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As Peru’s agricultural production grows, smallholders long for better markets

David Dudenhoefer's picture
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 CIP
Native potato varieties that were only consumed in the Andes are now served in Lima's best restaurants and exported as potato chips. Photo: CIP
Peruvian Agriculture has experienced impressive growth over the past two decades, which has contributed to the steady decline in the number of Peruvians living in poverty, yet millions of the country’s smallholders have missed out on that prosperity. A new book on Peru’s agricultural sector offers examples of more equitable approaches to agricultural development, to tap the sector’s full potential for alleviating poverty.

The World Bank recently released the book Gaining Momentum in Peruvian Agriculture: Opportunities to Increase Productivity and Enhance Competitiveness, which provides valuable insight on this issue, as well as a comprehensive analysis of Peru’s agricultural development over the past two decades. The country’s agricultural sector averaged 3.3% growth from 2000 to 2015, and is currently experiencing even greater growth. Whereas the traditional measure of agriculture’s contribution to Peru’s GDP is 7.3 percent, the book’s authors calculated an expanded measure of the sector’s economic impact, taking into account upstream and downstream linkages, and found that it actually contributes at least 11.3 percent of GDP.

However, the performance of Peru’s agricultural sector has been uneven. Agricultural productivity growth has been very robust in the country’s coastal region, where large-scale farms produce crops such as asparagus, grapes and peppers destined for export markets. Meanwhile growth in agriculture in the Andean highlands has largely been stagnant.

Michael Morris, a Lead Agricultural Economist at the World Bank and leader of the team that prepared the book, noted, “Our analysis of productivity trends and gaps confirms the view that Peru’s agriculture sector comprises three very different worlds—the highly productive and technologically advanced Costa, the relatively unproductive and technologically lagging Sierra, and the heterogeneous Selva where modern agriculture and traditional agriculture exist side by side.”

Nevertheless, there is some good news for smallholders in the Andean Sierra and Amazonian Selva, since a growing number have been able to access better-paying markets for traditional crops such as cocoa and native potato varieties.To illustrate the potential for more inclusive models of agricultural development, the authors included four case studies that profiled groups of farmers that have begun selling their bananas, cocoa, coffee or potatoes to buyers that pay preferential prices.

Luz Díaz, a Senior Agribusiness Specialist at the World Bank and one of the book’s authors, explained that she and her colleagues included those case studies in the book because they represent success stories of small farmers who have increased their incomes by gaining access to quality and differentiated markets. “We highlighted these cases because all of them bring lessons on how to develop inclusive value chains that generate opportunities for smallholders,” she said.

One of the more encouraging of those success stories has taken place in the Andes, or Sierra, a region that lies within the center of origin of crops such as potato and quinoa, but is also home to about 47 percent of the country’s poor. Potato is the principal crop of more than 80% of farmers in the Peruvian Andes, many of who grow native potato varieties that were largely unknown outside the region two decades ago.

To tap the commercial potential of Peru’s approximately 3,000 potato varieties, the International Potato Center (CIP) and partners spent years working under the regional Papa Andina Program, which helped Andean smallholders gain access to new markets for native potatoes. That program brought together public institutions, businesses and NGOs in Peru in a project called INCOPA, which elevated the potato’s profile on a national level, developed markets for native potatoes, and connected farmers to those markets with a goal of reducing rural poverty.

“In the case of native potatoes, international development agencies supported and created a space for the institutions and local stakeholders to come together and interact,” noted Díaz. “It has been at the core of what value chain development should be, to have this convergence of views and a shared vision to move forward.”

INCOPA’s innovation platforms developed value chains for colorful potato varieties that had traditionally been consumed only in the Andes, but are now sold and served in the supermarkets and restaurants of Peru’s largest cities, and are exported as potato chips or other processed foods. INCOPA also catalyzed the designation of May 30th as Peru’s National Potato Day and organized media campaigns that helped push demand up from an estimated 70 kg of potato consumed per capita per year in the early 2000s to 80 kg at present. Sales of native potatoes increased by more than 70% and prices for them increased 150%. The total value of native potato exports rose from US$821,000 in 2010 to US$2.5 million in 2015, mostly from packaged snacks. This is encouraging news for the approximately 700,000 Peruvian families that depend on potatoes, though most of them continue to produce for local or commodity markets.

Miguel Ordinola, an agricultural economist at CIP who coordinated INCOPA, explained that in addition to helping Andean farmers find better markets for their potatoes, the project contributed to the development of a Participatory Market Chain Approach that has since been used in other countries in South America, East Africa and Southeast Asia. He noted that other organizations have copied the INCOPA model to help farmers tap the potential of local crop biodiversity to improve their livelihoods, and that interest in the approach is growing. Ordinola added that the sale of native potatoes has not only improved the incomes of smallholder families, it has created a sense of pride among Andean farmers, because native potatoes are part of their natural and cultural heritage.

Graham Thiele, who leads the CGIAR Research Program on Roots, Tubers and Bananas (RTB), which works with potato, cassava, sweetpotato, banana and other crops to improve the incomes, food security and nutrition of smallholder families in developing nations, was one of the coordinators of Papa Andina. He observed that lessons learned from that experience can be applied to other crops, noting that they have already informed sweetpotato, potato and banana interventions in Uganda, Indonesia and the Philippines.

“There are lessons to be drawn from that experience on how you can take a crop that is undervalued, that is grown by people in more challenging environments, poor people with few resources, and how it can be revalued to generate better livelihoods for those people,” Thiele said.

While the large farms of Peru’s coastal region will likely remain the main engine of growth in agricultural production, there is clearly ample opportunity for international organizations and NGOs to partner with farmers and businesses to tap the market potential of the country’s exceptional crop diversity, and contribute to the reduction of rural poverty in the process.

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David Dudenhoefer is a Lima-based freelance journalist and communications consultant who specializes in agriculture, forests, indigenous issues and the environment.  He wrote this blog for the International Potato Center (CIP).

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