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Income diversification through agricultural development1

Alexander Schejtman2, Julio BerdeguР№, FР№lix Modrego


November 2006

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Agriculture as a driver of employment and income diversification

There is a wealth of localized success stories of the role of agriculture as a driver of employment and income diversification in poor rural communities, and also of local initiatives of dialogue and public-private partnership.i Nonetheless, they have remained as micro-local experiences without a road map on how, and under what conditions “collective action through rural institutions can improve access to services and competitiveness in order to make a difference in aggregate poverty figures.”ii

There are some examples of policy-driven initiatives at a higher scale where agriculture-based processes led to employment and income diversification with significant impacts on poverty reduction, which can offer some lessons on the way to resolve the upscaling problem of microlocal initiatives.

Petrolina-Juazeiro, an area of 53,000 square kilometers and 510,000 inhabitants in the states of Bahia and Pernambuco in Brazil, was no different than most of the rural areas in northeast Brazil, one of the main areas of concentrated poverty in Latin America. Its economy was based on a stagnant agriculture dominated by the production of cotton, livestock and subsistence crops. From the mid-nineties to 2006, a public corporation implemented six projects with close to 46,000 hectares of irrigated lands. This led to the emergence of more than 200 agricultural firms, about 2,200 small farmers, and more than 100,000 wage workers (60 percent as permanent laborers, 40 percent of whom were women), with incomes and wages way above the regional average, producing high value export crops.iii

The Salinas district (in the Bolivar Department of Ecuador, where the majority of the population is made up of Quechua Indians), is today recognized throughout the country for the high quality of its cheese production. It has 22 small and medium-sized cheese factories linked to 28 savings and loan cooperatives that cover the whole territory. Marketing is carried out through their own outlets, or through supermarkets and pizza parlors (under their “El Salinerito” trade mark), and exports are channeled through Camari, a development NGO. A series of other local manufacturing activities have branched from this development: hams and cold meats, buttons made from native woods, toys, etc.iv

Yunnan is one of the poorest provinces in China. The “Household Responsibility System” introduced in 1978, and the liberalization of agricultural prices and marketing between 1978 and 1984, triggered substantial changes in agricultural practices in the 1990s. As a result of the transformation of collective production into family farming, there was a considerable increase in the production of high-value crops, leading to a decline in rural poverty from 41 percent in 1985 to 23 percent in 1997. Agricultural diversification has been the main exit strategy from poverty adopted by rural households. Better roads have played a key role in the decisions taken by specific companies, which decided to promote the cultivation of tobacco, tea and sugarcane among small farmers under contractual arrangements.v

The Sleman District (Yogyakarta, Indonesia) has adopted a new approach to rural development by empowering local communities to identify and develop the potential opportunities of local resources. Various networks, which are being used to build basic infrastructure, have encouraged dynamic linkages between the three main areas of the region’s economy: trade and tourism (21.5 percent of the district’s production) manufacturing, including specialized food industries (20 percent) and agriculture (16 percent). This has allowed a stable rate of growth above the national average and the significant reduction of families on

In Sub-Saharan Africa, confusion between a welfare or entrepreneurial approach was identified as one of the major weaknesses of LED initiatives. An example can be found in the Mahala Development Centre: in an area where unemployment was high and income levels very low, value-adding activities were shifted from urban centers to rural-sector households, with poor results in terms of both poverty and efficiency.vii

From this examples it is possible to identify some relevant lessons for strengthening agriculture as a driver of rural employment and income diversification: (i) In all successful cases there was some kind of innovation in products, services, organization of processes and management; (ii) innovations allowed products or services to reach more dynamic markets, and; (iii) agricultural dynamism required strong linkages with manufacturers and services

  1. This document is part of a series of contributions by Rimisp-Latin American Center for Rural Development ( to the preparation of the World Development Report 2008 “Agriculture for Development”. This work was carried out with the aid of a grant from the International Development Research Centre, Ottawa, Canada ( The contents of this document are the exclusive responsibility of the authors.
  2. Corresponding author: Rimisp – Latin American Center for Rural Development,
  1. Zezza and others 2006
  2. World Bank, 2006
  3. (Damiani 2006)
  4. Manuel Chiriboga, 2005
  5. Damiani 2006
  6. Roberts 2005
  7. Quan, Julian and others 2006

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