AGRICULTURE, THE WAY TO REDUCE POVERTY AND BOOST THE ECONOMY IN PERU AND COLOMBIA

Introduction

Agriculture can lead the way to eradicate extreme poverty. A couple of decades ago, extreme poverty replaced economic growth as the big goal with the release of the Millennium Development Goals (MDGs) (Christiansen et al., 2011). Along with this change in global goals, Food Security became a priority for the Sustainable Development Goals (Andersson & Axelsson, ch 4, p.84). However, it is an economic sector which relevance varies depending on the author and time of its research. In the case of Latin America, one might say that the development of the agriculture sector has allowed the industry and service sector to develop. The aim of this report is to evaluate if agricultural development has been a success in terms of poverty reduction and employment in Colombia and Peru. The research question proposed has the aim of illustrating the agrarian situation in Latin America mainly for stakeholders of the public sector and academics from any science.

Research question: Are farmers in the case of Colombia and Peru the big losers of the economic development of the countries?

Literature review

The economic benefits of boosting agriculture have remained controversial in the literature. Some authors, like Gerschenkron, did not see its clear value in economic development (Andersson & Axelsson, ch 4, p.70). However, a healthy economy needs a stable food economy. If food supply and price are not steady, this will touch other parts of the society, and it will produce different behaviours that can lead to harmful political and social consequences (Andersson & Axelsson, ch 4, p.76). The authors also mention the reduction in the bias of governments to not understand the vital role of agriculture in the economy (Andersson & Axelsson, ch 4, p.86). ´

On the other hand, according to Christiansen et al. (2011), the growth of the agricultural sector has a positive impact on the poorest population. Other industries help to boost different income levels, but when it comes to attacking extreme poverty around the world, which is the Millennium Development Goals (MDGs), the agriculture sector has to be the one who leads the way. Now, how can nations boost their agriculture sector? The author raises the question that the prominent farmer will profit more than the small ones when it comes to investments. However, the goal then is not who benefits more, but how can we tackle extreme poverty with the development of agriculture.

Finally, in modern economic growth, the rate of structural transformation of the economy is high, from agriculture to industry and from industry to services. All of it, related to an increase in productivity levels (Kuznets, 1973). This structural transformation implies the movement of workers from one sector to another.

Framework

Productivity measures the development of the agriculture sector. Productivity is defined as value-added per worker. Poverty is taken as living with less than 1,9 US dollars a day which is considered extreme poverty. Also, employment in the different sectors of the economy is represented as a percentage of the working population in that specific sector. These three variables will help understand the overall economic benefits, and the specific ones related to employment and poverty, of boosting agriculture.

Data

The data used in the research is taken from the World Bank and Food and Agriculture Organization of the United Nations. It involves employment in the all-economy as filtered by services, industry and agriculture jobs. It also includes percentages of poverty and government expenditure.

Analysis

The agricultural sector has been maintaining increased support of the government in Peru and Colombia. Figure 1 illustrates how the governments of both countries have retained a positive slope in the expenditure of the sector. Therefore, governments are convinced of the importance of the sector.

In terms of employment during the last two decades, both countries show to have a positive increase in all sectors, when aggregated in Figure 2., of the economy. However, the employment of the agricultural sector has been decreasing (Figure 3), the employment in the industry has remained stable (Figure 4) and the employment of the service sector has been maintaining a positive trend (Figure 5). These facts are related to Figure 6, where one can see how the rural population has been decreasing over time. Also, to the fact that productivity in agriculture, a relevant point according to the literature, has been increasing (Figure 7). Therefore, one can argue than those more productive workers, or farmers, are staying, and the other ones are reaching other sectors of the economy, especially the service sector. Also, as seen in Figure 8, poverty has been reduced annually, and it seems to correlate with all the other variables. For these reasons, the research question can be answered by saying that agriculture development in Peru and Colombia has only brought success to the overall economy.

Conclusion

Agriculture development provides food supply and political stability to developing economies. Therefore, it has to be incorporated in the agendas of any nation that wish to succeed in the long economic run. On the other hand, when machines or new techniques arrive and productivity levels in the sector rise, it is a natural economic phenomenon that workers move from one sector to another. In the case of Latin America, we looked at the example of Peru and Colombia. In both countries, it is clear how as employment in agriculture decreased the work of the other sectors increased. It is normal to have a certain lag while the economy can create new jobs for these newly unemployed people, but in the end, they seem to have found a job in other sectors. For this reason, agricultural transformation in those regions has been a success. It is only allowing both countries to have the basics to start their economic development paths.

References

· Christiaensen, L., Demery, L., & Kuhl, J. (2011). The (evolving) role of agriculture in

poverty reduction — An empirical perspective. Journal of development economics, 96(2),

239–254.

· World Bank. World Development Indicators. The World Bank Group, data.worldbank.org. Accessed 10 Oct. 2019. From https://data.worldbank.org/indicator/

· Food and Agriculture Organization of the United Nations. (2019). FAOSTAT Database: FAO. Retrieved 10 Oct 2019 from http://www.fao.org/faostat/en/?#data/OE

· Simon Kuznets (1973) ‘Modern Economic Growth: Findings and Reflections’, The American Economic Review, 63(3), p. 247. Available at: http://search.ebscohost.com/login.aspx?direct=true&db=edsjsr&AN=edsjsr.1914358&site=eds live&scope=site (Accessed: 4 September 2019).

List of Figures

Figure 1.Government Expenditute in Agriculture, Forestry and Fishing

Source: FAO Stat

Figure 2. Employment to population ratio, 15+, total (%) (modeled ILO estimate) — Colombia, Peru

Source: World Bank Database

Figure 3. Employment in agriculture (% of total employment) (modeled ILO estimate)

Source: World Bank Database

Figure 4. Employment in Industry (% of total employment) (modeled ILO estimate)

Source: World Bank Database

Figure 5. Employment in services (% of total employment) (modeled ILO estimate) — Colombia, Peru

Source: World Bank Database

Figure 6. Rural population (% of total population) — Colombia, Peru

Source: World Bank Database

Figure 7. Agriculture, forestry, and fishing, value added (constant 2010 US$) — Colombia, Peru

Source: World Bank Database

Figure 8. Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population)

Source: World Bank Database

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