By: Ruben G. Echeverria
Sr. Research Fellow at the International Food Policy Research Institute (IFPRI)
Director General Emeritus, International Center for Tropical Agriculture

Rural societies and agri-food systems in Latin America and the Caribbean (LAC) face common and unprecedented challenges such as: improving the efficiency of food and agricultural systems; increasing the sustainability of agriculture; building the resiliency of communities, agriculture, and ecosystems to adapt to climate change; and increasing economic and social inclusion, while contributing to opportunities for employment and income generation.

Innovation is critical to address such challenges. Therefore, technical and institutional change should be high on the agenda of policymakers, civil society, and the private and public sectors. Despite the development of agricultural innovation programs in the region during the past two decades, there is still a need to strengthen agricultural research, technology, and innovation systems (including digital innovation) to face such challenges. The LAC region offers an excellent opportunity to seek innovative, tangible, and large-scale rural development and agri-food systems results, particularly if it continues being the most significant net food exporting region (a challenge in terms of productivity), as well as maintaining its role as an essential provider of global environmental services such as biodiversity, water, soils, forests, and other ecosystem services.

Such challenges become even more relevant due to major global trends, such as changing consumer needs, climate change, low levels of public funding for agricultural research in the Global South, and the need to make agri-food systems healthier, sustainable, and more resilient. Furthermore, the severe overweight and obesity epidemic (combined with persistent hunger) in the LAC region and the mixed agricultural research and innovation capacity at the national level to respond to such challenges highlight the need to rethink how to innovate to realize impacts at scale.²

The current global technological innovation trends allow us to consider digital, data science, artificial intelligence, genomics, and new biological tools that can significantly improve agri-food systems and livelihoods. All these key challenges and opportunities for research, development, and innovation should be addressed considering the substantial heterogeneity of LAC countries, particularly regarding the diverse contribution of agriculture to economic growth and employment across countries (Figure 1.)

Figure 1: Contribution of Agriculture to GDP and Employment, LAC Countries, 2018

A critical dimension of heterogeneity for agricultural innovation in the region is that small-scale family farms are almost 85 percent of all farms. Of the approximately 15 million farms in the region, probably 13 million could be considered small-scale family farms. However, smallholder family farming is not a homogeneous sector. For example, a group of commercial family farms integrated into markets is already part of the science and technology innovation system. There is also a group in transition to commercial markets where technical assistance could play a key role. Finally, a more traditional or subsistence group of smallholders is not integrated into markets and is often marginalized from formal innovation systems and processes.³

INNOVATION AND PRODUCTIVITY

In the early 2000s, the performance of LAC’s agriculture sector was the best it had been in many years. This growth was short-lived. By the early 2010s, agricultural development was sluggish. The lesson is often repeated but remains true: only much more significant investment in research and development and innovation can sustain medium- and long-term improvements in productivity, sustainability and resilience, and social inclusion.

In 2000-2010, regional agricultural growth was strong, driven by a favorable macroeconomic environment and high prices for primary commodities. The sector saw a steady growth of total factor productivity (TFP), output and input per worker, and a reduction of the TFP gap between the region and OECD countries.⁴ Remarkably, even during the 2008 worldwide recession and the high phase of the commodity price cycle, some LAC countries were still increasing output per worker at an average annual rate of 4.4 percent between 2003 and 2012, compared with 0.7 percent in the 1980s.

The upward phase of the commodity price cycle that started in the early 2000s was over by 2011, with commodity prices falling or remaining stable, reflecting an anticipated increase in commodity supply along with weaker demand from China and other major commodity-importing economies.⁵ The past decade shows sluggish growth in several LAC countries, not only because of lower commodity prices but also because of macroeconomic difficulties and policy readjustments. Worsening fiscal conditions and a persistent increase in debt ratios brought back fiscal adjustments and recessions in the region.

Regional agricultural growth decelerated after 2012. The average annual growth of output per worker between 2003 and 2011 was 4.4 percent, decreasing to 2.8 percent during 2012-2016. Output growth was driven almost equally by growth in TFP and input per worker. During the fast-growing period of 2003 to 2011, output growth was driven by TFP growth. TFP grew on average at an annual rate of 2.2 percent, the same as growth in input per worker. Regional agricultural growth decelerated after 2012. The average annual growth of output per worker between 2003 and 2011 was 4.4 percent, decreasing to 2.8 percent in 2012-2016. With the slowdown of production after 2012, TFP growth fell to an annual average of 1.3 percent, while growth in input per worker dropped to 1.5 percent. Although these growth rates are significant when compared to historic trends, the change signals the end of the favorable period for LAC’s agriculture.

TFP growth in agriculture was mainly driven by technical change, with average annual TFP growth rates of 2.2 percent during 2003-2011 and 1.1 percent after 2012. During the commodity price boom, crop and livestock production grew at an annual growth rate of 3.4 and 3.1 percent, respectively. TFP growth for both subsectors was slightly higher for crops (2.5 percent) than 2.2 percent for livestock. After 2011, annual growth in crop production dropped from 3.4 to 2.8 percent, and TFP decreased by half (from 2.5 to 1.2 percent). Growth rates of livestock output in 2012-2016 dropped to one-third of those in 2003-2011, from 3.1 to 1.0 percent, and TFP growth decreased from 2.2 to 0.7 percent. Livestock TFP seemed to reach a plateau after 2012, and crop production is the subsector driving growth.⁶

Greenhouse gas emissions increased much faster in crop production (3.4 percent) than in livestock production (0.8 percent), although emissions from livestock are six to eight times higher than crop emissions. Most of the emissions from agriculture come from enteric fermentation in ruminants and manure. In crop production, a primary source of emissions was synthetic fertilizer (more than half of the total emissions), rice cultivation, and crop residues. At the country level, between 2003 and 2011, Brazil, Paraguay and Uruguay were the countries with the fastest-growing agriculture, driven mainly by growth in crop production and the boom of soybean production for export, followed by Peru, Nicaragua, and Guatemala, all with agricultural production growth rates above 4 percent.⁷

THE NEED FOR MORE SIGNIFICANT INVESTMENT IN INNOVATION

There is no future for productive, sustainable, resilient, and inclusive agri-food systems in the region without a much greater commitment to investment in research, development, and innovation from the public sector, civil society organizations, and private companies. Investments in agricultural technologies in LAC are still relatively low, reaching only 1 percent of the venture capital investment in the region.⁸ As shown in Figure 2, only a few countries invest above 1 percent of agricultural production in research, compared with countries like China, Vietnam, and India that are investing over 2 percent of agricultural GDP in research and the higher income countries that have been continuously investing above 4 percent of agricultural GDP.

Furthermore, most of the research investment is focused on staple crops. Only a few countries have national research systems with high civil society participation and the private sector in the region.⁹ The public sector employed more than half of agricultural researchers in the mid-2000s, the higher education sector about 40 percent, and non-profit organizations 5 percent. However, there are significant variations across countries. For instance, in Brazil, the Dominican Republic, Ecuador, Panama, and Venezuela, the government sector employed more than 70 percent of each country’s agricultural researchers. In Mexico and Peru, roughly two-thirds of agricultural researchers were employed within higher education institutes. In Colombia and Honduras, producer organizations accounted for approximately 40 percent of the total number of researchers.

Figure 2: Agricultural Research Spending as a Share of AgGDP by Country, 2012–2016

Figure 3: Total Number of Researchers and Agricultural Research Expenditures in LAC, 2016

By 2016, the region invested about USD 5 billion annually in agri-cultural R&D (Figure 3), representing a significant increase over the previous decade. Total researcher numbers — measured in full-time equivalents – also increased to close to 20 000 agricultural researchers, nearly twice as many as in the early 1980s. Most of the growth in spending and number of researchers was driven mainly by the three countries with LAC’s most prominent agricultural research systems: Argentina, Brazil, and Mexico.

Considering the slowing down of growth in the agricultural sector during the past decade and the relatively low levels of investment in research, development, innovation, new partnerships, and financing mechanisms should be promoted by an endowment funded by several countries of the region and Spain. However, the current amount in the endowment (approximately USD 100 million) is still small to reach a significant regional scale. A unique institutional innovation was the creation, two decades ago, of the Regional Fund for Agriculture Technology (FONTAGRO) to support regional research projects on a competitive basis. The Fund operates with the income generated.

The region has benefited from the historical presence of relevant international agricultural research centers from the CGIAR based in LAC (CIAT, CIMMYT, and CIP) and others working in the region (Bioversity International, IFPRI, ICRAF as well as CATIE) with an important set of programs in the region. LAC has national research institutes with significant scientific capacities, including EMBRAPA in Brazil, INTA in Argentina, INIA in Uruguay and Chile, AgroSavia in Colombia, and INIFAP in Mexico. Furthermore, Universities, civil society organizations such as producer associations, and private companies have had a vital role in agricultural innovation in the region. Yet, despite these structures, LAC lags in terms of the level of investment compared with developed countries and other developing countries, most notably in Asia.

To complement publicly-funded activities, a key sector to promote — through institutional innovations and regulatory frameworks — is the private sector and civil society organizations such as producer associations. Private sector funded and executed research (focused on the primary sector and the rest of the innovation value chain, processing, marketing, and retail) is still at a low level in LAC compared to the rest of the world. Thus, in addition to significantly strengthening public-private partnerships, there is a need to improve coordination, complementarities, and synergies among all agricultural science, technology, and innovation agents.

In addition to increasing funding levels, it is crucial to rethink priorities and the new capacities needed in such systems. For instance, improving strategies, management processes, institutional evaluation, and organizational learning, planning, and business-related articulation for innovation, strengthening intellectual property regimes, and the capacity to develop start-ups and accelerators including government, businesses, and academia. In sum, promoting innovations to have a large-scale impact instead of simply for the generation and diffusion of technology should be prioritized.

Innovation is also required to identify ways to overcome the most common barriers to adopting new technologies. In this regard, sound policies could incentivize much-needed investments in research, technology development, and innovation. According to global assessments, these barriers include training and information (88 percent), policy/institutional (39 percent), economic (30 percent), social/cultural (16 percent), and environmental (9 percent).¹⁰ Specific barriers to technology adoption include low availability of required inputs (such as high yielding seeds for improved varieties or water scarcity during droughts), high costs of installation (e.g., enhanced irrigation facilities) with limited access to credit and markets, high labor costs and a limited level of technical knowledge and skills. Strengthening social networks among producers to share initiatives, good practices, and innovations is critical in this regard.