Bulletin of Latin American Research, Vol. 21, No. 3, pp.

425±441, 2002

The Neoliberal Inheritance:

Agrarian Policy and Rural
Differentiation in Democratic Chile
WARWICK E. MURRAY
Institute of Geography, Victoria University, Wellington, New
Zealand

This paper critically appraises the core philosophies of the three

ConcertacioÂn governments with respect to agrarian change and rural
restructuring in Chile since 1990. It identifies common ideological
ground in the successive administrations' perspectives on the nature
and role of agriculture in the wider economy, arguing that a `neoliberal
inheritance' has pervaded each. In drawing on primary and secondary
data from the non-traditional fruit export sector the paper challenges
the concept of reconversioÂn as a panacea for rural under-development
and grower failure. Given the simultaneously regionalising and
globalising context which frames the Chilean transition, the paper
highlights the tough choices that face policy makers at the current time.
Developmental dilemmas are increasing in the sector, given the stated
desire of the ConcertacioÂn governments to move beyond pure,
efficiency-driven, neoliberalism towards the incorporation of equity
and sustainability goals. After ten years of democratic transition it is
timely to ask if policy shows any signs of moving beyond reconversioÂn.

Keywords: Chile; democratic transition; agriculture; neoliberalism;

agrarian policy; reconversioÂn

Introduction ± rural change and the democratic transition

Lo que ha predominado en el manejo sectorial es una linea dual en

que con una mano se abren los mercados a la competencia y con la
orta se quiere dar algo la proteccioÂn que tiene en los paõÂses
desarrollados. Con esta ambivilencia, los resultados no dejan
contentos ni a moros ni a cristianos1 (Saez, El Mercurio, July 2000: 1)

1 Translated this reads: `In the management of the agrarian sector a contradiction has
prevailed. On one hand markets have been opened to competition, whilst on the
other, there has been a desire to offer protection, as practised in developed countries.
This results in an ambivalence which satisfies neither Moors nor Christians'.
ß 2002 Society for Latin American Studies. Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA. 425
 Warwick E. Murray

The first ConcertacioÂn government, led by Patricio Aylwin (1990±94), came to

power promising to reduce social inequalities in Chile whilst remaining conscious
of the new demands of economic globalisation. Eduardo Frei (1994±2000), the
second ConcertacioÂn president, went even further, undertaking to eliminate
extreme poverty by the end of his term. Although some reduction has been
achieved during the transition, over a quarter of rural dwellers still live in poverty
(ECLAC, 1998).2 Furthermore, income distribution both within rural areas and
between rural and urban households has increased over the last decade. Between
1987 and 1996 the proportion of the rural population in the lowest income decile
rose from 35 to 36 per cent (Belfor, 2000). Intense pressure is on Ricardo Lagos
(2000), the most left leaning (albeit substantially renovado)3 of the democratic
presidents so far, to tackle this persistent problem. Crucially however, the Lagos
administration is attempting to address equity and sustainability goals whilst
remaining wedded to neoliberalism which, to some commentators, is the
fundamental cause of the deep rural differentiation which has taken place over
the last three decades (Kay and Gwynne, 1997).
The dilemma of attempting to satisfy potentially contradictory rural social
and economic objectives has characterised the agrarian policy of the successive
democratic governments. It has been consistently argued, based on neo-
structuralist thought,4 that it is possible to both reap the benefits of neoliberalism
(and linked globalisation) whilst simultaneously regulating its regressive impacts
through targeted intervention (Sunkel, 1993). On this basis, as Kay argued in
1997 `a neoliberal and social democratic consensus is developing in Chile through
the political alliance of the ConcertacioÂn coalition of parties' (p. 9). In reality, it is
the neoliberal strand of the `consensus' which has been ascendant and has largely
determined policy direction.
The problem with the above, for those concerned with social equity in the
countryside at least, that the successive governments' emphasis on; `continuity
rather than change, on competitiveness rather than protectionism, on private
entrepreneurship rather than state intervention, on limiting social demands to
what is economically and politically feasible, and on technical competence rather
than ideology' (Kay, 1997: 14) condemns a vast proportion of the rural
population, mainly those who are already less fortunate, to an increasingly
uncertain future. In the rural sector, as this paper endeavours to show, regressive

2 According to ECLAC (1998) the proportion of households living in poverty fell from
36 to 20 per cent between 1990 and 1996. The decline in this proportion was slower in
the case of rural households ± falling from 34 to 26 per cent over the same period. The
proportion of households living below the indigence line fell from 12 to 8 per cent.
These positive figures hide slow progress in reducing income disparities both in rural
and urban areas.
3 Renovado is the term used to refer to Socialists and other leftists in Chile who have
shifted from structuralist to liberal positions in their interpretation of the relative
importance of the market and the state (see Eduardo Silva in this issue for a discussion
of this concept).
4 See Eduardo Silva in this edition for a discussion of neostructuralism.

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 Agrarian Policy and Rural Differentiation in Democratic Chile

impacts have not been regulated effectively.5 Land re-concentration, semi and full
proletarianisation and, in some areas, population loss, are increasingly common
in rural Chile. A `two-track' agricultural system, comprising successful large and
medium export-oriented growers on the one side, and small-scale inward-
oriented peasants and rural labourers on the other has been compounded over the
past ten years. This restructuring and polarisation mirrors change over the same
period elsewhere in the social-economy (Barton, 1999).
In the new democratic political environment hurdles of austerity, displacement
and exclusion in the pursuit of neoliberal economic objectives cannot be crossed
as easily as they were during the dictatorship. To a certain extent the successive
ConcertacioÂn governments have had to respond to the increasing calls for reform.
Agrarian issues have thus become highly contested, and large-scale protests
among farmers in the south of the country in 1996 and 2000 illustrate this point.
In general however, concessions have been piecemeal. One reason for the relative
lack of attention accorded to rural concerns is the continuing urbanisation of
Chilean society. Only 14.3 per cent of the population live in rural areas and this is
projected to decline to 11 per cent by 2015 (ECLAC, 2001). Furthermore, the
economic importance of agriculture has declined, falling from 8.2 to 6.3 per cent
of GDP between 1990 and 1999 (ECLAC, 2001). The goal of cheap food supply
for the burgeoning urban masses has been a greater priority for the democratic
governments than reducing rural inequality. Furthermore, government
intervention in agriculture is constrained by a vastly altered global political-
economic context. The transition governments have prioritised integration and
regionalism as ways of coping with the threats and opportunities associated with
economic globalisation. International capital, and the institutions which circulate
it, has rewarded them for doing so. The implication, if not explicitly stated, is
that some farmers and even some rural localities will have to fall by the wayside
in order to forge ahead with Chile's globalisation project.
In light of the above, this paper has two broad aims. First, it seeks to trace the
neoliberal inheritance in ConcertacioÂn rural policy in the 1990s. In particular, it
analyses the roots and nature of the key continuity between the military and
democratic periods ± the policy of reconversioÂn (individual and collective re-
orientation towards competitive, usually global, markets). Second, the paper asks
why ± in the face of high poverty, increasing inequality and high levels of failure
in the countryside ± this inheritance has remained so pervasive and influential. In
addressing these aims, discussion first centres on rural neoliberalism during the
military period and its legacies. Subsequent to this, attention is turned to the
question of continuity and the concept of reconversioÂn during the transition
period. Based on primary case-study evidence gathered in the mid 1990s, a fourth
section analyses the experience of a group of reconverted small-scale growers
(parceleros) in the face of increased global competition and rising quality
demands in Chile's leading agricultural export sector, fruit. In the conclusion the

5 Indeed, the term neo-structuralist perhaps should not be used to describe rural policy
during the democratic transition. Pragmatic neoliberalism is possibly more suitable.

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 Warwick E. Murray

paper argues that moving policy beyond reconversioÂn is crucial for the deepening
of democracy in rural Chile.

The rural legacy of military rule ± dynamism and sustainability

for some

This section outlines the major policies of the military with respect to agriculture.
This is necessary in order to lay the context for the discussion of subsequent
policy and the case study of parceleros later in the paper. The impact of
authoritarianism was profound in the agricultural sector, where deep changes in
internal structure and orientation were forged. Amongst a range of policies that
precipitated this fundamental change, two stand out:
1. Agrarian counter-reform
2. Neoliberal agriculture

Agrarian counter-reform
Soon after the assumption of power the military regime declared its intention to
`normalise' and `consolidate' the agrarian reform programmes of Frei (senior)
and Allende. In effect, this amounted to an almost total reversal of the reforms
enacted under the previous administrations. By 1979 the counter-reform was
completed. The effect upon the land tenancy structure of the Chilean agricultural
sector was fundamental. As is shown in Table 1 below, between 1972 and 1979
land in the reform sector (the collective sector created during Allende's reform)
dropped from 35.5 percent to zero. Through the privatisation, parcelling-up, and
sale of land from the reform sector the importance of the small (<5BIH) and
medium-small (5±20BIH) private farm sector (often referred to as the parcelero
sector) increased markedly.
In a distributional sense the impact of the counter-reform was largely
regressive (see Jarvis, 1989). In a narrow economic sense, however, the policy
fulfilled its objectives. In particular, the creation of a small and medium scale
farm sector precipitated increased efficiency through competition in land and
Table 1 Proportion of land accounted for by different sized farm units, Chile 1972±1979
Size Category 1972 1979
<5BIH 9.7 13.3
5±20BIH 13 29
20±80BIH 38.9 36.3
>80BIH 2.9 16.9
Reform sector 35.5 0
Public agencies 0 4
Source: Adapted from Jarvis (1989).
Note: distributions are expressed as percentages.
BIH refers to a basic irrigated hectare.

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 Agrarian Policy and Rural Differentiation in Democratic Chile

commodity markets (Cruz,1993; Gwynne and Meneses, 1994; Kay, 1993;

Universidad CatoÂlica, 1991). In the above manner, Pinochet's counter-reforms
helped lay the basis for the growth in selected regions and selected non-
traditional agricultural sub-sectors in the 1980s.

Neoliberal agriculture

Perhaps the most fundamental change effected by the Pinochet regime was the
imposition of a neoliberal model of economic development. In the case of
agriculture this implied an emphasis on the right to private property (as enacted
through the counter-reform) and a minimal role for government in rural policy
affairs (Kay and Silva, 1992). By facilitating free-market resource allocation and
by opening up to the global market, the comparative advantage of rural regions
and localities was allowed to operate at the international scale. By the end of the
1970s Chile was the most open economy in the world (Gwynne, 1990).
Although the period between 1973±81 has been termed the extreme phase of
neoliberalism (Gwynne and Kay, 1997) the model was never `pure'. The counter-
reform, the sale of state assets to capitalists at below-cost prices, and the forestry
subsidy of 1974 represent examples of explicit intervention. However, each of
these moves was intended to stimulate the free-market and ultimately allow the
withdrawal of direct state involvement (Universidad CatoÂlica, 1991). General
macroeconomic policy had an important indirect impact upon the agricultural
sector. The withdrawal of protective measures for industry, which had effectively
taxed agriculture, helped raise relative prices. Furthermore, trade liberalisation
measures helped precipitate the large increases in non-traditional agricultural
exports (NTAX) discussed in greater detail below. Following an economy-wide
recession in 1982 and 1983, which saw agricultural unemployment rise and GDP
fall for two successive years, the regime's extreme neoliberalism was revised. A
notable intervention was the introduction of price stabilisation mechanisms in
three essential commodities: wheat, sugar and oilseed (Gwynne and Bee, 1993).
Other examples included the increase in agricultural tariffs for a short period and
technology transfer programmes for small-scale farmers.
Overall, the rise in the export of NTAX has been seen as `the most outstanding
impact of the neoliberal reforms' (Apey, 1995: 123). Between 1971 and 1994, the
nominal value of NTAX (not including forestry and fishing) increased by a
magnitude of 47, from US$22.7 million to US$1138. The benefits of this growth
were not equitably spread however. Indeed, neoliberalism favoured selected
growers, sectors and regions creating profound rural differentiation. The legacy of
military neoliberalism was dynamism and sustainability for some only. The main
contours of this polarisation are outlined below:
1. Export-oriented farmers grew economically at the expense of inward-
oriented ones.
2. Non-traditional sectors prospered as traditional sectors continued to
stagnate and decline.

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 Warwick E. Murray

3. Large-scale farmers prospered relative to smaller scale farmers.

4. Minifundistas fared particularly badly relative to the rest of the sector.
5. Regionally, areas where NTAX dominated prospered. In general the South
did badly and the Central and Northern regions did well.
6. Locally, adjacent valley systems and neighbouring villages became highly
socio-economically differentiated given their ability to compete, and
antecedents such as micro-climatic suitability for given crops.
7. Localities and regions became vulnerable ± becoming virtual monocultures
linked into commodity networks over which they had little control.
8. Temporary workers were created from the proletarianised former growers
and the female population. Permanent on-farm labour declined leading to
rising insecurity.

The neoliberal inheritance of the ConcertacioÂn governments

There can be no doubt that the military's free-market reforms bestowed a
disproportionate level of benefits upon the already economically well endowed.
The generation of wealth among the middle and upper socio-economic classes
has not `trickled down' to the economically deprived masses. As noted
previously, governments subsequent to the military have been conscious of this
problem and the need for intervention in this area. The approach of the first two
democratic presidents, in which a social conscience was subordinated to the free-
market, has been termed `neoliberalism with a human face' (Kay, 1993; Hojman,
1995). From a political economy perspective the continuity of neoliberalism in
this period can be explained by a range of factors, including: the powerful
influence of international capital and the desire of the government to maintain
investor confidence; the role of the military-aligned national business elite and
their opposition to social reform and high taxation; the broad range of political
interests represented in the ConcertacioÂn governments which effectively blocked
progressive social reform; the legacy of the 1980 constitution which swung the
balance of power in the parliament and senate towards the right wing; and the
wish of the democratic governments to not antagonise the military by reversing
reforms which would displease its business allies.
Ricardo Lagos promised to move social priorities a stage further. In a number
of speeches and releases early into his term he placed heavy emphasis on equality
of opportunity, poverty reduction, and educational reform as the basis for
development and environmental sustainability. In this context he has argued, `We
will need as large a State as is socially-necessary. Free markets are not perfect and
the State must be present where needed to create equal access, to stimulate
cultural development and to redress existing inequalities.'6 Notwithstanding, he

6 Interview with Ricardo Lagos for the Socialist International Magazine reproduced on
the official website Presidencia de Chile, www. Presidencia.cl accessed February 12
1999. The interview is no longer listed on the site.

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 Agrarian Policy and Rural Differentiation in Democratic Chile

is careful to remind the public of the need to maintain macroeconomic stability as

an important pre-requisite for socially progressive policy. As Lagos commented
in 1999:

In a globalised world we will have to export more and better,

emphasising the generation of good quality jobs, the contribution of
exports to domestic growth and productive investment. Our financial
opening should not be without some controls and will have to take
into account domestic stability, as well as entrepreneurial, social and
productive development. In a similar sense, we must also advance
further in the modernisation of production, export capacity and
labour in our economy, to make the country less vulnerable to the
downswings of the globalised economy. It means that we must
continue on the track of regional integration with our neighbours in
the Mercosur and the hemisphere, making compatible a decisive
commitment to the region with Chile's future as a global trader. (See
note 6)

The underlying message then is little changed, and globalist and regionalist
agendas seem likely to continue to take precedence over social issues. When one
considers the re-vitalisation of the right (partly in response to the failure of the
ConcertacioÂn to address social issues) and the continued dominance of such
parties in government it seems difficult to imagine any other future for Chile in
the medium term.

Agrarian policy of the democratic governments

As was the case during the military period, agrarian policy has been largely
determined by broad macro-economic imperatives. Agri-business has played a
large role in lobbying government to maintain its neoliberal policy course. Such
companies grew enormously in influence in the 1980s, through the growth of the
NTAX sector in particular. High foreign ownership and the employment of large
labour-forces in packing houses up and down the country partly explain the
sector's support for neoliberalism. Given these processes, and broader support
for neoliberalism as discussed previously, ConcertacioÂn rural policy has
represented a `continuity' of military policy in at least six ways. (Adapted from
Kay, 1997):
1) The fundamental importance of equilibrium and stability through macro-
economic policy
2) The maintenance of agriculture's dynamism ± especially in exports
3) The continued focus on the role of integration into global agricultural
markets
4) The continuance of implicit cheap food policy
5) The continued priority accorded to regional integration over concerns of
traditional agriculture

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 Warwick E. Murray

6) The continued promotion of reconversioÂn of growers in line with all of the

above
There are, however, breaks with the past. For example, each of the successive
governments has placed more emphasis on the important socio-cultural role of
`rurality' (Belfor, 2000). There have been efforts to broaden the inclusiveness of
policy. One particularly important example has been the work of the Inter-
ministerial Commission on Rural Poverty (Apey, 2001). However, underlying
many such moves is the objective of creating and perpetuating the neoliberal
model of agriculture. In his recent survey of Chile's agrarian policy over three
decades from 1973, Belfor (2000) argues that the model has not changed
fundamentally. Lagos's policy platform ± although the most radical of the
transitional governments to date ± is little different in essence. Although rural
social issues and environmental issues have been paid some lip-service, the central
pillar remains rural market stability and free market resource allocation
conditioned by the forces of globalisation. A revision of the government's new
internet sites for ODEPA (Oficina de Estudios y Politicas Agrarias), INIA
(Instituto Nacional de Investigaciones Agropecuarias), INDAP (Instituto
Nacional de Desarrollo Agropecuario), SAG (Servicio AgrõÂ cola y Ganadero)
and other agencies of the Ministry of Agriculture reveals a strong neoliberal
component in policy.7 Finally, it is instructive that Lagos did not mention the
countryside a great deal in his major pre- and post election speeches.8

ReconversioÂn as a survival strategy for small-scale growers

From the early 1990s, in academic and policy circles, increasing emphasis has
been placed on the role of reconversioÂn as a means of raising the welfare of
farmers. The term has a number of alternative titles, including the `second
modernisation' and `productive transformation with equity'. These alternatives
arise as the concept has been appropriated by groups and observers of different
ideological perspectives and defined accordingly. Hojman (1995), for example,
defines reconversioÂn as; `the need to shift productive resources (land, capital,
labour) away from those activities and sectors which are no longer competitive
by international standards' (p. 93) Kay (1997) argues that for more pragmatic
policy-makers it has tended to approximate the Hojman's definition. For those
further to the centre-left:

(I)n a broad sense reconversioÂn measures aim at enabling and

improving peasant agriculture's ability to adapt to Chile's increasing
exposure to global competition and to enter into the more dynamic
world market by shifting their traditional production pattern to new

7 These websites can be accessed through the main portal of the Chilean Ministry of
Agriculture at www.minagri.gob.cl
8 See www.presidencia.cl for a comprehensive list of President Lagos' speeches.

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 Agrarian Policy and Rural Differentiation in Democratic Chile

products while at the same time improving their efficiency thereby

increasing their competitiveness. (1997: 7±8).

Partly due to problems of definition and failure to determine exactly who such
imperatives should be targeted at, no integrated policy package aimed at pursuing
the reconversioÂn objective has yet been formalised. The concept, of course, is not
new and underpinned the logic of rural neoliberalism during the military years.
Where the democratic governments and the military diverge however is the
relative emphasis placed on the different mechanisms for bringing reconversioÂn
about. At a broad level, reconversioÂn can be market or state-mediated. The latter
has received greater emphasis under the ConcertacioÂn governments.
In the case of market-mediated reconversioÂn it is largely the capitalist class of
medium to large scale farmers who have been able to generate sufficient resources
necessary in order to re-orientate the nature of their production. There is growing
consensus, however, that small-scale growers in particular face a range of
constraints which can seriously hamper efforts to `reconvert'. These include lack
of finance, lack of information, lack of bargaining power, the necessity of
securing subsistence income, and the necessity of reducing risk (Murray, 1997).
Increasingly, among neoliberal theorists, these constraints are being characterised
as `market imperfections' ± allowing such thinkers to continue to conceptualise
an interventionary role for the state as determined by the `principle of
subsidiarity'. Based upon this argument the ConcertacioÂn government has
intervened with the objective of strengthening the market.
However, there is still considerable debate with regard to targeting of
reconversioÂn. In general, only `viable' farmers have been deemed eligible for
assistance and support. This has led to a situation where, in general, the smallest
of the small ± the minifundistas ± have been largely bypassed. This raises serious
dilemmas. Is the government to concentrate scarce resources on the viable group,
allowing other anti-poverty measures to cater for the needs of minifundistas?
Given that certain localities are home to groupings of traditionally-oriented
minifundistas, this has created a geographical concentration of exclusion. Among
indigenous farming groups in the South a double-squeeze is occurring. Most are
not considered viable for state-mediated reconversioÂn. At the same time, they are
being increasingly out-competed by cheap imports from larger countries in the
Mercosur region. NAFTA membership will exacerbate this problem and the
uneven development which it is creating.

Policy aimed at reconversioÂn of small-scale farmers

It is estimated that approximately 120,000 small-scale farmers (of approximately
240,000 in total) are not viable and are under constant pressure to maintain their
livelihoods in the face of new commercial realities (Leiva and Sotomayor, 1994).
The remaining half are often the recipients of government or non-governmental
assistance towards reconversioÂn. Belfor (2000) identifies four areas which have
defined the post-authoritarian government's agrarian policy: (1) insertion into

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 Warwick E. Murray

markets; (2) price stabilisation; (3) support for competitiveness; and (4) measures
to assist reconversioÂn of small-scale farmers. In three of these four areas (1, 2, and
4) reconversioÂn is thus a central component.
There are numerous individual examples of policy aimed at reconversioÂn
arranged particularly around technology transfer, credit provision, technical
assistance, and irrigation infrastructure. A central example has been the
Programme of Technology Transfer (PTT) organised by INDAP which reaches
over 50,000 peasant farmers. This scheme expanded in the 1990s to provide credit
for technology and has benefited 70,000 small farmers (Ortega 1993). A second
major example is INDAP's technical assistance scheme which subsidises 90 per
cent of the cost of expert consultancy for small growers. In general INDAP,
which plays the central role in state-mediated reconversioÂn, increased its
spending by a magnitude of 2.6 between 1990 and 1996 and is now the largest
branch in the Ministry of Agriculture (Belfor, 2000).
Further examples of government intervention in the pursuance of the
reconversioÂn objective have included the following: the creation of link financing
for small-scale growers wishing to take advantage of the subsidies for
reforestation (applied during the regime); large scale projects for the rice
producers of regions VII and VIII which aim at increasing efficiency and
introducing diversification; programmes encouraging links between agro-
industry and small-scale farmers; projects aiming to increase the cultivation of
recent NTAX such as flowers, seeds and bulbs; projects aimed at increasing the
participation of women in agricultural markets and various irrigation initiatives
for small-scale producers (Kay, 1997).
The Lagos administration shows signs of placing reconversioÂn at the centre of
its agrarian policy. The US$5 billion 10 year agricultural development plan
announced in 2000 involved seven major points: (1) confidence and security for
producers; (2) market development; (3) management of natural resources quality;
(4) competitiveness; (5) quality produce; (5) forestry development; and (6) the
new rural world.9 Central to the proposed selection of policies under each of
these headings is the modernisation of agriculture and the need to adjust to global
forces in order to survive.

Macro-productive impacts of reconversioÂn

Land use changes are an important way of tracking the macro-impacts of
reconversioÂn and aggregate adoption behaviour. Land use trends are shown in
Figure 1. Between 1989/90 and 1997/98, there was a decrease in land area under
traditional crops from 987.440 ha. to 775.794 ha. This continues a trend
identified by Kay (1997) which saw the same measure fall from 1,157,000 hectares
in 1986/87. In contrast, land under fruit and vines, horticulture and artificial
pastures has increased over the transition period. Fallow land has declined. In
terms of extensive land use (not shown in Figure 1) improved pastures and in

9 This plan can be accessed via www.minagri.gob.cl

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 Agrarian Policy and Rural Differentiation in Democratic Chile

Figure 1 Intensive land use, Chile 1989/90±1997/98

Source: Calculated from ODEP (2001).

particular forestry have increased, whilst land use for natural pastures has
declined. This illustrates a shift over the decade from traditional inward-oriented
activities to non-traditional export oriented agriculture. Of course this analysis in
itself says nothing of the distributional nature of the reconversioÂn process. The
shift has been undertaken principally by medium and large scale growers. This is
particularly the case with forestry reconversioÂn, given the long waiting period for
initial returns. It is also the case for fruit investments which have very high entry
costs. Furthermore, aggregate figures say nothing of the economic sustainability
of reconverted farmers.
Much of the contemporary debate surrounding the Chilean `agrarian question'
tends to focus on the issue of reconversioÂn and, in particular, how that should be
attained. However, little has been said with regard to what happens after small
farmers successfully complete their reconversioÂn. Kay (1997) comments that
those small-scale farmers who are `able and willing to adapt may not only
improve their chances of survival but indeed prosper' (p. 14). This seems possible
but is not necessarily true. In a recent conference paper Apey (2001) argued that
post reconversioÂn success rates in some horticultural sectors such as tomatoes
and broccoli had been promising, with small farmer yields surprising the
observers. Primary evidence from work undertaken in the mid-1990s in the fruit
sector tells an altogether different story however.

Grower failure in an era of globalisation

In 1995, two case studies in the NTAX sector were undertaken (Murray, 1996).
These analysed how small-scale farmers had become integrated into globalising

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 Warwick E. Murray

fruit networks and the social and economic impacts experienced at the local
scale. These were the `cutting edge' growers ± created under the counter reform
and participating in global markets. The group gained access through a mixture
of market induced (financed by export companies) and state-mediated (irrigation
technology and other technology transfer) reconversioÂn with greatest emphasis
placed on the former. In the case study areas of Curico (Region VII) (focused on
apple exports) and El Palqui, (Region IV) (focused on grape exports) worrying
trends were revealed with respect to the ability of small growers to remain
competitive in times of global market difficulties (see Murray, 1997, 1998 and
1999).
The underlying conditions in the two regions were different. In CuricoÂ, land
was of higher quality, water more readily available, a history of fruit production
existed, there was greater propensity to co-operate, agriculture was relatively
diversified, and parcelas created in the counter reform were generally of a larger
size than in El Palqui. However, a very similar three phase transition for small-
scale farmers was observed beginning in around 1979 in both localities:
1) Completion of counter-reform and continued traditional production
2) Incorporation of small-scale growers into expanding fruit export sector
3) Squeezing out of small-scale growers and re-concentration of land
ReconversioÂn (phase 2) in these case study examples was experienced in the mid-
1980s. This was facilitated largely by the granting of credit and transfer of
technology by large, often multinational, fruit export companies who established
contract-based supply networks. In the late 1980s until the early 1990s, given a
buoyant export market (see Figure 2), returns were uniformly high.
In the mid 1990s the global fruit complex tightened, especially in the major
markets for apples and grapes (see Figure 2) and the companies responded with a
programme of rationalisation. The enormous power they held in local markets
meant that they could pass on many of the costs of production to the farmers
(through both legal and not so legal means). Grower debt spiralled out of control
and land was transferred from the growers to agri-business or relatively large
growers. Figure 3, for example, shows that in El Palqui the ownership of parcelas
by export companies created in the counter-reform rose considerably between the
end of the 1980s and the mid-1990s. By 1994, 32 of the original 144 parcelas were
owned by companies.10 Medium and large scale growers did not experience the
same levels of difficulty given greater resources and greater bargaining power
with the export companies, which in many cases had evolved into spatial bi-
lateral monopolies.11 Indeed, many large-scale grower became successful enough
to buy-out several struggling small-scale farmers.

10 This is likely to under-estimate the ownership of land by companies as revealed

through the examination of local agricultural census data; for tax purposes some
companies purchased land under individual names.
11 A geographically delineated market characterised by a single-firm buyer and seller. In
this case firms had gained effective monopsony control of labour and land markets
and monopoly control of the sale of agricultural inputs and the transfer of technology.

436 ß 2002 Society for Latin American Studies

 Agrarian Policy and Rural Differentiation in Democratic Chile

Figure 2 Chilean fruit exports 1971±1999 (value in US$000s)

Source: ODEPA (2001).

Figure 3 Number of parcelas owned by Agri-business, El Palqui, Chile 1983±1994

Source: Author.

Overall, disguised and eventually full proletarianisation of much of the small

farm sector in these localities has perpetuated the two-tier agricultural system
referred to earlier in this article. The crucial point is that with more effective
regulation of companies ± in particular their contract arrangements with growers
± many failures could have been averted. However in some policy circles `market
selection' has been read as an inevitable part of the transition to a `second'
modernisation.
The fruit sector has resumed growth, largely through diversification away
from grapes and apples which had become saturated on world markets, to more
`exotic' varieties and new markets (especially in Latin America). If growers can
become involved there may well be valuable opportunities in this area, although
participation in the fruit complex will always entail high risk. Taking part in such

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 Warwick E. Murray

markets whilst simultaneously resisting the build-up of high levels of company-

owned debt is not an option available to most small-scale growers. Furthermore,
the concentration which took place in the sector in the 1990s, together with
increasingly tight international competition and quality demands, imply that it
will be increasingly difficult for smaller growers to enter, compete, and survive.
The `easy phase' of export expansion is over, and sustainable participation will
require great resilience on the part of the small-farm sector. During an interview
in 1995,12 an export firm official in Curico said, `small farmers should get out (of
the fruit sector) now while they still have a chance ± this is a market for big boys!
They would have been better-off if they had never received their parcelas.' If
government policy does not evolve considerably this will become an increasing
reality.

Conclusion ± beyond reconversioÂn?

The first broad aim of this paper was to illustrate that a significant neoliberal
inheritance shaped the evolution of agrarian policy during the democratic
transition. Although the ConcertacioÂn governments have indicated their desire to
tackle rural poverty and inequality ± and in some cases policy has been
constructed to do this ± export-oriented rural modernisation remains the
overriding priority. In general, agrarian policy has been subordinated to, and
shaped-by, broader macroeconomic imperatives. As has been consistently argued
here, the continuity in neoliberalism has led to increased rural inequality and has
sustained unacceptably high levels of poverty. This is particularly the case among
the rural proletariat and the small farm sector, including minifundistas. The
emphasis of the successive governments of Aylwin, Frei and now Lagos on
reconversioÂn as the favoured strategy for small-scale growers, is cause for serious
concern. Perhaps one of the most important implications of the discussion
presented here is that considerably high levels of failure have been recorded
among a group that has `re-converted' to a particularly high-growth sub-sector.
ReconversioÂn is not the panacea that the government and various observers may
hope or believe.
If the Lagos government is serious about the survival of small-scale growers
through reconversioÂn and wishes to effectively pursue its stated aim of reducing
rural poverty through this policy, it must increase support for parceleros after
reconversioÂn. In the specific case of the fruit export sector, measures must be
taken to reduce the structural imbalances which characterise the large firm-small
grower relationship. There are six broad areas to which policy should be
addressed: Monitoring of fruit procurement contracts; legal aid for small-scale
growers in contract disputes; a system of financial provision and debt re-
negotiation for small growers; more effective non-company owned technology
transfer; provision of impartial information; and, incentives to organise and

12 Interview, CuricoÂ, May 1995.

438 ß 2002 Society for Latin American Studies

 Agrarian Policy and Rural Differentiation in Democratic Chile

bargain collectively. The latter should include policy to raise people's awareness
of the potential rewards of collective economic activity in a society which remains
wary of such activity. The idea that failure is inevitable for small farmers and
minifundistas in particular needs to be re-thought. Survival will certainly be
difficult without some form of support pre- and post-reconversioÂn in today's
rapidly moving global agro-food complex. The provision of adequate support
mechanisms will be expensive. Whether the ConcertacioÂn has the political will
and ability to undertake such reform is uncertain. A range of developmental
dilemmas persist which are often conceptualised in dualistic terms including:
globalisation versus protection; rural versus urban; regionalism versus domestic
rural interests; and environment versus development. Debate over such tensions
at the national and local levels will determine the evolution of policy towards
agriculture and rural society over the coming years.
To turn to the second overall aim of this paper; how did an agrarian policy
which failed to address poverty, promoted differentiation, and increased
inequality, remain so influential? It seems remarkable that in the new democratic
context the approach was not reformed in order placate the electorate. At a
general level, the powerful alliance of international and agri-business capital has
been important in explaining the persistence of neoliberal agrarian policy.
Governments have been reticent to undermine foreign and domestic investment
sources. Given such imperatives, the reform of NTAX contract systems, for
example, is not something that the ConcertacioÂn governments have wished to
address. It could be argued, at a broader level, that the transitional governments
have had their hands tied by orthodox developmental institutions which place
export maximisation and economic growth above all else. These arguments have
been strongly articulated by the allied Chilean business sector. Further to this it
might be added that, given demographic trends and shifting rural/urban power
relations, the ConcertacioÂn is simply pursuing policies of urban bias intended to
win the votes of the majority electorate. Equally important in explaining the
persistence of rural neoliberalism, however, is the rightist bias in Chile's
governance structures ± especially the legislature. This has acted as an important
impediment to progressive policy in rural areas. Ironically, in recent elections it is
in these areas that the right-wing parties (especially the UDI) have seen their most
impressive gains. The ConcertacioÂn governments have clearly failed to satisfy the
rural electorate and are perceived to have not delivered on their promises for the
agricultural sector. Unless future administrations reform the regressive legacies of
neoliberal rural policy, see beyond reconversioÂn, and attempt to deepen economic
democracy13 in the countryside we can expect more inequality and failure.

Acknowledgements
I am grateful to Jonathan Barton, Cris Kay and another referee for valuable comments on
the original draft of this article. For editorial and theoretical input I am also grateful to
Phil Morrison and Sara Kindon. The errors which remain are my own.
13 By this term I mean equitable access to economic resources and entitlements.

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 Warwick E. Murray

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