Two decades of adjustment and agricultural development in Latin America and the Caribbean

Introduction (first paragraphs of the introduction) This paper analyses two decades of economic adjustment in Latin America and the Caribbean, focusing on its impact on the agricultural (and in some cases, the rural) sector. A critical evaluation of the dramatic structural changes that took place in the region is merited in the face of the new international financial crisis that is affecting the continent, especially since the agricultural sector has not been given sufficient significance in the reform process. The context of such an analysis gradually changed during the 1990s. The Washington Consensus, which was previously predominant among the international financial institutions (IFIs), gave primary importance to the correction of relative prices; it has been complemented or partly replaced by neo-institutional and even neo-structuralist ideas, in view of the continuing existence of serious market failures and the negative effects of over-adjustment in relation to the so-called 'minimal state' (Killick, 1989, 1995; Streeten, 1993; ECLAC, 1996; Ramos, 1997). This paper's analysis of the effects of adjustment on the agricultural sector contributes to a more qualified view of the overall process of reforms in Latin America and the Caribbean not only by investigating concretely the sectoral impact, but also by comparing original assumptions and expectations with implemented reforms and outcomes.The import substitution industrialization (ISI) model, which was implemented throughout much of the region during the post-war period until the early 1980s, discriminated against agriculture through exchange rate overvaluation, export taxes, protection of the industrial sector and direct market interventions. In particular, the overvaluation of the exchange rates was related to a spur in imports during the 1970s, while the interventionist price policies were blamed for causing reduced growth and poor export performance (Krueger and others, 1991). The agricultural sector did reasonably well in the 1970s and the first half of the 1980s, however, as price discrimination was combined with a substantial package of support measures (e.g., public investment, subsidized credit and agricultural services). This paper demonstrates that the assumed bad performance of the sector during the 1980s (the so-called lost decade) has to be qualified in view of the available macroeconomic and sectoral data, in particular with regard to the first half of the 1980s. Substantial differences can be observed between the performance of the macroeconomy and the behaviour of the Latin American and Caribbean agricultural sector, both during and after this period, for the region as a whole and among individual countries. Furthermore, the shift toward an export-led growth model (Weeks, 1995; Bulmer-Thomas, 1996; Thorpe, 1997) did not overcome the so-called paradox of agriculture, in which verbal recognition of the sector's importance in the economy was contradicted by low investment priorities and deficient (or even absent) sectoral policy (Weeks, 1995; Spoor, 1997; Reca and Echeverría, 1998). The paper also seeks to contribute to an overall review of agricultural (and rural) development policies in Latin America and the Caribbean. There is a tendency to focus on economic dynamism in certain sectors, most often those linked to international capital and transnational corporations (TNCs), while ignoring the marginalization of others, including the most populous small farmer and peasant sectors. Although this issue falls outside the main scope of the paper, the analysis points toward a new role for the State, one that does not return to the interventionist agenda, but rather takes a more indirect, albeit activist, public role with regard to this important sector (De Janvry and Sadoulet, 1993; Spoor, 1995, 1997).