Smallholders and the Non-Farm Transition in Latin America

I. Harbaugh

• Publisher: Palgrave Pivot
• Year: 2014
• Print ISBN:
  9781137487155
• eBook ISBN:
  9781137487162
• Topic: Politics & International Relations
• Subtopic: American Government
• Index: Politics & International Relations

Smallholders and the Non-Farm Transition in Latin America explores the drivers of agricultural displacement in Latin America and argues that government support is essential to help small farmers gain the skills, financial capital, and opportunities needed to transition to a profitable alternative in the non-farm sector.

1

Promoting Non-Farm Skills and Knowledge

Abstract: Chapter 1 discusses the human capital barriers to successful non-farm employment and explores methods to enhance relevant skills. Because agricultural profitability can be a key driver of non-farm growth, the chapter argues that support for the non-farm sector does not require a reduction in agricultural programs; rather many initiatives to boost non-farm skills can be integrated within existing development programs for farmers. Options discussed include adjustments to traditional extension services, Farmer Field Schools, programs to increase market integration with changing supply chains, and collective bargaining through farming cooperatives.

Keywords: agricultural extension; farming cooperatives; farmer field schools

Harbaugh, Isabel. Smallholders and the Non-Farm Transition. New York: Palgrave Macmillan, 2014. DOI: 10.1057/9781137487162.0003.

As the introduction made clear, an increase in rural human capital among small farmers is essential for their collective non-farm success. The difference in skills and knowledge between large and small farmers is one of the main reasons why the former group is able to access highly profitable positions while the latter can usually only access low-growth and low-profit jobs. If small farmers had the abilities needed to perform the non-farm functions that more wealthy residents typically do, they may gain lasting relief from the ongoing pressures of rural poverty.

While formal education is typically the main skill-related determinant of profitability in the non-farm sector, there are various ways in which a government may compensate for a farmer’s lack of schooling and help them develop the relevant skills for non-agricultural pursuits (Estudillo and Otsuko 1999). Vocational education, apprenticeship programs, and support systems for rural entrepreneurship are popular programs in rural areas because they specifically address the capabilities and knowledge that can be applied to jobs outside of agriculture.

From a financial perspective, however, these programs are problematic in that they often must divert resources from agricultural-based initiatives. Due to ongoing budgetary constraints, rural policymakers find themselves having to choose between plans to address non-farm capabilities, which may become increasingly necessary in the future, and agricultural support programs, which are desperately needed by millions of small farmers today (Ellis and Biggs 2001). Faced with this dilemma, many rural governments choose to neglect non-farm skill building in favor of more urgent agricultural needs, leading over time to a significant underinvestment in non-farm human capital development.

To address this problem, a significant change in mindset is needed in order to better acknowledge and take advantage of the interconnectivity of farm and non-farm skill development. One of the best ways to prepare small farmers to transition away from agriculture (aside from formal schooling) is actually to make them better farmers. While seemingly counterintuitive, there are numerous reasons why more effective farmers will find greater success in the non-farm sector.

To begin, marginalized farmers often pursue non-farm income out of desperation, leading them to select positions that have the lowest barriers to entry (Rodriguez and Meneses 2010). When farmers are able to earn an adequate income within agriculture, they will be much more discerning in their selection of non-farm revenue streams. Rather than take the first available opportunity, they can wait until better positions avail themselves, just as larger, wealthier farmers typically do.

In many areas, these opportunities are still emerging. Until this nascent non-farm industry can develop enough to provide sustainable jobs for more rural inhabitants, farmers will need to be able to survive within agriculture. Too often, smallholders succumb to the pressures of changing agricultural markets and sell off their land to cover debt obligations and temporarily alleviate their financial struggles. When land sales occur before a non-farm opportunity is available, the farmer will ultimately end up in greater poverty than before (Deininger 2003). In order to help smallholders “hang on” until the non-farm economy has a chance to grow, many farmers need to improve their agricultural effectiveness.

For some farmers, the early development stages of the local non-farm economy will last beyond their lifetimes, and they may never have the chance to make a transition outside of primary crop production. Nonetheless, agricultural success today can help prepare future generations for the non-farm sector because farmers will be able to invest in the education of their children. Struggling farmers lack both the capital needed to fund education and the freedom to allow their children time off from the fields. One of the biggest barriers to continuing rural education is the obligation to assist in agricultural production. If family labor needs are reduced, however, families could enjoy a significant improvement in welfare over the course of a single generation. One study of rural Mexico found that educational investments by rural inhabitants had surprisingly high rate of returns, though the highest returns shifted away from crop production and toward non-farm jobs as years of schooling increased (Yunez-Naude and Taylor 2001). The children of farmers who can afford to invest in education will be much more successful in the non-farm sector than those who were unable to continue with school due to family labor needs or lack of investment capital.

Greater agricultural knowledge and ability will also enable farmers to invest in the quality of their land. Due to credit constraints as well as low levels of education, smallholders often make insufficient investments in soil quality, leading to a gradual deterioration of their production potential and efficiency (Deininger 2003). Those that are more attentive to the long-term development of their property, however, should see the value of this land rise over time. When farmers are finally ready to sell their land, they will be able to receive a higher level of compensation, thereby providing them with a higher initial capital injection to start an off-farm venture.

Finally, there are many important skills for agricultural production that can also be applied to non-farm pursuits. By attempting to foster these skills within an agricultural context, governments or NGOs can achieve an impact that is both immediately applicable for farmers and valuable in the later transition away from agriculture. Farmers will likely be more comfortable and confident applying skills acquired in an agricultural environment rather than those with seemingly distant applications. In the case that some farmers decide to remain in agriculture, investments in these types of abilities will have greater returns than those that are only applicable once a farmer transitions out of agriculture.

For these reasons, placing greater emphasis on the accumulation of non-farm human capital does not require a massive overall of current rural agendas. On the contrary, programs to support relevant non-farm skill development can and should be integrated into existing initiatives aimed at the agricultural sector. These programs already support the objective of non-farm preparation simply by making smallholders more effective and stable within agriculture, leading to important land and educational investments as well as allowing smallholders to survive within the sector until non-farm opportunities are available. In many instances, agricultural programs for small farmers need only to be tailored slightly in order to achieve a much larger impact on the development of non-farm abilities. With this objective in mind, there are four primary areas of interest for policymakers to explore: tailored extension services, skill building through Farmer Field Schools, promotion of market awareness and integration, and finally, the establishment of farmer associations and promotion of joint economic activities.

Tailoring extension services

Increased farmer effectiveness and skill building are generally achieved through the provision of state-run extension services, which includes a wide variety of initiatives, from programs to spread knowledge of efficient crops and farming techniques to campaigns to raise awareness of legal requirements, marketing opportunities, and effective management styles. While extension services initially focused exclusively on achieving national food security, extension objectives have expanded to align with the broader policy agenda of improving rural livelihoods. Considering the new focus on rural poverty, policymakers can more easily advocate for an additional goal of these advisory services: preparing rural farmers for non-farm employment. As previously discussed, this objective will be achieved in part by making farmers more effective within agriculture, but with slight changes to the goals and methodology of extension, governments can encourage even greater preparation for the post-agriculture transition by ensuring that extension targets the skill and knowledge areas that are most applicable to non-farm employment.

Due to the heterogeneity of non-farm activities and the tremendous variance between regions and communities, this objective requires a substantial increase in the decentralization of extension services. With a more specific understanding of local non-farm opportunities, these advisors will be more likely to capitalize on chances to impart knowledge regarding alternative forms of employment. If a village is located near a body of water, for instance, experts can supplement their standard extension programming with advice to take advantage of this resource to gain additional income. As farmers build a more diverse skill-base and understanding of local opportunities, they will be better equipped to pursue these prospects full-time. With a centralized, standardized system, this level of specialization would be unfeasible, but under a decentralized system, there is much greater potential to provide these additional services.

Greater regional tailoring is also necessary to achieve the primary goal of extension programs, which is to say greater agricultural profitability. The initial extension model promoted by the World Bank in the 1950s relied heavily on a centralized, standardized, and publicly operated system to train and direct a core of extension experts. While this model may have initially succeeded in disseminating new knowledge from the Green Revolution, today it is too rigid to address the multiplicity of concerns that farmers face or account for regional diversity (Swanson and Rajalahti 2010). For countries with vastly different eco-regions such as Bolivia, it would be nearly impossible to design a single extension model to service both farmers in the mountainous Andes and those in the tropical Amazon. Decentralization allows extension agencies to be more responsive to the diverse needs of farmers within a single country.

Furthermore, decentralizing extension programs to regional actors increases the likelihood of crop diversity. If crop recommendations are dictated by a single central authority, there is a risk that farmers will all turn to a uniform set of crops, creating an excessive supply and decreasing profitability (Sharma 2002). With more actors involved, overall crop production is likely to be more diverse because different extension programs will encourage different products based on the merits of different eco-regions.

Decentralization also increases the likelihood that local people will have a say in the planning process, which is an essential factor in tailoring extension services to specific circumstances. Farmer participation can ensure that training programs more effectively address the diverse needs of rural people, as expressed by the farmers themselves. Programs will be more responsive to changes in these needs because there will be more frequent communication between planners and beneficiaries. Extension organizations can receive much needed information by increasing correspondence with farmers, especially regarding opportunities for non-farm employment, which vary substantially among different communities (Parker 1995). On the participants’ part, helping to define the program goals and strategies will increase the emotional investment in the program’s outcomes, leading to greater engagement and effort (Swanson and Samy 2003).

Allowing farmers to be more involved in extension services can gradually lead to a significant and accessible source of non-farm employment for current farmers. In response to the declining provision of public extension, an NGO in Peru started a training program to develop rural farmers into private agricultural consultants who could in turn assist other marginalized farmers in the area (Hellin and Dixon 2008). These consultants, called Kamayoq in local Quechua, were trained to both impart technical knowledge and encourage farmers to experiment with local resources in order to develop their own solutions and innovations. The model has proven surprisingly effective in both disseminating valuable skills more widely among marginalized farmers as well as providing a steady source of income for the Kamayoq. Given the promise of future return, many applicants to the training program are now willing to pay for part of their education, thereby making the program more financially sustainable and possibly applicable to other regions and countries that are currently struggling to fund these initiatives (Hellin and Dixon 2008).

Despite the benefits of decentralization, both for the farm and non-farm economy, this transition raises several challenges. Decentralization projects tend to be costly due to the need for substantial legal restructuring, but the political cost often exceeds any financial burden (Parker 1995). Central governments are often resistant to motions that would require them to relinquish control over policymaking, but more importantly, they are hesitant to give financing power and autonomy to lower levels of authority. For this reason, governments often implement decentralization schemes without allotting the necessary resources or ability to local bodies or granting them the power to raise capital through tax levies (Garman, Haggard, and Willis 2001). If municipal governments receive greater responsibility for extension but financial resources are unchanged, the quality and quantity of extension will most certainly decrease. Central governments need to either divert a segment of their budget to sub-national actors or allow for greater local taxation, while stipulating that these funds be used for agricultural promotion.

No matter the funding structure, however, decentralization often demands greater financial and human resources than many governments can sustain, due to the duplication in management positions. Lower level governments may not possess the capacity for program administration, leading to an overall decline in the quality of extension services provided. Further problems include decreased accountability from shared responsibility for programs, ineffectiveness due to limited incentive for efficiency and innovation, interference of political agendas, and elite capture (Feder, Willit, and Zijp 1999). Especially when local leaders are involved in the targeting process, the beneficiaries of decentralized extension services often reflect a disproportionate makeup of wealthy and powerful farmers while poor farmers, ethnic minorities, and women are generally underrepresented (Feder et al. 2010).

To address some of these concerns, the state can delegate a greater role to the private sector for the provision of publicly financed extension services. In Costa Rica, for instance, the government conducted a pilot program in which farmers received vouchers for extension courses from private providers (Ameur 1994). While the state continued to finance these services, it achieved a greater degree of efficiency, innovation, and accountability than under public operation because private extension agents were driven to compete for contracts. Private sector involvement in extension is also associated with greater use of technology, as private actors are often better equipped with technological resources and knowledge (OECD 2012). This success, however, is contingent on the assumption that extension agents remain qualified and uncorrupt, which would necessitate some sort of continuing accreditation scheme as well as regulations to protect the poor and vulnerable (Rivera and Alex 2004). Furthermore, governments must explicitly stipulate that extension agencies promote non-farm activities as well. If extension services are available only to agricultural workers, there is some conflict of interest for extension providers because their continued income depends on small farmers’ continued focus on agriculture. Non-farm educational services, however, present a new business opportunity for these private groups. If the government also offers to subsidize non-agricultural extension or even better, makes this element a required component of current extension programs, the system will encourage farmer groups to pursue the most profitable opportunities available to them, whether agricultural or otherwise.

In sum, decentralization of extension services should afford a greater role for sub-national government bodies, private companies, and farmers themselves. Each of these actors can help to improve the quality of services provided and better prepare farmers for the transition away from agriculture. While many countries have begun some of these processes of decentralization, there remains significant space for further development in this field.

Among Latin American countries, Chile stands apart for its successful decentralization of national extension services, which incorporates all of the above elements and actors. In its current form, the state-run Agricultural Advisory Service (AAS) relies completely on contracted agencies to operate extension programs. The government provides small farmers with educational subsidies and allows them to select the contractor, drawing from a range of private agronomists, consulting agencies, and municipal government bodies that offer these services. Groups of farmers graduate through a series of multi-year programs, and each level requires the groups to play a larger role in designing projects and defining objectives. Due to the limited restrictions on the project design, the program has expanded to address a wide range technical, management, business planning, and legal concerns affecting small farmers. While there is no set approach for contractors to address these issues, the government conducts careful monitoring of methodologies and outcomes (Berdegué and Marchant 2002).

The positive assessments of the program are a testament to the success of decentralization, public–private partnerships, and farmer participation. A 1995 study determined that households with below average crop yields in 1983 were able to obtain yields 25 percent above the national average for wheat, 31 percent for corn, and 14 percent for field beans over the course of eight years (Namdar-Iraní and Quezada 1995, p. 150).¹ According to a major government-sponsored external evaluation in 1997, the net present value of these benefits to farmers exceeded 200 percent of the net present cost of the program, assuming that productivity levels would last for six years following the end of the consultative services (Comisión Interministerial de Fomento Productivo 1998, as cited in Berdegué and Marchant 2002, p. 5). Clearly, extension services conducted with an appropriate degree of decentralization present a significant opportunity for governments to improve farming effectiveness and thereby rural livelihoods.

Skill building in farmer field schools

While decentralization can improv...

Table of contents

• Cover
• Title
• Introduction: Smallholders and the Non-Farm Rural Economy
• 1 Promoting Non-Farm Skills and Knowledge
• 2 Overcoming Financial Barriers
• 3 Promoting Non-Farm Employment
• Conclusion: Connecting the Dots
• References
• Index