major strategic role in the overall development process; secondly, the region is more

sensitive to changes in international markets and more vulnerable to interventions that restrict

or distort competition in international trade.

During the last decade, and particularly since 1993, the Latin American and Caribbean agricultural

exports (defined broadly to encompass crop, livestock, fishery and forestry products) gained

renewed momentum, thanks to a recovery in the international prices of several of the region’s

main export products in 1994-1996. During the second half of the decade, external sales were

further boosted by subregional integration agreements, particularly MERCOSUR. In recent

years, the region’s agricultural exports have totalled about US$ 60 billion per year (US$ 62.3

billion in 2001, the latest year for which there is information from all subsectors). In comparison,

between 1980 and 1993, the total value of agricultural exports was around US$ 35 billion.

The regional agricultural imports grew rapidly between 1987 and 1997, boosted mainly by

increased foreign purchases in Mexico. Although Mexican imports continued to grow after 1997,

the expansion was offset by a reduction in Brazil, as imports were substituted by domestic

supply, and the regional total tended to level off between US$ 30 billion and US$ 32 billion, in

other words just over half the level of exports.

The region’s agricultural imports grew faster than exports between 1988 and 1993, since when

the rate of growth of both trade flows has been similar following the more vigorous export

growth of 1993. Consequently, having shrunk from US$ 24 billion to US$ 17 billion between 1988

and 1993, the surplus was restored thereafter and has since tended to stabilize between US$ 28

billion and US$ 30 billion (see figures 208 and 209).

235

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L T

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LTU

RA

L P

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S

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: EXTERNAL TRADE IN AGRICULTURE, FORESTRY AND FISHERY PRODUCTS(Millions of dollars)

Figure 208

0

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Balance

Imports

Exports

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: TRADE INDEX VALUE (1993=100)Figure 209

Balance

Exports

Imports

40

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

60

80

100

120

140

160

180

236

The size of the sectoral trade surplus (between US$ 28 billion and US$ 30 billion) has been very

significant in the overall context of the regional external accounts. The regional current account

deficit fluctuated between US$ 38 billion and US$ 88 billion per year between 1993 and 2001,

so the contribution made by an agricultural sector surplus of around US$ 30 billion is significant

for the wider external balance.

The agricultural trade surplus is generated essentially in Brazil and the southern cone countries,

which account for most of the regional figure with rapidly increasing shares. In contrast, the

agricultural trade deficit in Mexico is also expanding fast and accounts for most of the region’s

deficit. Mexico and the CARICOM countries, except for Belize and Guyana, are traditionally net

importers of agricultural products. Over the last decade the Latin Caribbean countries have also

experienced deficits resulting from the deterioration in Cuban agricultural trade balance, and

vigorous import growth in the Dominican Republic (see figure 210).

LAC: BALANCE OF TRADE IN AGRICULTURE, FORESTRY AND FISHERY PRODUCTS(Thousands of dollars)

Figure 210

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

-5,000

-10,0001980 1990 2001

Brazil Southern Cone Central AmericaAndeans countries Latin Caribbean Mexico CARICOM

237

Most of the countries in the region have an agricultural trade surplus; only Mexico, Venezuela,

El Salvador and some of the Caribbean island states run systematic deficits. The sectoral balance

is significant in a large number of Latin American and Caribbean countries, although the regional

balance—positive or negative— is concentrated in just a few countries, reflecting the wide differences

in the size of the region’s economies. Brazil, Argentina and Chile display the largest surpluses,

while Mexico and, to a lesser extent, Venezuela have the largest deficits (see figure 211).

Roughly 80% of the agriculture-forestry-fishery trade surplus is generated by the crop-producing

subsector, and in recent years the fishery sector contribution became very important (almost 20%).

The net balance of trade in livestock and forestry products is virtually zero, although in recent

years has tended to be slightly negative (see figures 212 and 213).

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAO/RLC based on FAOSTAT.

20011990

LAC: BALANCE OF TRADE IN AGRICULTURE, FORESTRY AND FISHERY PRODUCTS(Millions of dollars)

Figure 211

-7,500 -5,000 0 5,000 10,000 15,000 17,500

MexicoVenezuela

Dominican RepublicEl Salvador

JamaicaSaint Lucia

HaitiCuba

BahamasBarbados

Saint Kitts and NevisAntigua and BarbudaTrinidad and Tobago

SurinameDominica

Saint Vincent and the GrenadinesGrenada

BelizePanamaGuyana

NicaraguaHonduras

BoliviaGuatemala

ColombiaParaguayUruguay

PeruCosta Rica

EcuadorChile

ArgentinaBrazil

238

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: BALANCE OF TRADE IN AGRICULTURE, FORESTRY AND FISHERY PRODUCTS(Millions of dollars)

Figure 212

Crop production

Livestock

Forestry

Fishing

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

-5,000

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

LAC: BALANCE OF TRADE IN AGRICULTURE, FORESTRY AND FISHERYPRODUCTS BY SUBSECTORS (Millions of dollars)

Figure 213

Crop production Fishing Livestock Forestry

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

35,000

30,000

25,000

20,000

15,000

10,000

5,0000

0

239

Exports

The rapid growth of sectoral exports during the last decade has been quite widespread

throughout the region. Export values doubled during the decade in Brazil, Mexico and the

southern cone countries, although in Mexico the increases are small in absolute terms.

Exports from the Andean countries also grew in smaller proportion. Central American exports

expanded slowly, while those from the CARICOM countries stagnated, and exports from the

Latin Caribbean plummeted as a result of a drastic slump in Cuba. This trend contrasts with

the general stagnation endured during the 1980s, when only the southern cone countries

managed to increase their agricultural exports. The cumulative change has resulted in a

greater concentration of the region’s exports in Brazil and the southern cone, each of which

account for one third of the total (see figures 214 and 215).

INT

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NA

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IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

LAC: GEOGRAPHIC DISTRIBUTION OF AGRICULTURE, FORESTRY AND FISHERY(Millions of dollars)

Figure 214

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

1980

Brazil

MexicoCARICOM

Latin Caribbean Southern Cone

Andean countriesCentral America

1990 2001

25,000

20,000

15,000

10,000

5,000

0

SOURCE: FAO/RLC based on FAOSTAT y FISHSTAT plus.

LAC: SHARE OF AGRICULTURE, FORESTRY AND FISHERY EXPORTS BYSUBREGION (Percentage)

Figure 215

Colombia 1%

Uruguay 5%

CARICOM 2%

Central America 8%

Andeancountries

12%

Brazil26%

Southern Cone31%

Mexico 8%

LatinCaribbean

13%

Mexico 10%

Brazil33%

CARICOM 2%

Latin Caribbean 2%

Central America 8%

Andeancountries

11%

Southern Cone34%

1990 2001

240

In the long run, the agricultural share in total merchandise exports is tending to decline, as

external trade diversifies and products from manufacturing industry gain a larger share. In

1980, agricultural exports from Latin America and the Caribbean accounted for one third (33%)

of total merchandise exports; but by 1990 the figure had fallen to 27%, and by 2001 it had

reached 17%. During this period the reduction mainly reflected rapid growth in non-agricultural

exports from Mexico.

The share of agriculture in total merchandise exports is very substantial in many countries of

the region. In 2001 the sector contributed over 30% of total merchandise sales abroad in 18

cases; and in seven of those countries it accounted for over half. The sector accounted for under

10% of total goods exported in just six countries (see figure 216).

The majority of sectoral exports are generated by the crop-growing sub-sector; nonetheless,

sales of fishery and to a lesser extent forestry products, are growing faster and thus gaining a

larger relative share. In 1990, just over three quarters (76%) of the sector’s exports came from

crop production; whereas the remaining 24% was divided roughly equally among the other three

subsectors, livestock (9%), fishing (8%) and forestry (7%). The relatively faster growth of fishery

LAC: SHARE OF AGRICULTURE, FORESTRY AND FISHERY EXPORTS IN TOTALMERCHANDISE EXPORTS BY COUNTRY IN 2001 (Percentage)

0 10 20 30 40 50 60 70 80

VenezuelaAntigua and BarbudaTrinidad and Tobago

MexicoDominican Republic

HaitiBahamasBarbados

El SalvadorJamaica

SurinameColombia

Saint Kitts and NevisPeru

Costa RicaChile

BrazilCuba

DominicaGrenadaEcuador

BoliviaUruguayGuyana

GuatemalaSaint Lucia

ArgentinaHonduras

PanamaSaint Vincent and the Grenadines

NicaraguaParaguay

Belize

Figure 216

SOURCE: FAO/RLC based on FAOSTAT y WTO.

241

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: INDEX OF AGRICULTURE, FORESTRY AND FISHERY EXPORTS BYSUBSECTOR (1990=100)

Figure 217

Fishing

Forestry

Livestock

Crop

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: SUBSECTORAL SHARES IN TOTAL AGRICULTURE, FORESTRY AND FISHERYEXPORTS (Percentage)

Figure 218

Forestry 7%

Crop 76%

Fishing 8%

Livestock 9%

Forestry 8%

Fishing 11%

Livestock 9%

Crop 72%

1990 2001

and forestry exports during the decade resulted in a larger share for these subsectors. In 2001,

crop-production continues to be the largest contributor (72%), while livestock exports held their

level (9%) and fishery and forestry exports increased their shares (11% and 8%, respectively)

(see figures 217 and 218).

Imports

Until 1987, the regional agricultural imports were broadly stable around US$ 12 billion per year;

but rapid growth of import by Mexico since 1988 onwards, together with an import surge in

Brazil during mid-1990s, raised the regional total to US$ 33 billion in 1998. Thereafter the level

stabilized slightly below its peak, essentially reflecting a reduction in imports by Brazil thanks

to its rapid expansion of domestic supply in that country.

0

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

50

100

150

200

250

242

LAC: GEOGRAPHIC DISTRIBUTION OF AGRICULTURE, FORESTRY AND FISHERYIMPORTS (Millions of dollars)

Figure 219

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

1980

Brazil

MexicoCARICOM

Latin Caribbean Southern Cone

Andean countriesCentral America

1990 2001

12,000

10,000

8,000

6,000

4,000

2,000

0

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: SHARE OF AGRICULTURE, FORESTRY AND FISHERY IMPORTS BY SUBREGION(Percentage)

Figure 220

CARICOM 8%

Mexico34%

Latin Caribbean 11%

AmericaCentral 7%

1990 2001

Brazil17%

Southern Cone 6%

Andeancountries

17%

Southern Cone 11%

Andeancountries

18%Mexico36%

Brazil12%

CARICOM 6%Latin Caribbean 6%

AmericaCentral 11%

The most important change in the 1980s was Mexico’s increased share in the regional total

agricultural imports, which grew from 22% to 34%. During the 1990s, particularly in the later

years, Brazil’s share declined from 17% to just 12% of the regional total. The imports of Latin

Caribbean countries also shrank as result of a slump in international trade in Cuba. In

contrast, imports in the southern cone grew, partly as a result of intra-regional trade among

the MERCOSUR countries; while imports also expanded in Central America and Mexico (see

figures 219 and 220).

243

INT

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NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAO/RLC based on FAOSTAT and WTO.

LAC: SHARE OF AGRICULTURE, FORESTRY AND FISHERY IMPORTS IN TOTALMERCHANDISE IMPORTS (Percentage)

Figure 221

20011990

0 10 20 30 40 50 60 70

Antigua and BarbudaBrazil

MexicoChile

ArgentinaParaguay

Dominican Republic

Costa RicaEcuador

Trinidad and TobagoGuyana

Saint Kitts and Nevis

VenezuelaUruguay

BelizePanama

ColombiaBolivia

NicaraguaGuatemala

Barbados

JamaicaGrenada

BahamasSurinameHonduras

PeruEl Salvador

CubaDominica

Saint Vincent and the Grenadines

Saint LuciaHaiti

The regional capacity to generate agricultural surpluses is further confirmed by the small

share of agriculture in total merchandise imports. This is consistent with the regional

development level and the need to use foreign purchasing power for high-technology and more

capital-intensive production. During the 1980s, agricultural products accounted for about 14%

of total merchandise imports; from 1990 through 1997, the proportion fell to about 12%, and

in the ensuing years it has continued to decline, accounting for just 9% of total goods imported

by the region in 2001.

The low share of agricultural products in total goods imports is a general characteristic of

the region. In 2001, the share of agricultural products in total merchandise imports was below

18% in 29 of the region’s 33 countries; the share was larger only in four Caribbean countries—

Haiti (29%), Saint Lucia (27%), Saint Vincent and the Grenadines (24%) and Dominica (23%)

(see figure 221).

244

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: INDEX OF AGRICULTURE, FORESTRY AND FISHERY IMPORTS BYSUBSECTOR (1990=100)

Figure 223

Forestry

Fishing

Crop

Livestock

SOURCE: FAO/RLC based on FAOSTAT and FISHSTAT plus.

LAC: SUBSECTORAL SHARES IN TOTAL AGRICULTURE, FORESTRY AND FISHERYIMPORTS (Percentage)

Figure 222

Fishing 3%

1990 2001

Crop 61%Livestock

21%

Forestry15%

Crop 60%

Fishing 3%

Forestry18%

Livestock19%

The composition of sectoral imports has tended to remain stable. About 60% corresponds to

crops, 19% to livestock products; 18% to forestry and 3% to fishery products. Within this overall

stability, forestry and fishery imports are growing slightly faster, albeit from a lower absolute

base. In contrast, livestock imports are growing more slowly (see figures 222 and 223).

0

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

50

100

150

200

250

300

245

The agricultural crop surplus varies widely among the different countries of the region, and is

concentrated in Brazil and Argentina, given the size of these economies. Nonetheless, Chile,

Ecuador, Costa Rica, also display significant surpluses. Despite the surplus at the regional level,

a large number of countries run deficits in their crop trade. In 2003, the major deficits happened

in Mexico and Venezuela (see figure 225).

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

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RO

DU

CT

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SOURCE: FAOSTAT

LAC: EXTERNAL TRADE IN AGRICULTURAL CROPS (Millions of dollars)Figure 224

B. CROP-PRODUCING SUBSECTOR

Subsectoral balance

Exports of agricultural crops accounted for 72% of the regional total sectoral exports in 2002,

and 12.9% of its total exported products. Crop imports represented 61% of total agricultural

imports and about 5.1% of all imported products.

Between 1984 and 1990 the subsectoral surplus had stabilized at around US$ 20 billion. In the

early years of the 1990s, as a result of a steady decline in export prices and stagnation in exported

volumes compounded by continuous import growth, the surplus shrank to just US$ 13 billion by

1993. Since that year export values have recovered, thanks firstly to higher international prices,

and secondly to larger volumes shipped in response to the price stimulus. By 1997, the surplus

had almost doubled to reach US$ 25 billion. Prices subsequently resumed their downward trend,

and the surplus stabilized at around US$ 25 billion (see figure 224).

Value of imports

Balance value

Value of exports

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

220

03

0

15,000

10,000

5,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

246

Exports

Between 1980 and 1993, crop exports hardly grew at all (the rate of expansion was -0.04%)

and remained stuck at levels of around US$ 26 billion. In contrast, between this last year and

2003, foreign sales expanded at a rate of 3.4% per year. Better prices and larger volumes

exported raised total export value to US$ 45 billion by 1997. Although volumes have continued

to grow since then, weaker prices have undermined values, and total crop exports have

stabilized around US$ 45 billion.

The behaviour of international prices plays a key role in explaining the acceleration of export

growth. Firstly, there is a direct effect on the monetary value of goods exported; secondly, better

prices may also stimulate an increase in export volumes.

The international prices of the region’s agricultural exports had been falling systematically

during the 1980s, registering a cumulative decline of 37% between 1980 and 1993. In 1994,

Figure 225 LAC: BALANCE OF TRADES IN AGRICULTURAL CROPS BY COUNTRY 2003 (Millions of dollars)

SOURCE: FAO/RLC based on FAOSTAT 2004.

-500 1,500 3,500 5,500 7,500 9,500 11,500 13,500

Panama

Saint Lucia

Suriname

Antigua and Barbuda

Dominica

Saint Kitts and Nevis

Saint Vincent and the Grenadines

Grenada

Nicaragua

Belize

Guyana

Uruguay

Bolivia

Honduras

Guatemala

Colombia

Paraguay

Costa Rica

Ecuador

Chile

Argentina

Brazil

-2,000 -1,800 -1,600 -1,400 -1,200 -1,000 -800 -600 -400 -200 0

Mexico

Venezuela

Haiti

Dominican Republic

El Salvador

Peru

Trinidad and Tobago

Jamaica

Bahamas

Barbados

Cuba

247

by contrast, prices rose by 18%, and in the two following years there were additional increases

(3% and 6%), after which these levels were maintained until 1997. Since 1998 then prices have

fallen back again in spite of their recovery during 2003 they fell again 25% below their 1996

peak (see figure 226).

Export volumes had grown slowly between 1980 and 1993, posting a cumulative increase of

44% during those 13 years. Thereafter volumes began to grow rapidly thanks to better prices;

and in the following nine years to 2003 they increased by 91%.

Since 1980 to 1993, a deterioration in the agricultural terms of trade, measured as the price

ratio between the regional agricultural exports and its total imports, meant a sharp decline in

external purchasing power. During that period, despite physical export volumes growing by

37%, a steady fall in prices meant that export earnings in 1993 were actually 10% lower than in

1980. This reduction, compounded by higher prices for goods imported in the region, meant

that the external purchasing power of exports in 1993 was barely half of its 1980 level (54%),

despite larger volumes sold abroad (see figure 227).

INT

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NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

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L P

RO

DU

CT

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SOURCE: FAO/RLC based on FAOSTAT.

LAC: QUANTUM, UNIT VALUE AND VALUE INDEX OF AGRICULTURAL CROPEXPORTS (1995=100)

Figure 226

Quantum Index

Value Index

Unit Value Index

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

40

60

80

100

120

140

160

248

Between 1993 and 2001, rising prices in the early years were followed by a fall from 1997 onwards,

thereby giving a virtually neutral result for the period overall. Thus, the 73% increase in the

volume of agricultural products exported between 1997 and 2001 represented a 76% increase

in value terms. Nonetheless, the rise in import prices caused external purchasing power to

decline by 11% during the period.

Composition of exports

The composition of agricultural exports from Latin America and the Caribbean has altered

significantly in recent decades. In 1980, the key export products were coffee and sugar. The

slump in sales of these products resulting from drastic changes on international markets, in

conjunction with the growth of oilseed and fruit exports during the 1980s, meant that in 1990

the regional exports were more diversified, with the four product groups mentioned at broadly

similar levels. Over the last decade, these trends have intensified, especially the growth of oilseed

exports. External fruit sales also grew strongly, which was not the case with vegetable sales.

Cereal exports increased, thanks partly to the development of intra-regional cereal trade

especially within MERCOSUR. Sugar and coffe exports continued to drop, and coffee exports

also dropped. In 2003, the main export products were oilseeds (39%), followed by fruit (20%)

(see figures 228 and 229).

SOURCE: FAOSTAT

AL: QUANTUM, VALUE AND PURCHASING POWER OF AGRICULTURAL CROPEXPORTS (1980-2002)

Figure 227

0

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

2

20

40

60

80

100

120

140

160

180

200

Quantum value index

Value Index

Purchasing power

249

Geographic distribution of crop exports

In absolute terms the regional crop exports are highly concentrated in the largest economies.

Nonetheless, the past decade has witnessed additional concentration in Brazil, Argentina and

Mexico that cannot be explained by size difference alone, but reflects the share of these two

first countries in the recent expansion of soybean exports. In addition to the larger absolute

level, both countries display extremely high export growth, of 6.2% and 8.2% per year respectively.

Exports from Mexico also grew strongly (8.1% per year), reflecting the country’s coordination

with the North American market. Other countries that saw their share of exports increase

include Chile (5.7%), Costa Rica (5.8%), Guatemala (5.8%), Peru (8.8%), Bolivia (14.4%), Bahamas

(8.3%) Trinidad and Tobago (5.0%) and Belize (4.9%) (see figure 230).

INT

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LAC: EXPORTS OF AGRICULTURAL EXPORTS (Millions of dollars)Figure 228

SOURCE: FAOSTAT.

Cereals

Sugar

Coffee, tea, cocoa and spicesGreen vegetables

Tobacco

Pulses

Fruits Oilcrops

Plant fibres and rubber

1980 1990 2003

18,500

16,000

13,500

11,000

8,500

6,000

3,500

1,000

-1,500

SOURCE: FAO/RLC based on FAOSTAT.

LAC: COMPOSITION OF AGRICULTURAL CROP EXPORTS (Percentage)Figure 229

1990

Oilcrops23%

Sugar andHoney21%

Coffee andothers18%

Fruits20%

Animal feed 0,2%Tobacco 3%

Pulses 1%

Greenvegetables 5%

Vegetal fibresand rubber 3%

Cereals 6%

2003

Sugar andHoney10%

Tobacco 3% Animal feed 0.2%

Oilcrops39% Coffee

and others10%

Pulses 1%

Vegetable fibresand rubber 1%

Greenvegetables 8%

Fruits20%

Cereals 8%

250

In 1990, exports of oilseeds from Latin America and the Caribbean were highly concentrated

in Argentina and Brazil, while other countries exported relatively marginal amounts. By 2003,

this concentration had intensified sharply, especially as result of soybean exports in these two

countries. On a smaller scale, but with major importance for the country’s agriculture, soybean

exports have also expanded in Bolivia and Paraguay (see figure 231).

LAC: VALUE OF CROP EXPORTS BY COUNTRY (Millions of dollars)Figure 230

SOURCE: FAOSTAT 2004.

20031990

Nicaragua

El Salvador

Dominican Republic

Uruguay

Bolivia

Cuba

Honduras

Peru

Paraguay

Guatemala

Costa Rica

Ecuador

Colombia

Chile

Mexico

Argentina

Brazil

Belize

Guyana

Jamaica

Panama

2,000 4,000 6,000 8,000 10,000 12,000 14,000

20 40 60 80 100 120 140 160 180 200

16,000

Antigua and Barbuda

Bahamas

Saint Kitts and Nevis

Dominica

Grenada

Saint Lucia

Haiti

Saint Vincent and the Grenadines

Suriname

Barbados

Venezuela

Trinidad and Tobago

251

The geographic location of fruit exports is widely distributed throughout the region. Until

the 1990s the leading exporter was Brazil, partly thanks to sales of citric products; but the

remarkable development of fruit growing in Chile over the last two decades has resulted in

a rapid expansion of fruit exports from this country, virtually tripling during the decade,

while exports from Brazil were hampered by difficulties in the markets for orange juice and

other citric products. In addition to Brazil and Chile, fruit exports are important in most

countries of the region (see figure 232).

INT

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LTU

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1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

LAC: OILCROPS EXPORTS BY COUNTRY (Millions of dollars)Figure 231

SOURCE: FAOSTAT 2004.

20031990

Peru

El Salvador

Dominican Republic

Venezuela

Chile

Trinidad and Tobago

Nicaragua

Honduras

Ecuador

Costa Rica

Guatemala

Colombia

Mexico

Uruguay

Bolivia

Paraguay

Argentina

Brazil

1 2 3 4 5

Antigua and Barbuda

Grenada

Haiti

Saint Kitts and Nevis

Saint Lucia

Suriname

Belize

Saint Vincent and the Grenadines

Dominica

Bahamas

Cuba

Guyana

Jamaica

Barbados

Panama

252

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

Uruguay

Dominican Republic

Belize

Peru

Panama

Guatemala

Honduras

Colombia

Argentina

Costa Rica

Mexico

Ecuador

Brazi

Chile

LAC: FRUITS EXPORTS BY COUNTRY (Millions of dollars)Figure 232

SOURCE: FAOSTAT.

20031990

50 100 150 200-

Bolivia

Jamaica

Cuba

Suriname

Venezuela

Nicaragua

Saint Lucia

Saint Vincent and the Grenadines

El Salvador

Dominica

Trinidad and Tobago

Haiti

Guyana

Bahamas

Paraguay

Barbados

Grenada

Antigua and Barbuda

Saint Kitts and Nevis

253

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

LAC: GREEN VEGETABLES EXPORTS BY COUNTRY (Millions of dollars)Figure 233

SOURCE: FAOSTAT.

20031990

500 1,000 1,500 2,000 2,500 3,000

Saint Vincent and the Grenadines

Suriname

Nicaragua

El Salvador

Trinidad and Tobago

Panama

Dominican Republic

Jamaica

Ecuador

Honduras

Colombia

Brazil

Guatemala

Costa Rica

Chile

Peru

Argentina

Mexico

2 4 6 8 10 12

Antigua and Barbuda

Saint Lucia

Saint Kitts and Nevis

Bahamas

Haiti

Bolivia

Grenada

Cuba

Barbados

Belize

Guyana

Uruguay

Dominica

Paraguay

Venezuela

In 1990, the regional vegetable exports were heavily concentrated in Mexico, represented by sales

to the United States taking advantage of geographic proximity and climate differences.

Implementation of the North American Free Trade Agreement (NAFTA) meant that by 2002

concentration had intensified still further. There has also been a significant growth in Peru,

thanks largely to exports of asparagus and preserves. Vegetable exports are also important in

Central America, Argentina and Chile, as well as in other countries of the region (see figure 233).

Cereal exports are highly concentrated in Argentina, partly reflecting trade within MERCOSUR

(see figure 234).

254

500 1,000 1,500 2,000 2,500

LAC: CEREAL EXPORTS BY COUNTRY (Millions of dollars)Figure 234

SOURCE: FAOSTAT.

20031990

Guatemala

Venezuela

Nicaragua

Trinidad and Tobago

Ecuador

Costa Rica

Peru

El Salvador

Colombia

Paraguay

Chile

Uruguay

Mexico

Brazil

Argentina

10 20 30

Haiti

Antigua andBarbuda

Dominica

Saint Lucia

Saint Kittsand Nevis

Belize

Guyana

Bahamas

Cuba

Panama

Grenada

DominicanRepublic

Jamaica

Bolivia

Barbados

Suriname

Saint Vincent andthe Grenadines

Honduras

255

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

Figure 235 LAC: SUGAR EXPORTS BY COUNTRY (Millions of dollars)

SOURCE: FAOSTAT.

20031990

Barbados

Bolivia

Honduras

Peru

Nicaragua

Uruguay

Costa Rica

Belize

Ecuador

Chile

Jamaica

El Salvador

Dominican Republic

Guyana

Guatemala

Argentina

Colombia

Mexico

Cuba

Brazil

10 20 30 40 50

Haiti

Antigua and Barbuda

Suriname

Dominica

Grenada

Saint Vicente and

the Grenadines

Saint Lucia

Bahamas

Venezuela

Saint Kitts and Nevis

Paraguay

Panama

Trinidad and Tobago

Export growth has been restricted since this is a highly intervened market, and because of the

effect of sugar substitutes on demand, and low-productivity conditions in most countries of

the region. Cuban sugar exports present a hard slow recovery since the disappearance of the

market provided by the socialist countries. Sugar exports now mainly come from Brazil (see

figure 235).

256

SOURCE: FAOSTAT.

500 1,000 1,500 2,000

Trinidad and Tobago

Panama

Grenada

Venezuela

Jamaica

Argentina

Nicaragua

Dominican Republic

El Salvador

Honduras

Costa Rica

Ecuador

Peru

Mexico

Guatemala

Colombia

Brazil

Figure 236 LAC: COFFEE, TEA, COCOA AND SPICES EXPORTS BY COUNTRY (Millions of dollars)

1990 2003

Chile

Haití

Bolivia

Cuba10 20 30

Saint Vincent andthe Grenadines

Dominica

Guyana

Uruguay

Paraguay

The time series analysed does not record the collapse of Latin American and Caribbean coffee

exports over the last few years, resulting from changes on the international market following

increases in production in Vietnam and elsewhere. This change further accentuates the

tremendous instability displayed by this market, which has a strong effect in several regional

economies, especially those in Central America. Traditionally the leading producers have been

Brazil and Colombia, followed by Mexico and the Central American countries (see figure 236).

Antigua andBarbuda

Saint Kitts and Nevis

Barbados

Suriname

Bahamas

Belize

Saint Lucia

257

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S200 400 600 800 1,000 1,200

LAC: TOBACCO EXPORTS BY COUNTRY (Millions of dollars)Figure 237

SOURCE: FAOSTAT.

1990 2003

Trinidad and Tobago

Chile

Paraguay

Dominican Republic

Nicaragua

Honduras

Guatemala

Venezuela

Colombia

Cuba

Ecuador

Mexico

Argentina

Brazil

0.5

Antigua and Barbuda

Saint Kitts and Nevis

Suriname

El Salvador

Haiti

Belize

Dominica

Guyana

Jamaica

Saint Vincent and the Grenadines

Saint Lucia

Grenada

Bahamas

Bolivia

Panama

Barbados

Costa Rica

Peru

Uruguay

1.0 1.5 2.0 2.5 3.0 3.5 4.0

Tobacco exports have been highly concentrated in Brazil, and that trend intensified strongly

during the last decade (see figure 237).

Imports

Having suffered a decline during the 1980s, the regional crop imports resumed their growth

in the 1990s, thanks to relative recovery in the economies concerned, and boosted by greater

market integration and larger trade flows among the MERCOSUR countries. During the 1980s,

regional imports declined by 2.6% per year; but, in the 1990s they grew at an average annual

rate of 5.3%. The total amount imported (roughly US$ 10 billion in the 1980s) reached US$ 19

billion in 1996, and stabilized around that level until 2003. That increase was caused mainly

by higher levels of imports as the prices keept almost without variation (see figure 238).

258

LAC: IMPORTS OF AGRICULTURAL PRODUCTS BY GROUP (Millions of dollars)Figure 239

SOURCE: FAOSTAT.

Animal feed

Sugar, honey

Coffee, tea,and spices

Vegetal fibresand rubber

Cereals

Oilcrops

Fruits

Green vegetables

Pulses

Tobacco

1980 1990 2003

8

7

6

5

4

3

2

1

SOURCE: FAO/RLC based on FAOSTAT.

LAC: QUANTUM, PRICE AND VALUE INDEX OF AGRICULTURAL CROP IMPORTS(1995=100)

Figure 238

Quantum Index

Value Index

Unit value index

Composition of agricultural crop imports

In the 1980s cereals and oilseeds were already the largest categories of the regional crop imports,

and during the last decade they also grew most in absolute terms. Imports of fruit, vegetables

and animal feed have also expanded (see figures 239 and 240).

20

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

40

60

80

100

120

140

160

259

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAOSTAT.

LAC: IMPORTS OF AGRICULTURAL PRODUCTS BY GROUP (Millions of dollars)Figure 240

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

1980 1990 2003

Cerea

ls

Oilcro

ps

Fruits

Green

veget

ables

Pulses

Sugar, h

oney

and b

eewax

Coffe

e, te

a, co

coa

and sp

ices

Veget

able

fibre

s

and ru

bber

Animal

feed

SOURCE: FAO/RLC based on FAOSTAT.

LAC: IMPORTS OF AGRICULTURAL CROPS BY COUNTRY (Percentage)Figure 241

1990

CARICOM 6%Latin Caribbean 11%

Brazil17%

Southern Cone 6%

Mexico35%

Andeanscountries

18%

Central America 7%

Brazil15%

Mexico36%

Andeanscountries

19%

Southern Cone 8%

Central America 10%

Latin Caribbean 8%

CARICOM 4%

2003

Geographic distribution of crop imports

Mexico is without doubt the region’s leading importer of agricultural crops, accounting for one

third of the total. This large share reflects a longstanding situation that became stronger since

1988 when Mexican imports began to accelerate. The shares of the various subregions have changed

little over the last decade, although the Central American share has risen from 7% to 10%, while

it has fallen, in the Latin Caribbean countries, from 11% to 8% (see figure 241 and 242).

260

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

SOURCE: FAOSTAT.

1990 2003

Figure 242 LAC: IMPORTS OF AGRICULTURAL CROPS BY COUNTRY (Millions of dollars)

Paraguay

Nicaragua

Bolivia

Uruguay

Trinidad and Tobago

Panama

Jamaica

Honduras

Haiti

Costa Rica

Ecuador

Guatemala

El Salvador

Argentina

Dominican Republic

Cuba

Chile

Peru

Venezuela

Colombia

Brazil

Mexico

20 40 60 80 100

Saint Kitts and Nevis

Antigua and Barbuda

Grenada

Dominica

Saint Vincent and the Grenadines

Belize

Saint Lucia

Guyana

Suriname

Bahamas

Barbados

261

Most of the countries of the region import cereals, with Mexico and Brazil being the largest importers

given the size of their economies. During the last decade this concentration has intensified strongly

in Mexico, following the implementation of NAFTA and reflecting the relative weakness of its

domestic supply. Mexico’s cereal imports have more than doubled during the last decade. Colombia’s

cereal imports also grew significantly (see figure 243).

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAOSTAT.

1990 2003

500 1,000 1,500 2,000 2,500 3,000

LAC: CEREAL IMPORTS BY COUNTRY (Millions of dollars)Figure 243

Trinidad and Tobago

Nicaragua

Uruguay

Panama

Bolivia

Jamaica

Honduras

El Salvador

Ecuador

Costa Rica

Haiti

Guatemala

Dominican Republic

Chile

Cuba

Venezuela

Peru

Colombia

Brazil

Mexico

5 10 15 20

Grenada

Saint Kittsand Nevis

Dominica

Antigua andBarbuda

Belize

Saint Vincent andthe Grenadines

Saint Lucia

Suriname

Guyana

Argentina

Paraguay

Barbados

Bahamas

262

Oilseed imports are heavily concentrated in Mexico, and growing fast. Imports in this category

also increased rapidly over the last decade, but from a smaller base, in Brazil, Colombia, Peru, Chile,

El Salvador, Ecuador, Bolivia, Guyana, Bahamas and Belize (see figure 244).

LAC: OILCROPS IMPORTS BY COUNTRY (Millions of dollars)Figure 244

SOURCE: FAOSTAT.

1990 2003

500 1,000 1,500 2,000 2,500

Trinidad and Tobago

Jamaica

Bolivia

Panama

Nicaragua

Haiti

Honduras

Costa Rica

Argentina

El Salvador

Ecuador

Guatemala

Cuba

Dominican Republic

Chile

Peru

Colombia

Venezuela

Brazil

Mexico

10 20 30 40

Saint Kitts and Nevis

Antigua andBarbuda

Saint Vicente andthe Grenadines

Saint Lucia

Grenada

Belize

Bahamas

Dominica

Paraguay

Guyana

Suriname

Barbados

Uruguay

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

LAC: FRUIT IMPORTS BY COUNTRY (Millions of dollars)Figure 245

SOURCE: FAOSTAT.

1990 2003

Nicaragua

Uruguay

Jamaica

Bahamas

Barbados

Dominican Republic

Trinidad and Tobago

Honduras

Panama

Peru

Venezuela

Guatemala

Costa Rica

Ecuador

Chile

El Salvador

Colombia

Argentina

Brazil

Mexico

100 200 300 400 500 600 700 800

2 4 6 8

Dominica

Belize

Suriname

Saint Vicent andthe Grenadines

Antigua and Barbuda

Saint Kitts and Nevis

Guyana

Haiti

Grenada

Paraguay

Bolivia

Cuba

263

In the other crop groups (fruit, green vegetables, pulses, coffee, sugar, plant fibres, tobacco and

animal feed) the geographic distribution of imports follows a similar pattern, with concentration

in Mexico and broad diffusion among most other countries of the region. In the case of tobacco

imports, the Dominican Republic has registered an exceptionally high share in the last year

(see figures 245 through 252).

Saint Lucia

SOURCE: FAOSTAT.

1990 2003

100 200 300 400 500

Dominican Republic

Paraguay

Honduras

Barbados

Ecuador

Argentina

Guatemala

Colombia

Bolivia

Cuba

Bahamas

Jamaica

Panama

Costa Rica

Chile

Trinidad and Tobago

Venezuela

El Salvador

Brazil

Mexico

LAC: VEGETABLE IMPORTS BY COUNTRY (Millions of dollars)Figure 246

5 10 15

264

Antigua and Barbuda

Grenada

Dominica

Saint Vincent andthe Grenadines

Saint Kitts and Nevis

Belize

Suriname

Saint Lucia

Guyana

Haiti

Peru

Nicaragua

Uruguay

265

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

LAC: PULSES IMPORTS BY COUNTRY (Millions of dollars)Figure 247

SOURCE: FAOSTAT.

1990 2003

50 100 150 200 250 300

Uruguay

Nicaragua

Bolivia

Honduras

Guatemala

Argentina

Trinidad and Tobago

Panama

El Salvador

Ecuador

Dominican Republic

Chile

Costa Rica

Peru

Haiti

Venezuela

Brazil

Colombia

Cuba

Mexico

1 2 3

Saint Kitts and Nevis

Paraguay

Antigua and Barbuda

Belize

Grenada

Saint Vincent andthe Grenadines

Dominica

Bahamas

Suriname

Barbados

Saint Lucia

Jamaica

Guyana

266

SOURCE: FAOSTAT.

1990 2003

LAC: COFFEE IMPORTS BY COUNTRY (Millions of dollars)Figure 248

50 100 150 200

Barbados

Cuba

Panama

Jamaica

Bolivia

Nicaragua

Trinidad and Tobago

Venezuela

Costa Rica

Honduras

Guatemala

Ecuador

El Salvador

Peru

Colombia

Uruguay

Chile

Argentina

Brazil

Mexico

1 2 3 4

Antigua andBarbuda

Haiti

Saint Kittsand Nevis

Grenada

Dominica

Saint Vincent andthe Grenadines

Belize

Saint Lucia

Guyana

Suriname

Paraguay

Bahamas

DominicanRepublic

267

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

100 200 300 400 500 600 700

SOURCE: FAOSTAT.

1990 2003

LAC: SUGAR IMPORTS BY COUNTRY (Millions of dollars)Figure 249

Barbados

Panama

Brazil

El Salvador

Honduras

Argentina

Dominican Republic

Costa Rica

Peru

Trinidad and Tobago

Ecuador

Guatemala

Uruguay

Jamaica

Haiti

Cuba

Colombia

Venezuela

Chile

Mexico

5 10 15

Saint Kittsand Nevis

Belize

Antigua andBarbuda

Grenada

Dominica

Saint Vincent andthe Grenadines

Guyana

Saint Lucia

Suriname

Paraguay

Bahamas

Nicaragua

Bolivia

268

LAC: PLANT FIBRE AND RUBBER IMPORTS BY COUNTRY (Millions of dollars)Figure 250

100 200 300 400 500 600 700

SOURCE: FAOSTAT 2004.

20031990

Trinidad and Tobago

Nicaragua

Uruguay

Panama

Suriname

Cuba

Costa Rica

Dominican Republic

Honduras

Bolivia

Guatemala

Ecuador

El Salvador

Venezuela

Chile

Peru

Colombia

Argentina

Brazil

Mexico

0.50 1.00 1.50

Saint Vincent andthe Grenadines

Dominica

Grenada

Saint Kitts and Nevis

Saint Lucia

Antigua and Barbuda

Guyana

Belize

Haiti

Barbados

Bahamas

Paraguay

Jamaica

269

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

LAC: TOBACCO IMPORTS BY COUNTRY (Millions of dollars)Figure 251

SOURCE: FAOSTAT 2004.

20031990

20 40 60 80 100 120

Suriname

Bolivia

Ecuador

Peru

Haiti

Nicaragua

Costa Rica

Jamaica

Guatemala

Chile

Trinidad and Tobago

Uruguay

Venezuela

Colombia

Argentina

Honduras

Brazil

Paraguay

Mexico

Dominican Republic

1 2 3 4

Guyana

Saint Kitts and Nevis

Belize

Saint Lucia

Antigua and Barbuda

Saint Vicent andthe Grenadines

Grenada

Dominica

Panama

Barbados

El Salvador

Cuba

Bahamas

270

20 40 60 80 100 120 140 160

LAC: ANIMAL FEED IMPORTS BY COUNTRY (Millions of dollars)Figure 252

Haiti

Panama

Cuba

Uruguay

Argentina

Bahamas

Peru

Venezuela

El Salvador

Guatemala

Honduras

Ecuador

Costa Rica

Jamaica

Colombia

Brazil

Belize

Trinidad and Tobago

Chile

Mexico

SOURCE: FAOSTAT 2004.

20031990

0.50 1.00 1.50

RepublicaDominicana

Antigua andBarbuda

Dominica

Saint Kittsand Nevis

Saint Lucia

Paraguay

Saint Vincent andthe Grenadines

Bolivia

Nicaragua

Barbados

Grenada

Guyana

Suriname

C. LIVESTOCK SECTOR

International trade in livestock products is virtually in balance in Latin America and the

Caribbean; exports and imports both amount to about US$ 6 billion per year, accounting for

roughly 1.6% of imports and exports in the regional overall external merchandise trade. Within

overall agriculture sector trade, livestock products account for 9% of exports and 19% of imports.

During the 1980s, the small trade balance was generally positive but displayed a slightly

declining trend. Although the balances have always been small, the result has been negative

over the last decade, except in 2002, largely reflecting the slowdown in exports between 1996

and 1998 (see figures 253 and 254).

271

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAO/RLC based on FAOSTAT.

LAC: INTERNATIONAL TRADE IN LIVESTOCK PRODUCTS (Millions of dollars)Figure 253

-2,000

-1,000

0

1,000

2.000

3,000

Imports

Exports

Balance

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

4,000

5,000

6,000

7,00019

80

198

119

82

198

319

84

198

519

86

198

719

88

198

919

90

199

119

92

199

319

94

199

519

96

199

719

98

199

920

00

200

120

02

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXTERNAL TRADE IN LIVESTOCK PRODUCTS (Millions of dollars)Figure 254

-2.000

-1.000

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

Trade balance

Value of exports

Value of imports

The sub- sectoral trade balance is very small because the surplus in bovine and poultry meat

is offset by a deficit in dairy products. Trade in pig meat and live animals is virtually in balance,

with the sign changing back and forth (see table 56).

Trade in livestock products is also in balance in most countries considered individually.

Among surplus countries only Brazil, Argentina, Chile, Uruguay and Nicaragua displayed

relatively large balances; in the latter two, the livestock sector accounts for a particularly

272

LAC: BALANCE OF TRADE IN LIVESTOCK PRODUCTS 2002 (Millions of dollars)Figure 255

SOURCE: FAO/RLC based on FAOSTAT 2004.

Mexico

Cuba

El Salvador

Venezuela

Guatemala

Jamaica

Dominican Republic

Honduras

Trinidad and Tobago

Haiti

Bahamas

Peru

Saint Lucia

Barbados

Guyana

Colombia

Grenada

Saint Vincent and the Grenadines

Suriname

Ecuador

Belize

Dominica

Antigua and Barbuda

Saint Kitts and Nevis

Bolivia

Panama

Paraguay

Costa Rica

Nicaragua

Chile

Uruguay

Argentina

Brazil

-3,000 -2,000 -1,000 0 1,000 2,000 3,000

large share of their overall trade balance. Among deficit countries, most of the negative

balance is concentrated in Mexico, because of its size; but, in relative terms, there are also

significant deficits in several Central American countries (El Salvador, Guatemala and

Honduras), and a number of Caribbean countries (Cuba, Haiti, Saint Lucia, Dominica, Grenada,

Guyana, Bahamas and Barbados) (see figure 255).

LAC: EXTERNAL TRADE IN LIVESTOCK PRODUCTS (2002)Table 56

Product Imports Trade balance Growth rate (%)

TOTAL 6,099,490 4,926,877 100.0 100.0 5.4 5.1

Bovine meat 2,048,809 1,454,350 33.6 29.5 1.6 9.2

Poultry meat 1,576,205 509,093 25.8 10.3 10.0 6.8

Pig meat 902,566 551,420 14.8 11.2 23.7 11.1

Sheep meat 34,437 -55,443 0.6 1.8 0.0 9.3

Goat meat 174 2,146 -1,972 -1.2 -5.2

Other meats 50,587 56,188 1.4 -2.3

Dairy products and eggs 730,857 1,864,326 12.0 37.8 14.2 3.5

Live animals 444,734 92,595 -0.1 1.7

254,933 52,936 201,997 4.2 1.1 -5.5 0.1

Exports Imports

Share (%)

SOURCE: FAO/RLC based on FAOSTAT 2004.

(Thousands of dollars) (Thousands of dollars)(1990-2002)

Exports Imports

106,775

Animal fibre

352,139

89,880

-1,133,469

1,172,613

594,459

1,067,112

351,146

0.0

1.0

7.1

0.0

1.8

7.3

Exports

273

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAO/RLC based on FAOSTAT.

LAC: SUBREGIONAL SHARES IN EXPORTS AND IMPORTS OF LIVESTOCKPRODUCTS (Percentage)

Figure 256

Brazil 49%

LatinCaribbean 0%

CARICOM 0.3 %

Andean countries 3%

Central America 5%

Mexico 11%

Southern Cone 32%

Exports2002

Mexico 58%

Brazil 7%

LatinCaribbean

6%

CARICOM 7%

SouthernCone 6%

Andeancountries 7%Central America 9%

Imports2002

Despite the relatively small scale of trade balances in this subsector, there is clear differentiation

in the balances recorded among countries. As much as 81% of exports come from Brazil and the

southern cone countries; whereas Mexico is the destination for 58% of livestock-product imports

(see figure 256).

Exports

During the 1980s, exports of livestock products from Latin America and the Caribbean did not

show changes, posting a slightly negative average growth rate of -0.2% per year. The slight

reduction that occurred in the first half of the decade was offset by an increase, also moderate,

during the second half. As from 1992, chicken meat exports from Brazil grew strongly, supported

by sharp percentage rise in bovine meat exports in that country after 1997, and a year later also

in Mexico and Nicaragua, albeit involving smaller absolute amounts. A number of other countries

also saw rapid growth, but with less effect on the regional totals. The result was an average

growth rate of 5.3% per year during the decade.

The main explanation for this acceleration can be found on the supply side, especially in the

development of poultry production, while international prices have had relatively neutral effects

on the overall sub-sector. The export quantum index rose by 44% between 1992 and 1995; and,

following an interruption of the rising trend in 1996-1998, it then grew by a further 53% between

then and 2002. These represent,specilly in Brazil, a significant increases in export volumes,

based on profitable technology models (see figure 257).

274

SOURCE: FAO/RLC based on FAOSTAT.

LAC: UNIT VALUE, QUANTUM AND VALUE INDEX OF LIVESTOCK PRODUCTEXPORTS (1995=100)

Figure 257

20

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

40

60

80

100

120

Quantum Index

Value Index

Unit value index

140

SOURCE: FAO/RLC based on FAOSTAT.

AL: INDEX OF QUANTUM, VALUE AND PURCHASING POWER OFLIVESTOCK-PRODUCT EXPORTS

Figure 258

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

2

0

20

40

60

80

100

120

140

160

Exports quantum index

Exports value index

External purchasingpower of exports

Although international prices have had a neutral effect on exports in this subsector, their

purchasing power was reduced sharply during the early 1980s by a relative rise in import prices.

Since 1984, the erosion of purchasing power has been lower, but constant, as import prices have

not risen while exports have expanded continuously (see figure 258).

275

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

LAC: EXPORTS OF LIVESTOCK PRODUCTS (Millions of dollars)Figure 259

1980 1990 2002

SOURCE: FAOSTAT.

Animal fibres

Live animals

Pig meatDairy products and eggs

Livestock subproducts

Goat meat

Poultry meat Bovine meat

Sheep meat2,100

1,850

1,600

1,350

1,100

850

600

350

100

-150

Composition of livestock product exports

The structure of the regional exports in the livestock sub-sector has changed significantly

during the last decade. Until the early 1990s, bovine meat exports accounted for the absolute

majority. Wool exports were less important and also declined rapidly from the 1980s onwards,

along with exports of animals on the hoof—basically yearling cattle exported by Mexico for

fattening in the United States, taking advantage of lower fodder costs.

The last decade witnessed several changes, the most significant was the exceptional growth of

poultry meat exports, which expanded from US$ 400 million in 1990 to over US$ 1.6 billion in

2002. Practically all of this increase occurred in Brazil (see figure 259).

Exports of pig meat also grew vigorously during the decade: having been practically non-existent

at the beginning of the 1990s, the US$ 900 million mark was attained by 2002. Half of this increase

occurred in Brazil and nearly all the rest in Chile and Mexico. Exports of dairy products and eggs

also grew strongly, albeit on a more modest scale, mostly in Argentina.

The composition of livestock exports was thus very different from the situation in 1990. The

share of bovine meat fell from over half (51%) to just one third (33%); the share of wool exports

also dropped from 11% to just 4%. In contrast, poultry meat exports expanded from 12% to 26%

of the sub-sectoral total. There were also increased shares for pig meat (from 1% to 15%), and

dairy products and eggs (from 7% to 12%) (see figure 260).

276

Geographic distribution of livestock exports

The origin of the livestock exports has varied significantly during the last decade. Until 1990,

Argentina was the leading exporter, followed relatively closely by Brazil, Uruguay, Mexico, and

in smaller amounts, by Paraguay, Chile, Bolivia and a number of Central American countries.

Since then, the exceptionally strong growth of exports from Brazil, which have increased fivefold

between 1990 and 2002, has resulted in a heavy concentration of the region’s livestock exports

in this country. Brazil’s share of the regional total grew from 20% in 1990 to almost half (49%)

in 2002. As counterpart, the share of southern cone countries dropped from 58% to 32% (see

figures 261 and 262).

SOURCE: FAO/RLC based on FAOSTAT.

LAC: COMPOSITION OF LIVESTOCK-PRODUCT EXPORTS (Percentage)Figure 260

1990 2002

Other meats 2%Dairy products

and eggs 7%

Bovine meat51%

Animalfibre11%

Sheep meat 2%

Poultrymeat 12%

Liveanimals

14%

Goat meat 0%

Pig meat 1%

Other meats 2%

Bovine meat33%

Dairyproductsand milk

12%

Sheep meat 1%

Poultry meat26%

Goat meat 0%

Pig meat15%

Animal fibre 4%

Live animals 7%

277

INT

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NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

500 1,000 1,500 2,000 2,500 3,000 3,500

LAC: VALUE OF LIVESTOCK EXPORTS (Millions of dollars)Figure 261

SOURCE: FAOSTAT 2004.

20021990

Ecuador

Bolivia

Guatemala

El Salvador

Paraguay

Panama

Peru

Colombia

Costa Rica

Nicaragua

Chile

Mexico

Uruguay

Argentina

Brazil

10 20 30 40 50 60

Suriname

Dominica

Grenada

Saint Vincent andthe Grenadines

Antigua and Barbuda

Saint Kitts and Nevis

Saint Lucia

Bahamas

Haiti

Belize

DominicanRepublic

Cuba

Guyana

Barbados

Trinidad and Tobago

Venezuela

Honduras

Jamaica

SOURCE: FAOSTAT.

LAC: SUBREGIONAL SHARES OF LIVESTOCK-PRODUCT EXPORTS (Percentage)Figure 262

1990 2002

Latin Caribbean 0.8%Andean countries 4.1%

Brazil19.6%

Mexico12.0%

SouthernCone

57.6%

Central America 5.4% CARICOM 0.5%

Brazil48.7%

Mexico11.3%

SouthernCone

32.4%

Latin Caribbean 0.0%

CARICOM 0.3%Central America 4.7%

Andean countries 2.5%

278

LAC: VALUE OF BOVINE MEAT EXPORTS (Millions of dollars)Figure 263

SOURCE: FAOSTAT 2004.

20021990

200 400 600 800 1,000 1,200

Honduras

Bolivia

Venezuela

Chile

Trinidad and Tobago

Colombia

Guatemala

Panama

Paraguay

Mexico

Costa Rica

Nicaragua

Uruguay

Argentina

Brazil

10 20 30

Ecuador

Dominican Republic

Antigua and Barbuda

Barbados

Dominica

Grenada

Guyana

Saint Vicent andthe Grenadines

Saint Lucia

Suriname

Saint Kitts and Nevis

Peru

Haiti

El Salvador

Cuba

Bahamas

Jamaica

Belize

Honduras

The changes in the geographic distribution of bovine meat exports largely follow the pattern

displayed by the subsector as a whole, the most significant change being the concentration of

exports in Brazil (see figure 263).

279

INT

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NA

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NA

L T

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DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

50 100 150 200 250 300 350

LAC: EXPORTS OF DAIRY PRODUCTS AND EGGS (Millions of dollars)Figure 264

SOURCE: FAOSTAT 2004.

20021990

Ecuador

Honduras

Bolivia

Jamaica

Peru

Panama

Costa Rica

Nicaragua

Chile

Brazil

Mexico

Colombia

Uruguay

Argentina

Antigua and Barbuda

Grenada

Saint Lucia

Suriname

Dominica

Haiti

Saint Vincent andthe Grenadines

Saint Kitts and Nevis

Belize

Dominican Republic

Bahamas

Paraguay

Guyana

Cuba

Barbados

Venezuela

Guatemala

Trinidad and Tobago

El Salvador

1 2 3 4 5 6

Over the last decade, the Argentinian exports of dairy products and eggs grew strongly, thereby

increasing their level of concentration. At the same time, exports also grew substantially in

other countries which had previously exported only minimal amounts of these products, such

as Colombia, Brazil, Mexico and Chile. There were also significant increases in exports from

Central American countries (see figure 264).

280

LAC: EXPORTS OF POULTRY MEAT (Millions of dollars)Figure 265

SOURCE: FAOSTAT 2004.

20021990

200 400 600 800 1,000 1,200 1,400 1,600

Nicaragua

Trinidad and Tobago

Dominican Republic

El Salvador

Jamaica

Barbados

Venezuela

Uruguay

Peru

Panama

Costa Rica

Ecuador

Mexico

Argentina

Chile

Brazil

0.5 1.0 1.5 2.0

Paraguay

Bahamas

Dominica

Grenada

Guyana

Saint Kitts and Nevis

Suriname

Haiti

Cuba

Saint Vincent and the Grenadines

Belize

Bolivia

Colombia

Honduras

Antigua and Barbuda

Guatemala

Saint Lucia

The change in the geographic distribution of exports of poultry meat merely reflects the huge

increase in exports from Brazil; no other country in the region had previously sold significant

amounts of this product, and Brazil currently claims 95% of the regional total (see figure 265).

281

INT

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NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

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RO

DU

CT

S

100 200 300 400 500 600

LAC: VALUE OF PIG MEAT EXPORTS (Millions of dollars)Figure 266

SOURCE: FAOSTAT 2004.

20021990

Peru

Nicaragua

Jamaica

Venezuela

Argentina

Ecuador

Trinidad and Tobago

Barbados

El Salvador

Guatemala

Costa Rica

Mexico

Chile

Brazil

0.02 0.04 0.06 0.08 0.10

Paraguay

Uruguay

Bolivia

Honduras

Panama

Haiti

Antigua and Barbuda

Dominica

Grenada

Saint Kitts and Nevis

Saint Vincent and the Grenadines

Saint Lucia

Suriname

Bahamas

Guyana

Colombia

Dominican Republic

Cuba

Belize

Exports of pig meat only began to be significant during the last decade, and were concentrated

essentially in Brazil. Nonetheless both Chile and Mexico now have significant external sales

of this product (see figure 266).

Exports of animal fibres, mostly wool, are concentrated in Argentina and Uruguay, but have

been decreasing fast over the last few decades (see figure 267).

LAC: EXPORTS OF ANIMAL FIBRES (Millions of dollars)Figure 267

SOURCE: FAOSTAT 2004.

20021990

Honduras

Costa Rica

Guatemala

Colombia

Ecuador

El Salvador

Paraguay

Bolivia

Mexico

Chile

Brazil

Peru

Argentina

Uruguay

20 40 60 80 100 120 140 160 180

0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08Venezuela

Nicaragua

Panama

Cuba

Haiti

Dominican

Antigua and Barbuda

Barbados

Belize

Dominica

Grenada

Guyana

Jamaica

Saint Kitts and Nevis

Saint Vincent and the Grenadines

Saint Lucia

Suriname

Trinidad and Tobago

Bahamas

282

Most live-animal exports originate in Mexico and consist of cattle that are born taking advantage

of the rainy season in that country, and after weaning are sold to the United States for fattening,

since it would not be profitable to feed them in Mexico during the dry season; moreover, ratios

between meat prices and the cost of feed and concentrates are more favourable in the United

States (see figure 268).

LAC: VALUE OF LIVE ANIMALS EXPORTS (Millions of dollars)Figure 268

SOURCE: FAOSTAT 2004.

20021990

Guyana

Barbados

Venezuela

Peru

Paraguay

El Salvador

Brazil

Costa Rica

Colombia

Argentina

Chile

Panama

Nicaragua

Mexico

50 100 150 200 250 300 350 400

10 20 30 40 50 60

Haiti

Bahamas

Dominica

Grenada

Saint Vincent and the Grenadines

Suriname

Ecuador

Antigua and Barbuda

Saint Lucia

Bolivia

Jamaica

Saint Kitts and Nevis

Trinidad and Tobago

Honduras

Belize

Cuba

Dominican

Uruguay

Guatemala

283

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

284

SOURCE: FAO/RLC based on FAOSTAT.

LAC: QUANTUM, UNIT VALUE AND VALUE INDEX OF LIVESTOCK- PRODUCTSIMPORTS (1995=100)

Figure 269

Quantum index

Value index

Unit value index

Imports

Imports of livestock products have grown steadily since 1983, in particular reflecting the rapid

increase in Mexican imports of bovine meat and dairy products. During the 1990s, the pace of

growth accelerated somewhat, reaching an annual average rate of 5.2% over the last decade.

Growth was almost exclusively due to larger import volumes, since 1987 international prices

have shown small fluctuations that cancel each other out in the medium term (see figure 269).

Until the 1980s, milk accounted for about half of the regional total livestock-product imports.

During that decade, as a result of the economic crisis and a contraction in both income and

consumption, livestock product imports declined or stagnated in most countries, with only

Mexico and Brazil displaying significant growth. On the contrary during the 1990s, in contrast,

an expansion in milk imports was supported by growth in bovine meat trade, partly explained

by sub-regional trade within MERCOSUR. Imports of pig meat also grew, albeit to a lesser extent

(see figure 270).

As a consequence, livestock imports diversified. The share of dairy products and eggs fell from

55% to 39%; the share of bovine meat imports grew from 20% to 30%, and that of pig meat from

5% to 11% (see figure 271).

During the past decade, while Mexican imports recorded larger absolute amounts, livestock-

product imports grew rapidly in most countries in relative terms, except for Brazil where

domestic supply expanded vigorously. Although Mexican imports continued to grow fastest,

in relative terms there was also rapid growth in Chile, Uruguay and Central American countries.

There were also significant increases in the Caribbean, particularly in Guyana, Suriname and

Haiti (see figure 272).

20

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

40

60

80

100

120

140

LAC: IMPORTS OF LIVESTOCK PRODUCTS (Millions of dollars)Figure 270

SOURCE: FAOSTAT.

Goat meat

Animal fibres

Sheep meat

Live animals

Pig meat

Bovine meat

Dairy products and eggs

Livestock subproducts

Poultry meat

Other meats

2.2502.0001.7501.5001.2501.000

750500250

1980 1990 2001 2002

285

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

SSOURCE: FAO/RLC based on FAOSTAT.

LAC: COMPOSITION OF LIVESTOCK IMPORTS (Percentage)Figure 271

1990

Dairyproductsand eggs

55%

Bovinemeat20%

Live animals 9%Poultry meat 8%

Animal fibre 2%

Sheep meat 1%

Pig meat 5%Goat meat 0%

2002

Live animals 7%

Bovinemeat30%

Dairyproductsand eggs

39%

Pigmeat11%

Animal fibre 1%

Sheep meat 2%

Goat meat 0%

Poultry meat 10%

286

Geographic distribution of livestock importDuring the decade, the relative importance of countries as destinations for livestock-product

imports changed significantly. The share going to Mexico grew substantially, from 46% to 58%,

thereby accentuating the heavy concentration of livestock-product imports in this country. The

share received by Central American countries more than doubled (except in Nicaragua), from

4% to 9%. The share of imports received by southern cone countries also grew, largely as a result

of trade between MERCOSUR members. In contrast, the largest relative decline occurred in

Brazil, where the share of livestock-product imports plummeted from 19% to 7% (see figure 273).

In 2002, nearly three quarters of the regional bovine meat imports went to Mexico (72%), while

the remainder was widely distributed among the other countries. In relative terms, there were

particularly large import shares in Chile (10%), El Salvador (3%), Bahamas (1%), Barbados (0.4%)

and Jamaica (1%) (see figure 274).

VALUE OF LIVESTOCK IMPORTS (Millions of dollars)Figure 272

SOURCE: FAOSTAT 2004.

20021990500 1,000 1,500 2,000 2,500 3,000 3,500

Uruguay

Honduras

Colombia

Jamaica

Peru

Guatemala

Venezuela

El Salvador

Chile

Cuba

Brazil

Mexico

10 20 30 40 50 60 70 80

Saint Kitts and Nevis

Antigua and Barbuda

Dominica

Paraguay

Belize

Suriname

Bolivia

Saint Vincent and the Grenadines

Grenada

Ecuador

Guyana

Nicaragua

Barbados

Saint Lucia

Costa Rica

Panama

Argentina

Bahamas

Haiti

Trinidad and Tobago

Dominican Republic

287

INT

ER

NA

TIO

NA

L T

RA

DE

IN A

GR

ICU

LTU

RA

L P

RO

DU

CT

S

SOURCE: FAO/RLC based on FAOSTAT.

LAC: SUBREGIONAL SHARES OF LIVESTOCKS IMPORTS (Percentage)Figure 273

1990

CARICOM 11%

Brazil19%

Southern Cone 2%

Mexico46%

CentralAmerica 4%

Mexico58%

Latin Caribbean6%

CARICOM 7%

Brazil 7%

2002

LatinCaribbean

12%

Andeancountries 6%

Central America9%

Andeancountries 7%

Southern Cone 6%

LAC: VALUE OF BOVINE MEAT IMPORTS (Millions of dollars)Figure 274

SOURCE: FAOSTAT 2004.

20021990

200 400 600 800 1,000 1,200

Honduras

Colombia

Saint Lucia

Barbados

Argentina

Cuba

Venezuela

Trinidad and Tobago

Guatemala

Peru

Bahamas

Jamaica

Costa Rica

El Salvador

Brazil

Chile

Mexico

Saint Kitts and Nevis

Paraguay

Haiti

Guyana

Antigua and Barbuda

Belize

Dominica

Bolivia

Nicaragua

Suriname

Ecuador

Panama

Grenada

Dominican Republic

Saint Vincent and the Grenadines

Uruguay

1 2 3 4

288

LAC: VALUE OF IMPORTS OF DAIRY PRODUCTS AND EGGS (Millions of dollars)Figure 275

SOURCE: FAOSTAT 2004.

20021990

100 200 300 400 500 600 700 800

Costa Rica

Panama

Guyana

Chile

Haiti

Dominican Republic

Colombia

Honduras

Trinidad and Tobago

Jamaica

Peru

Guatemala

El Salvador

Cuba

Venezuela

Brazil

Mexico

5 10 15 20

Saint Kitts and Nevis

Uruguay

Suriname

Dominica

Saint Vincent andthe Grenadines

Antigua and Barbuda

Grenada

Bolivia

Paraguay

Belize

Ecuador

Argentina

Bahamas

Barbados

Nicaragua

Saint Lucia

Imports of dairy products were widely distributed throughout the region, with Mexico the

leading importer (40%) partly because of the size of its economy. Large shares were also absorbed

by Cuba (5%), El Salvador and Guatemala (4% each), Barbados and Bahamas (0.8% each), Guyana

(1%) and Saint Lucia (0.9%) (see figure 275).

Over half of all poultry-meat imports in the region went to Mexico (55%). In relative terms, there

were large-scale imports of chicken in Cuba (16%), Guatemala (4%), Bahamas (2%), Saint Lucia

(1.6%), Grenada (1%) and Antigua and Barbuda (0.7%) (see figure 276).

In the region Mexico was the leading importer of pig meat (72%), while imports to Cuba were

also large in relative terms (5%).

289

INT

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LAC: VALUE OF POULTRY MEAT IMPORTS (Millions of dollars)Figure 276

SOURCE: FAOSTAT 2004.

20021990

50 100 150 200 250 300

Trinidad and Tobago

Dominica

Antigua and Barbuda

Honduras

Peru

Grenada

Saint Vincent and the Grenadines

Panama

Suriname

Saint Lucia

Bahamas

Jamaica

Haiti

Colombia

Guatemala

Cuba

Mexico

1 2 3 4 5 6 7 8

Venezuela

Chile

Paraguay

Belize

Uruguay

Bolivia

Nicaragua

Brazil

Dominican Republic

Argentina

Ecuador

El Salvador

Costa Rica

Guyana

Saint Kitts and Nevis

Barbados

D. INTERNATIONAL TRADE FISHERY PRODUCTS

The regional international trade in fishery products is growing strongly. In 2001, external sales

of these products amounted to almost US$ 7 billion, accounting for 11% of the sector’s total

exports and 2% of the total value of goods exported by the all the countries of the region. In

several cases the share of fishery products in total merchandise exports was even larger: Panama

(31%), Peru (16%), Ecuador (15%), Guyana (13%), Bahamas (11%) and Chile (11%).

Considering fishery imports are negligible in all countries, accounting, as a regional average,

for just 0.3% of total goods imported in 2001, and 3% of sectoral imports. Fishery products

represented 1% of total merchandise imports in four countries only (Barbados, Grenada, Saint

Kitts and Nevis and Saint Lucia). Outside of the island states, the largest share of total external

purchases was in Colombia (0.6%).

As a result, the fishery trade balance is large and growing, based almost entirely on the value

of exports (see figure 277).

290

LAC: BALANCE OF TRADE OF THE FISHERY SECTOR (Millions of dollars)Figure 278

1980 1990 2001

SOURCE: FISHSTAT plus.a/ Salmons.

Aquatic animals and mammals

Cephalopods

Crustaceans

Molluscs

Other marine products

Demersal fish

Diadromousa and freshwater fish

Pelagic fish

2.100

1.600

1.100

600

100

-400

SOURCE: FISHSTAT plus.

LAC: EXTERNAL TRADE IN FISHERY PRODUCTS (Millions of dollars)Figure 277

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

Trade balance

Exports value

Imports value

The most significant change in the composition of the regional surplus resulted from the

development of salmon production in Chile starting in 1988. In the 1980s the structure of

the regional trade surplus had been based on broadly the same components, mainly crustaceans

(shrimp) and pelagic fish (canned and in the form of fish meal). During the 1990s the

contribution to the trade surplus made by diadromous and freshwater fish (salmonidae) grew

exceptionally strongly, as Chile’s salmon trade surplus grew from US$ 7 million to US$ 940

million between 1987 and 2001. At the same time, the regional trade surplus in crustaceans,

pelagic fish and other marine products also expanded. Consequently, the regional trade

surplus in fishery products as a whole widened from US$ 2.8 billion in 1990 to US$ 5.9 billion

in 2001 (see figure 278).

291

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Partly due to the low level of consumption per capita, the region has a surplus in all product

categories. In 2001, the main components of the subsectoral trade surplus continued to be

crustaceans and pelagic fish (34% and 25%, respectively), with diadromous fish accounting for

another 14% (see table 57).

Chile produces the leading share of the fishery trade surplus, mainly as result of its remarkable

development of salmon farming, but also with trade surpluses in pelagic fish, molluscs,

marine animals and seaweed. Peru also has a large share, based essentially on its trade

surplus in pelagic fish (60% of the regional surplus in this category). The surplus in Argentina

is based on crustaceans, demersal fish and cephalopods (octopus and squid); whereas that

in Ecuador is largely the outcome of sales of canned crustaceans and pelagic species.

Many of the island states have trade deficits in fishery products, thereby revealing a demand

not satisfied by domestic supply in a productive sector of particular importance given the

situation of these countries (see figure 279).

Table 57

Product Exports Imports Trade balance Growth rate (%)

(Thousands of dollars) (Thousands of dollars)

TOTAL 6,949 100.0 6.4 8.5

1,785 329 1,455 31.9 3.9 8.0

309 152 156 14.8 1.1 6.2

969 126 842 12.2 17.6 31.9

2,119 75 2,043 4.8 13.7

220 27 192 13.9 16.7

219 29 189 7.3 13.5

44 1 43 -1.7 8.9

69 10 58 1.0 1.0 13.8 15.5

1,212 280 932 27.1 8.6 5.2

Share (%)

SOURCE: FAO/RLC based on FISHSTAT plus.a/ Salmons.

(1990-2001)

Exports Imports Exports Imports

LAC: EXTERNAL TRADE IN FISHERY PRODUCTS 2001

Pelagic fish

Demersal f ish

Diadromousa and freshwater fish

Crustaceans

Cephalopods

Molluscs

Aquatic animals and mammals

Aquatic plants

Other marine products

5,9151,033

17.4

25.7

100.0

4.5

13.9

3.2 2.7

0.6 0.1

30.5 7.3

3.2 2.9

292

Exports

Fishery exports have maintained their pace of growth over the last two decades; expanding by

6.0% per year in the 1980s and by 6.4% in the 1990s. Nonetheless, there have been significant

changes in the composition of exports. Until 1990, 69% of external sales corresponded to the

two traditionally important groups in the region’s fishery exports, namely crustaceans and

pelagic fish (basically in the form of fish meal). By 2001, in contrast, those two groups accounted

for just 57%, while diadromous fish had expanded to 14% of the total (see figure 280).

LAC: BALANCE OF TRADE IN FISHERY PRODUCTS 2001, BY COUNTRY(Millions of dollars)

Figure 279

SOURCE: FISHSTAT plus.

20011990

Dominican RepublicJamaica

BarbadosBolivia

Saint LuciaHaiti

Saint Kitts and NevisParaguayDominica

Antigua and BarbudaSaint Vincent and the Grenadines

BelizeGrenada

Trinidad and TobagoSuriname

Guatemala

BrazilEl Salvador

CubaNicaragua

GuyanaBahamas

VenezuelaUruguay

HondurasCosta RicaColombia

PanamaMexico

EcuadorArgentina

PeruChile

-100 400 900 1400 1900

293

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LAC: EXPORTS OF PELAGIC FISH (Millions of dollars)Figure 281

SOURCE: FISHSTAT plus.

1980 1990 2001

EcuadorOthers

Peru

Chile900800700600500400300200100

The growth of salmon exports has been the most significant change in the region during the

period. In 1997, US$ 15 billion worth of diadromous and freshwater fish were exported; by 2001,

the figure had risen to US$ 970 billion. Practically all of this increase corresponded to salmon

exports from Chile (US$ 937 million).

Exports of the pelagic fish were concentrated mainly in Peru and Chile (essentially fish meal).

During the 1980s, these exports grew rapidly in both countries, especially in Chile; over the

past decade, Chilean exports of pelagic fish stabilized, while the category grew exponentially

in Peru (see figure 281).

SOURCE: FAO/RLC based on FISHSTAT plus.

LAC: COMPOSITION OF FISHERY EXPORTS (Percentage)Figure 280

1990

Cephalopods 1%

Crustaceans38%

Demersal fish 9%Other marineproducts 13%

2001

Pelagicfish31%

Molluscs 3%

Aquatic animalsand mammals 0.1%

Aquatic plants 1%

Diadromousa andfreshwater fish 4%

Crustaceans31%

Pelagicfish26%

Cephalopods 3%

Aquatic animalsand mammals 1%

Aquatic plants 1%

Diadromous andfreshwater fish 14%

Demersal fish 4%Other marineproducts 17%

Molluscs 3%

a/ Salmons.

294

Crustacean exports had grown rapidly in Ecuador during the 1980s; but export growth was halted

by serious diseases that attacked shrimp farming in that country, and external sales had declined

by 2001. On the contrary, there were exceptionally large increases in Argentina and Mexico, which

regained their 1980 levels, but on a different base (see figure 282).

The geographic distribution of mollusc exports also changed dramatically during the last decade,

growing strongly in Chile and, to a lesser extent, in Argentina and Peru. Mollusc exports in

Mexico declined, however (see figure 283).

LAC: EXPORTS OF CRUSTACEANS (Millions of dollars)Figure 282

1980 1990 2001

SOURCE: FISHSTAT plus.

Mexico

Argentina

ColombiaHonduras

Panama

Others

Venezuela Ecuador

Brazil600

500

400

300

200

100

LAC: EXPORTS OF MOLLUSCS (Millions of dollars)Figure 283

1980

140

120

100

80

60

40

20

Others

1990 2001

SOURCE: FISHSTAT plus.

Peru Chile

Argentina

Mexico

295

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Cephalopod exports also grew significantly. In 1990, the external sales in this category amounted

to US$ 43 million, and by 2001 the figure had reached US$ 220 million, most of which (US$ 149

million) represented exports from Argentina.

Country shares in fishery exports

Despite significant changes in the composition of exports, the different countries have seen only

minor changes in their regional shares. The change in the structure of fishery exports from Chile

did not cause a major change in this country’s share of total regional exports (see figure 284).

LAC: IMPORTS OF FISHERY PRODUCTS (Millions of dollars)Figure 285

1980 1990 2001

SOURCE: FISHSTAT plus.a/ Salmons.

400

300

200

100

Diadromousa and freshwater fish

Demersal fish

Other marine productsMolluscs

Cephalopods

Aquatic animals and mammals

Crustaceans Pelagic fish

Aquatic plants

SOURCE: FAO/RLC based on FISHSTAT plus.

LAC: COUNTRY SHARES OF FISHERY EXPORTS (Percentage)Figure 284

1990

Chile28%

Ecuador14%

Peru12%

Mexico11%

Others17%

Argentina10%

Brazil 4%

Colombia 4%

2002

Chile28%

Others14%

Argentina14%

Mexico10%

Peru16%

Ecuador10%

Brazil 4%

Panama 4%

Imports

In Latin America and the Caribbean, fishery imports essentially correspond to intra-regional trade

flows and generally involve small amounts. Until 1992, annual import values were below US$ 500

million, but by 2001 they had risen to US$ 1 billion. The increase occurred in the three categories that

were already relatively important, namely pelagic fish (mostly canned and fish meal), demersal fish

(hake or similar), and “other products” (mainly frozen or canned fish); and also among the diadromous

fish category, especially reflecting intra-regional trade in Chilean salmon (see figure 285).

296

Balanza Comercial

Valor de las Exportaciones

Valor de las Importaciones

SOURCE: FAO/RLC based on FAOSTAT.

LAC: EXTERNAL TRADE OF THE FORESTRY SECTOR (Millions of dollars)Figure 286

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

2

-2.000

-1.000

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

Trade balance

Value of Exports

Value of Imports

E. FORESTRY PRODUCTS

Balance of trade in forestry products

In 2002, forestry exports from Latin America and the Caribbean accounted for 8% of exports

in the broadly defined agricultural sector and 1.5% of total goods exported. Imports represented

17% of the sectoral total, and 1.6% of total merchandise imports. From 1998 to 2002, exports

have held steady at just over US$ 5 billion, and imports at around US$ 6 billion, thereby generating

a deficit of roughly US$ 1 billion per year41.

The figures for international trade in forestry products have a small weight in the regional

average; but their relative importance is greater in certain countries. In Chile, for example,

forestry products account for about 8% of external sales, in Uruguay and Guyana about 6%, and

in Brazil 5%.

During the 1980s, forestry exports grew by an average of 7.3% per year, especially driven by

Brazilian exports of manufactured products (pulps and fibres, paper and paperboard), while

Chilean exports also grew in smaller amounts. During that decade, characterized by economic

recession and shrinking domestic demand across most of the region, imports did not grow at

all, and actually declined (-1.2% annually), such that the initial deficit of US$ 1 billion was steadily

absorbed and by the end of the decade there was a surplus of US$ 300 million. During the 1990s,

the import side expanded rapidily at the rate of 7.6% per year, driven mainly by an increase in

Mexican paper imports. In addition, the pace of export growth eased to 5.1% per year, following

a slowdown in sales from Brazil and Chile especially after 1995. Consequently, the balance

declined again and, as mentioned above, the region has recorded an annual deficit of around

US$ 1 billion since 1998 (see figure 286).

41 Exports of forestry products are estimated at over US$ 7 billion in 2003.

297

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SOURCE: FAO/RLC based on FAOSTAT.

LAC: COUNTRY SHARE OF FORESTRY IMPORTS AND EXPORTS 2002 (Percentage)Figure 287

Chile30.7%

Mexico 3.6%

Uruguay 2.1%

Brazil48.6%

Others 5.9%

Colombia 1.9%

Peru 2.0%

Argentina 5.2%

Exports Imports

Mexico37.5%

Brazil12.9%

Others13.5%

Colombia 5.5%

Argentina 4.6%

Costa Rica 4.4%

Chile 4.2%

Peru 4.0%

Venezuela 3.8%

DominicanRepublic 3.5%

Guatemala 3.3%

El Salvador 2.6%

As much as 80% of the region’s forestry exports originate in Brazil and Chile (49% and 31%,

respectively), but imports are more widely distributed. Mexico is the leading importer, accounting

for 38% of the total (see figure 287).

The trade balance is concentrated in a few of the countries of the region, with most of the surplus

generated by Brazil and Chile, although Uruguay and Guyana also show significant national

surpluses. The deficit is concentrated in Mexico in absolute terms; but is also relatively large

in Saint Kitts and Nevis, and Saint Vincent and the Grenadines, as well as in Central American

countries except Nicaragua.

The overwhelming majority of the countries run trade deficits in forestry products; but for the

region as a whole these are compensated by the surpluses generated by Chile and Brazil. Chile

runs a surplus in all categories, while Brazil compensates for its deficit in newsprint with a

surplus in the other forestry product categories. This country is also the world’s largest producer

and exporter of short-fibre paper, which is manufactured from eucalyptus. There are also four

countries that are almost in balance or have small surpluses in their forestry-product trade,

albeit involving much lower figures than those of Brazil or Chile: Uruguay, Guyana, Argentina

and Suriname (see figure 288).

As exports are very small in Central America and the Caribbean, import trends control the level

of the deficit, which represents a significant proportion of overall merchandise imports in both

of these subregions. External purchases of forestry products in Central America accounted for

2.8% of total merchandise imports in 2002, 1.9% in the Latin Caribbean and in 2.2% CARICOM

(see figures 289, 290 and 291).

298

LAC: BALANCE OF TRADE IN FORESTRY PRODUCTS BY COUNTRY (Millions of dollars)Figure 288

SOURCE: FAO/RLC based on FAOSTAT.

20021990-2,000 -1,500 -1,000 -500 0 500 1,000 1,500 2,000

Mexico

Costa Rica

Colombia

Dominican Republic

Venezuela

Guatemala

El Salvador

Peru

Trinidad and Tobago

Jamaica

Panama

Cuba

Ecuador

Honduras

Barbados

Saint Vincent and the Grenadines

Bahamas

Haiti

Saint Lucia

Bolivia

Paraguay

Antigua and Barbuda

Nicaragua

Dominica

Saint Kitts and Nevis

Belize

Suriname

Argentina

Guyana

Uruguay

Chile

Brazil

SOURCE: FAOSTAT.

CENTRAL AMERICA: EXTERNAL TRADE OF THE FORESTRY SECTOR (Millions of dollars)Figure 289

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

199

419

95

199

619

97

199

819

99

200

020

01

200

2

-400

-200

0

-600

-800

200

400

600

800

Value of imports

Trade balance

Value of exports

299

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The regional relatively small trade balance stems from a deficit in paper and paperboard which

more than cancels out the surplus in all the other categories, in both primary and processed

products (see table 58).

SOURCE: FAOSTAT.

CARICOM: EXTERNAL TRADE OF THE FORESTRY SECTOR (Millions of dollars)Figure 291

198

019

81

198

219

83

198

419

85

198

619

87

198

819

89

199

019

91

199

219

93

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419

95

199

619

97

199

819

99

200

020

01

200

2

-200

-100

0

-300

100

200

300

400

Value of imports

Trade balance

Value of exports

SOURCE: FAOSTAT.

LATIN CARIBBEAN: EXTERNAL TRADE OF THE FORESTRY SECTOR (Millions of dollars)Figure 290

-400

198

019

81

198

219

83

198

419

85

198

619

87

198

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89

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019

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819

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01

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0

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100

200

300

400

Value of imports

Trade balance

Value of exports

300

Exports

During the 1980s, the main categories exported were pulp and fibres, paper and paperboard,

and sawn wood; since the last decade the exports of wood panels also became important (see

figure 292).

Only manufactured products (pulps and fibres, and paper and paperboard) increased in the

1980s, mainly reflecting the buoyancy of paper exports from Brazil; foreign sales of pulp and

fibre expanded in this country and in Chile.

During the 1990s, pulps and fibres were the most dynamic category, mainly in Chile (where

exports in this category now almost match those of Brazil); these two countries account for

practically all of the regional total.

The 1990s also saw the start of a prosperous export process in non-timber forestry products,

valued at over US$ 250 million for 2002, mainly in Brazil, Peru, Bolivia and Argentina.

Exports of paper and paperboard were weaker, mainly because Brazilian sales slumped by nearly

half. This decrease was partly offset by a stronger export performance in other countries—Chile

particularly, but also Mexico and Colombia.

LAC: EXTERNAL TRADE OF THE FORESTRY PRODUCTS (2002)Table 58

Exports Imports Trade balance Share (%) Growth rate (%) (1990-02)

Product Millions of US$ Exports Imports Exports Imports

Total 5,222 5,506 -283 100.0 100.0 5.1 7.6

Paper and paperboard 933 3,728 -2,795 17.9 67.7 0.9 8.5

Pulp and fibres 2,096 739 1,357 40.1 13.4 7.1 4.3

Sawn wood 1,233 529 704 23.6 9.6 6.2 4.6

Wood based panels 837 487 349 16.0 8.9 -2.5 5.0

Industrial roundwood 121 20 101 2.3 0.4 8.4 11.7

SOURCE: FAO/RLC based on FAOSTAT 2004.

LAC: VALUE OF FORESTRY EXPORTS (Millions of dollars)Figure 292

1980

2.500

2.000

1.500

1.000

500

Industrial roundwood

1990 2002

SOURCE: FAOSTAT.

Wood based panels Sawn wood

Pulp and fibres

Paper and paperboard

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Most of the increase in exports of panels was generated by Brazil; Chilean exports of this

category grew rapidly, but from a lower initial base.

Sawn wood export were strong in Brazil and Chile, but those from Honduras, Mexico, Argentina

and other countries were also significant.

Geographic distribution of forestry exports

Forestry exports in Latin America and the Caribbean are heavily concentrated in Brazil and

Chile. In recent years other countries have recorded export growth in different products, albeit

on a smaller scale. External sales of paper and paperboard increased in Mexico, Colombia,

Argentina and Uruguay; foreign sales of wood panels were also significant in Argentina and

Peru; as were sawn wood exports in Peru, Argentina, Honduras and Mexico. Nonetheless, export

growth in Brazil and Chile has been much more dynamic, and regional exports in this subsector

are continuing to concentrate in these two countries (see figures 293, 294, 295, 296 and 297).

LAC: VALUE OF FORESTRY EXPORTS (Millions of dollars)Figure 293

SOURCE: FAOSTAT 2004.

20021990

500 1,000 1,500 2,000 2,500 3,000

Cuba

Bahamas

Trinidad and Tobago

Belice

Suriname

El Salvador

Panama

Nicaragua

Costa Rica

Guatemala

Bolivia

Guyana

Paraguay

Honduras

Venezuela

Ecuador

Colombia

Peru

Uruguay

Mexico

Argentina

Chile

Brazil

200 400 600 800 1,000

Dominica

Barbados

Antigua and Barbuda

Saint Kitts and Nevis

Saint Vincent andthe Granadinas

Saint Lucia

Jamaica

Grenada

Dominican Republic

Haiti

302

LAC:VALUE OF EXPORTS OF PAPER AND PAPERBOARD (Millions of dollars)Figure 294

SOURCE: FAOSTAT 2004.

20021990

Guatemala

Costa Rica

Panama

El Salvador

Peru

Venezuela

Uruguay

Argentina

Colombia

Mexico

Chile

Brazil

100 200 300 400 500 600

LAC: VALUE OF EXPORTS OF PULP AND FIBRES (Millions of dollars)Figure 295

SOURCE: FAOSTAT 2004.

20021990

Dominica

Uruguay

Belize

Mexico

Argentina

Chile

Brazil

200 400 600 800 1,000 1,200

303

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LAC: VALUE OF EXPORTS OF WOOD-BASED PANELS (Millions of dollars)Figure 296

SOURCE: FAOSTAT 2004.

20021990

100 200 300 400 500

Cuba

Bolivia

Guatemala

Peru

Colombia

Ecuador

Chile

Brazil

Argentina

Paraguay

Costa Rica

Mexico

Nicaragua

Suriname

LAC: VALUE EXPORTS OF SAWN WOOD (Millions of dollars)Figure 297

SOURCE: FAOSTAT 2004.

20021990

100 200 300 400 500 600

Trinidad and Tobago

El Salvador

Belize

Panama

Costa Rica

Suriname

Colombia

Venezuela

Guatemala

Nicaragua

Uruguay

Guyana

Paraguay

Ecuador

Bolivia

Mexico

Honduras

Argentina

Peru

Chile

Brazil

304

Forestry Imports

In the 1980s forestry imports stabilized at around US$ 2 billion, in the midst of a contraction

in domestic demand throughout Latin America and the Caribbean caused by the external

debt crisis and ensuing adjustment programmes. During the 1990s, on the other hand,

forestry imports grew vigorously (7.6%), thanks especially to increases in paper imports in

Mexico, Brazil, Argentina, Chile, Peru, Dominican Republic and the Central American

countries (see figure 298).

Having hardly grown at all during the 1980s (0.9% per year), imports of paper and paperboard

expanded by 14% in 1991 and by a further 32% in 1992; after which they maintained strong

growth until 1997 before stabilizing, thereby demonstrating a high income-elasticity of demand.

Although the growth in paper imports was quite widespread in the region, it was mostly

concentrated in Mexico and in Central America (see figure 299).

LAC: VALUE OF FORESTRY IMPORTS (Millions of dollars)Figure 298

1980

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

Industrial roundwood

1990 2002

SOURCE: FAOSTAT 2004.

Wood based panels Sawn wood

Pulp and fibres

Paper and paperboards

305

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LAC: VALUE OF IMPORTS OF PAPER AND PAPERBOARD (Millions of dollars)Figure 299

1980

1,400

1,200

1,000

800

600

400

200

Brazil

MexicoCARICOM

Latin Caribbean Southern Cone

Andean countriesCentral America

1990 2002

SOURCE: FAOSTAT.

LAC: VALUE OF IMPORTS OF PULP AND FIBRES (Millions of dollars)Figure 300

1980

350

300

250

200

150

100

50

Brazil

MexicoCARICOM

Latin Caribbean Southern Cone

Andean countriesCentral America

1990 2002

SOURCE: FAOSTAT 2004.

Imports of the other processed product, pulp and fibres, were smaller in amount and concentrated

exclusively in Mexico. During the 1990s, the latter imports in this category increased, as did

those of Brazil, Colombia and Venezuela (see figure 300).

306

LAC: VALUE OF IMPORTS OF WOOD-BASED PANELS (Millions of dollars)Figure 301

1980

Brazil

MexicoCARICOM

Latin Caribbean Southern Cone

Andean countriesCentral America

1990 2002

2,500

2,000

1,500

1,000

500

SOURCE: FAOSTAT 2004.

250

200

150

100

50

LAC: VALUE OF IMPORTS OF SAWN WOOD (Millions of dollars)Figure 302

Brazil

MexicoCARICOM

Latin Caribbean Southern Cone

Andean countriesCentral America

SOURCE: FAOSTAT 2004.

1980 1990 2002

Imports of primary forest products are relatively insignificant. Purchases of wood panels

grew rapidly in Mexico from 1999 onwards, since when have accounted for half of the region’s

total imports in this category, which expanded at annual rate of 5% during the last decade

(see figure 301).

The other category in which regional imports achieved significant levels is sawn wood, having

expanded by 4.6% per year over the last decade, boosted particularly by higher imports in

Mexico, Jamaica and the Bahamas (see figure 302).

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The heavy concentration of forestry imports in Mexico is also reflected in each of the specific

product categories (see figures 304, 305, 306 and 307).

Geographic distribution of forestry-product imports

External purchases by the leading importer of forestry products, Mexico, have continued to

grow rapidly during the last decade, as has also occurred in most countries of the region. Only

in Cuba, Ecuador, Panama, Bahamas, Belize and Antigua and Barbuda have forestry imports

stagnated or declined (see figure 303).

LAC: VALUE OF FORESTRY IMPORTS (Millions of dollars)Figure 303

SOURCE: FAOSTAT 2004.

20021990

500 1,000 1,500 2,000 2,500

Saint Kitts and NevisSaint Lucia

GuyanaSaint Vincent and the Grenadines

Suriname

BoliviaDominica

Belice

NicaraguaAntigua and Barbuda

Haiti

BarbadosParaguay

El Salvador

BahamasUruguay

HondurasTrinidad and Tobago

JamaicaGuatemala

Dominican Republic

Costa RicaArgentina

Chile

PanamaPeru

Ecuador

ColombiaCuba

Venezuela

BrazilMexico

10 20 30 40

Saint Kitts andNevis

Saint Lucia

Guyana

Saint Vincent andthe Grenadines

Suriname

Bolivia

Dominica

Belice

Nicaragua

Antigua andBarbuda

Haiti

Barbados

308

LAC: VALUE OF IMPORTS OF PULP AND FIBRES (Millions of dollars)Figure 305

SOURCE: FAOSTAT 2004.

2002199050i 100 150 200 250 300 350

Guatemala

Panama

Cuba

Costa Rica

Uruguay

Ecuador

Peru

Argentina

Venezuela

Colombia

Brazil

Mexico

LAC: VALUE OF IMPORTS OF PAPER AND PAPERBOARD (Millions of dollars)Figure 304

SOURCE: FAOSTAT 2004.

20021990

200 400 600 800 1,000 1,200 1,400

Mexico

Colombia

Ecuador

Brazil

Venezuela

Chile

Panama

Cuba

Costa Rica

Guatemala

Peru

Argentina

Dominican Republic

Jamaica

Trinidad and Tobago

Honduras

Uruguay

Paraguay

El Salvador

Nicaragua

Haiti

Bahamas

Barbados

Bolivia

Suriname

Belice

Guyana

Dominica

Saint Vincent and the Grenadines

309

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LAC: VALUE OF IMPORTS OF WOOD BASED PANELS (Millions of dollars)Figure 306

SOURCE: FAOSTAT 2004.

20021990

500 1,000 1,500 2,000 2,500

Bahamas

Belize

Dominica

Argentina

Honduras

Saint Vincent and the Grenadines

Uruguay

Barbados

Costa Rica

El Salvador

Panama

Trinidad and Tobago

Cuba

Dominican Republic

Peru

Jamaica

Venezuela

Colombia

Brazil

Mexico

310

LAC: VALUE OF IMPORTS OF SAWN WOOD (Millions of dollars)Figure 307

SOURCE: FAOSTAT 2004.

20021990

50 100 150 200 250

Dominica

Panama

Haiti

Antigua and Barbuda

Peru

Uruguay

Argentina

Colombia

Barbados

Venezuela

Cuba

Bahamas

Saint Vincent and the Grenadines

El Salvador

Trinidad and Tobago

Jamaica

Brazil

Dominican Republic

Mexico

The development of Latin American and Caribbean forestry trade has been strongly linked to

the pace of economic growth, and demonstrates high import elasticity with respect to income.

Progress has been driven by changes in legal and institutional frameworks, supported by

economic integration and technical training. The forces with potential to fuel this trade in the

future include the development of new financial mechanisms and productive chains.

The countries of Latin America and the Caribbean face common problems in forestry trade

development—mainly high levels of deforestation, illegal felling, forest fires and pests,

compounded by high production costs stemming from institutional and infrastructural

shortcomings.

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V. CONCLUSIONS AND POLICY ORIENTATIONS

314

A. INTRODUCTION

This final chapter discusses the trends and challenges analysed above, in order to draw lessons

and policy orientations. The intention is not to conclude with specific recommendations or “recipes”

that can be applied across the board to solve the problems identified; for each society will take the

decisions as best sulted to their country. Instead the aim is to draw on the analysis of the foregoing

chapters to contribute to a collective reflection about the key challenges that agriculture faces in

Latin American and Caribbean countries, and about the orientations of agricultural policy, its

chief characteristics, possible new instruments and how to make them viable; changes in agents

and relations, and other elements that are potentially useful in defining plans of action and

programmes for agricultural and rural development.

B. THE GLOBAL CHALLENGE: GROWTH WITH EQUITY

Over the past 25 years, the countries of Latin America and the Caribbean have endured severe

crises and made profound structural reforms in their economies; they have also undergone far-

important political change. This process has been anything but linear, continuous and

homogeneous; in several cases there have been major setbacks and repeated recessions. The

process has also not been homogeneous; the diversity of experience during this period embraces

much of the spectrum ranging between economic orthodoxy and heterodox alternatives laced

with pragmatism. The forms of the various cases have been varied, and even today there are

huge differences between individual countries. Nonetheless, in the final analysis, there is clearly

a high degree of convergence and even an element of synchronization in the changes that are

unfolding. Adjustment for economic stabilization and the main structural reform processes

have both been widespread across the region (see chapters I and II).

Although this is partly explained by the relatively common initial level of development among the

Latin American and Caribbean economies, constraints arising from the international setting have

also played an increasingly important role. Based on extraordinary technical progress, particularly

in telecommunications and information technology, economic globalization has emerged as the

defining feature of the direction of change in the socioeconomic development process and in future

prospects. This reflects not only the rapidly growing importance of international trade, which now

accounts for a quarter of world output, but also the transnationalization of economic and productive

processes themselves, involving production-processing-consumption chains that transcend national

borders, and capital flows that offer unparalleled opportunities for development financing and

broad scope for productive investment. But this also entails high levels of uncertainty, vulnerability

and instability.

Government policies are becoming increasingly homogeneous, both for structural reasons and

because of international commitments and competitive demands. Moreover, private enterprises,

which carry out activities are heavily influenced by the globalization of financial and trade

circuits, tend to pursue broadly similar strategies.

315

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Economic openness, trade and financial liberalization, privatization, deregulation, the priority

given to macroeconomic fundamentals, and emphasis on the role of the market in allocating

productive resources, are all features of the development model that are not only shared by most

countries of the region, but largely reflect a rationale that transcends policy choices.

Notwithstanding the constraints arising from this exogenous backdrop, however, policy

orientations still have considerable scope for action and undeniable relevance, not only in

making the most of the opportunities that arise and minimizing adverse economic impacts,

but also to improve equity, maintain local control over ways of life and preserve cultural identity.

At a time of relatively more favourable prospects in the medium-to-long term, the huge scale

of the challenge facing Latin American and Caribbean countries needs to be recognized. They

need to regain a sustained growth path in a setting that includes highly influential factors that

are beyond their control (requiring strict discipline in resource management); and, at the same

time, urgent needs arising from the huge social deficits that have accumulated through time

can longer be ignored.

As discussed in the preceding chapters, one of the most worrying features of the current

economic paradigm, with negative effects on economic growth and equity alike, is the fact that

a large part of the population tends to be excluded from development processes. While

globalization dissolves borders and fosters multiple linkages in economic growth, the regional

structural heterogeneity breaks these processes up, blocking and distorting resource use and

preventing numerous agents from participating in economic circuits. Ultimately, this excludes

a large part of the population from current streams of progress.

Latin America is the most unequal region in the world; and in recent decades, far from improving,

the regional income distribution has actually become even more concentrated. Worsening

inequality might be understandable if it reflected an initial deepening of market relations in

the move towards a more global economy, since groups with greater capacities can integrate

more efficiently. But trends towards greater concentration have persisted even in countries

where gross domestic product has been growing on a sustained basis for several years. The

current growth model is not leading Latin American countries towards the more equitably

income distributions prevailing in developed countries; on the contrary, high levels of

concentration in the distribution of family income are being perpetuated and are spreading in

the vast majority of the region’s countries.

Children in poor families have less access to opportunities in terms of education, training and

healthcare; and they grow up in depressed economic environments lacking in infrastructure

and services. Economic heterogeneity and transmission of poverty from one generation to the

next are thus the main difficulties in overcoming the structural problems of underdevelopment

and ensuring widespread access to acceptable minimum levels of well-being for the population

at large. It is essential to achieve a development model that eliminates exclusion and generates

employment and income opportunities for the large mass of the population that lives in poverty,

and thus reverse the trend towards exclusion. This does not mean aspiring to a homogeneous

society, which is totally unrealistic, but certainly much greater equality of opportunity than

prevails today.

316

In the last few years, several studies have shown that, far from being mutually exclusive,

economic growth and equity reinforce each other. Resource allocation alternatives that are

exclusive in the short run carry less weight than complementarity in the long term42.

Bottlenecks in human resources, and in physical and service infrastructure, generate

heterogeneity in production, economic polarization, environmental deterioration and social

exclusion, with the result that much of the population is excluded from the progress that

economic growth brings in its wake. Such constraints also hinder efficient exploitation of

national resources, prevent domestic saving from playing a larger role in the financing of

development, and heighten social tensions—thereby also generating a climate of political

instability, social violence and problems of governance, which undermine the potential for

sustained economic growth.

From a medium- and long-term perspective, achieving greater equity is not negatively related

to the pace of economic growth; in fact the two processes are mutually stimulating. Yet, when

differences in access to assets, education, health, services, consumption and citizenship are

perpetuated from one generation to another, the economic growth process produces a polarizing

dynamic that diverges from equal opportunities and continuously widens economic and social

differences, thereby undermining the growth base.

Sustained economic progress requires sustainable use of resources and efficient participation

by the population through democratic institutional arrangements. Moreover, political democracy

needs to be sustained by social democracy; and this, in turn, is only possible in a solidarity-

based society, where equal opportunities contribute to social mobility and coexistence amidst

inevitable inequalities.

The challenge is to address the urgent needs of the majority of the population that lacks

minimum acceptable levels of well-being, while, at the same time, continuing to increase growth

rates in a sustainable manner. These two goals—poverty alleviation and growth—can be targeted

through various concrete policies; but incorporating the population at large into the benefits

of progress, and solving investment needs (with both domestic and external saving) to finance

rapid and sustainable growth, will be at the centre of the region’s development agenda.

42 Bibliography: among other articles“What is the evidence on income inequality and development”, Irman Adelman, California Agricultural ExperimentStation, Giannini Foundation of Agricultural Economics, University of California, April 1989.“Inequality does cause underdevelopment: New evidence”, William Easterly, Center for Global Development, January2002.“New ways of looking at old issues: inequality and growth”, K. Deininger and L. Squire, Journal of Development Economics,vol 57, 1998.“The vicious cycle of inequality in Latin America”, T. L. Karl, October 2002.“Economic Growth and Income Inequality: Reexamining the Links”, K. Deininger and L. Squire, 1998.“Has income distribution really worsened in the South? And has income distribution really worsened between the Northand the South?”, P. Rodas-Martini and L. Cifuentes, Human Development Report, 2001.“Sorpresas distributivas después de una década de reformas: Latinoamérica en los Noventas”, M. Székely and J. L.Londoño, Inter-American Development Bank, 1998.“Income distribution, poverty and social expenditure in Latin America”, J. A. Ocampo, ECLAC Review 65, August 1998.“Possibilities and limitations for the reduction of poverty in Latin America”, Social Panorama of Latin America, 2001-2002, ECLAC, 2002.

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C. COMPONENTS OF DEVELOPMENT POLICY

Simultaneous pursuit of the recovery of sustained economic growth and improvements in equity

require a complex strategy involving: an economic policy designed to promote inclusive development;

a full range of social policies and universal coverage of basic services; human capital support

programmes; institutional development and strengthening of social capital; citizenship rescue

actions that reduce exclusion; and targeted support.

The first condition for reducing poverty and marginality involves the restoration of rapid and

sustained economic growth. Recession or stalled output growth fuels unemployment, diminishes

the capacity and reach of social policies, and undermines opportunities to obtain higher incomes

through self-employment. In such conditions, poverty spreads in the absence of viable strategies

to counteract these negative effects.

Rapid and sustained economic growth is necessary for reducing poverty and exclusion, it is not

sufficient in itself. The current development model is highly polarizing and causes income to

become increasingly concentrated in the most economically privileged segment of the population.

In such conditions, it is hard for corrective mechanisms, such as targeted public spending, to

alter the polarizing effects of income concentration from outside the economic process.

Government measures to promote equity are futile if the production and distribution process

constantly intensifies concentration, and societies reproduce and strengthen polarization.

Economic policy design is a basic tool in the fight against poverty; and in the coming years it

will be necessary to take explicit account of its influence on variables affecting investment and

employment, and to incorporate policy orientations that promote the creation of quality jobs

along with measures to reduce poverty and inequality.

A large proportion of poor and indigent people are excluded from economic processes and the

incentives that stem from national output growth. In addition to an economic policy that

promotes inclusion, complementary social policies are needed to reduce exclusion. Investments

to improve education, health, training and the conditions of social participation among population

groups living in poverty (considering the family unit as a whole in its community surroundings),

along with the development of programmes to expand coverage of social services, are

unquestionable priorities in such policies. People living in conditions of poverty also need

assistance to broaden their access to productive resources.

Achieving efficiency in policy design implementation entails reorganizing productive and

distributive processes, to adapt them to the new development conditions. New types of agents

need to be developed—both public and private—along with new forms of relationship and a better

regulatory framework. This institutional development means more efficient modalities for

gaining access to and using natural resources, markets, financing, and both formal and informal

standards.

Direct, targeted, temporary and transparent support can be provided to respond to current

urgencies, resolve the most serious deficiencies, and avoid cumulative deterioration among

poor families.

Targeted programmes to develop productive capacities among excluded population groups, as a

potential exit from other forms of support that are necessarily temporary.

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The marginality suffered by low-income population groups is often more than economic; as

well as exclusion from goods and labour markets, such groups also tend to be excluded from

social programmes and are affected by a variety of other problems that prevent them from a

normal participation in social life. Accordingly, citizenship rescue programmes are needed

that help this population group participate more fully in social policy decision making.

D. THE AGRICULTURAL AND RURAL DEVELOPMENT POLICY APPROACH

Within this broad strategy, it is essential to recognize that rural-urban polarization still persists

as a fundamental expression of income concentration, inequality of opportunities and the

intergenerational transmission of poverty in Latin American and Caribbean countries. Although

most poor people and nearly half of those who are indigent live in the cities, the impact of

poverty is far greater in rural areas. Two thirds of the rural population live in poverty, and almost

two fifths in conditions of indigence.

In all of the countries of the region, rural exclusion has generated extensive areas of poverty, where

lack of infrastructure, communications and services seriously discourages investment, Severely

fragments development and tends to propagate polarization. The combination of large masses of

rural poor, without training, education or minimum conditions of subsistence, compounded by

the absence of a policy committed to the environmental sustainability of development, has generated

a negative dynamic where poverty and loss of productive potential are becoming increasingly

serious problems across broad areasof different countries of the region, provoking environmental

degradation and disintegration of the national development base.

Broadly speaking, rural areas function as a mechanism for absorbing unemployment and

underemployment, by providing modes of subsistence to population groups that are excluded from

the main currents of the prevailing development model. The rural sector thus serves as a stabilization

factor offering special conditions that combine productive activities with the family unit and

community life, to offer adequate survival strategies based on very low monetary incomes.

The pitiful conditions endured by most of the rural population stand in strong contrast to the

modernity being achieved in many spheres of Latin American and Caribbean development. This

massive expression of underdevelopment has its pallid reflection in welfare indicators, which are

clearly unfavourable to the rural sector in terms of education, health, sanitation services and

conditions of life generally. Moreover, in rural areas there is less social mobility, and opportunities

for progress are scarce. Nuclei of “core” poverty tend to consolidate in rural zones because the

children of poor rural families have fewer opportunities in education, training and health; and

they grow up in depressed economic environments, lacking in infrastructure and services. Not

only are they poorer to start with, they also make less progress.

The fragmentation of urban-rural development has been accompanied by gender fragmentation.

Rural women suffer segregation in labour markets, where their pay is systematically lower, and

they also face discrimination in access to credit and landownership.

Poverty is particularly severe among indigenous peoples; and the fact that such population

groups are also subject to exclusion to an even greater degree has rendered several traditional

communities economically unviable. As the ways of life and modes of organization of indigenous

communities are closely linked to the rural domain, poverty relief which continues to rely mainly

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on migration to the cities is likely to entail the loss of cultural and social heritage among such

communities, and the vast diversity of ways of life in the Latin American and Caribbean

countryside will be diminished.

Although the task of rural development reaches far beyond the domain of agricultural production,

agricultural policy nonetheless plays a fundamental role in any strategy. While rural development

implies a diversification of employment sources and greater vertical integration among economic

activities in rural areas, there is a direct relation—a positive dynamic—between agricultural and

non-farm rural incomes. Although the need persists to reallocate human resources of very low

productivity currently in the rural area, the simplistic belief that industry will generate job

opportunities and incomes has been superseded by an approach which, rather than viewing the

two sectors as antagonistic, stresses their links. The competitiveness that matters encompasses

the whole production-processing-trade-consumption chain. Such global systemic competitiveness

largely depends on the macroeconomic context and degree of inter-sectoral coordination; it is

not a question of seeking relative advantages for individual products in isolation. What is

essential is to construct and develop the competitiveness of the system as a whole, including

various forms of inter-sectoral integration and territorial coordination.

The competitive capacity of agriculture, and the profitability of sectoral activities, do not depend

on indicators of rural productivity alone. Agronomic progress is always desirable, and it is essential

to exploit the wide-ranging potential for returns if available technologies were to become more

widespread. But to achieve rapid and sustainable agricultural growth, it is essential to address

elements that fall outside the remit of agricultural technology and farmers’ capacities, such as

those caused by changes in the international setting and in the macroeconomic framework, or

shortcomings in infrastructure and services, among others.

Agricultural policy needs to be consistent with a broader vision that embraces vertical integration

with other sectors, and linkages with other policies in the rural domain. Nonetheless, sectoral

policy alone is clearly unable to cope with the scale of the problems and challenges facing the

rural sector. It is essential to define a rural development strategy—as a recognized national

priority—and to build social consensus on the modalities and costs of the main policies, evaluated

in terms of solutions to the key national problems. Policy design needs to embrace intersectoral

relations and the land-based approach to development.

An extension of the development approach must also encompass the rural development strategy

itself. The territorial basis of development should not be confined merely to the rural sector,

but should make the most of linkages with small urban centres and the intermediate city system.

More than a rural development strategy, what is needed is an urban-rural development strategy

that exploits the multiple possibilities available to the rural population for economic activity

originating in relatively neighbouring population clusters—both in terms of demand for goods

and services and access to markets, and in terms of possibilities for the provision of inputs and

financing. The last few years, in particular, have highlighted the potential of migrant workers’

remittances in this regard.

The strategy to transform and revalue the rural areas calls for a sustained drive to develop basic

infrastructure, such as electricity, transport or communications, in addition to support for

productive investment in various sectors.It is also essential a broad participation in social policy—

especially in education, health, food security and the provision of basic utilities—as part of a

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strategy for human capital investment and rebuilding of rural institutions, within a dynamic of

social capital development (broadly defined to encompass the different modes and mechanisms

of relationship between agents, the norms governing such relations, and development among

agents themselves through forms of representation and empowerment).

E. THE ROLE OF AGRICULTURAL AND RURAL DEVELOPMENT

Recently, rural development has once again been attracting the attention of national authorities

and international organizations, but for reasons other than the traditional arguments in defence

of agriculture that adduce the importance of certain specific products, or paternalistic arguments

related to small-scale producers. The latter are now seen as obsolete and lacking in bargaining

power vis-à-vis macroeconomic or financial priorities. The current emphasis on productivity

and competitiveness, reduction of the State and the new international setting, have shifted the

axes of potential agricultural policy towards the creation of conditions to absorb technical and

productive capital, and the promotion of an urban-rural development process that aims to reduce

poverty by creating jobs and generating local incomes.

As the foregoing chapters have shown, agricultural and rural development has major potential to

foster economic growth, equity and conservation of the environment. In recent years, consensus

on this potential has been growing. Agricultural and rural development has formed a central part

of national strategies in the region’s countries. It has also gained a high priority on the agendas

of various international organizations, not only FAO and other specialized agencies, but also

multilateral banks, such as the Inter-American Development Bank (IDB) and the World Bank43.

The new argument in favour of agricultural and rural development differs from earlier demands

on behalf of the rural sector and the peasant economy—which at times were little more than

rhetoric—in two key respects: the scope of the new approach, and the role assigned to it within

economic and social development.

The new approach has several key dimensions:

i) It supersedes the narrow sectoral view that focused on primary agricultural production alone, and

instead highlights the importance of intersectoral coordination and the concept of the agribusiness

sector, emphasizing productive chains and product systems.

ii) Rural development is no longer seen as depending on agricultural progress alone; non-farm

economic activities have a key role to play.

iii) Various forms of linkage between the rural and urban economies are highlighted.

iv) As a corollary of the three preceding elements, policy agents and instruments will also be

different.

There are also substantial differences in terms of its role within overall economic and social

development. Aside from the debate on the multifunctional nature of agriculture, which could

be biased by the backdrop of trade negotiations, the vision of agricultural development in Latin

America and the Caribbean is being expanded beyond the narrow sectoral framework, to

43 See, for example, documents arising from FAO, “World Food Summit”, “World Food Summit Five Years Later”, IFPRI“2020 Vision”, “The Path Out of Poverty” and “Strategy for Agrifood Development in Latin America, 2000” of the IDBand World Bank.

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encompass the fundamental inter-relationships that exist between agriculture and possibilities

for transformation and revaluation of the rural domain to solve key national problems.

The performance of agriculture has effects that go beyond sensitive product markets; in the

reality of the production chains prevailing in most of the region’s countries, agriculture is an

essential element in building systemic competitiveness and enhancing trade and agribusiness

integration. It also affects natural resources as the environmental basis of development, beyond

their direct productive potential, and plays a significant role in overcoming regional imbalances,

and in the territorial organization of development. Agriculture is also fundamental in providing

opportunities for large segments of the population that live in rural areas, and in exploiting

programmes to alleviate rural poverty.

The agriculture and rural development policy affects fundamental areas including the following:

i) Food supply and food security: in addition to the essential nature of food availability, lower

prices benefit poor population groups in particular, most of whose spending goes on such goods.

ii) Real incomes, through food prices; and overall systemic competitiveness, through greater

exploitation of the natural resource base, and its effect on wage and raw materials costs.

iii) Job creation and income generation among population groups that tend to be excluded from

modern commercial circuits.

iv) Poverty reduction, achievement of greater equity and progress towards more equal

opportunities.

v) Incorporation of extensive zones that are currently excluded from the economic growth

process; overcoming regional imbalances, and the territorial management of development.

vi) Improvements in environmental sustainability, and sustainable exploitation of natural

resources. Erosion, desertification, deforestation and loss of genetic wealth are all closely linked

to poverty and exclusion in rural areas, and to the technological orientations of the corresponding

productive processes.

vii) Recovery of cultural wealth, and its relation to the preservation of natural environments.

F. INSTITUTIONAL DEVELOPMENT AND STRENGTHENING OF SOCIAL

CAPITAL

An initial requirement of sectoral policy is that it should be consistent with macroeconomic policy.

Not only is this a prerequisite for policy to be effective, rather than merely a statement of intentions,

it is also the way to take explicit account of factors that are beyond farmers’ control, such as the

exchange rate, interest rates, or requirements for public expenditure and investment. It is also

necessary to remain alert to growing macroeconomic volatility and the effect of such changes,

which are sometimes abrupt, on conditions for agricultural and rural development.

Allocation of productive resources through market mechanisms, combined with the State’s new

role in development and progress in administrative decentralization, require agricultural policy

to be highly participatory. Policy design, implementation and evaluation are tasks that should

be approached jointly by public-sector bodies and civil-society stakeholders, taking special

account of fiscal constraints, the weakness of public structures and the need for the private

sector to expand its action in rural areas.

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It is also essential to seek specific means to give rural inhabitants greater decision-making

capacity and enable them to become genuine protagonists in the development process. These

requirements also underscore the priority need to rebuild rural institutions in keeping with the

new conditions of Latin American and Caribbean development.

The abrupt withdrawal of government and the numerous institutions that performed multiple

activities in support of agriculture, in conjunction with the drastic change that has occurred

in forms of competition in agricultural production, on national and international markets alike,

has radically altered relations between agents and provoked sudden obsolescence among rural

institutions.

Nonetheless, the process of correcting that policy has certainly not been an organized search

for rationality in economic policies, in particular because the external debt crisis and subsequent

adjustment to achieve macroeconomic stabilization caused a sudden drain on the State’s

financial capacities. The economic crisis also resulted in the collapse of the State. The overblown

institutional framework that supported agricultural development was dismantled more because

it could not be maintained, than in response to criteria of economic rationality in the civil

service. The various institutions in charge of agricultural programmes were eliminated or

drastically downsized, before suitable private-sector replacements could be found.

The initial assumption in those early years of adjustment was that if macroeconomic balances

were kept stable, the private sector could satisfy demands for sectoral development. Soon

afterwards, the thesis of State subsidiarity made it clear that there were significant areas where

State action was irreplaceable, and that it should intervene exclusively in cases where the market

failed: public goods, externalities, natural monopolies, asymmetric information, economies of

scale, and so forth. In the last few years, this negative definition of the areas of State intervention—

by exclusion from situations that the market can resolve on its own—has been enhanced by a

positive definition of State activities that can help the market become more efficient. This has

led to the realization that areas of action exist where a proactive policy, compatible and consistent

with market mechanisms rather than contrary to them, can achieve positive results.

In situations where the participation of economic agents is highly unequal, as is the case in

rural zones, markets lose competitiveness and their efficiency and capacity to resolve productive

problems. As a result, they become mechanisms that accentuate polarization, requiring

complementary interventions to keep their outcomes within acceptable levels of equity.

Recognition of the huge inequality of opportunities endured by the rural population justifies

a set of differential policies to correct this situation. To support restructuring among the farming

population, the rural institutional framework needs strengthening to support and enhance the

process of investment in social and productive infrastructure and human capital, with a view

to generating productive jobs of a very different type (both in farming and non-farming activities).

State intervention is fully justified in the provision of public goods; or in situations where there

are significant externalities attached to private action; and in measures aimed at reducing

transaction costs, especially for small-scale producers. Similarly, a deliberate policy is needed

to enhance systemic efficiency, create conditions for competitiveness in the medium term and

achieve more effective exploitation of the natural resource base. In Latin American and Caribbean

countries the State has played a key role in the development of productive infrastructure such

as irrigation, and also in transport, communications and marketing infrastructure. Such

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development does not necessarily have to be financed exclusively with public funds; but State

action is crucial in providing stimulus, organization and financial support for these activities.

It is essential to develop a new institutional framework for agricultural policy that allows for

participation and exploitation of initiatives from different stakeholders: small- and large-scale

producers, family farmers, indigenous groups, traders, entrepreneurs, investors, government

and non-governmental institutions. In particular, it should have the capacity to mobilize

producers to overcome the legal, political, economic and cultural obstacles that restrict their

development possibilities. The key task of institutional development is to increase efficiency

and reduce uncertainty. The challenge consists of building institutional forms that can strengthen

and channel social and private initiatives, ensuring that these have access to information, a

long-term perspective, and bargaining capacity.

This is a question of promoting development among the various agents and enhancing the forms

and mechanisms by which they interrelate, through better rules and forms of organization. It

includes reforms that are pending within the State modernization process, such as a deepening

of decentralization to include effective transfer of economic resources and technical capacities

to decentralized government mechanisms, strengthening of intermediate support and coordination

mechanisms, increasing the capacity of civil society to supervise State action, and development

of mechanisms for building consensus with private agents.

The strengthening of social capital and governance capacity among local authorities, as part

of a wide-ranging decentralization process, is emerging as the alternative with greatest potential

to raise the efficiency of local development policy, coordinating representative organizations

of society, and strengthening social capital to boost the efficiency of skilled human resources

in the public domain. Technical support for decentralized mechanisms, and strengthening their

orientation towards operations closely coordinated with producers and other civil society

stakeholders, will thus be clear priorities in rebuilding the rural institutional framework.

In short, to respond to the new development orientations, agricultural policy needs to be neutral

with respect to relative prices and highly participatory. It should not be confined merely to the

promotion of primary production, but must respond to markets demands and the linkages and

ties with agribusiness and agri-commerce processes. It should also stress investment in human

capital, reduction of transaction costs for small-scale producers, their participation in the rural

(or urban-rural) development strategy, and pertinent differential needs. Consideration should

also be given to the complementary aspects of development from the standpoint of the national-

global dynamic. A key aspect is the construction of new rural institutions (in the broad sense

of the term), within a process of social capital strengthening that gives viability to a new

agricultural and rural dynamics.

G. NEW POLICY INSTRUMENTS

Although many of the old sectoral policy instruments were done away with during the adjustment

phase, they have not been adequately replaced; yet needs persist, in the financing system and

in marketing, for example. Other areas, such as animal health and plant protection systems

require major redesign and strengthening. The development of institutional capacity to fulfil

commitments arising from the Agreement on Sanitary and Phytosanitary Measures also needs

special attention; and the institutional framework for agricultural research and rural extension

needs adaptation to become more efficient and spread technical progress more widely.

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Furthermore, new priorities have arisen, such as the need for information systems and support

for more effective international involvement.

The new market-based policy strategy excludes many of the tools of traditional agricultural

policy that are inconsistent with the macroeconomic framework or with the commitments and

exigencies of international integration. It also rejects measures which have a distorting effect

on relative prices, along with non-transparent global subsidies. Constraints relating to the

availability of fiscal funds are also tending to direct policy choices towards cofinanced actions

that are inexpensive to administer.

New policy instruments constitute significant institutional development in themselves. This

is not limited to organizational changes in the public sector, or to a mere shifting of

responsibilities towards the private sector; it also encompasses the rules and mechanisms of

interaction that determine the ways in which social stakeholders interact. The establishment

of policies—and the laws and mechanisms that give them validity and make them operational—

is thus a clear example of institution development.

Nonetheless, these new policy instruments also require specific institutional modalities and

developments that differ radically from those of traditional agricultural policy, yet are crucial

for achieving policy objectives. Just as important as obtaining funding for the new instruments

is the need to design mechanisms that attract widespread support and participation from the

various stakeholders, and which can reach the target population while complying with established

regulations and operating with low administrative costs.

The new instruments involve highly participatory programmes executed in decentralized fashion;

they are consistent with the constraints of the macroeconomic framework and the exigencies

of international participation, as well as with other efforts to achieve greater intersectoral

integration. They also provide a complementary basis of support for rural poverty reduction

programmes.

The broad scope of rural development policy includes several key areas:

The regulatory framework governing international trade

There is a burgeoning agenda in priority agriculture and food issues that transcend national

boundaries, such as trade negotiations, agreements on investment, animal health, plant

protection, food safety and quality, and environmental sustainability. Systems of rules and

regulations need alterations in a wide variety of areas, to bring them into line with international

standards and create coordination mechanisms at the appropriate levels. In complementary

fashion, subregional and bilateral integration agreements are proliferating. Economic

globalization is rapidly erasing the separation—in space and time—of phenomena that affected

development in various countries, giving way to increasing inter-relationship. A major area of

the agricultural and rural development policy in the countries of Latin America and the Caribbean,

is to obtain international consensus and trade negotiations to achieve more favourable trading

the political and technical strengthening in the negotiations to eliminate or meningfully reduce

subsidy and commercial protection mechanism in developing countries is fundamental.

Special efforts are also needed to develop analytical instruments for ex-ante and ex-post estimations

of the effects of economic and trade integration agreements. Such instruments would make it

possible to design programmes to exploit new opportunities, by lifting the various barriers that

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restrict export potential. This would also make it possible to design policies and programmes to

minimize the economic and social costs of productive restructuring. Specific disputes that

sometimes tend to dominate integration processes in the short term need to be resolved within

a broad development vision and with a long-term perspective.

Property rights and market development

At the national level, an initial sphere of action involves the development of markets for the

main factors of production: land, natural resources, labour, capital and technology—including

steps to establish a clear framework of property rights over land, water, biodiversity, forests,

technological patents, and so forth. Conditions also need to be established to foster the

development of rural financial markets, and to regulate the rural labour market, since both

display special characteristics. The efficiency of these markets largely depends on institutional

development.

The viability of having policy instruments in place for those factors of production—which have

a key influence on both competitiveness and agricultural profitability—depends firstly on the

real existence of the respective markets and their efficiency in coordinating the corresponding

supply and demand, within a legal framework that clearly establishes the scope and limitations

of rights, procedures to negotiate them (contracts), and forms of regulation for their beneficial

exploitation.

Only within such a framework is it likely to be possible to implement instruments that are

compatible with market mechanisms, and which encourage the social use of such productive

factors while achieving better results in terms of productivity, competitiveness, equity,

environmental sustainability, and the other goals of agricultural development.

Security in land tenure, access to titling, reduction of the transaction costs generated by

bureaucratic procedures, explicitness and trust in commercial mechanisms for the sale and

rental of land, together with clear rules making it possible to regulate its beneficial exploitation

on a sustainable basis, and thus optimize economic results, requires specific institutional

growth that is essential for agricultural development. This involves creating legal and

administrative rules, while also generating information systems and providing training to the

people involved.

In countries where land ownership is still heavily concentrated and there are many unproductive

large estates (latifundios), it is important to promote agrarian reform processes that draw on

the positive and negative experiences that exist in the region. For examplemeasures such as

loosening of fiscal constraints or direct targeted support for the poorest families could also be

included.

Property rights over water extend far beyond the agricultural and rural development framework.

As an essential resource par excellence, demands for more and better quality water for urban

consumption, agriculture, mining, industry and electric power generation are expanding rapidly.

It is becoming essential to optimize water use—sequentially or on an alternative basis—for

widely differing purposes. The way water resources are exploited has a major effect on regional

development. Watershed conservation and management, typification in terms of the degree

and scope of water rights, transparency in processes of awarding such rights, water resource

management, user organization and training, and education of the public at large, also pose

major challenges for institutional development.

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In fishery activity, some of the regional economies are attempting to introduce the transferable-

fishery-quota system which assigns “property rights”, allowing purchase, sale or rental of the

right to participate in a regulated fishing area. This system is based on the assumption that

those who hold the right to exploit a fishery will also want to ensure that it is managed efficiently

and sustainably, since the economic value of the right depends directly on the fishery performance.

Nonetheless, efforts made to introduce this quota system have been opposed by small-scale

fishermen, labour organizations, boat owners and fish processors.

Concessions are a pillar of development in the forestry sub-sector; yet various studies have

suggested that governments in many cases receive less than 50% of forest rents and often much

less than this. Possibly there are better ways to promote development of the forestry industry,

increase exports and facilitate access to forestry land for poor rural populations. Key aspects

of concessions policy need to be reviewed, such as the type of charges applied (rates based on

surface area or volume, taxes, etc), the duration of concession contracts, procedures to prevent

or minimize corruption, and the degree of competition promoted in forestry markets.

Agricultural development programmes

The new conditions of regional economies have invalidated agricultural policy measures aimed

at controlling relative prices. The technical assumptions that underpinned this policy have been

long superseded in the new approaches to development, and by evidence arising from more

recent experiences. The widely assumed price inelasticity of agricultural supply has been shown

to be false, especially considering effects on the reallocation of productive, human, technical

and natural resources in anything other than the short term. The economic liberalization process

resulted in the elimination of multiple exchange rates, differentiated tariffs, quantitative trade

barriers and export taxes. In the absence of control over foreign trade that made it possible to

regulate local prices, domestic trade was also set free; official prices and subsidies were

suppressed; and most interventions that distorted relative prices were eliminated. This has

resulted in the suppression of taxes and retentions, thereby affording the market greater freedom

to set prices. Nonetheless, while the behaviour of demand and prices normally responds to

conditions that are beyond the control of the region’s countries, there is still plenty of room for

countries to take measures aimed at enhancing competitiveness to be able to face market

challenges on a better footing. Measures for infrastructure development, provision of services,

access to financing and markets, and reduction of transaction costs, could play an important

role in this regard.

The design of such instruments, along with their forms of execution, relationships with agents

participating in the various economic and administrative domains, and adaptation to each

practical reality, are among the institutional development efforts that will make it possible to

implement an agricultural policy that is consistent with the region’s new development model.

Recognition of the role of microeconomic policies assumes that the domain of productive activities

is the market economy—not defined by the theoretical paradigm of pure and perfect competition,

but imposed as an objective reality. It also recognizes that the State’s role is not only to fulfil non-

economic functions and take responsibility for the macroeconomic framework. The false State vs.

market dichotomy has been rejected, and the usefulness of the State in developing markets and

making them more efficient is now recognized.

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The spontaneous effects of changes in relative prices on agricultural production can be severely

hampered by market failures and by the unfavourable “climate” that still persists in many of

the region’s economies. The opportunity provided by higher prices in several productive sectors

is occurring at a time of serious economic difficulties for producers, severe financing constraints

and significant distortions in market operations. To maximize the positive effects of trade

liberalization and economic integration, it is essential to develop an agricultural policy which

assures that better prices are actually perceived by farmers, and that these have capacity for

productive response.

Agricultural policy—with the collaboration of all agents involved—therefore needs to overcome

the bottlenecks that exist in credit, marketing, infrastructure, services, phytosanitary and

zoosanitary requirements, quality standards, management systems, market information,

technical assistance and input supply. Only within such a policy can producers benefit from

better relative prices and harness the stimulus thus provided to raise productivity and increase

production.

The reduction of public investment channelled into agriculture following crises and adjustment

processes, seriously impaired sectoral development. The impact was felt particularly in the

rural domain because public investment—in communications, electrification, basic services,

etc—also acted as a major stimulus to private investment. The simultaneous reduction in the

availability of public services compounded by financing difficulties discouraged investments

still further. In some areas, such as irrigation, the systems for operating and managing existing

infrastructure were also drastically altered.

To promote the capitalization of agriculture, programmes could be designed for investments

that are cofinanced between the State and farmers, in order to raise investment levels in targeted

areas. Generally speaking, this is a matter of establishing the possibility of subsidies or bonuses

within guidelines that are consistent with sector development priorities. A wide range of

potential new policy instruments exists in this area, consistent with the macroeconomic

framework and with the exigencies of international participation44.

Subsidies to develop irrigation

Irrigation projects give rise to major externalities and require substantial regulation; and

financing them normally requires loan conditions that are tied to the potential to be developed.

Generally speaking, investments of this type generate high economic and social returns; and

several countries have implemented irrigation development programmes that subsidize part

of the cost of the respective infrastructure.

For example, Chile has a programme that subsidizes up to 75% of the total cost of irrigation,

drainage or mechanization projects. Both property-based and other civil works projects are

covered, and individual owners, organizations, agricultural enterprises, cooperatives, irrigation

associations, and so forth, can all submit bids. The subsidy is only paid when the works are

finished and have been approved; and the projects to be supported are selected on the basis of

competitive bidding. There are two categories of bidding process: one for projects promoted by

44 The examples given refer to Chile and Mexico, where a study has been carried out on this subject. There are a numberof similar programmes in other countries. Roughly US$ 3,000 in the programme in Mexico. To receive the subsidy, the newly forested area must be accredited by a qualified professional, and have a managementplan approved by the corresponding official body (in Chile, this is the National Forestry Corporation).

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agricultural entrepreneurs and another for those involving small-scale producers (in the latter

case, bids are submitted through the Agricultural Development Institute, INDAP).

Projects are awarded points based on expansion of the irrigated area, or the productive potential

to be achieved, and in terms of lowest cost per hectare. In projects submitted by agricultural

entrepreneurs, the size of the private contribution in relation to the total project cost also has

considerable weight in the points score. This means that the subsidy paid in entrepreneurial

projects is well below 75%.

In the last few years, over 10,000 projects have been submitted and roughly 5,000 have received

subsidies. Approximately 250,000 hectares of irrigated land have been incorporated into business

agriculture, along with nearly 200,000 hectares to the benefit of 65,000 small-scale producers.

In Mexico, the Rural Alliance (Alianza para el Campo) programme, contains a wide variety of

agricultural and rural development support mechanisms, including programmes to encourage

capitalization. In general, the State’s role is limited to setting the rules and establishing procedures

for granting subsidies, while the various operations are carried out directly among the agents

involved. Within the promotion of investment in irrigation works, there are a number of programmes

for promoting private investment (the Fertilizer and Irrigation program “Ferti-irrigación”,

agricultural technification using pumped irrigation, and a programme to recover salinated soils).

Subsidies for mechanization.

Alianza para el Campo also provides support for the purchase and repair of agricultural machinery.

In this case the respective commercial arrangements are made directly between farmers and

enterprises that sell or repair machinery (tractors, seed sowing machines, levellers, specialized

tools, etc); the Federal Government provides 20% of the cost of new machinery, up to an established

maximum45; and the government of the respective federative state provides an additional 10%.

For major machinery repairs, the Federal Government contributes 30% of the cost (up to a

maximum of roughly US$ 600), with the state government contributing a further 15%.

Subsidies to priority product groups

Alianza para el Campo also runs programmes that assist with seed purchase, technology transfer,

or plant protection with respect to various priority crops (ornamental horticulture, citric crops,

palm oil, coconut palm, cotton and soybeans), and also livestock production.

The Federal Government subsidizes up to 40% of the costs of establishment or rehabilitation

of grazing land sown with grasses or pulse vegetables, and investment in infrastructure (fencing,

drinking troughs, pumping equipment and transport piping, weighing scales, anti-tick dips,

etc). The state government contributes a further 10%. Other programmes provide subsidies to

purchase and import animals of high genetic quality. On average, subsidies account for between

35% and 40% of the total cost.

Subsidies for reforestation projects

Chile has one of the largest areas of planted forest in the region, and forestry exports are one of

the leading product lines in its foreign trade. State incentives for private investment have played

a leading role in the development of this sector. Over the last 20 years, about 2 million hectares

45 Roughly US$ 3,000 in the programme in Mexico.

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of land have been forested, with slightly over half of this area benefiting from fiscal support

through subsidy mechanisms totalling just over US$ 200 million.

The subsidy is provided on a once-only basis in respect of the corresponding land area,

reimbursing 75% of the net costs of forestation (preparation of the land, purchase of plants,

workers’ wages, net costs of pruning and thinning, etc). The proportion rises to 90% in projects

making use of depleted soils on steep slopes46. Support of this type has provided a solution to

the problems of obtaining finance for such long-term projects, thereby making it possible to

complement forestry development based on investments by transnational enterprises, particularly

targeting the pulp and paper industry.

A number of negative externalities have been identified in this sector, relating to biodiversity

loss or increased soil acidity, in addition to the displacement of certain population groups. But

such problems are not inevitable in forestry projects. There are also significant positive

externalities: environmental ones, stemming from the recovery of soils and protection against

erosion; and economic ones, stemming from jobs created in activities among suppliers and in

product processing.

Marketing support

The transition from a closed economy with prices that were regulated at all stages of production

systems—managed prices for the producer, agribusinesses and final consumers—to a more open

market economy, has posed a major challenge for the agricultureof the region. In most countries,

the public body responsible for setting such prices and for regulating the domestic and

international market has either disappeared altogether or else has been stripped of most of its

powers. Tariff protection has also been rapidly lowered as a result of sub-regional integration

processes— in some cases negotiated with compensation measures47.

In the case of Mexico, support modalities were established in the context of its admission to

NAFTA, which made it possible to compensate buyers for paying an agreed domestic price that

was above the price of the corresponding imported product. The amount of the support covers

the difference between the international and domestic prices, in both cases including the

respective marketing costs. The body responsible for these support mechanisms, ASERCA,

neither buys nor sells, but operates exclusively to provide the support needed to keep prices in

line with those on the international market.

In addition, ASERCA maintains an information system, in both printed and electronic form,

which publishes products of varying frequency: a website, daily price bulletins, weekly specialist

bulletins, a monthly magazine, and so forth.

It also supports farmers’ operations in markets.

Rural financing

One of the most complex problems still to be solved in agricultural development policy is its

financing. In the 1990s, stabilization and adjustment policies caused the demise of traditional

forms of agricultural credit, which was usually granted by State-owned banks and characterized

by negative interest rates, unpaid debts and debt cancellation. These systems entailed high

fiscal costs and involved major conflicts of efficiency, equality and transparency.

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46 To receive the subsidy, the newly forested area must be accredited by a qualified professional, and have a managementplan approved by the corresponding official body (in Chile, this is the National Forestry Corporation).47 For example, PROCAMPO in Mexico, or the commitment to increase public expenditure on agriculture in Chile.

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A large percentage of rural producers depended on informal financing sources, and continue

to do so nowadays. Among such sources, supplier credit has grown significantly, in addition

to agro-industrial and commercial financing for farming products, and remittances sent

by emigrated workers. Several countries have developed microfinancing systems supported

by NGO’s.

Developing efficient credit mechanisms are targeting the search on flexible solutions that

combine formalization of existing financing sources with a new regulatory framework that

supports efficiency and transparency, and incentives for microcredit and complementary actions

by development banks. More than an agricultural credit mechanism, the aim is to develop rural

financial systems that encompass credit, insurance and saving. The inclusion of mechanisms

to capture savings could open up better alternatives for channelling remittances into productive

investment, and would also allow for broader financial coverage and better knowledge of

customers. This, in turn, could reduce transaction costs and information asymmetries, thereby

increasing synergy in the different activities of the system. Progress in the construction of such

systems basically depends on institutional development that promotes participatory mechanisms

subject to clear regulations, and government support to foster the necessary trust.

Progress in terms of the recognition and stability of property rights over land, subject to

principles of efficiency and equity in land tenure, are also important mechanisms for expanding

access to credit and developing rural financial markets.

Research and technology transfer systems

The basic design criteria for crop and livestock technology transfer and research systems also

require significant institutional development. The objectives here are as follows: open systems,

where universities participate along with other public- or private-sector bodies, either national

or international, involved in agricultural research and technology transfer; competitive systems,

funded by the State and other financing agencies (multilateral banks, regional research funds,

international cooperation) on the basis of results and achievement; dynamic systems, with

capacity to respond to the challenges of domestic and external competition; environmentally

sustainable systems, i.e. with technological proposals that help arrest the deterioration of natural

resources; and decentralized systems that ensure participation from producers and other private

stakeholders and provide opportunities for them to contribute to the financing and orientation

of activities.

In addition, lack of funds and the expanding scope of demands for technology, to incorporate

commercial, agribusiness and management aspects are giving rise to a new national agricultural

technology systems (NATS) paradigm which include the following lay characteristics:

(i) Separation of research financing policies from the actual execution of the research activities.

The first of these concerns the major priorities of technology policy, whereas the second is a

matter of efficiency and management.

(ii) Institutional plurality of NATSs, encompassing universities, NGOs, producer organizations,

etc. This reflects a diversification of financing sources for research and development activities.

33148 Examples are the “kilo for kilo” or “pound for pound” programmes.

(iii) Increasing use of competitive funds by the different types of NATS agents, especially

competitive grants.

(iv) Concentration of public funds for research into technology of public use, basic and strategic

research, (long-term research with uncertain results), research into technologies for small-scale

producers, research on natural resources, etc.

(v) Institutional autonomy combined with periodic accountability (research contracts). Process-

based financing is giving way to results-based financing.

(vi) Organized participation by producers and agribusinesses in research plans, assignment of

priorities, financing and evaluation. Institutional modalities in this respect may vary widely:

partial financing activities, participation in the governance of research institutions, contractual

relations, etc.

(vii) Change in the linear relationship between research and transfer. The traditional vertical

link between the technical expert and the farmer, in a specific product line, is rendered obsolete

by the realization that technical assistance is a complex educational process that needs to be

set in the farmers’ own logic of survival and progress. This requires direct participation by

producers and their organizations, along with NGOs and other private institutions in both

formal and informal types of partnership, promoting information dissemination and feedback

mechanisms. It also involves moving from a mere “production culture” towards a “business

culture”. Certain combinations with development programmes may yield highly favourable

results. For example, there are programmes that subsidize the difference between a kilogram

of certified or enhanced seed and a kilogram of grain produced by the farmer, in order to promote

technological change48.

There are also a number of alternatives for expanding the bases of financial support for NATSs.

In many cases, agreements are reached with the private sector, through foundations, to

complement existing resources and capacities. The marketing of research products and services

is thus far an underexploited alternative. The sale of research products by public-sector or

mixed-ownership institutions , charging a royalty of some kind for products subject to intellectual

property protection, is being successfully promoted by a number of institutes in the region. A

plant variety is created, with protection under the legislation on seeds, and this is placed on

public tender for exploitation by private enterprise for a given period of time, in accordance

with current legislation.

Incomes can also be generated by selling services that are not research activities strictly speaking,

such as soil analysis, agrochemical testing, and other diagnostic activities. Nonetheless, such

cases would only be justified where surplus capacity exists and the income can be used to help

finance research activities. Specific circumstances aside, however, it would be better to sell surplus

capacity in order to prevent research institutions being diverted from their specific purpose.

To enable the rural poor population to access such services on a more widespread basis, specific

modalities of rural technical assistance will need to be established that differ significantly

from traditional agricultural extension activities. The traditional agriculture extension scheme

attempts to make farmers aware of efficient technology that is already validated and available

within the technology generation system. This knowledge transfer is then complemented by

specific support to help producers adopt such technology . The results achieved by this approach

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are very limited, however, in the case of low-income rural population groups, which generally

lack a profitable and competitive agricultural project and do not have the means to adopt pre-

existing technology packages.

Peasant farming economies have very diverse forms of interaction with the market, combining

commercial production with self-consumption activities, together with income generated outside

the family farm. Although agricultural activities are a major pillar of the system, their coexistence

with numerous non-farm activities means that it is the overall set of activities that gives the

rationale to the survival strategy.

Recognizing this reality, rural extension modalities are moving away from the traditional view of

agricultural extension. Instead, the aim is to provide technical assistance to enhance productivity

in the various income-generating activities carried out by farmers, families. This requires support

from the demand side of technical assistance; i.e. help for communities to translate their

knowledge of problems and assistance needs into specific technical assistance demands.

On the supply side, it is essential to strengthen capacities, in order to overcome the inertia that

tends to direct support towards agricultural technologies and neglect other possibilities.

Technical assistance capacity needs to match the diversity that exists in demand. Moreover,

technical support for agricultural production should not be restricted to primary production

activities, but should also emphasize marketing, value-added and management, among other

aspects. Consideration should also be given to demands for technical support in non-farm

activities (including linkages with activities outside the community that play a part in the

population’s survival strategy through remittances or services).

Efficient tools are needed to operate the technical assistance support system, including subsidy

modalities (partial, temporary and transparent), community control over the service, the most

efficient mechanisms (farmer to farmer, etc); and monitoring and evaluation systems, including

impact evaluation, which involves measuring the change in productivity or profitability resulting

from technical support, compared to progress achieved by farmers that do not receive such support.

Direct producer support

The underlying justification for direct support to agricultural producers is its capacity to promote

income growth, sometimes on a cumulative basis, while recognizing that the country-city

polarization remains an expression of unequal opportunities and a fundamental mechanism

for intergenerational transmission of poverty. Perhaps the best example in the region is

PROCAMPO, in Mexico, which has channelled direct support amounting to some US$ 1 billion

benefiting around 3 million producers per year49.

Such direct support has the advantage of raising living standards according to the exclusive

criteria of the beneficiaries themselves. Results achieved in terms of improving the family’s

human capital, capitalizing the family farm, or making some immediate productive use of the

funds received, stem from autonomous decisions.

These transfers do not distort trade; the amount of the support is not tied to production or to changes

in market prices, and they are fully funded from fiscal resources, without any transfer from consumers.

They therefore comply fully with international commitments.

49 In the case of PROCAMPO in Mexico, a justification exists in the sense of seeking to ensure that producers of basiccrops continue to receive, through this new direct channel, the equivalent of the subsidies that were paid through priceguarantee systems, which have had to disappear under the rules of membership of the North Atlantic Free TradeAgreement (NAFTA).

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The subsidies are targeted and transparent, and the fact that they are established with a known

time-limit allows decision making to take this into account.

The targeting of support requires a beneficiary register to be created, which raises the problem

of discrimination between different population groups and runs the risk of political cronyism.

H. INSTITUTIONAL CHANGES FOR THE NEW POLICY INSTRUMENTS

The establishment of decentralized and participatory policy instruments, operating in support

of the market, clearly represents a major step forward from previous policies that tended to be

vertical, narrow, paternalistic, bureaucratic and inefficient. Although these new instruments

no longer spawn bureaucratic growth, they naturally require agent relationships that allow for

effective deconcentration of decision-making and genuine participation. Elimination of the

bureaucratic entity that embodied traditional policy thus forces the new policies to address the

social dimension and rebuild rural institutions.

In traditional agricultural policy a key role in policy implementation was usually played by a

government agency. These were specialized by field of action, type of support, or even branch

of production; and they were often exclusively oriented towards productive development. Their

mode of operation was essentially vertical—from the government body down to the beneficiaries.

In such circumstances, the internal regulations of the entity in question, and its administrative

procedures, resulted in policy decisions being made through a specialized technical team.

Efficiency in implementation, and consistency with other policies, was also the responsibility

of the government agency—a task that was made easier by its relatively narrow sectoral focus.

Among the new agricultural policy orientations, with instruments that are intended to enhance

the functioning of the market, policy goals are firmly anchored in economic relations themselves.

This requires policy to be designed on analytically very sound foundations, and shared with the

various stakeholders involved in policy implementation: central government, decentralized

government bodies, producer organizations, NGOs, etc. This setting, and the rationale of the policy

itself, require a broader view of objectives that takes account of intersectoral linkages and

consistency within the economic rationale of the various stakeholders. The need for governance

capacity on the part of the State is therefore much greater.

What was previously resolved through relatively simple bureaucratic procedures now requires

much more complex institutional development and is more demanding in terms of service

quality. The functioning of decentralized and participatory instruments requires an explicit

logical framework, developed information systems and a strengthening of the technical capacities

of the various agents involved.

A detailed legal framework needs to be formulated to enable all stakeholders to participate

under recognized rules of the game, with clear and transparent participation mechanisms.

Normally, the regulatory framework will need to be adjusted periodically, and this requires a

flexible civil service. A communication system which can function efficiently in the precarious

conditions of services in rural area will be essential.

Most of the countries of the region maintain rural development support programmes. Although

there is tremendous diversity in the type of support provided, progress in many cases has tended

to follow the footsteps of agricultural policies. Rather than proliferating central government

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institutions, highly decentralized participatory programmes have been established with highly

decentralized execution—often at the municipal level. These programmes form the most important

institutional base for channelling resources into rural development, and depend on many actions

which, although decided upon locally, must nonetheless respond to and be consistent with a

logic of national aim.

Unlike the agricultural policy traditional mechanisms, the new instruments tend to be

differentiated, targeting specific population groups. When subsidies are established, they are

intended to be targeted, temporary and transparent. This requires the timeframe of programmes

to be defined on solid technical foundations, with an explicitly defined the target population,

and clear criteria for beneficiary eligibility, accreditation mechanisms and forms of oversight.

The fact that participatory programmes naturally tend to be highly decentralized requires

communication and dissemination systems, support for beneficiary organizations, administrative

rules and procedures governing interaction between the various categories of stakeholder, and modes

of coordination that ensure policy consistency in the national domain.

The previous bureaucratic and paternalistic type of growth, which was very onerous and highly

inefficient, tended to centralize decision making; and society maintained a very indirect and

potential participation capacity through State supervision of each administrative body. In

practice, each organization had a clear information advantage and a more specific interest,

which meant that its survival and potential growth aspirations normally took precedence over

external intentions of global rationality.

The challenge in the new policy orientations is to deconcentrate decision-making capacities,

while at the same time increasing consistency and efficiency. Administrative decentralization

represents a major step in this direction. In order to expand participation, decisions need to

address local demands more precisely, establish regional synergies and promote political

accountability. Moreover greater legal, administrative, financial and technical capacity is needed

among decentralized bodies. It is also necessary to strengthen integration ties and put

mechanisms in place to ensure consistency at the national level.

Policy financing problems were traditionally resolved mostly through budgetary requisition by

the corresponding body. In contrast, the new policy instruments, which rely on cofinancing,

require systems to manage funds from various sources, reconciling public investment criteria

with those of private funding mechanisms and diversified administrative supervision.

Furthermore, the operational organization which was under the responsibility of the public

agency, along with its monitoring and evaluation functions, now need to be shared. Instead of

evaluations of administrative processes and resource spending, impact evaluations are now

required to measure the effect of the program and its capacity to achieve its goals efficiently.

This is not just a question of different stakeholders participating in the evaluation; the evaluation

itself is no longer unambiguous, but is approached with different criteria and viewpoints, with

targets which might be prioritized differently by the Government and private agents. It is also

no longer a process evaluation based on administrative operation and execution of expenditure,

but an impact evaluation that measures the effect of the programme in terms of achieving

objectives, and its efficacy and efficiency. Lastly, it is no longer a matter of assessing the

performance of the government agency, but of evaluating the results achieved with the programme,

and improving its design and organization.

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Deconcentration of decision-making capacities requires information systems that report the

results of monitoring and evaluation to the different agents involved. Efficient organizational

and operational forms are crucial for policy efficiency under the new policy instruments,.

By replacing policies that were based on paternalism and a large bureaucracy, the new policy

orientations allow for the democratization of decision making and far more efficient resource

use. Nonetheless, elimination of the simple vertical relation between central government

institutions and passive beneficiaries, and its replacement by decentralized participatory

policies, no longer allows for solutions that are merely administrative, but places heavy demands

on institutional development in the rural domain.

The concept of institutional development is not limited to organizational changes in the public

sector, or to a mere shifting of responsibilities towards the private sector. The current approach,

which has superseded the false State vs. market dichotomy, recognizes the usefulness of the

State in developing markets and making them more efficient. This is a question of promoting

development among the different agents and enhancing the modes and mechanisms in which

they interrelate, through better rules and organizational forms.

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