ELLA AREA: ECONOMIC DEVELOPMENT|ELLA THEME: SMALLHOLDER FARMERS AND RURAL DEVELOPMENT
Source: Schejtman, A. 2008.
. Rimisp, SanSalvador.Note: Author translation o chart.
Table 1: Composition of Income by Type of Family Farming
Currently, wages are higher in the rural non-arm sector thanin agriculture, mostly because o skill dierences. In Mexico,the average wage in non-agriculture is 56% higher than inagriculture. Both sectors requently exhibit a bimodal wagedistribution, revealing dualism. At the same time, there isevidence that agricultural wages have been declining acrossmany Latin American countries. Temporary workers in Brazil,or example, have lost a third o their income over the last 30years. In Mexico, between 1988 and 1996, temporary workerslost 30% o their purchasing power and have not recovered it.
Overall, the diversity o activities in rural areas has led toa corresponding diversiication in income sources. Thecomposition o rural amily income has changed, moving awayrom dependency on agricultural earnings rom revenues andwages, to diversied income sources in which non-arm ruralwages, rural non-arm activities, remittances and transers,at least or speciic low-income groups, have a share. O-arm work in agriculture and non-agriculture currentlyemploys 47% to 49% o adult males in Latin America andthe Caribbean.
The ollowing graph illustrates the cases oMexico, Chile, Ecuador and Nicaragua, grouped by subsistenceamily arming (SFF) and consolidated amily arming (CFF),using data or 2007.
De Janvry, A., Key, N., Sadoulet, E. 1997.
. AgriculturalPolicy and Economic Development Series – 2. FAO, Rome.
KEY POLICY DRIVER OF CHANGING RURALREALITIES
During the 1990s, most countries in Latin Americaexperienced proound social and economic transormations.Perhaps the most signicant driver o these two key changesexperienced by Latin America’s amily armers comes romthe package o policies largely linked with the region’s eortsat economic liberalisation. With International Monetary Fundand World Bank assistance, countries in Latin America - asin most developing country regions - designed austerityprogrammes, which included large reductions in centralgovernment expenditures; government budget decits ellrom a continental average o 5.5% o GDP in 1988 to 1.8%in 1995. These programmes also included decreases inthe growth o the money supply, exchange rate devaluationand wage repression. Structural adjustment loans weretied to economic reorms that included the removal o tradebarriers and impediments to oreign investment, inancialliberalisation, privatisation o state enterprises, deregulation,and reorms o the tax system and property rights laws.Because o the Washington consensus, the neoliberalexport-orientated approach to development translated intoa widespread adoption o ree market-ree trade policies inLatin America.
The inluence o these policies on the Latin Americanagricultural sector can be broken down into our trends:
Market liberalisation brought signiicant changes inrelative prices, which aected production costs o dierentagricultural products in a variety o ways.
Development o private sector activities across theeconomy, including a signicant expansion o commercialagriculture.
Asigniicant low o external direct investments in anumber o economic activities, including the agro-industryin larger and better endowed countries such as Brazil andArgentina.
Ina number o countries, but not all, an explicit policy oreducing the size and cost o the public sector in general andthe rural sector in particular. This included the privatisation