Document nº 6 An inclusive rural transformation in progress,rural areas. In fact, the rural poverty rate situated at about 60 percent in the early 1980s (about 73 million people),

Food, agriculture and rural development inLatin America and the Caribbean2030/

Document nº 6

An inclusive rural transformation in progress, butwith unequal pace and characteristics across countries

Rui BenficaInternational Food Policy Research Institute (IFPRI)

Food, agriculture and rural development in Latin America and the Caribbean2030/

Document nº 6

Food and Agriculture Organization of the United NationsSantiago, 2019

An inclusive rural transformation in progress, butwith unequal pace and characteristics across countries

Required citation: Benfica R. 2019. An inclusive rural transformation in progress, but with unequal pace and characteristics across countries. 2030 – Food, agriculture and rural development in Latin America and the Caribbean, No. 6. Santiago, FAO. 34p.

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This analysis looks at the trends in the levels and pace of structural and rural transformation, and the degree of inclusiveness across Latin America and the Caribbean region (LAC), highlighting the disparities across countries. The analysis uses disaggregated poverty data from the United Na-tions Economic Commission for Latin America and the Caribbean (ECLAC) and international-ly comparable poverty and other data from the World Bank, the World Development Indicators (WDI) from 1990 to 2017, for a set of 16 countries. Several results stand out. First, poverty in LAC has been falling since the early 2000s, but significant differences persist across countries and between rural and urban areas in each country. Second, by some measures, the pace of poverty reduction has slowed down in recent years. Accounting for population growth and rural-urban migration, the incremental numbers of people getting out of poverty vary widely across coun-tries. Third, in spite of progress in the past two decades, inequality in LAC remains among the highest in the world, with the richest 10 percent concentrating significantly more income than the bottom 40 percent. The failure to improve shared prosperity jeopardizes poverty eradication efforts, particularly in face of the ongoing global economic slowdown that is also manifesting in LAC. Fourth, agricultural growth also shows fluctuations, but contrary to total GDP, it has rather accelerated in recent years. Fifth, structural and rural transformation are still well under-way in most countries in the region. Starting on a relatively high level already in the mid-1990s, LAC continues to be the developing region with the highest degree of structural transformation. Likewise, the region is undergoing rural transformation, characterized by growing agricultural productivity and increased importance of the agrifood systems in the economies, in response to growing incomes in urban and rural areas, and to a broad diet transformation. Finally, with respect to the inclusive nature of the transformation process, this paper undertook an empirical analysis relying on simple correlations, and found that: (a) over time and for all poverty, inequal-ity and shared prosperity measures, the process of rural transformation through increased agri-cultural labour productivity, results in statistically significant improvements in the region; (b) the strength of the association of rural transformation with the inclusion process was higher in the period 2007-2012, particularly with respect to extreme poverty. The correlation at higher poverty lines (moderate poverty) was further strengthened throughout the more recent period, which is consistent with a weakened relationship with reduced inequality in recent years; (c) the pace of rural transformation has had a stronger effect on the pace of poverty reduction in the first stage, between 2000-06 and 2007-12, but it weakened, during the most recent period between 2007-12 and 2013-16; and finally, (d) there is considerable difference across countries when it comes to the inclusive dimensions of rural transformation1.

Summary

1 The author was Lead Economist with the Research and Impact Assessment Division at the International Fund for Agricultural Development (IFAD) during the initial stages of this work. The author acknowledges editorial review contributions from Anja Lesa, Research and Knowledge Management Consultant with the Research and Impact Assessment Division, IFAD

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The Latin America and the Caribbean (LAC) region has experienced significant progress in multiple development dimensions. Economic growth and diversification have been historically substantial in a region that experienced rapid urbanization and remarkable progress in reducing urban poverty, but was characterized by growing inequality and significant challenges in the rural areas. In fact, the rural poverty rate situated at about 60 percent in the early 1980s (about 73 million people), increased to about 64 percent in 1999 (about 77 million people). Over the same period, rural-urban disparities and income inequality also increased substantially in many countries in the region, with the regional GINI remaining at an average of 53.3 for the 1990-2000 decade. Eleven out of the 16 countries surveyed showed GINI coefficients of over 50.0. In relation to income distribution, the top 10 percent earned, on average, over 41 percent of the total income, while the bottom 40 percent earned only 7.4 percent. While trends in the early part of the 21st Century have reversed those figures, income inequality levels remain high, and are an important development challenge in the region.

The IFAD 2016 Rural Development report2 found that most countries in LAC had already reached relatively high levels of structural and rural transformation by the mid1990s, with an urbanization rate of over 75 per cent, and considerably low shares of agriculture in GDP and employment. Findings suggest that, over that period, almost all countries that underwent rapid structural or rural transformation, or both, reduced rural poverty faster than the region as a whole, but not all countries that experienced rapid transformation were able to cut rural pov-erty rapidly. Further, almost all countries with rapid rural poverty reduction, with a few excep-tions, also narrowed rural income inequality faster than the regional average (IFAD, 2016).

In recent years, the region has experienced significant political and social challenges and an un-precedented economic slowdown. In light of this, and taking advantage of newly available data on poverty, inequality, and the most recent information on the unfolding of structural and rural transformation (trends in economic diversification and productivity) in the region, this analysis updates previous ones in order to assess the implications of such new developments on inclusive outcomes, notably poverty and inequality.

The roadmap to this paper is as follows. First, the analysis assesses the trends in rural and urban poverty at the aggregate and country levels. Second, it highlights trends in income concentra-tion and distribution, and the relative degree of progress/aggravation in reducing/widening inequalities and the disparities across countries. Third, the analysis looks at the patterns of eco-nomic growth (highlighting cycles and slowdowns) and transformation to assess the patterns in the levels and speeds of structural and rural transformation in the region and across countries. Fourth, it examines the relationships between transformation and inclusion outcomes. The final section presents a summary of conclusions.

1. Introduction

2 The IFAD 2016 Rural Development Report focused on the topic “Fostering Inclusive Rural Transformation” and undertook a careful analysis of the patterns of structural and rural transformation around the world and how it related to inclusive outcomes from the early 1990s to approximately 2012.

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This analysis looks at the trends in levels and change rates of poverty in LAC. Available sources for the analysis include the World Development Indicators (WDI) that present internationally comparable poverty numbers (adjusted for Purchasing Power Parity) and the recently released poverty measures from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) that provide a rural-urban disaggregation and the distinction between extreme and moderate poverty. While WDI data have been widely used for international com-parisons since the early 1990s, for the purposes of this analysis, ECLAC data are also used since they allow for the disaggregation of results by urban and rural areas for the 16 LAC countries since 2000.

Poverty is falling, but significant differences persist between rural and urban areas

The analysis of poverty trends reveals that the region has achieved remarkable progress, but challenges remain in making them broad-based. Over the period 1990-2013, the extreme poverty rate (at USD 1.90 per person-a-day PPP poverty line) has historically been lower than that of other regions, except the Middle East and North Africa (MENA), and East Europe and Central Asia (EECA) (See Figure 1a).

2. Assessing the trends in overall, rural, and urban poverty

Figure 1. World and regional trends for extreme poverty, 1990-2013

Po

vert

y he

adco

unt

rati

o (

%)

70

60

50

40

30

20

10

0

1990 1993 1996 1999 2002 2005 2008 2011 2013

South Asia

Sub-Saharan Africa

World

East Asia and Pacific

Eastern Europe anda Central Asia

Latin America anda the Caribbean

Middle East and North Africa

Num

ber

of

extr

eme

po

or

(mill

ions

)

1990 1993 1996 1999 2002 2005 2008 2011 2013

South Asia

Sub-Saharan Africa

World





2,000

1,800

1,600

1,400

1,200

1,000

800

600

400

200

0

Source: World Bank: Poverty and Shared Prosperity 2016 - Taking on Inequality

Po

vert

y he

adco

unt

rati

o (

%)

70

60

50

40

30

20

10

0

1990 1993 1996 1999 2002 2005 2008 2011 2013

South Asia

Sub-Saharan Africa

World





(a) Extreme poverty headcount (b) Number of extreme poor

http://datatopics.worldbank.org/world-development-indicators/http://interwp.cepal.org/sisgen/ConsultaIntegrada.asp?idIndicador=3347&idioma=e

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After a period of relative stagnation through the 1990s, extreme poverty in LAC has been falling since 2000. However, it appears to have tapered off in 2008-2013, after significant de-clines in 2002-08 with annual rates of reduction of 1.0 percent, with only 0.3 percent annual-ly in the most recent period (World Bank, 2016). By 2013 LAC had an extreme poverty rate slightly higher than that in Eastern Asia and the Pacific (EAP). It should be noted that, when compared to other regions, LAC has also exhibited a relatively lower number of poor people (Figure 1b).

Internationally comparable data for extreme ($1.90 per person per day, PPP 2011) and mod-erate ($3.20 per person per day, PPP 2011) poverty show some important findings. The region has experienced significant poverty reduction in the past two decades. Over that period, both the extreme and moderate poverty rates have been halved from the initial levels of just over 15 and 30 percent, respectively. The proportion of poor people living in moderate poverty was initially more than double of those living in extreme poverty, but the gap has slowly narrowed from about 15 to 5 percent point difference by 2017 (See Figure 2).

Figure 2. Regional poverty trends: extreme and moderate poverty at the national level

Source: Economic Commission for Latin America and the Caribbean of the United Nations (ECLAC, 2019)

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10

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20

25

30

Po

vert

y R

ate

(%)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Year

Poverty rate at $1.90 ppd Poverty rate at $3.20 ppd

Poverty lines at: $1.90 and $3.20 ppd, PPP 20111990 - 2017

Trends in Poverty in Latin America and the Caribe

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Figure 3. Trends in extreme and moderate poverty, by urban and rural areas (ECLAC)


0

10

20

30

40

50

60

Ext

rem

e P

ove

rty

(%)

2000 2002 2004 2006 2008 2010 2012 2014 2016Year

Rural areas Urban areas

Extreme Poverty2000 - 2017

Trends in Rural and Urban Poverty in Latin America and the Caribe

There has been a significant reduction in both rural and urban poverty, but discrepancies remain. In spite of a significant fall, rural poverty remains relatively higher than that in urban areas, but the gap seems to be narrowing slightly in recent years, as the rate of rural pover-ty has fallen relatively faster (See Figure 3). More efforts are, however, required in order to achieve poverty eradication in rural areas in the coming years. All countries have made prog-ress in extreme poverty reduction, but to differing degrees

All countries have made progress in extreme poverty reduction, but to differing degrees

Since 2000, the majority of LAC countries have made substantial progress with regard to ex-treme rural poverty reduction (See Figure 4a). It should be stated, however, that countries start-ed from very different levels, and progress was extremely diverse. First, Honduras and Bolivia stand out as countries with relatively high levels of poverty, but with differing degrees of suc-

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Figure 4. Trends in country level extreme poverty, by urban and rural areas (ECLAC)

0

20

40

60

Rur

al E

xtre

me

Po

vert

y (%

)

2000 2002 2004 2006 2008 2010 2012 2014 2016

Year

Bolivia Chile Colombia Costa Rica

Dominican Republic Ecuador Guatemala Honduras

Mexico Nicaragua Panama Peru

Paraguay El Salvador Uruguay

2000 - 2017

Trends in Rural Extreme Poverty in LAC

0

10

20

30

Urb

an E

xtre

me

Po

vert

y (%

)

2000 2002 2004 2006 2008 2010 2012 2014 2016

Year





2000 - 2017

Trends in Urban Extreme Poverty in LAC


cess, with Bolivia managing to reduce poverty quite substantially, and Honduras still remain-ing with relatively high levels in 2017. Second, with low rates of poverty since the early 2000s, Uruguay, almost eradicated rural poverty in recent years. Third, Chile made the most progress towards extreme rural poverty reduction, with drops from 26 percent by the mid-2000s to only about 7 percent in 2017. A similar trend, but at relatively higher levels was achieved by Peru, which also more than halved its rural poverty rate over the period. Fourth, Costa Rica presents relatively low levels of rural extreme poverty, but has not managed to make much progress in recent years. Finally, in all countries, the levels of urban poverty were lower, but the relative country rankings and trends were very similar (See Figure 4b).

(a) Rural areas

(b) Urban areas

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Trends in rural and urban moderate poverty are shown in Figure 5. Trends observed are very similar to those of extreme poverty, across countries, at relatively higher levels in both urban and rural areas. Annex Tables 1a and 1b present detailed information on extreme and moder-ate poverty rates.

Figure 5. Trends in country level moderate poverty, by urban and rural areas (ECLAC)

0

20

40

60

80

Rur

al M

od

erat

e P

ove

rty

(%)

2000 2002 2004 2006 2008 2010 2012 2014 2016

Year





2000 - 2017

Trends in Rural Moderate Poverty in LAC

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20

30

40

50

60

Urb

an M

od

erat

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ove

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(%)

YearBolivia Chile Colombia Costa Rica




2000 - 2017

Trends in Urban Moderate Poverty in LAC

Source: United Nations Economic Commission for Latin America and the Caribbean (ECLAC, 2019)

(a) Rural areas

(b) Urban areas

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The incremental numbers of people getting out of poverty vary widely across countries in both rural and urban areas

The marginal gains in poverty reduction in the region are also differentiated across countries. When looking at data from the WDI (Extreme poverty at USD 1.90 per person per day, PPP 2011), for the relevant period, it may be observed that the rate of poverty reduction between 2007-12 and 2013-16 has been slower than that of the preceding period between 2000-2006 and 2007-2012 for most countries in the region (See Figure 6).

Figure 6. The slowing pace of poverty reduction in LAC

0

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Ext

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1.90

pp

d, P

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11 (

%)

2000-06 2007-12 2013-17

Period

Bolivia Brazil Chile Costa Rica



Paraguay Venezuela

LAC Countries2000/07 - 2008/2012 - 2013/2016

Trends in Extreme Poverty in Latin America and the Caribe

Source: World Development Indicators.

While this trend is not immediately apparent when using ECLAC disaggregated data on poverty rates, after picking the 10 countries with data for the three periods and poverty measurements for rural and urban areas, and computing the actual additional number of people getting out of poverty over time in rural and urban areas, (Table 1)3several aspects may be observed.

First, most countries have managed to consistently move people out of poverty in both rural and urban areas. A few exceptions were Honduras and Paraguay, in rural areas, and Honduras, El Salvador and the Dominican Republic, in urban areas. Honduras was initially successful in moving a significant number of people out of poverty in rural areas, but the number of urban poor people increased. In the subsequent period, the number of rural poor people increased, and urban poverty further deteriorated. In Paraguay, the number of urban people getting out of poverty increased overtime, while in rural areas, after an initial increase in the number of poor people, the country managed to move a quarter million rural people out of poverty in the period leading to 2013-16. El Salvador and the Dominican Republic were quite successful in taking an increasing number of rural people out of poverty, with the Dominican Republic even doubling it in urban areas. After a period of increasing poverty, these two countries were able to move people out of poverty, more than off-setting those initial increases.

3 Annex Tables 1a-1c present information on the average annual change in the poverty rates over the periods.

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Table 1. People getting out of extreme poverty, by urban and rural areas

LAC

countries

People Getting Out of Extreme Poverty

(Rural Areas)


(Urban Areas)

From 2000-06

to 2007-12

From 2007-12

to 2013-16

Ratio of Additional

People

From 2000-06

to 2007-12

From 2007-12

to 2013-16

Ratio of Additional

People

Bolivia 307 204 405 104 1.32 314 760 387 167 1.23Chile 182 973 213 018 1.16 301 851 697 912 2.31

Colombia 453 556 930 653 2.05 306 394 1 015 170 3.31

El Salvador 148 198 165 447 1.12 -4 178 79 951 -

Honduras 169 056 -43 913 - -116 085 -392 059 -

Nicaragua 11 981 242 306 20.22 8 118 96 903 11.94

Panama 65 315 54 877 0.84 23 886 17 454 0.73

Paraguay -22259 245 968 - 16 045 76 945 4.80

Dominican Republic 101 676 209 909 2.06 -190 409 180 343 -

Uruguay 4 102 1 944 0.47 54 228 37 857 0.70

Source: ECLAC (2019)

Second, in rural areas, most of the countries that systematically moved people out of poverty, increased those numbers over time, except for Uruguay and Panama, where a reduced number of rural people were moved out of poverty. In the Dominican Republic and Colombia, the num-ber of those moving out of poverty doubled from over 400 thousand to close to a million, while in Nicaragua the number increased 20-fold. Finally, similar trends were also observed in urban areas, where Nicaragua experienced the largest increase in the number of people getting out of poverty, i.e., approximately 12-fold; while Panama and Uruguay (countries with very low pover-ty rates) experienced a slowdown. All the other countries, except Bolivia, more than doubled the numbers of people getting out of poverty in urban areas. (See Table 1).

This analysis looks at the extent to which growth and prosperity are shared in LAC by looking at (a) the levels and changes in the concentration of income (GINI coefficients), and (b) observed trends in income distribution between the bottom 40 percent and the top 10 percent. The analysis highlights trends, and the relative degree of progress/aggravation in reducing/widening disparities across countries in the region.

3. Inequality and shared prosperity trends

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In spite of progress, inequality in LAC remains high and jeopardizes poverty eradication

As the current economic slowdown distresses the global prospects of achieving zero absolute poverty by 2030, LAC, a highly unequal region, is in a particularly vulnerable situation. In fact, as poverty reduction in a country can typically be decomposed into high average growth, reduc-tion in income inequality, or a combination of the two (Datt and Ravallion, 1992), in face of a slowdown in economic growth, a more equal distribution of income will be required for LAC countries to sustain poverty reduction gains of the past decade (World Bank, 2016).

The levels of inequality in LAC are considerably higher than those in other regions. By the late 2000s, the average GINI coefficient in LAC was about 48.4, which was significantly above the world average of about 41.5 (UNDP, 2014).

Data from the WDI tracing inequality since the early 1990s show that after a period of relatively high and stagnant inequality in the 1990s, significant progress has been made by countries in the region since around 2000 (Figure 7 and Table 2).

Figure 7. Trends in inequality in LAC

40

45

50

55

60

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Year

Bolivia Brazil Chile Colombia

Costa Rica Dominican Republic Ecuador Guatemala

Honduras Mexico Nicaragua Panama

Peru Paraguay El Salvador Uruguay

1990 - 2016

Trends in Inequality in Latin America and the CaribeGINI Coecient

GIN

I Co

eci

ent

Source: World Development Indicators (WDI, 2019).

Countries like Brazil, Peru, and Paraguay, where the GINI coefficient, in 1990-2000, was as high as 59.0, 55.4 and 52.1 respectively, experienced sustained reductions in inequality, reaching lev-els as low as 51.9, 43.7 and 48.5 in 2013-16. Other countries such as Bolivia and Nicaragua also experienced significant reductions over that period. Among all countries surveyed, only Costa Rica saw inequality increasing over that period.

In spite of this apparent progress, inequality remains considerably high in the region, notably in Brazil, Chile, Colombia, Costa Rica, Guatemala, Honduras, Panama and Paraguay, where GINI levels are currently (2013-16) above the regional average of 47. Table 2 shows the trends in inequality in LAC countries from 1990-00 to 2013-16.

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Table 2. Income Inequality in LAC: GINI Coefficients, 1990-2000 to 2013-16

LAC Countries

GINI Coefficient

1990-2000 2000-06 2007-12 2013-16

Bolivia 52.8 58.1 49.4 46.7Brazil 59.0 57.1 53.6 51.9Chile 55.8 50.8 48.3 47.5Colombia 55.7 55.6 54.2 51.9Costa Rica 46.2 49.3 49.0 48.8Ecuador 53.9 53.8 48.7 45.7El Salvador 52.3 49.6 44.3 41.4Guatemala - 54.4 - 48.3Honduras 54.6 57.4 54.7 50.7Mexico 49.2 49.1 45.1 44.6Nicaragua 55.9 50.9 43.9 46.2Panama 57.6 55.6 52.2 50.8Paraguay 52.1 53.9 50.6 48.5Peru 55.4 51.4 46.8 43.7Dominican Republic 49.2 51.2 47.5 45.3Uruguay - 45.9 44.0 40.1All Region 53.3 53.2 49.2 47.0


While some improvements were made, income is highly concentrated among the richest

The trends in the distribution of income present a consistent picture of high inequality levels, that also suggest high rural-urban inequalities. Around 1990-2000, the share of income earned by the top 10 percent was significantly higher (averaging 41.4 in the region) than that of the bottom 40 percent (averaging only 7.4 percent). Over the period of analysis, the share of income earned by the top 10 percent has dropped to 36.1 in 2013-16, while that for the bottom 40 percent increased slightly to 8.9 percent in the same period, but the disparity remains significant.

Figure 8 shows the trends for the LAC countries from 1990 to 2017, highlighting the comparison between the top 10 percent and the bottom 40 percent. Similarly to poverty and inequality, signif-icant differences are observed across countries. (Table 3).

Over the periods 1990-2000 to 2013-16, LAC countries have experienced some changes with respect to income distribution (Figure 9a and 9b, and Table 3). By 1990-2000, in 9 out of 16 countries, the top 10 percent earned more than 40 percent of the income. By 2013-16, that num-ber dropped to only two countries, Brazil and Colombia. In spite of improvements in all countries, those two countries, along with Guatemala, Honduras, Panama, and Paraguay, still had the top 10 percent with shares as high as 38 percent. Likewise, the share of income earned by the bottom 40 percent was considerably low. From 1990 to 2012, no country had shares exceeding 10 percent. By 2013-16, only two countries (El Salvador and Uruguay) had shares that exceeded that mark. It should be noted, however, that all countries, except Costa Rica, had improvements in these indi-cators pointing to, at the minimum, modest progress in shared prosperity.

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Figure 8. Trends in shared prosperity in LAC, regional income distribution

Figure 9. Trends in shared prosperity by country, Top 10 percent and bottom 40 percent

10

20

30

40

Sha

re o

f In

com

e ea

rned

(%

)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Year

Bottom 40% Bottom 80% Top 10%

Share of income earned by bottom 40%, 80% and Top 10%1990 - 2017

Disparity in Income Distribution in LAC Region

30

35

40

45

50

Sha

re o

f In

com

e o

f th

e T

op

10

% (

%)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Year





Income Earned by the Top 10%1990 - 2016

Trends in Shared Prosperity in Latin America and the Caribe

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income Earned by Bottom 40%1990 - 2016


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%)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016









10

20

30

40

Sha

re o

f In

com

e ea

rned

(%

)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Year




10

20

30

40

Sha

re o

f In

com

e ea

rned

(%

)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Year




10

20

30

40

Sha

re o

f In

com

e ea

rned

(%

)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Year




(a) Top 10% of income earners

(b) Bottom 40% of income earners

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Table 3. Trends in shared prosperity, 1990-2000 to 2013-16

LAC

countries

Top 10 percent Bottom 40 percent

1990-2000

2000-06

2007-12

2013-16

1990-2000

2000-06

2007-12

2013-16

Bolivia 39.9 45.2 36.9 34.5 7.3 6.3 8.3 9.0

Brazil 46.6 45.1 42.2 40.9 5.9 6.3 7.3 7.8

Chile 45.5 40.8 39.1 38.2 6.9 8.1 8.8 8.9

Colombia 44.3 44.5 42.8 40.8 7.2 7.1 7.1 7.7

Costa Rica 34.2 37.7 37.9 37.1 9.2 8.3 8.3 8.3

Ecuador 42.8 42.5 37.2 34.8 7.4 7.4 8.4 9.1El Salvador 39.7 37.4 34.4 32.2 7.7 8.3 9.5 10.3

Guatemala - 43.6 - 38.1 - 7.2 - 8.6Honduras 42.9 44.1 42.2 38.0 7.0 6.1 6.9 7.7

Mexico 38.5 39.0 35.7 36.0 8.3 8.5 9.4 9.6Nicaragua 43.8 41.2 34.2 37.2 6.9 8.1 9.6 9.2

Panama 43.1 42.1 40.1 38.8 6.3 6.6 7.6 8.0

Paraguay 40.1 43.0 39.9 38.0 7.5 7.4 8.1 8.5

Peru 43.5 39.5 35.2 32.7 6.8 7.7 8.8 9.7

Dom. Rep. 38.8 40.3 37.2 35.0 8.5 7.9 8.7 9.2

Uruguay - 35.0 33.2 29.9 - 8.8 9.3 10.4All Region 41.4 41.5 38.0 36.1 7.4 7.4 8.3 8.9

Source: World Development Indicators (WDI, 2019)

Table 1. People getting out of extreme poverty, by urban and rural areas

LAC

countries


(Rural Areas)


(Urban Areas)

From 2000-06

to 2007-12

From 2007-12

to 2013-16

Ratio of Additional

People

From 2000-06

to 2007-12

From 2007-12

to 2013-16

Ratio of Additional

People

Bolivia 307,204 405,104 1.32 314,760 387,167 1.23Chile 182,973 213,018 1.16 301,851 697,912 2.31

Colombia 453,556 930,653 2.05 306,394 1,015,170 3.31

El Salvador 148,198 165,447 1.12 -4,178 79,951 -

Honduras 169,056 -43,913 - -116,085 -392,059 -

Nicaragua 11,981 242,306 20.22 8,118 96,903 11.94

Panama 65,315 54,877 0.84 23,886 17,454 0.73

Paraguay -22,259 245,968 - 16,045 76,945 4.80

Dominican Republic 101,676 209,909 2.06 -190,409 180,343 -

Uruguay 4,102 1,944 0.47 54,228 37,857 0.70

Source: ECLAC (2019)

As the economic slowdown persists, continued investments to sustain gains in agricultural productivity and output, as well as the expansion of agricultural value chains, will be critical for continued poverty reduction. Equally important will be actions aimed at reducing inequalities in the distribution of income that can counter the negative effects on poverty reduction of the economic downturns.

In light of the global economic slowdown, this section assesses the extent to which the LAC countries have experienced growth and economic slowdown periods in the past three decades. Following definitions similar to those used in IFAD2016 (described later), patterns, in terms of levels and speeds in structural (ST) and rural transformation (RT), are also assessed in the region as a whole and in individual countries.

4. Patterns of growth and economic transformation

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A Quick Look at GDP and Agricultural Growth Record

After a period of economic fluctuations in the 1990s, the LAC economy experienced a period of relative prosperity and sustained economic growth since the late 1990s up to approximately 2007-08. Around 2008, as a result of the world financial crisis, the LAC economies experienced significant economic slowdown (Figure 10). Table 4 shows that 8 of the 16 countries in the anal-ysis experienced slower annual growth rates in 2013-16, when compared to the previous period. The region as a whole grew at an average of 3.5 percent in the latter period compared to the 4.3 percent in the previous one.

Figure 10. Trends in GDP growth rates

2.5

3

3.5

4

4.5

Annu

al g

row

th ra

te (%

)

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016Year

Average Annual GDP Growth Rates (%)1990 - 2017

Economic Growth in Latin America and the Caribe


Agricultural growth has also experienced some fluctuations, but contrary to total GDP trends, it has rather accelerated in recent years – on average it increased to 3.5 percent (2013-16) from an earlier drop into the global slowdown, going from 3.6 percent (2000-06) to 2.4 percent (2007-12). Nine of the 16 countries had increases in agricultural GDP growth.

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Table 4. Economic Growth and Agricultural Growth, 1990-2000 to 2013-16

LAC countries

Average Annual GDP Growth Rate (Percent)

Average Annual Agricultural GDP Growth Rate (Percent)

1990-2000

2000-06

2007-12

2013-16

1990-2000

2000-06

2007-12

2013-16

Bolivia 4.0 3.3 4.8 5.1 3.2 3.7 2.0 4.9

Brazil 1.9 3.2 4.1 -0.5 2.5 4.6 2.4 4.6

Chile 6.1 5.0 4.0 2.2 5.2 7.5 2.0 1.6

Colombia 2.9 4.0 4.5 3.2 1.6 3.0 1.3 4.5

Costa Rica 4.8 4.3 4.3 3.4 5.2 2.6 1.7 1.7

Ecuador 2.3 4.3 4.4 2.0 4.2 4.0 2.7 4.7

El Salvador 3.7 1.9 1.8 2.3 -0.9 -2.4 1.1 0.0

Guatemala 4.1 3.4 3.4 3.6 3.0 2.7 3.3 3.5

Honduras 2.8 5.3 3.3 3.6 0.2 5.8 4.1 4.9

Mexico 3.5 2.4 1.8 2.5 2.0 2.0 1.2 3.0

Nicaragua 3.0 3.4 3.7 4.8 3.5 4.2 3.6 3.1

Panama 5.8 4.7 8.3 5.6 2.8 5.2 -2.4 1.6

Paraguay 3.1 1.7 4.4 5.2 3.7 4.0 5.5 11.9

Peru 3.2 4.5 6.6 3.6 4.0 3.7 3.8 2.0

Dom. Rep. 5.0 4.5 4.3 6.1 2.0 5.0 5.0 4.1

Uruguay 3.7 0.6 5.7 2.5 2.4 2.5 1.0 0.6

All Region 3.7 3.5 4.3 3.5 2.8 3.6 2.4 3.5


Structural and Rural Transformation in LAC

Over the past three decades, many countries in the LAC region have gone through signifi-cant processes of transformation that included rapid urbanization, economic diversification, a fast-changing economic structure where the share of agriculture in the economy, both in terms of employment and output, has shrunk in comparison to other sectors. In the process, agricultural output expanded as land and labor productivity increased. The Rural Development Report 2016 evaluated the period post 2000, in order to assess the extent of the transformations, and how they related to inclusive outcomes over the period 1990-2012. We extend the analysis here to a more recent period. Figure 11 presents the core result of structural transformation from a sample of 16 countries using data for the period 2000-2017.

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Figure 11. Agricultural GDP, employment shares shrink, as agricultural output expands

-20

-10

0

10

20

30

40

Sha

re o

f ag

ricu

ltur

e (%

)

7 8 9 10Log GNI per capita

% of Agriculture in GDP

% of Agriculture in Employment

Agriculture in GDP - Agriculture in Employment (%)

LAC Countries2000 - 2017

Share of Agriculture in GDP and Employment by GDP per capita


The standard result holds that, as countries become richer, i.e., higher per capita incomes, the relative shares of agriculture in output and employment shrink (Figure 11). Labour migrates into more productive sectors such as manufacturing and services. Increases in the demand for farm and agro-food system output result in an expanding agricultural sector whose productivity increases over time as the process of rural transformation unleashes.

Defining structural and rural transformations

For the purposes of this analysis, structural transformation (ST) is considered as both a cause and an effect of economic growth. It involves an increased productivity in agriculture and in the urban economy, a changing economic structure, away from agriculture towards manufacturing and services (IFAD, 2016), including in the agro-food sector. It is also characterized by growing urbanization, rural-urban migration and international trade. The level of ST is captured by a fre-quently used measure, the share of non-agricultural activity in GDP (or employment). The speed of structural transformation is defined as the average annual change in the ST variable.

Rural transformation (RT) involves rising agricultural productivity, increased commercializa-tion, diversification of production patterns, better rural coverage and access to rural services and infra-structure. RT is embedded in the ST process. In this analysis the level of RT is measured as agricultural labour productivity (with land productivity used for robustness), a variable that is both a driver and a reflection of the transformation process (IFAD, 2016). The speed of RT is defined as the average annual change in the variable.

LAC is the developing region that underwent more structural transformation

An analysis comparing all the regions has revealed that since the 1990s, all developing re-gions underwent ST. By 1990, LAC was the most transformed region with over 85 percent of non-agriculture GDP share, well above Middle East and North Africa (MENA) with less than

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80 percent. Around 2012, the average for LAC topped 90 percent (IFAD, 2016). But how has ST unfolded in LAC in recent years, both regionally and in individual countries? The rankings (based on end levels) across the two definitions are quite consistent. Mexico, Chile, Brazil and Costa Rica appear as the most transformed countries, while Guatemala, Nicaragua, Honduras and Bolivia appear as the less transformed ones (Figure 12).

With little room left for further progress in ST, we do observe, however, some marginal gains in some countries, particularly with respect to non-agricultural employment, and also in those that started at a relatively lower level. Countries that are relatively more transformed remained with relatively high shares. In some cases, countries such as El Salvador, Paraguay, Nicaragua, and Uruguay, were “re-agriculturalized” (with a slight drop in the share of non-agriculture) from 2000-06 to 2007-12 due in part to the commodities boom (IFAD, 2016). In the subsequent period leading into 2013-17, Uruguay, Paraguay, and Nicaragua increased their non-agricultural shares, but generally below their original levels (Figure 12).

LAC is experiencing rural transformation, characterized by growing agricultural productivityIn addition to its early and sustained ST, the LAC region also experienced, and continues to experience, a significant process of RT. Agricultural output was about 1.6 higher in 2002 than in 1980, a period over which, agricultural value added per worker increased 2.2 times (IFAD, 2016). This analysis indicates that those trends persisted and intensified in the past 15 years.

This paper looks at average levels within the three periods in order to assess the trends in agri-cultural productivity at the country level. As a robustness check, it starts by looking at both land and labour productivity across all countries (Figure 13).

The two RT measures of agricultural productivity result in some consistent patterns. In fact, by the two measures, three countries (Chile, Brazil and Dominican Republic) appear consistently in the top 5th rankings by current levels, while four countries (Honduras, Nicaragua, Bolivia, and El Salvador) appear consistently in the bottom 5th ranking. The figure also shows that the ma-jority of the countries experienced increases in productivity over time. The next section focusses on labour productivity to assess short and long-term trends.

Figure 12. Structural transformation in LAC, 2000-06 to 2013-16

0 10 20 30 40 50 60 70 80 90 100

Share of Non-Agriculture in GDP (%)

ParaguayNicaraguaHonduras

Bolivia Guatemala

EcuadorPeru

UruguayColombia

El Salvador

ChileBrasil

Costa Rica Dominican Republic

MexicoPanama

Share of Non-Agriculture in GDP1990 - 2017

Structural Transformation by Country

2000 - 2006 2007 - 2012 2013 - 2017

0 10 20 30 40 50 60 70 80 90 100

Share of Non-Agriculture in Employment (%)

GuatemalaNicaraguaHonduras

Bolivia Peru

EcuadorParaguay

El SalvadorColombia

Panama

MexicoDominican Republic

Costa RicaBrasilChile

Uruguay

Share of Non-Agriculture in Employment1990 - 2017

Structural Transformation by Country

2000 - 2006 2007 - 2012 2013 - 2017


(a) Share of non-agriculture in GDP (b) Share of non-agriculture in Employment

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Figure 13. Rural transformation in LAC, 2000-06 to 2013-16

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000Agricultural VA per worker ($)

Bolivia NicaraguaHonduras

El SalvadorPeru

GuatemalaPanamaEcuador

MexicoColombia

BrasilParaguay

Dominican Republic

Costa RicaChile

Agricultural Value Added per Worker1990 - 2017

Agricultural Labor Productivity by Country

2000 - 2006 2007 - 2012 2013 - 2017

0 2000 4000 6000 8000

Kilograms per hectare

HondurasNicaragua

Bolivia GuatemalaEl Salvador

PanamaEcuador

MexicoParaguay

Costa RicaColombia

Peru

ChileBrasil

UruguayDominican Republic

Cereal Yield1990 - 2017

Agricultural Land Productivity by Country

2000 - 2006 2007 - 2012 2013 - 2017


Short and long-term trends in agricultural productivity

As highlighted earlier, in spite of the slowdown in GDP growth in recent years, many LAC countries managed to expand their agricultural and food systems output by taking advantage of the opportunities brought up by the commodities boom. To do so, agricultural labour produc-tivity had to be increased in a sustainable way. We take mid-point averages for the three sub-pe-riods used in this analysis and compare the average annual change between P1 (2000-06) and P2 (2007-12) calling it Short-Term 01; then between P2 and P3 (2013-17) calling it Short-Term 02. We also take the Long-Term annual average change between P1 and P3 (Table 5).

Table 5. Agricultural labour productivity growth, 1990-2000 to 2013-16

LAC Countries

Average annual change in agricultural labour productivity

Short Term 01: 2000-06 to 2007-12

Short Term 02: 2007-12 to 2013-16

Long Term: 2000-06 to 2013-16

Bolivia 4.5 3.7 4.1

Brazil 7.6 11.3 9.4

Chile 6.5 2.4 4.4

Colombia 0.3 2.6 1.4

Costa Rica 5.4 2.0 3.7

Ecuador 3.0 3.5 3.2

El Salvador -1.4 -1.3 -1.3

Guatemala 1.2 4.0 2.6

Honduras 0.1 4.9 2.5

Mexico 2.8 0.2 1.5

Nicaragua 1.1 -1.5 -0.2

Panama -3.2 -2.7 -3.0

Paraguay 7.0 10.1 8.5

Peru 5.0 1.3 3.1

Dominican Republic 4.3 4.0 4.1

Uruguay -13.1 3.1 -5.4

All Region 1.9 3.0 2.4


(a) Labour productivity (b) Land productivity

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All countries, with the exception of El Salvador, Nicaragua, Panama, and Uruguay, experienced positive growth in agricultural labour productivity in both short-term periods. Those four coun-tries are also the only ones that did not experience positive long-term growth.

RT is embedded in the ST process, with agro-industrial growth playing a critical role

In the LAC region, RT has proceeded as countries sustained high levels of ST. The process is characterized by increased agricultural productivity and a growing importance of the agri-food systems in the economy. This process was fueled by a growing urban economy, an increasingly diversified and transformed rural sector, changes in consumption patterns, a boost in demand from institutional and social programmes, and a commodity boom following the 2007-08 food and fuel crisis.

Figure 14 summarizes the ST and RT relationship for LAC countries, highlighting the down-ward trend in the shares of agricultural output in GDP and the share of agricultural employment in total employment, versus the growing labour (panel a) and land productivity (panel b), over the periods 2000-2006 and 2013-2017.

Figure 14. Structural transformation and agricultural productivity in LAC2000-06 to 2013-17

(a) Structural transformation and labour productivity

(b) Structural transformation and land productivity

5

10

15

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25

Sha

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in G

DP

, Em

plo

ymen

t (%

)

0

100000

200000

300000

Ag

ricu

ltur

al V

alue

Ad

ded

per

wo

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($

)

2000-06 2007-13 2013-17

Agricultural Value Added per worker Share of Agriculture in GDP Share of Agriculture in Employment

Structural Transformation and Agricultural Labor Productivity in LAC2000-06 - 2013-17

5

10

15

20

25

Sha

re o

f A

gri

cult

ure

in G

DP

, Em

plo

ymen

t (%

)

0

2000

4000

6000

8000

Ag

ricu

ltur

al V

alue

Ad

ded

per

wo

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($

)

2000-06 2007-13 2013-17

Cereal Yield Share of Agriculture in GDP Share of Agriculture in Employment

Structural Transformation and Agricultural Land Productivity in LAC2000-06 - 2013-17


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Figure 15 highlights how, as ST proceeds in LAC and agriculture becomes relatively smaller in total output and employment (but growing), agro-food industry output per capita expands, stressing the role of the rural economy and the agro-food system more broadly4 5.

Agribusiness real output per capita, which includes agro-industry and related services, rises as GDP progresses during structural transformation, only declining later, at much higher levels of development (de Janvry, 2009). The importance of agriculture thus goes beyond that of primary production, and is likely to grow with continued transformation of the agro-food systems (AFS). Efforts to support the growth and modernization of the AFS, maximizing its potential for em-ployment generation and income growth is, therefore critical in the development process.

Figure 15. Structural transformation and agro-food industry growth in LAC1991-05 to 2006-10

0

5

10

15

Sha

re o

f A

gri

cult

ure

in G

DP

(%

)0

50

100

150

200

Rea

l Ag

rifo

od

Ind

ustr

y O

utp

ut p

c (2

00

5 U

S$

)

1991-95 1996-00 2001-05 2006-10

Agrifood Industry Output per capita Share of Agriculture in GDP

Structural Transformation and Agrifood Industry TrendsLAC Countries 1991-05 - 2006-10

Source: IFAD, using World Bank and UNIDO.

4 Agro-industry, defined as a component of industrial activity where value is added to agricultural produce through processing and handling operations, is typically a significant component of the emergence of indus-try as ST progresses (IFAD, 2016; Suttie and Benfica, 2016).

5 While we do not have comparable data for the most recent period, the observed trends through 2010, are a useful illustration of the relationship, and trends are likely to have been sustained.

This part of the analysis looks at the links between the transformation processes and inclusion outcomes over the period starting in 2000 through 2016.

The debate over the effects of agricultural growth on poverty has been the focus of policy interest in LAC for some time. While some authors argue for a direct positive link (Timmer, 2009; World Bank, 2007), other evidence suggests that, historically, at least in the 40 years heading into the early

5. Examining the links between economic transformation and inclusion

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2000s, there has been a paradox, characterized by sustained annual agricultural growth of about 2.5 percent, but with most of rural people still stuck in poverty (World Bank, 2007). To understand this paradox, Da Silva et al. (2009) undertook a study of the eight LAC countries with the largest agricultural economies and found that: (a) even in countries with good agricultural smallholder policies and budgets, those played a lesser role than social policies in promoting inclusion; (b) the effects of agricultural productivity and growth varied widely within countries subject to the struc-ture of production across space; and (c) initial levels of inequality played an important role in the extent of the agricultural growth effect on poverty.

This analysis, does not extend into a more recent period. Instead, it relies on existing data to as-sess the links between transformation and inclusion. Given the sparse availability of poverty data for each country, this paper initially undertakes an analysis at the aggregate level for the region by looking at (a) the basic descriptive graphical analysis establishing the relationship between ST, RT and poverty reduction under the various definitions considered in the previous sections, and (b) using simple correlation analysis to evaluate the changing nature of the relationship between RT, poverty and inequality levels, in each of the distinct periods. Then, the analysis looks at those relationships by country.

Figures 16 and 17 illustrate the relationship between ST, RT, and poverty reduction in LAC over the period examined. The analysis uses the previously referred definitions of ST (agriculture in employment), RT (agricultural valued added per worker), and several poverty measures (PPP 2011 Poverty Rates at USD 1.90 and USD 3.20 from WDI; and ECLAC based measure of extreme rural and urban poverty). The figures show, as expected, that over the period examined, there was a drop in the share of agriculture, as a source of employment in the region (dotted line), while agricultural labour productivity increased, particularly in recent years (red bars). Those trends illustrate the ongoing processes of ST and RT.

Another question relates to whether those processes have been inclusive. While acknowledge-ment is made that inclusion is a very broad concept with multiple dimensions (economic, social, political, psychological, etc.), in the absence of other indicators, the poverty rates are used as the inclusion indicators.

By all poverty measures, a downward trend in poverty holds, with extreme poverty at USD 1.90 per day, dropping from just over 10 percent, at the turn of the century, to below 5 percent in recent years. The poverty rate at USD 3.20 per day has dropped from about 24 percent to just over 10 percent in the same period (Figure 16).

Figure 17 shows similar trends highlighting the drops in both extreme (Figure 17a) and mod-erate (Figure 17b) poverty. As indicated earlier, rural poverty remains significantly higher than urban poverty in the region.

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Figure 16. ST, agricultural productivity, and poverty (USD 1.90 and USD 3.20 per day, PPP 2011)

Figure 17. ST, agricultural productivity, and rural and urban poverty (ECLAC, 2019)

(a) ST, agricultural productivity, and extreme rural and urban poverty

(b) ST, agricultural productivity, and moderate rural and urban poverty



5

10

15

20

25

Sha

re o

f A

gri

cult

ure

in E

mp

loym

ent

(%)

Po

vert

y R

ate

(%)

0

100000

200000

300000

Ag

ricu

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al V

alue

Ad

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($

)

2000-06 2007-13 2013-17

Agricultural Value Added per worker Share of Agriculture in Employment

Poverty Rate at $1.90 ppd, PPP (2011) Poverty Rate at $3.20 ppd, PPP (2011)

Structural Transformation, Agricultural Productivity and Poverty2000-06 - 2013-17

All LAC Countries

5

10

15

20

25

30

Sha

re o

f A

gri

cult

ure

in E

mp

loym

ent

(%)

Rur

al E

xtre

me

Po

vert

y R

ate

(%)

0

100000

200000

300000

Ag

ricu

ltur

al V

alue

Ad

ded

per

wo

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($

)

2000-06 2007-13 2013-17


Rural Extreme Poverty Rate Urban Extreme Poverty Rate

Structural Transformation, Agricultural Productivity and Extreme Poverty2000-06 - 2013-17

All LAC Countries

20

30

40

50

60

Sha

re o

f A

gri

cult

ure

in E

mp

loym

ent

(%)

Rur

al E

xtre

me

Po

vert

y R

ate

(%)

0

100000

200000

300000

Ag

ricu

ltur

al V

alue

Ad

ded

per

wo

rker

($

)

2000-06 2007-13 2013-17


Rural Moderate Poverty Rate Urban Moderate Poverty Rate

Structural Transformation, Agricultural Productivity and Moderate Poverty2000-06 - 2013-17

All LAC Countries

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The graphical analysis presented is simply an assessment of trends. In order to further explore the actual association between transformations and inclusion, the focus is placed on RT, since ST is rel-atively less variable and has been relatively high in most countries throughout the period examined. A simple correlation analysis is carried out to look at the relationship between levels and changes of agricultural productivity, and the levels and changes in poverty and inequality in the region, thus comparing the different time periods. In addition to assessing the sign and the statistical signif-icance of the relationships, the analysis also looks at how the magnitudes change over time, i.e., whether the strengths of the relationship are getting stronger (or weakened) over the years.

The analysis of level correlation in RT and inclusion, presents some interesting results (Table 6, first three columns). First, in all of the three periods and for all poverty, inequality and shared prosperity measures, findings show that the process of RT, through increased agricultural labour productivity, results in statistically significant improvements in those outcomes.

Second, the order of magnitude, i.e., the strength shown by the contribution of RT to the inclu-sion process was strongest in the period 2007-2012, which coincides with the beginning of the economic slowdown, exhibiting an inverted u-shaped relationship. One exception is the moderate poverty, whose correlations have consistently increased in magnitude over time. For example, the correlations for rural moderate poverty increased from -0.595 in 2000-06, to -0.887 in 2007-12, and -0.892 in 2013-16. Finally, the analysis consistently shows that RT increased correlation with moderate poverty reduction results in similarly weaker links with the measures of inequality and shared prosperity over time. The relatively greater strengths in moving relatively better off people up, results in weaker ability to improve income distribution. It should be noted, however, that in all cases the differences over time are not as accentuated and remain particularly strong.

Assessment of the correlation of changes in agricultural productivity versus inclusion at the regional level (Table 6, columns 4-6) shows that RT has had a stronger effect on poverty reduction in the first stage (short term 01), i.e., between 2000-06 and 2007-12, while its strengths have weakened leading into a more recent period between 2007-12 and 2013-16 (short period 02). Some sizable correlations have been found for the poverty measures in the longer run (last column).

Subject to the availability of data, the analysis looks at the country level correlations between agri-cultural productivity and poverty. Table 7 looks at the correlation of RT with moderate poverty in rural and urban areas. Annex Table 2 presents the numbers for the USD 1.90 and USD 3.20 per person per day poverty rates.

Results regarding rural moderate poverty show that, among the six countries with statistically sig-nificant correlations in at least one of the three periods, four of them (Bolivia, Ecuador, Peru, and Dominican Republic) have had the strongest RT poverty correlations during 2007-2012. In Co-lombia, after a long period where productivity gains seem to have not had an effect on rural poverty reduction, observations show a particularly strong correlation is observed in 2013-16. In Paraguay, RT seemed to be quite strongly associated with poverty reduction in 2000-06, but the association weakened in the subsequent periods. Diverse results are also found in urban areas, where the asso-ciation of RT with poverty reduction is less evident. From Annex Table 2, it is also evident that RT had a significant correlation with poverty reduction (using PPP USD 1.90 per day) i.e., in Brazil in 2017-12, and in Chile, Costa Rica, Mexico and Panama in 2000-06. It appears that the effect of RT on poverty has been particularly weaker in more recent times, in most countries.

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Table 6. Correlation between agricultural productivity and poverty and inequality

Correlation between agricultural productivity and

poverty, inequality

Correlation between changes in agricultural productivity and poverty

*(Slope)

2000-06 2007-12 2013-16

Short Term 01:

2000-06 to 2007-12

Short Term 02:

2007-12 to 2013-16

Long Term 2000-06 to 2013-16

Productivity and poverty

Poverty at USD 1.90 ppd -0.540*** -0.634*** -0.496*** -0.1401 0.1020 -0.0872

Poverty at USD 3.20 ppd

-0.620*** -0.735*** -0.613***-0.2481 0.1084 -0.1533

Extreme poverty

-0.419*** -0.556*** -0.482***-0.2796 0.0616 -0.2013

Rural extreme poverty

-0.433*** -0.681*** -0.561***-0.1685 -0.0335 -0.3666

Urban extreme poverty

-0.400** -0.422*** -0.374***-0.1168 0.0410 -0.2549

Moderate poverty

-0.395** -0.605*** -0.600***0.0934 0.0212 -0.0656

Rural mod. poverty

-0.595*** -0.887*** -0.892***0.1831 -0.0151 -0.2045

Urban mod. poverty

-0.173 -0.398*** -0.448***0.2984 -0.0093 0.0145

Productivity and inequality

GINI coefficient -0.368*** -0.327** -0.277** -0.1431 -0.3199 0.0138

Income top 10 percent

-0.348*** -0.296** -0.243*-0.1745 -0.3510 -0.0920

Income bottom 40 percent

0.332*** 0.272** 0.252*0.1176 0.2525 -0.0807

Source: World Development Indicators (WDI, 2019) and ECLAL (2019).

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Table 7. Correlation between agricultural productivity and moderate poverty, urban and rural

Correlation between agricultural productivity and moderate rural

poverty

Correlation between agricultural productivity and moderate urban

poverty

2000-06 2007-12 2013-16 2000-06 2007-12 2013-16

Bolivia -0.050 -0.800* -0.718 -0.899** -0.831* -0.118

Brazil n/a n/a n/a n/a n/a n/a

Chile n/a n/a -0.574 n/a n/a -0.507

Colombia 0.954 0.756 -0.941** 0.691 0.582 -0.855*

Costa Rica n/a -0965 0.102 n/a -0.301 -0.664

Ecuador n/a -0.914* -0.754 n/a -0.855 0.173

El Salvador 0.314 -0.155 -0.169 -0.442 -0.194 0.339

Guatemala n/a n/a n/a n/a n/a n/a

Honduras -0.023 -0.072 -0.884 -0.224 -0.120 0.0894

Mexico n/a n/a n/a n/a n/a n/a

Nicaragua n/a n/a n/a n/a n/a n/a

Panama n/a 0.734 0.766 n/a 0.799 0.9488*

Paraguay -0.462* -0.219 -0.057 -0.181 -0.076 -0.590

Peru n/a -0.939** 0.166 n/a -0.901** 0.150

Dominican Republic 0.312 -0.772* -0.740

n/a-0.515 -0.708

Uruguay n/a 0.334 -0.729 0.220 0.157 -0.781

Source: ECLAC.

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This analysis used internationally comparable poverty and other data from ECLAC and the World Bank to look at trends in the levels and pace of structural transformation, rural transfor-mation, and inclusion in LAC. Several findings stand out. First, since the early 2000s, poverty has been falling, but significant differences persist across countries and between rural and urban areas. Second, by some measures, the pace of poverty reduction has reduced in recent years in the aggregate, but, accounting for population growth and rural-urban migration, the incremental numbers of people getting out of poverty vary widely across countries.

Third, inequality in LAC remains among the highest in the world in spite of progress in the past two decades. The failure to improve shared prosperity jeopardizes poverty eradication efforts, particularly in face of the ongoing world economic slowdown that LAC economies are also experiencing. Fourth, agricultural growth also shows fluctuations, but contrary to total GDP, it has rather accelerated in recent years. As the economic slowdown persists, continued investments to sustain gains in agricultural productivity and output, as well as the expansion of agricultural value chains, will be critical for continued poverty reduction. Fifth, structural and rural trans-formation are proceeding in most countries in the region. LAC continues to be the developing region with the highest degree of structural transformation. The region is undergoing rural transformation, characterized by growing agricultural productivity and increased importance of the agrifood systems in the economies, in response to growing incomes in urban and rural areas, and to a broad diet transformation.

Finally, with respect to the inclusive nature of the transformation process, this paper undertook an empirical analysis relying on simple correlations, and found that: (a) over time and for all poverty, inequality and shared prosperity measures, the process of rural transformation through increased agricultural labor productivity, results in statistically significant improvements in the region; (b) the order of magnitude, i.e., the strength of the association of rural transformation with the inclusion process was higher in the period 2007-2012, particularly with respect to ex-treme poverty. The correlation at high poverty lines (moderate poverty) was further strengthened throughout the more recent period, which is consistent with a weakened relationship with re-duced inequality in recent years; (c) the pace of rural transformation has had a stronger effect on the pace of poverty reduction in the first stage, between 2000-06 and 2007-12, but it weakened, during the most recent period between 2007-12 and 2013-16; and finally, (d) there is consider-able difference across countries when it comes to the inclusive dimensions of rural transforma-tion. Most of the countries with significant inclusion effects from productivity gains experience it in rural areas and in initial periods, with effects weakening later in 2013-2016.

6. Summary of Conclusions

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Da Silva, J.G., Gómez, S. and Castañeda, R. (Editors). 2009. Boom agrícola y persistencia de la pobreza rural: Estudio de ocho casos. Santiago. Food and Agriculture Organization of the United Nations (FAO).

Datt, Gaurav and Ravallion, Martin. “Growth and Redistribution Components of Changes in Poverty Measures: A Decomposition with Applications to Brazil and India in the 1980s” Journal of Development Economics, 38, (1992): 275-295.

De Janvery, A. 2009. Agriculture for development: Implications for agro-industries. In: Agro-industries for development. Rome. CAB International and Food and Agriculture Organization of the United Nations (FAO).

ECLAC. 2019. CEPALSTAT/Base de Datos. Santiago. United Nations Economic Commission for Latin America and the Caribbean. Santiago. (ECLAC).

IFAD. 2016. Rural Development Report 2016: Fostering Inclusive Rural Transformation. Rome. International Fund for Agricultural Development. Rome. (IFAD).

Suttie, D. & Benfica, R. (2016). Structural and Rural Transformation in Africa: Challenges, Opportunities and Implications for Policy and Investments. Washington, D.C. World Bank.

World Bank. 2007. World development report 2008: agriculture for development. Washington D.C., World Bank.

World Bank. 2016. Poverty and Shared Prosperity 2016 - Taking on Inequality. Washington, D.C. World Bank.

World Bank (2019). World Development Indicators (WDI). Washington, D.C. World Bank.

References

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ANNEX TABLESANNEX Table 1a. Average annual changes in extreme poverty rates (WDI)

LAC Countries

Average annual change in extreme poverty

(USD 1.90 ppd, PPP 2011)

Average annual change in extreme poverty

(USD 3.20 ppd, PPP 2011)

Short Term 01:

2000-06 to 2007-12

Short Term 02:

2007-12 to 2013-16

Long Term 02:

2000-06 to 2013-16

Short Term 01: 2000-06

to 2007-12

Short Term 02:

2007-12 to 2013-16

Long Term 02:

2000-06 to 2013-16

Bolivia -2.2 -0.7 -1.4 -3.1 -1.3 -2.2

Brazil -0.9 -0.4 -0.6 -1.8 -0.9 -1.4

Chile -0.3 -0.2 -0.3 -0.9 -0.6 -0.8

Colombia -1.2 -0.6 -0.9 -2.1 -1.2 -1.6

Costa Rica -0.5 -0.1 -0.3 -1.0 -0.2 -0.6

Ecuador -1.9 -0.6 -1.2 -3.2 -1.2 -2.2

El Salvador -1.3 -0.5 -0.9 -1.4 -1.1 -1.3

Guatemala - - -0.2 0.1

Honduras -1.6 0.0 -0.8 -1.9 0.1 -0.9

Mexico -0.4 -0.3 -0.4 -0.8 -0.6 -0.7

Nicaragua -1.0 -0.8 -0.9 -2.0 -1.9 -2.0

Panama -1.3 -0.5 -0.9 -1.8 -0.8 -1.3

Paraguay -0.6 -0.7 -0.6 -1.2 -1.3 -1.2

Peru -1.5 -0.7 -1.1 -2.6 -1.2 -1.9

Dominican Rep. -0.5 -0.3 -0.4 -0.7 -0.9 -0.8

Uruguay -0.1 0.0 0.0 -0.4 -0.2 -0.3

All region -1.0 -0.4 -0.7 -1.7 -0.9 -1.2


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ANNEX Table 1b. Average annual changes in extreme poverty rates (ECLAC)

LAC Countries

Average annual change in extreme RURAL Poverty

Average annual change in extreme URBAN Poverty

Short Term 01:

2000-06 to 2007-12

Short Term 02:

2007-12 to 2013-16

Long Term 02: 2000-06

to 2013-16


to 2007-12

Short Term 02:

2007-12 to 2013-16

Long Term 02:

2000-06 to 2013-16

Bolivia -2.2 -2.6 -2.4 -1.7 -1.4 -1.6

Brazil - - -

Chile -1.8 -2.0 -1.9 -0.6 -1.0 -0.8

Colombia -0.7 -1.7 -1.2 -0.4 -0.7 -0.5

Costa Rica - 0.1 - 0.1

Ecuador - -2.2 - -0.5

El Salvador -1.0 -1.3 -1.2 -0.2 -0.5 -0.3

Guatemala -0.6 - - 0.2

Honduras -1.6 0.0 -0.8 -0.6 0.8 0.1

Mexico - - -

Nicaragua -0.4 -2.1 -1.3 -0.2 -0.6 -0.4

Panama -1.5 -1.1 -1.3 -0.4 -0.2 -0.3

Paraguay 0.0 -2.0 -1.0 -0.2 -0.5 -0.3

Peru -2.5 - -0.2

Dominican Rep. -0.1 -1.3 -0.7 0.2 -0.7 -0.2

Uruguay -0.3 -0.2 -0.3 -0.4 -0.2 -0.3

All region -0.9 -1.5 -1.2 -0.4 -0.4 -0.5

Source: ECLAC (2019).

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ANNEX Table 1c. Average annual changes in moderate poverty (ECLAC)

LAC Countries

Average annual change in moderate RURAL poverty

Average annual change in moderate URBAN poverty

Short Term 01:

2000-06 to 2007-12

Short Term 02:

2007-12 to 2013-16

Long Term 02: 2000-06

to 2013-16


to 2007-12

Short Term 02:

2007-12 to 2013-16

Long Term 02:

2000-06 to 2013-16

Bolivia -2.2 -2.3 - -1.9 -2.6 -2.2

Brazil - - - - - -

Chile -2.2 -3.7 -3.0 -0.9 -2.3 -1.6

Colombia -1.5 -2.2 -1.8 -2.1 -1.6 -1.9

Costa Rica - 0.0 - - 0.0 -

Ecuador - -3.3 - - -1.1 -

El Salvador 0.0 -1.9 -1.0 0.6 -0.8 -0.1

Guatemala -0.2 - - 1.3 -

Honduras -1.0 -0.1 -0.5 -0.2 1.1 0.4

Mexico - - - - - -

Nicaragua -1.2 -2.6 -1.9 -0.8 -2.4 -1.6

Panama -1.7 -1.9 -1.8 -1.1 -1.1 -1.1

Paraguay -1.2 -3.0 -2.1 -2.3 -1.9 -2.1

Peru - -3.6 - - -1.4 -

Dominican Rep. -0.2 -1.6 -0.9 1.1 -1.6 -0.3

Uruguay -2.4 -1.2 -1.8 -3.1 -2.0 -2.6

All region -1.3 -2.1 -1.7 -0.9 -1.4 -1.3

Source: ECLAC (2019).

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ANNEX Table 2. Correlation between agricultural productivity and poverty, USD 1.90 and USD 3.20 per day

LAC Countries

Correlation between agricultural productivity and poverty at USD

1.90 per day (PPP 2011)

Correlation between agricultural productivity and poverty at USD

3.20 per day (PPP 2011)

2000-06 2007-12 2013-16 2000-06 2007-12 2013-16

Bolivia -0.700* -0.654* 0.612 -0.755* -0.729 -0.102

Brazil -0.785* -0.904* -0.576 -0.763* -0.895** -0.323

Chile -0.993* n/a n/a -0.999** n/a n/a

Colombia -0.034 0.742 -0.975** -0.096 0.703 -0.933**

Costa Rica -0.847** -0.433 0.490 -0.868* -0485 0.073

Ecuador -0.982** -0.952** -0.844 -0.986*** -0.936** -0.849

El Salvador 0.280 0.260 -0.645 0.215 0.109 -0.655

Guatemala n/a n/a n/a n/a n/a n/aHonduras 0.411 0.814** -0.998*** 0.403 0.736* -0.654

Mexico -0.871* 0.948 n/a -0.979*** 0.991 n/a

Nicaragua n/a n/a n/a n/a n/a n/a

Panama -0.824** 0.921** 0.869 -0.778** 0.899** 0.881

Paraguay -0.617 -0.156 -0.134 -0.515 -0.139 0.106

Peru 0.138 -0.859** 0.464 -0.236 -0.910** 0.326

Dominican Rep. -0.069 -0.879** -0.934* 0.138 -0899** -0.720

Uruguay -0.195 0.365 -0.875 -0.420 0.335 -0.822

Notes: n/a because there are only 2 observations.


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Document nº 6 An inclusive rural transformation in progress,rural areas. In fact, the rural poverty rate situated at about 60 percent in the early 1980s (about 73 million people),

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