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Agriculture

Agriculture remains a key rural sector for Chile and perhaps best demonstrates the binary nature of the current policy environment for rural regions. Parts of Chilean agriculture are globally competitive as evidenced by a 13.4% share of total exports in 2011, which is far higher than in most OECD countries (OECD, 2013c). Chile is indeed the lead world exporter of table grapes, blueberries, plums, dried apples; the second largest exporter of avocados, frozen raspberries, prunes, apple juice; and the third largest exporter of kiwis. Agricultural production in Chile has a strong geographic component. Due a rich variety of geographic and climatic conditions, production is geographically very differentiated (Figure 2.7).

Figure 2.7. Agricultural production in Chilean regions

Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map.

Source: Chilean Ministry for Agriculture (ODEPA).

A relatively small number of large farms have adopted world-class technology and compete in world markets with very limited public support. These farms provide considerable direct employment because they are concentrated in the horticultural and vegetable sectors and also a large employment opportunity for lower skill workers in the processing of these crops. On the other hand, there are still many farm households which live in extreme poverty with only a limited attachment to the market economy. These are the target of Chile’s main agricultural policy initiatives. There is room to better integrate this dual economy by focusing on improving the competitiveness of small farmers, through technical assistance programmes, targeting their skills and bringing them closer to technology and the business know-how needed to compete in international markets.

The main agency supporting farmers, INDAP, is restricted to serving only small-scale producers with the twin objectives of improving current income levels - through technical assistance, investment and input subsidies - and also providing longer term technical and investment support to bring some of these producers to the point where their farms are viable commercial units. Notwithstanding this fact, a significant number of the farms served by INDAP will not reach this goal, which makes the diversification of the rural economy to provide more non-farm employment opportunities crucial. Off-farm employment can allow small farms the opportunity to remain engaged in agriculture while earning the majority of their income off farm.

Box 2.7. Part-time farming

While the typical idea of farming remains a situation where a couple works full-time on their farm with the help of children, the vast majority of farm households in OECD countries are part-time farmers. In most countries, the average farm household earns more money from its off-farm activities than from its farm activity (see figure below). Unless there are specific national policies, such as in France and Germany, that discourage part-time farming, even larger commercial size farms are likely to have some off-farm income. For small farms that cannot produce a large enough volume of agricultural commodities to generate sufficient income to provide a good standard of living, the possibility of off-farm income represents an alternative to either poverty or leaving farming.

Share of farm income in total income of farm households from the mid-1980s to the late

1990s

Source: Calculations based on national statistics and EUROSTAT database (Eurostat, 1999 and 2002).

Off-farm income plays multiple roles for the farm household. It provides a source of income that can be used to fund investments in the farm that cannot be funded solely from farm profits. It provides supplemental income for the household where the farm is not able to meet household needs. It provides important risk management functions, since off-farm income is not correlated with farm income, which exhibits a high variability. Finally, off-farm income can provide important social connections for farm families that might otherwise be relatively isolated.

But the possibility for earning off-farm income hinges on broader rural development actions. Diversification of the rural economy beyond farming provides a wider set of employment opportunities that can be a source of income for farmers as well as other local residents. In particular, where farms are small and have low productivity, the best way to raise farm household income is often to provide an alternative source of part-time employment via rural development, rather than through farm subsidies.

From a rural community or region perspective, diversification into such activities as manufacturing, tourism and energy production provides important income and employment stabilization benefits as well as new jobs and income. In particular, connecting farmers with off-farm opportunities can be mutually beneficial when both parties are interested in seasonal or part-time employment. By combining multiple part-time activities, a farm household can have both a higher and more stable income than is available from only the farm.

INDAP also maintains a distinct programme to support the expansion of farming by the indigenous population in regions where they have a significant presence. INDAP provides technical support to those indigenous families that work in agriculture and those that benefited from land purchases as well as access to the full set of support programmes available for other small-scale farmers. The National Corporation for Indigenous Development (Conadi) provides support for the purchase of farm land by indigenous people.

INDAP is one of the key organisations of the Ministry of Agriculture in terms of rural policy. Its mission focuses on building capacity and supporting actions to promote sustainable development of smallholder agriculture similarly to an agricultural extension service. However, the service is restricted by law to smaller farms and therefore the entire agro-business complex remains outside of the action of INDAP. The main strength of INDAP is its territorial presence, with 122 offices around Chile. The presence of INDAP is an essential reference not only for small farmers, but also for numerous economic and social groups that operate in rural areas and constitute a large part of its territorial capital. When proposing a more co-ordinated institutional action in rural areas, INDAP has a key role to play given the extended network and has the potential to improve vertical forms of multi-level governance and better integrate local participation in other sectoral domains.

There is potential for linking agriculture to other sectors. The Ministry of Agriculture promotes farming, without exploring the possibilities and potentials associated to the impulse of relationships between economic activities and actors (at least in a formal manner). Some newer programmes focus on the creation of added value in agricultural business (i.e. farm-based tourism, etc.), but the ministry’s action are confined to the agricultural sector, so far with limited integration with other dimensions of rurality.

Currently, there is limited direct support for large farms. Indeed, Chile is seen by the OECD as one of the few countries that does not distort the agricultural sector with a variety of subsidies. Effective support for large farms is provided mainly in indirect forms through: [1]

polices is a need to better tailor public resources devoted to rural areas to the local needs in the areas of education, innovation, accessibility and service provision. This will entail a stronger local involvement and engagement through bottom-up approaches.

In sum, this section highlights a bimodal agricultural model: one composed of small farmers and the other of large agricultural exporters. In the former, policies are subsistence and in the latter they are very sectoral and only focus on the agricultural sector with limited integration in other domains, thus operating in silos. The Ministry of Agriculture has two distinct programmes in these respective areas, both with little connection amongst themselves.

  • [1] The construction of dams and primary distribution channels that provide irrigationwater necessary in a semi-arid climate. • Chile, like other OECD countries, provides extensive support for agriculturalresearch which benefits all farmers, but particularly commercial size farms thathave better capacity to adopt new technologies. • The last major benefit for large-size farms is a comprehensive export promotionprogramme that is not specific to agriculture but which provides clear benefits tothose farms with the capability to compete in export markets. The National Society of Agriculture (SNA), operating since 1838, is a co-operativecomposed of farmers, agricultural associations and business enterprises. Its main actionsare, on the one hand, administering 17 vocational colleges, and on the other, publicresources dedicated to the promotion of innovation and productive development(CODESER) in the domain of agriculture, through its 27 regional offices. It primarilymanages resources by CORFO. Key objectives by the SNA are promoting collaborationand relations between partners to generate economies of scale and critical mass,enhancing innovation aimed at closing the technological gap in rural areas bymodernising subsistence farming, improving access to credit and accessibility, promotingcultural change, improving the institutional integration of small and medium farmers, andthe standard of living in rural areas. The main challenges identified by the SNA in rural
 
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