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Agricultural Growth, Efficiency, and Family Agriculture in Paraguay

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Agricultural Growth, Efficiency, and Family Agriculture in Paraguay 4706066 IFPRI Discussion Paper 01747 August 2018 Agricultural Growth, Efficiency, and Family Agriculture in Paraguay Alejandro Nin-Pratt Environment and Production Technology Division INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE The International Food Policy Research Institute (IFPRI), established in 1975, provides research-based policy solutions to sustainably reduce poverty and end hunger and malnutrition. IFPRI’s strategic research aims to foster a climate-resilient and sustainable food supply; promote healthy diets and nutrition for all; build inclusive and efficient markets, trade systems, and food industries; transform agricultural and rural economies; and strengthen institutions and governance. Gender is integrated in all the Institute’s work. Partnerships, communications, capacity strengthening, and data and knowledge management are essential components to translate IFPRI’s research from action to impact. The Institute’s regional and country programs play a critical role in responding to demand for food policy research and in delivering holistic support for country-led development. IFPRI collaborates with partners around the world. AUTHORS Alejandro Nin-Pratt ([email protected]) is a senior research fellow in the Environment and Production Technology Division of the International Food Policy Research Institute, Washington, D.C. Notices 1 IFPRI Discussion Papers contain preliminary material and research results and are circulated in order to stimulate discussion and critical comment. They have not been subject to a formal external review via IFPRI’s Publications Review Committee. Any opinions stated herein are those of the author(s) and are not necessarily representative of or endorsed by IFPRI. 2 The boundaries and names shown and the designations used on the map(s) herein do not imply official endorsement or acceptance by the International Food Policy Research Institute (IFPRI) or its partners and contributors. 3 Copyright remains with the authors. The authors are free to proceed, without further IFPRI permission, to publish this paper, or any revised version of it, in outlets such as journals, books, and other publications. Contents TABLES iii FIGURES iv ABSTRACT vi 1. INTRODUCTION 1 2. POLICY ENVIRONMENT AND ECONOMIC GROWTH 3 3. AGRICULTURE IN PARAGUAY 16 4. FAMILY AGRICULTURE 26 5. MEASURES OF ECONOMIC AND TECHNICAL EFFICIENCY 35 6. AGRICULTURAL GROWTH AND EFFICIENCY 42 7. SUMMARY AND CONCLUSIONS 55 REFERENCES 58 Tables 2.1– Paraguay in the region (average values 2010-2015) 4 2.2– Contribution of sectoral productivity growth and of reallocation of employment between sectors to economy-wide labor productivity growth, 1995-2014 15 3.1– Changes in output composition and output growth, 1988/1990 – 2010/2013 17 3.2– Changes in agricultural export composition and export growth, 1988/1990 – 2010/2013 17 3.3– Distribution of farms, farm area, and land use by region, agroecological zone and departamento, 2008 19 4.1– Number of farms, agricultural area, household family members and hired workers across strata of farm size, 2008. 28 4.2– Share of FA and commercial farms in total farm area in four departamentos, 1991 and 2008 36 4.3– Share of FA and commercial farms in total, crop and livestock output in four departamentos, 1991 and 2008. 36 4.4– Changes in the mix of outputs in four departamentos, measured as changes in shares of different agricultural activities in total output, between 1991 and 2008. 37 6.1– Classification of FA households in groups of revenue efficiency, departamento of San Pedro, 1997 and 2008. 43 6.2– Classification of commercial farms in groups of revenue efficiency, departamento of San Pedro, 1997 and 2008. 45 6.3– Revenue efficiency decomposition for FA production in San Pedro, 1997 and 2008. 46 6.4– Revenue efficiency decomposition for FA production in San Pedro, 1997 and 2008. 47 6.5– Classification of family agriculture farms in groups of revenue efficiency, departamento of Caaguazu, 1997 and 2008. 48 6.6– Classification of commercial farms in groups of revenue efficiency, departamento of Caaguazu, 1997 and 2008. 49 6.7– Classification of family agriculture farms in groups of revenue efficiency, departamento of Alto Parana, 1997 and 2008. 51 6.8– Classification of commercial farms in groups of revenue efficiency, departamento of Alto Parana, 1997 and 2008. 52 iii Figures 2.1–Trends in GDP and GDP growth rates 3 2.2– Annual inflation rate, consumer prices 1981-2013 5 2.3– Index of exchange rate undervaluation 5 2.4– Exports and imports of goods and services, 1991-2015 6 2.5– Trends in GDP per capita (in 2010 constant US$) 7 2.6– Poverty trends 2003-2015 in percentage of population 8 2.7- Trends in the share of value added and employment of different economic sectors in Paraguay 12 2.8–Sectoral contribution to total labor productivity 13 3.1– Political and administrative map of Paraguay 20 3.2– Share of selected departamentos in the country’s total number of farms, farm area, cultivated area and area of pasture, 2008 21 3.3– Evolution of TFP output, input per worker, 1961-2012 23 3.4– Contribution of input per worker and TFP to total growth in output per worker 24 3.5– Trends in land and labor productivity 24 3.6– Trends in the use of inputs per worker, 1989-2012. 25 4.1– Share of FA in total cultivated area of different crops, 2008. 29 4.2– Production trends of agricultural activities produced by commercial farms and by family agriculture, 1975-2013 30 4.3–Number of farms, farm area, number family household members in agriculture and number of hired workers in 2008 measured relative to their value in 1991 (index = 100 in 1991) 32 4.4– Area of traditional FA crops and crops that expanded under commercial farming, 2008 values measured relative to their value in 1991 (index = 100 in 1991) 32 4.5– Output and input levels in 2008 compared to levels in 1997 (levels in 1997=100). Aggregated values for four departamentos: San Pedro, Caaguazu, Itapua and Alto Parana. 33 4.6– Average output composition in family and commercial farms, 1997 and 2008. Aggregated values for four departamentos: San Pedro, Caaguazu, Itapua and Alto Parana. 34 iv ABSTRACT Between 2001 and 2012, Latin America and the Caribbean’s (LAC) agriculture saw its best performance of the last 30 years. What were the implications of this growth for family agriculture (FA) in the region? This study contributes to answer this question by looking at the case of Paraguay, a country with one of the fastest growing agricultural sectors in the region during this period. At the center of the development challenges faced by this country is the debate on the role of family agriculture and smallholders in a future growth strategy. Between 1991 and 2008 the number of family workers in agriculture decreased significantly, while the total area of FA crops decreased to only 48 percent of its level in 1991. As some authors argued in the past, the 2000s represent a turning point for FA development in Paraguay, given that until 2002, the total area of farms of less than 20 hectares was still increasing, a trend that reversed after this year. Are these changes, part of a process of impoverishment of the rural population resulting from displacement of FA by the commercial sector as is normally assumed in previous studies? Evidence from this study shows that rural poverty decreased almost by half between 2003 and 2015; that the reduction of output of crops traditionally produced by FA was not the result of competition with the commercial sector, but mostly a consequence of the collapse of cotton production, a failure of a government program for FA; and that in regions with high proportion of FA, commercial crop production expanded by displacing inefficient extensive livestock farmers and not FA agriculture. We conclude that the situation of FA in Paraguay is much more diverse and complex than the simple claims of decomposition and disappearance as the result of the expansion of capitalist farmers. In this context, there are options for the government to promote the development of FA with the goal of increasing employment opportunities in rural areas while achieving a much-needed diversification of agricultural production and exports. Keywords: agriculture, efficiency, family agriculture, Latin America and the Caribbean, productivity v ACKNOWLEDGMENTS This study was undertaken as part of the work of the analytical component of the Agricultural Science and Technology Indicators (ASTI) led by the International Food Policy Research Institute (IFPRI), in collaboration with the Environment and Natural Disasters Division of the Inter-American Development Bank (IDB). Special recognition goes to Cesar Falconi, Principal Economist in the Environment and Natural Disasters Division of the IDB until 2016, at present the IDB Representative in Surinam. As our counterpart in the IDB, he made this study possible. The author gratefully acknowledges the financial support of the IDB, and very much appreciates the support and insights of Alvaro Garcia Negro in the IDB office in Asuncion, suggesting names of experts for the interviews and introducing us to some of the major policy issues and trends of agriculture in the country. Our trip to Paraguay wouldn’t have been possible without the support of IDB’s administrative staff in Asuncion who arranged all interviews and managed our agenda during our visit. Special thanks go to Dionisio Borda, Jose Brunstein, Blas Cristaldo, Manuel Ferreira, Luis Galeano, Mario León Frutos, Fernando Masi, and Henry Moriya, who kindly shared their expert opinion and insights on different aspects of Paraguay’s agriculture, providing key inputs for the study. Finally, special thanks to Sandra Perez for efficiently managing all the activities of the project and contributing to the outcome by actively participating in al interviews and discussions in Paraguay. This paper has not gone through IFPRI’s standard peer-review procedure.
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