Perspective in Agriculture and Rural Development in Latin America and the Caribbean

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1 Perspective in Agriculture and Rural Development in Latin America and the Caribbean February 2012 Víctor M. Villalobos Director General

2 Slide 1 HEMISFERIC AGRICULTURE PERSPECTIVE Ladies and Gentlemen: It is a privilege to be here with you to join you in the celebration of the 150 th anniversary of the United States Department of agriculture (USDA). It really is a very special event, and I want to thank Secretary Tom Vilsack for the invitation to participate in this event which has brought together nine former USDA Secretaries, and has become a benchmark event for all of those that are interested in the topics of the agri-food sector. IICA share the goals of generating greater amounts of healthy and safe food. IICA recognizes the value of the men and women who work every day to achieve these goals. These types of forum help us to continue recognizing the strategic contributions of the agricultural sector in the development of all countries, by further contributing in the global food supply. IICA as international body in the Western Hemisphere, participates in the creation of a new model of cooperation where the world community is putting a renewed effort in the agro-food agenda to meet the challenges of a greater food security. I have been asked to present a vision from the perspective of Latin America and the Caribbean (LAC). I have great confidence that the LAC region, and the vast majority of its member countries, is already showing the necessary conditions for a sustained and sustainable growth in the agri-food sector.

3 Slide 2 This view of LAC is based on decades of economic and sectoral reforms. According to data from the Inter-American Development Bank, since 1990, on average, the inflation in the region has fallen from three digits to less than 7 per cent. The average level of external indebtedness has gone from 28% of GDP to 7%. Also per capita income in the region has doubled; and measured by its purchasing power, it has reached on average approximately 11,000 dollars. The average tariff rate has gone from a level of 45% to 9%. In addition, other social indicators in the area show important advances: the availability of drinking water, electricity coverage, reduction of poverty and access to Elementary and Secondary education. However, much remains to be done. Certainly in this global world we are not exempt from risks and external shocks. The process of greater integration of LAC region with the rest of the world is improving, and it is no longer based solely on political factors. With regards to the agriculture sector, my optimism is based on the fact that the LAC region is facing a better environment and enjoying a better public policy framework that promotes the potential development in rural and agrofood activities (water availability, accessibility of crop land, assets in terms of biodiversity). However, the great challenge we face in LAC is to increase our productivity. Let me take a few minutes to comment on the major results of a joint document prepared by ECLAC, FAO and IICA that focuses on a perspective of agriculture in LAC in 2011/2012. The complete study is available on our web page.

4 Slide 3 THE CHALLENGES OF THE NEW AGRICULTURE World Agriculture is facing a transition process. Current systems of natural resources transformation into food presents not only a high economic costs, but also carry environmental costs. This creates uncertainty in its production; and it leads to a level of production that does not generate enough food to feed all of humanity. We currently have almost 1 billion people suffering chronic hunger. The status quo raises the need for a new paradigm for agriculture, and the need to face fundamental questions: How to improve productivity (to ensure food security for the growing population); How to rationalize the use of natural resources (less water, and less grazing and production land surface); How to deal with the markets and uncertainty in weather conditions. How to understand food security issues in a comprehensive manner, including: - Food availabity - Food Access - Sustainable Production - Use of Energy Alternatives (BIO FUELS) - Nutrition and Feed Habits However, due to time constrains and the subject that I have been ask to speak about, I will only comment on some aspects of these challenges being faced by the LAC region.

5 Slide 4 LAC AGRICULTURE SECTORAL ANALYSIS SHOWS A POSITIVE DEVELOPMENT TREND High agricultural commodity prices have stimulated, in real term, the growth of agriculture in Latin America and the Caribbean countries over the past decade (3.2%) If GDP growth is adjusted by implicit deflator, real growth was higher (3.8%) due to the agricultural commodities price increases, but with regional differences: 4.5% in the Southern Cone and 2.5% in the other regions During the last decade real agriculture income in the region has grown over 10%, despite a fall of 4% in 2009, and grew more than the production volume of production, whose growth rate never exceeded 5%. LAC AGRICULTURE SUPPORTS ECONOMIC GROWTH LAC agriculture dodged the recent global crisis, and became the recovery engine for the region During 2010 LAC s agriculture performance was positive, even when facing price volatility and adverse weather conditions. Increase prices of agricultural commodities encouraged agricultural trade, increasing agriculture participation in total trade. The southern part of the continent has become an agri-power, with an increasing share in world trade. China has played a fundamental role in the dynamism of LAC agricultural trade.

6 Slide 5 LAC AGRICULTURE PROSPECT IS POSITIVE, BUT Although LAC prospects for agricultural production are good, because population and income will push up food demand, there are major concerns: We are facing emerging challenges in animal & plant health and food safety (e.g., citrus greening); Improving agriculture performance is required to take advantage of opportunities, but there is a lack of investment in R+D+I; Countries agricultural map is changing; There will be major challenges due to climate change, and there is growing pressure over the land ownership. Once the economic slowdown is over, energy prices will increase, and because there is a high correlation between energy prices and food, food prices will also increase. We must also consider that there are important regional differences: some countries in the region will benefit from higher food prices and the economic growth of developing countries (especially those net exporters of cereals, oilseeds, dairy and meat), while net importers of these products, such as Central America, the Caribbean and the Andean countries, will face hardship.

7 Slide 6 LIVESTOCK OFFERS GOOD OPPORTUNITIES Due to increase meat production and consumption, livestock is a sector of opportunities. However, there is need to innovate and enhance livestock domestic production. Even though there was a slight drop in beef production and consumption, LAC and global meat production and consumption have grown during the second half of the last decade. LAC meat exports have grown (3, 2%) There is growth in the horizontal integration of meat and dairy production. But : Displacement of production to less productive soils is increasing; and animal health is becoming a systematic risk. In this regard, we could point out some recommendations, such as: o promote the development of livestock in small family units; o promote the development and innovation in value chains; and o develop policies to address climate change and a sustainable management of natural resources LAC HAS A GREAT POTENTIAL FOR ITS FOREST EXPLOITATION LAC forests make up 23.6% of the world's forests. There is great potential for its sustainable exploitation; however it is necessary to attract more private investment for forest plantations. LAC observes the following trends: o Loss of forest cover has slowed o Increased participation in the production and trade of forest products

8 o The contribution of the forestry sector to the GDP of the region increased steadily o Forest biomass carbon stocks have decreased And prospects suggest that: o Non-timber forest products are fundamental in the development strategies of rural communities o Increased efforts to improve governance and the sustainable management of forests will be needed o Efforts to keep biological diversity will continue o It will be necessary to restore degraded land and strengthen the management of river basins o Environmental services will contribute to the reduction of poverty

9 Slide 7 CRISIS IMPACT ON LAC The crisis in LAC had a much lower than expected negative impact in terms of evolution of poverty and rural income. Rural poverty is moving in the same direction as the evolution of the agricultural sector and the economy. OBSERVED TRENDS ARISING FROM THE CRISIS Some of the observed trends show that: o Reversed the downward trend in poverty and indigence; o However, the reductions were lower than in other crises; o There is a high share of non-agricultural income in the strategies of rural households; o Rural households who combined income from agriculture, with non-agricultural income, better faced the crisis; o Those countries with a large population abroad, saw a reduction in remittances from abroad, affecting poor households; and, o Public transfers offset the households income fall.

10 Slide 8 AGRICULTURAL Policies and safety nets LAC countries, both net importers and net exporters, were more likely to adopt defensive policies due to the crisis and the volatility of prices. In general, all countries promoted policies to encourage domestic production, seeking to protect both consumers and agricultural producers, especially those who showed greater vulnerability, thus maintaining stability in domestic prices and seeking to avoid unemployment. Social assistance policies and conditional transfers were the most prevalent policies to compensate for the crisis; in 2010 these policies contributed to reverse the growing trend of poverty. In some sub-regions, for example in Central America, in the South and the Caribbean, coordinated policies were adopted at sub-regional levels, such as: the Common Agricultural Policy (PACA); Strategies for Territorial Rural Development (ECADERT) and Agroambiental and health (ERAS), or for the development of the fruit sector in Central America; or the policy of food security in the Caribbean.

11 Slide 9 INCREASE IN THE AGRICULTURAL PRODUCTION IN LAC IICA s vision on LAC agriculture is that it plays a key role (and responsibility) in the production and supply of food and raw materials (grains, meat, timber, fresh and processed foods) for the rest of the world; thereby supporting its own food security. LAC is rich in natural resources (land, water and biodiversity), thus it can increase the production of food and agricultural raw materials for non-food uses. However, it must promote a new agriculture based on advance technological innovation in areas such as: SPS, post-harvest, irrigation systems, protected agriculture, biotechnology, and MIP. IICA believes that LAC countries should promote: o To shift from sectoral policies to policies for agriculture. o To develop joint and long-term visions. o To increase investment in agriculture. o To improve capacity to manage public resources. o To expand social protection programs in rural areas. o To strengthen programs designed to improve nutrition levels. o To avoid measures that restricts foreign trade. And carry out institutional transformations on the basis that rural development is not only a responsibility of the Ministries of Agriculture, but a collective responsibility with the policies on: education, health, economy, environment, etc.

12 Slide 10 IICA, the leading agricultural organization in the Hemisphere, offers technical cooperation to its member countries to: o Improve productivity and competitiveness of the agricultural sector; o Strengthen agriculture s contribution to the development of territories and to rural well-being; o Improve agriculture s capacity to mitigate the effects of, and adapt to, climate change, and make better use of natural resources; and, o Improve agriculture s contribution to food security. Globalization and technological advances have created enormous advantages that constitute great opportunities for creating new management models. IICA must manage its corporate activities in such a way as to integrate and coordinate efforts with its substantive areas and strive for continuous improvement.

13 Slide 11 FINALD REMARKS Agriculture is one area of major areas of concern in the international debate mainly because of food security, energy potential, and climate change and sustainability issues. IICA is an active participant in promoting a competitive and sustainable agriculture in the Americas, through country capacity building, technical cooperation, fostering innovation and sharing the knowledge in the region. IICA helps to implement practical solutions to increase production and productivity according to country needs. This actions facilitates the adoptions of better policies and reduce risk of food insecurity in the future. IICA is participating to help in the creation of a new model of collaboration in the international community

14 Slide 12 IICA has human capital and possess valuable experiences that, as mentioned earlier, are at the disposal of the international community to participate in the creation of a new model of collaboration (with Governments and their various forums G20; international agencies as World Bank, IDB, OECD, FAO, ECLAC, CIMMYT, etc;); and education and social centers (Universities, agribusiness companies and various members of civil society). Just to mention some areas of our most recent work: Crisis Management in Haiti; Capacity strengthening in member countries; Research in the Tropic Areas; PSP management and food safety. VISIT OUR WEB PAGE

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