End to Subsidies Would Not End Rural Poverty


By Marcela Valente*

Inter Press Service
December 2, 2005

Critics of the farm subsidies shelled out to farmers in wealthy nations argue that their elimination would improve the lives of farmers in developing countries. But some small farmers and activists in Latin America suspect that the benefits would only go to a handful of large agribusiness corporations.

The ones who stand to benefit from a possible opening up of markets in the European Union (EU) "are the big transnational corporations that dominate business in the countryside. There are only a few of them, and they produce a very limited variety of products," Argentine farmer Pedro Pereti told IPS. Pereti lives in Máximo Paz, in the eastern Argentine province of Santa Fe, where he cultivates 230 hectares of maize, soybeans and wheat and raises cattle on a small-scale. He is assistant secretary of the coordinating committee of family farmers in Mercosur - the Southern Common Market trade bloc made up of Argentina, Brazil, Paraguay and Uruguay - and argues that it would be a "grave error" for developed countries to eliminate subsidies before developing countries undergo an agrarian reform process.

"Without agrarian reform, there will be no automatic trickle-down effect," he maintained. "The Argentine countryside will turn into a green desert, because of the expansion of soybean cultivation, the current star crop, and the rural exodus will increase. Meanwhile, many more people from Africa and Latin America will go to Europe." It is noteworthy that after 50 years of existence, the United Nations Food and Agriculture Organisation (FAO) should have convened an international congress to discuss agrarian reform, he said, adding that "We should talk about land and productivity, because there won't be room for everyone."

FAO and the Brazilian government are organising a Mar. 7-10 international conference on Agrarian Reform and Rural Development in the city of Porto Alegre to debate the possible options for a new agricultural paradigm that would be respectful of the environment and would contribute to eradicating poverty and hunger. According to a late October report by the Economic Commission for Latin America and the Caribbean (ECLAC), the agricultural sector has grown by more than three percent a year over the last few years, a rate of growth which outstrips that of Latin American economic activity as a whole.

However, most people who work in agriculture in the region are poor. ECLAC attributes this disparity to a development model that has concentrated heavily on a handful of export commodities like fruit, beef, coffee and soybeans. But this pattern could become even more ingrained if the EU, the United States and Japan, who are jointly responsible for 80 percent of global agricultural protectionism, were to eliminate their farm subsidies, estimated at 250 billion dollars per year.

Alberto Broch, vice president of the National Confederation of Agriculture Workers (CONTAG) - Brazil's largest union federation of landless rural workers and small farmers - believes that ending the subsidies would be "beneficial" insofar as it would get rid of trade distortions, particularly the artificial lowering of prices. But removing them would not be sufficient to promote rural development, he added. "The elimination of subsidies would be no substitute for public policies making more credit available and guaranteeing minimum prices," the trade unionist told IPS, while calling for measures aimed at lending support to small farmers. "There are different kinds of agriculture in this country," which require different treatment, he stressed.

Adriano Campolina, the regional director of Action Aid, an international non-governmental development agency, sees things in a similar light. He said that while ending trade-distorting subsidies would be a good thing, developing countries "should have the right to protect their agriculture with subsidies that allow them to fight hunger and rural poverty." In order for an end to protectionism by and for the rich to have a positive impact on the world's smaller rural economies, policies must be implemented to enhance rural development through family-based agriculture, and to exert more control over corporate agribusiness, Campolina told IPS. Otherwise, improved access to rich-world markets "will benefit Cargill and the other transnational corporations that dominate the (agriculture and livestock) business," he underlined.

In Mexico, people in rural areas are not at all eager for the still far-off moment when the subsidies shoring up agriculture in powerful countries are dismantled. Miguel Pickard, of the Centre for Economic and Political Research for Community Action, told IPS that eliminating the subsidies "will not solve the big problems of inequity in world trade." If in fact industrialised countries do away with their agricultural subsidies, "some competitive producers in developing countries, big or small, will benefit. But the big corporations will benefit the most," the researcher concluded.

Once subsidies are removed, industrialised countries will undoubtedly adopt a strategy of buying up land and productive farm units in developing countries, Pickard predicted, which means governments in the region should make long-term plans to assist peasant farmers. But the end of protectionism is not yet in sight. It is possible that the sixth ministerial conference of the World Trade Organisation (WTO), which will take place in Hong Kong Dec.13-18, may postpone a decision on the agricultural question to the last phase of the multilateral trade talks, which are scheduled to conclude in late 2006.

Argentine agronomist Walter Pengue said that "if the subsidies are removed within a global production context like the present one, an improvement in the lot of peasants and small producers cannot be guaranteed." Pengue, a researcher with the Landscape Ecology and Environment Group at the University of Buenos Aires, maintained that Quechua and Aymara indigenous peasant farmers, who operate outside the trade rules of the global market, "will receive a very small share" of any possible benefits.

Quite the reverse, in fact, he warned: liberalisation could have a negative impact, by "increasing the pressure on the environment, further concentrating land ownership, and causing mass migration of small farmers to the cities." What would really be useful to small producers, he said, would be to "strengthen local and regional markets," like the open-air markets in small rural towns where peasants in Bolivia and Paraguay sell their surplus produce. "The model of rural development needs to be reformulated," he declared.

The market is "so distorted" that a melon grown in Argentina can be sold in Japan at a lower price than in the local market, in spite of the distance, he noted. In addition, there are countries, such as the United States, that control the trade in food products that are not even produced there, Pengue added. It should not be possible for prices of crops in developing countries to be determined in the capitals of Europe or the United States, nor should the economic viability of a Latin American country depend almost totally on the value their principal export product can command in those markets. "That isn't a real economy; it is a crazy, distorted economy that must be completely overhauled," he asserted.

With additional reporting by Mario Osava (Brazil) and Diego Cevallos (Mexico)

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