Peru - Agriculture

Agriculture

Perhaps the most important fact about the agricultural sector is that its production has not kept up with the growth of population. Total output of agriculture and fishing combined rose 63 percent between 1965 and 1988, but output per capita fell by 11 percent. Output per capita started falling in the early 1950s, climbed back up again to its 1950 level by 1970, then began a more pronounced and prolonged fall through the 1980s. Per capita output of food, as distinct from total agriculture, did better: it increased 1 percent during the period from the early 1980s to the late 1980s.

The downward trend in agricultural production per capita was accompanied by a fall in the share of output going to exports. From 1948 to 1952, Peru exported 23 percent of its agricultural output; by 1976 the export share was down to 8 percent. The trade balance for the agricultural sector remained consistently positive through the 1970s but then turned into an import surplus for the 1980s.

Although agricultural production in the aggregate failed to keep up with population growth, a few important products stood out as exceptions. With favorable support prices, output of rice increased at an annual rate of 7.9 percent in the 1980s. Changes in production techniques helped raise output of chickens and eggs at a rate of 6.5 percent in this period. The Ministry of Agriculture interpreted these positive results as evidence of what could be accomplished more generally with better incentives and improvement of agricultural techniques. For many crops, extremely wide variations in output per hectare, even in similar conditions of land and water supply, suggest that if effective extension services were implemented average productivity could be raised to levels closer to those achieved by leading producers. Contrary to the experience of many other countries in the region, productivity for most crops other than rice showed little or no improvement from 1979 to 1989.

Obstacles to increasing agricultural production include the poor quality of much of the country's land and the high degree of dependence on erratic supplies of water, plus the negative effects of public policies toward agriculture. Frequent recourse to price controls on food and in some periods to subsidized imports of food have hurt agricultural incentives as a byproduct of efforts to hold down prices for urban consumers. In general, government policies have persistently favored urban consumers at the expense of rural producers.

Another important set of questions bearing on agricultural productivity concerns the effects of the Agrarian Reform Law of 1969. The reform itself came long after the beginning of the decline in output per capita and was at first accompanied by a brief upturn. But the downtrend set in again from 1972 on and continued through the 1980s. The major question about the effects of the reform on productivity concerns the fact that most of the large estates taken away from prior owners were turned into cooperatives, made up of the former permanent workers on the estates. One problem was that the workers lacked management experience and a second was that incentives for individual participants were often unclear. Shares in earnings of the cooperative as a whole were not closely related to the individual member's time and effort, with the result that many of them concentrated on small parcels allocated to production for their own families rather than production for the cooperative. The performances of the cooperatives turned out to be highly varied. Some, particularly those with relatively good land and markets were able to raise output and group earnings more successfully than the previous landowners. But many were not, and by the end of the 1970s many of the cooperatives were either bankrupt or close to becoming so. The tension between individual incentives and concern for the functions of the cooperative as a whole led to a general turn toward "decollectivization" at the end of the 1970s, breaking up the cooperatives into individual holdings. When the practice was made legal by the Belaśnde government in 1980, it spread rapidly. The decollectivization has given Peruvian agriculture a much stronger component of individual family farming than it has ever had before. The large haciendas are gone, and the new farms are closer to a viable family-supporting size than has been true of the minifundios of the Sierra. The consequences for agricultural productivity and growth were still unclear in 1991: incentives for individual effort were greater but the smaller production units may have lost some economies of scale. An econometric study of land productivity in north-coast agriculture, tracing output from prior cooperatives through individual results with the same land in the 1980s, brings out a wide variety of results rather than any great change in total. It shows that the individual holdings have on average done slightly better than the preceding cooperatives on the same land, chiefly by greater inputs of labor per hectare, but not enough better to make any convincing case of superiority. The authors of this study rightly emphasize that results in the 1980s cannot be explained adequately only in terms of farming practices because productivity was also adversely affected by the deterioration of the economic system as a whole.

In addition to the negative effects on agriculture of economy-wide disequilibrium in the 1980s, some areas were badly hurt in this period by increased violence and partial depopulation. The violence worsened from 1988 through 1990, driving people out of farms and whole villages and leaving productive land and equipment idle. In some of the worst-hit areas, production had fallen in half.

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