Transcript Review of international efforts aimed at development of

Review of international efforts aimed at development of new
products, trials, alternative measures of success, and success stories
Chile
(and a little on Latin America)
William Foster
Can new products and new international and domestic marketing
channels increase rural incomes? Ideas, models, and evidence.
Sonoma, June 19-20, 2005
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.4
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1
The ABCs: azúcar, banano, café – the proportion of sugar, bananas
and coffee in total agricultural exports in Latin America.
1960
1970
A+B+C AMERICA CENTRAL
A+B+C CARIBE
1980
año
1990
A+B+C AMERICA DEL SUR
A+B+C TOTAL LAC
2000
Indices of diversity

Entropy (Shannon)
n
E   w i ln w i
i 1

Simpson-Herfindahl
n
S  1  w
i 1
SM  1   w1
 11
w2  
 21
2
i
SM  1  ww
12   w1 
2
2
 1   w1  w2  2w1w2 12 



22   w2 
Indices of agricultural export diversity in South America (SM).
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1961
1966
1971
1976
1981
1986
1991
1996
2001
Argentina
Bolivia
Brazil
Colombia
Chile
Uruguay
Peru
Paraguay
Ecuador
Venezuela
Decomposing the change in agricultural export
diversity: within primary products, within processed,
and between primary and processed.
Total change in export diversity index.

 1  Sp  
d Et  Sp·d Ep  (1  Sp )·d Ee  Ep  Ee  ln 
·d Sp

 Sp  

Due to primary
product diversity
Due to processed
product diversity
Due to the diversity
between primary and
processed products.
Decomposing the change in agricultural export
diversity: within primary products, within processed,
and between primary and processed: Chile.
Chile
Primary
products’
share of ag
export(%)
Entropy index
of diversity
Total
Primary
Processed
Simpson
Modified
Simpson
traditional
Annual average
change (%)
1965 1970 1975 1980 1985 1990 1995 2000 2002 1965- 19861985 2002
78
81
52
69
85
69
48
51
59
0.4
(0.11)
-2.1
(0.55)
3.09 2.93 3.06 3.06 2.60 3.14 3.47 3.20 3.24 -0.8
1.3
2.65 2.50 2.57 2.35 1.96 2.20 2.45 2.47 2.55 (1.12) (0.46)
2.13 1.97 2.18 2.51 2.62 3.01 3.05 2.54 2.55 (-0.22) (-0.01)
0.77 0.78 0.70 0.71 0.68 0.80 0.87 0.86 0.86
-0.6
1.4
0.93 0.93 0.92 0.92 0.81 0.89 0.94 0.91 0.92
-0.7
0.7
Decomposing the change in agricultural export
diversity: within primary products, within processed,
and between primary and processed: Brazil.
Brazil
Primary
products’
share of ag
export(%)
Entropy index
of diversity
Total
Primary
Processed
Simpson
Modified
Simpson
traditional
Annual average
change (%)
1965 1970 1975 1980 1985 1990 1995 2000 2002 1965- 19861985 2002
83
76
51
44
51
41
37
52
53
-2.4
0.2
(0.75) (-0.13)
2.10 2.38 2.82 2.83 2.90 2.98 3.01 3.03 3.03
1.6
0.3
1.38 1.51 2.00 1.57 1.81 2.03 1.98 2.01 2.16 (0.28) (1.45)
2.82 2.86 2.25 2.59 2.62 2.50 2.57 2.70 2.54 (-0.03) (-0.33)
0.43 0.44 0.53 0.56 0.59 0.65 0.67 0.67 0.66
1.6
0.6
0.66 0.75 0.89 0.88 0.90 0.91 0.92 0.92 0.92
1.5
0.1
The Relation between the Diversity of Agricultural
Exports and per capita Income in LCR 2000
4.5
Entropy measure of diversity
4
3.5
3
2.5
2
1.5
1
0.5
0
5.5
6
6.5
7
7.5
Ln(per capita GDP)
8
8.5
9
9.5
The Relation between the Diversity of Agricultural
Exports and Agricultural Share of GDP LCR 2000
4.5
Entropy measure of diversity
4
3.5
3
2.5
2
1.5
1
0.5
0
0
0.05
0.1
0.15
0.2
Agricultural GDP as % of total GDP
0.25
0.3
0.35
The Relation between
thediversity
Diversity of Agricultural
Agricultural
export
and trade
Exports openness
and Agricultural
GDP LCR 2000
in Share
LCRof2000
4.5
Entropy measure of diversity
4
Mexico
3.5
Chile
3
Jamaica
2.5
Costa Rica
2
Honduras
1.5
1
0.5
0
10
20
30
40
50
60
70
80
Trade openness (exports + imports)/GDP (%)
90
100
110
Diversity versus total value of agricultural exports (SM/V = 1 in 1961)
Souther Cone (2)
Souther Cone (1)
14.0
3.0
12.0
2.5
10.0
2.0
8.0
1.5
6.0
1.0
4.0
0.5
2.0
0.0
1961
0.0
1961
1971
Argentina
Chile
1981
Bolivia
Colombia
1991
2001
Brazil
1971
Ecuador
Uruguay
16.0
3.5
14.0
3.0
12.0
2.5
10.0
2.0
8.0
1.5
6.0
1.0
4.0
0.5
2.0
0.0
1961
0.0
1961
Mexico
Guatemala
1981
Nicaragua
Honduras
1991
Paraguay
Venezuela
2001
Peru
Caribbean
Central Am erica
4.0
1971
1981
1991
Panama
Costa Rica
2001
El Salvador
1971
Jamaica
Dominican Rep.
1981
T&Tobago
Haiti
1991
Cuba
2001
GMM estimation of the determinants of agricultural export diversity:
panel data LCR 1961-2002
Variable
Estimate
Std. error (robust)
z-statistic
p-value
0.5663111
0.0452727
12.51
0.000
– 0.0005292
0.0001998
– 2.65
0.008
– 6.44e-6
2.40e-6
–2.68
0.007
0.0005606
0.0001753
3.20
0.001
– 0.0454544
0.014129
– 3.22
0.00
–3.67e-6
3.57e-6
– 1.03
0.304
% land in irrigation.
0.0014990
0.0006757
2.22
0.027
ln (arable land)
–0.1819554
0.0337003
– 5.40
0.000
ln (agriculture GDP)
0.0119157
0.0237190
0.50
0.615
ln (total valor ag. exports)
–0.0640793
0.0131769
– 4.86
0.000
National trade openness
0.0827725
0.0216232
3.83
0.000
Agricultural trade openness
–0.0328415
0.0455946
– 0.72
0.471
ln (per capita income)
–0.1246151
0.0331936
– 3.75
0.000
% of population urban
–0.0034386
0.0018515
– 1.86
0.063
SMt-1
Government burden (% of GDP)
Inflation
Financial depth
(% private credit of GDP)
Tractors per 100 hectares.
100 grams de fertilizers per hectare
Synthesis of Chilean processed agricultural exports by continent
and category 2003, 2004. Thousands of US$. (no wine, US$800 million)
Conserved,
jellies, jams,
concentrates,
etc.
Dehydrated,
dried: prunes,
etc.
Frozen
Juices
Source: FEPACH,
CHILEALIMENTOS
Synthesis of Chilean processed fish and shellfish, and sweets
exports by continent and category 2003, 2004. Thousands of US$.
Note: does not include salmon (≈ US$1.5 billion)
Conserved fish
and shellfish
Frozen fish and
shellfish
Caramels and
chocolates
Total all
processed,
ag plus
fishy items
Source: FEPACH, CHILEALIMENTOS
Following new, “non-traditional” exports: government allows
drawback of tariffs on imported inputs for exports based on value.
Below about US$20 million, now 3% drawback.
Exports of two lines of non-traditional exports in US$1000s.
hot chili peppers
dried tomatoes
dried celery
dried garlic
2004
2,835
2,265
1,521
891
2003
2,115
2,402
2,036
716
2002
2,258
2,782
1,768
728
2001
2000
1999
1998
1997
411
798
802
1,510
1,935
Fresh cherries
31,934 36,189 31,262 21,670 18,637 20,561 15,174 10,328
Successful, lost support
Note: question about WTO
From a domestic base: Meats
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In the 1980s there was an shift in production from
many small producers to industrial production of
poultry and pork. Surge in domestic consumption of
pork and poultry.
Rapid recent growth in exports, doubling over three
years to US$386 million.
Pork represents about 60% of exports, poultry about
25%.
Net beef importer (about half), but US$23 millions
and growing niche exports (oddly, kobe beef too).
Lamb exports, with kosher and Mid-East buyers.
Evolution of the Pork and Poultry Sectors in Chile, 1979-1998
Pork
Poultry
Number of growers
Number of pigs (1000s)
Number of growers
Number of broilers (1000s)
Production of eggs (1000s)
1978
579
273
854
5,909
565
1983
382
387
257
6,078
593
1987
341
618
201
8,746
725
1993
319
1,004
213
17,320
902
1998
240
1,451
183
21,366
1,037
From a domestic base: Dairy
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In the 1970s, Chilean milk industry stank.
With reforms, milk industry was revolutionized.
Better milk, new products for consumers, per capita
demand surged with income and lower prices per
quality of product.
Small producers sloughed off as quality and timing
requirements got tougher.
Recently a net exporter both in volume and value.
Profit (and psychic) shock as reference price went
from cif to fob (at least 20%). (Aside: This would make a good
economic sociological study.)
Search for exportable product with little
thought to domestic market: salmon.
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The result of a deliberate search by investors and
Fundación Chile.
Once technical problems solved, private monies
flowed. Now many firms. 2004: US$1.4 billion.
Rural employment generated by firms along the
supply chain: from eggs to processing.
Not part of official agricultural GDP due to
processing, but highly important to rural income in
southern fiord areas.
Domestic consumption a residual, much more than
fruits. (US dumping charges plain silly.)
Very high-tech, foreign impulse: seeds
and bulbs. Take bulbs:
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Lilies, tulips, etc. 2000-2004 exports grew
126% - but from a very low base.
2004: 51 million bulbs exported US$10
million. (Holland, USA, Japan, Taiwan, China, others.)
300 has., only 8 producers, two firms.
High tech: Chile just now part of the
production chain to enlarge bulbs. Micropropagation just starting.
Substantial investments and long gestation.
Maybe up to US$100 million exports in 2010.
Expansion for export markets with
small domestic base: most berries.
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Blackberries always around, but expanded for export
market as
strawberries, raspberries, blueberries exports grew:
sophisticated coordination of quality control, transport
and management of a range of products and continuous
supply to markets (through sources in Guatemala,
Mexico, and now California).
Cranberries completely for export – pushed by single
US costumer at first. Domestic consumers baffled.
Berries built on reliability of Chilean supply of longerstored fruits: apples and table grapes.
Traceability and supplier (and to a degree, country)
reputation very important today. Coordination rents.
Designed for export markets using domestic base
as platform and test market: olive oil.
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Wineries heavily involved.
Spanish and Italian expertise in selection of
varieties and design of product.
Marketing efforts in Santiago to build scale.
Promise of rural employment in some areas
that benefited less from fruit boom.
Large up front investments and longer-term
planning.
Evolution of agriculture share of male and
female labor force
% of male and % of female
labor force
30
25
20
15
10
5
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
year
Employees, agriculture, male (% of male employment)
Employees, agriculture, female (% of female employment)
From 30,000 women in agriculture production sector to 100,000,
since 1980. From 600,000 men to 750,000.
Evolution of agriculture male and female labor
in agriculture
indices of male and female labor in
agriculture (1980 = 1)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
year
Index of female labor in agriculture
Index of male labor in agriculture
Concentration in purchases or own production
Product
Export
Orienteda
Fruit for export
Wine for export
Industrial tomatoesb
Seed multiplicationc
Import
Wheat
competing
Maize
Durum wheat
Raps (canola)
Sugar beets
Malting barley
Few or no
Potatoes
imports
Few or no
imports
Import
competing
4-firm
concentration
Herfindhal
Largest
firm
34%
32%
90%
47%
65%
67%
100%
100%
100%
100%
< 5%
0.04
0.04
0.23
0.8
0.15
0.22
0.5
1.00
1.00
0.52
< 0.01
11%
14%
32%
19%
25%
44%
50%
100%
100%
60%
< 5%
Product
4-firm
concentration
Herfindhal
Largest
firm
Broilersh
Turkeys
Pork
Beef cattle
Milkd
92%
100%
61%
40%
80%
0.37
0.42
0.18
0.11
0.18
55%
50%
40%
28%
28%
Some opinions-hypotheses
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Foreseeable future: climate and not brand that will
increase the diversity of agricultural products in Chile.
Diversity & total value growth dependent on
sophisticated investors, mainly domestic.
Rural household income mainly from production and
processing employment, less from self-employment as
producer.
Chile is California-izing, but with only 15 millions and a
ppp income of about US$9000: exports to north will
drive structure of agro-food sector.
Don’t expect much extra rent to land or rural fixed
factors. One possible exception: Mapuches.