Julio A. Berdegué

The Rapid Rise of Supermarkets in Latin America: Challenges and Opportunities for Development

Why are we writing, in the same article, about ‘supermarkets’ and ‘development’ in a region where 39% of the people are in poverty and 13% in absolute poverty (Echeverria, 1998)? Are not supermarkets niche players for rich consumers in the capital cities of the region? The answer is ‘no’; that traditional image is now a distant memory of the preliberalisation period before the 1990s. This theme issue of Development Policy Review shows that supermarkets are now dominant players in most of the agrifood economy of Latin America, having moved from a rough -estimate population-weighted average of 10-20% in 1990 to 50-60% of the retail sector in 2000. In one globalising decade, Latin American retailing made the change which took the US retail sector 50 years. The supermarkets, together with large-scale food manufacturers, have deeply transformed agrifood markets in the region. Many of those changes spell great challenges – even exclusion – for small farms and processing and distribution firms, but also potentially great opportunities. Development policy and programmes need to adapt to this radical change. The above findings are derived from the articles in this theme issue, the key points of which are compared in this overview article, and set in the context of background and other recent case literature. Earlier versions of the articles 1 were presented at the International Workshop ‘Concentration in the Processing and Retail Segments of the Agrifood System in Latin America, and its Effects on the Rural Poor’, held in November 2000 in Santiago, Chile, organised by the International Network for Research on Farming Systems (RIMISP) and funded by the Department for International Development (DFID) of the United Kingdom. The nine articles are on Argentina, Brazil, Chile, Costa Rica, and Mexico. They focus on the rise of supermarkets and large-scale food manufacturers over the 1990s to the present, and illustrate the effects of their rise on the dairy products and fresh fruit and vegetables (FFV) sectors. Dairy and FFV were chosen because of the interest development programmes have for these products: they are seen as good prospects for sma ll farms and firms because of their higher value-added and income-generation potential and their relative lack of economies of scale (compared with basic grains and

Rural Nonfarm Employment and Incomes in Latin America: Overview and Policy Implications

Abstract Rural nonfarm employment (RNFE) and incomes (RNFI) are crucial to Latin American rural households. The 11 rural household income studies in this volume, reviewed in this paper, use 1990s data and show that RNFI averages 40% of rural incomes. RNFI and RNFE have grown quickly over the past three decades. The review of evidence provided some surprising departures from traditional images of nonfarm activities of Latin American rural households. In terms of shares of rural incomes: (1) nonfarm wage incomes exceed self-employment incomes; (2) RNFI far exceeds farm wage incomes; (3) local RNFI far exceeds migration incomes; (4) Service-sector RNFI far exceeds manufactures RNFI. These findings suggest the need for more development program attention to wage employment in the service sector, versus the traditional focus on small enterprise manufactures. Moreover, poor households and zones tend to have higher shares in their incomes but lower absolute levels of RNFI as compared to richer households and zones. The RNFE of the poor tend to be the low-paid nonfarm equivalent of semi-subsistence farming. Raising the capacity of the poor to participate in the better-paid types of RNFE is crucial — via employment skills training, education, infrastructure, credit. Finally, RNFE has grown fastest and been most poverty-alleviating where there are dynamic growth motors, in particular in the agricultural sector, but also in tourism, links to urban areas, mining and forestry. This means that developing RNF jobs cannot be done at the expense of programs promoting agricultural development.

The Rapid Rise of Supermarkets in Developing Countries: Induced Organizational, Institutional, and Technological Change in Agrifood Systems

There has been extremely rapid transformation of the food retail sector in developing regions in the past 5 to10 years, accompanied by a further consolidation and multi-nationalization of the supermarket sector itself. This organizational change, accompanied by intense competition, has driven changes in the organization of procurement systems of supermarket chains, toward centralized and regionalized systems, use of specialized/dedicated wholesalers and preferred supplier systems, and demanding, private quality standards. These changes in the system have in turn determined the very recent rise of the use of contracts between supermarkets and agrifood producers in these regions to cover provision of services and provision for risk management, as well as requirements for demanding quality and safety attributes, which require substantial investment in technological change and ‘upgrading’ at the producer level. This paper presents a brief discussion of these trends, followed by a conceptual framework to explain this phenomenon, illustrated with empirical evidence drawn mainly from Latin America.Foreword * Part I:Transformation of Food Systems and the Small Farmer:Key Concepts * Small Farms and the Transformation of Food Systems: An Overview * The Rapid Rise of Supermarkets in Developing Countries: Induced Organizational, Institutional and Technological Change in Agri-Food Systems * Food Policy in the Era of Supermarkets:What s Different? * The Food Processing Industry, Globalization and Developing Countries * Forces of Change Affecting African Food Markets: Implications for Public Policy * Part II: The Changing Structure of Food Systems * The Changing Nature and Structure of Agri-Food Systems in Developing Countries: Beyond the Farm Gate * The Impact of Globalization and Vertical Integration in Agri-Food Processing on Local Suppliers: Evidence from the Polish Dairy Sector * The Role of Santiago Wholesale Markets in Supporting Small Farmers and Poor Consumers * The Rapid Rise of Kenyan Supermarkets: Impacts on the Fruit and Vegetable Supply System * Linkages Between Smallholder Farmers and Supermarkets: Lessons from Zambia * Part III: Implications of Food Systems Transformation for Smallholder Farmers * Overview of Case Studies Assessing Impacts of Food Systems Transformation on Smallholder Farmers * The Transition from Maize Production Systems to High-value Agriculture in Kenya * Linking Small Farmers in Bhutan with Markets:The Importance of Road Access * Marketing Channels and their Implications for Smallholder Farmers in India * Marketing China s Fruit: Are Small, Poor Farmers being Excluded from the Supply Chain? * Supermarkets and Small Farmers:The Case of Fresh Vegetables in Honduras * Impact of International Food Safety Standards on Smallholders: Evidence from Three Cases * Index

Rural Nonfarm Employment and Incomes in Chile

Abstract This article analyzes the evolution of rural nonfarm employment (RNFE) and income in Chile during 1990–96. The data used come from the National Socioeconomic Survey (CASEN), and from a household survey undertaken by the authors in two municipalities in 1999. The latter contrasted two zones, very different in terms of economic dynamism and rural poverty. We show that during the period, RNFE and incomes increased 10% and 18%, respectively, in 1996, reaching 39% of rural employment and 41% of rural incomes. The rate of multiactivity (the share of households participating in more than one sector) was only 20%, lower than expected, indicating a tendency toward economic specialization in rural income strategies. The determinants of such employment are mainly household characteristics, in particular variables related to human capital, such as the age and gender of the household head, and the schooling of the household members, although also important are access to credit and physical capital. The level of nonfarm income of rural households is determined mainly by the economic context, in particular the economic level and dynamism of the overall zone and the quality of the roads. It is proposed that policies to develop RNFE should be geared to zone characteristics, and should in general favor investments in education, in roads, and in access to credit. Moreover, households headed by women should be the object of special attention. To promote such policies, it will be necessary to address important gaps and weaknesses in the public institutional structure.

The Rapid Rise of Supermarkets in Chile: Effects on Dairy, Vegetable, and Beef Chains

Focusing on the recent expansion of supermarkets in Chile, from large to medium and small cities and across income strata, this article analyses the driving forces behind the process, including the extent and limits of concentration and foreign firm participation. Supermarkets’ procurement practices are examined in terms of their technological, organisational, management, and financial impact on traditional retailers, suppliers, processors and producers in the dairy, horticulture and meat chains. Public policies are proposed to expand the access of small and medium stakeholders in those chains to the opportunities opened directly and indirectly by supermarket expansion, as well as to limit and reduce the harmful effects of the process.

Deepening the basis of rural resource management: learning processes and decision support

Abstract Farmers in many parts of the world are confronting changes for which their experience provides limited guidance. Drawing on cases from a diverse set of resource management contexts, primarily in developing countries, this paper examines common features of the methods R&D workers are developing with farmers to enable them to adjust their decision-making and refine their management. These methods typically comprise a learning process and a decision aid that help farmers to understand aspects of the systems they manage that are not readily apparent. Often ill-adapted initially to farmers needs, the methods evolve through the interaction of farmers and R&D workers towards greater relevance, transparency, flexibility and usability. The effectiveness and impact of these methods have been only sporadically assessed and important facets remain poorly described. A more informed use of learning approaches and decision support aids, supported by theory and evaluated experience, would enable R&D to better support farmers confronting rapid change. Some of the institutional obstacles and opportunities that will affect the wider prospects for such approaches are outlined in the papers final section.

Multiple objective programming -- An application for analysis and evaluation of peasant economy of the VIIIth Region of Chile

Abstract This study was conducted within a Farming Systems Research project, after its diagnostic phase and as part of the on-farm research design stage. The objective was to develop and apply a mathematical model to aid in understanding the functioning of a small-scale farming system, and in evaluating ex ante the potential impact of different technological and rural development actions. Multiple objective programming proved to be a useful tool in reaching these objectives, as it highlighted the specific roles of the different production activities and the relationships between them at the whole-farm level. This study was conducted using data from small-scale peasant production systems in the VIIIth Region of Chile.