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The overall Latin American economic, political and institutional framework has substantially changed in the last two decades, in part as a consequence of the implementation of structural adjustment programmes. This study reviews some of the implications of these changes on the design and implementation of agricultural policy and provides concrete suggestions regarding the utilization of some new agricultural policy instruments.

Part I of the document gives an overview of how the general evolution of Latin American countries towards the adoption of market oriented economic policies and the retrenchment of the state in the wake of economic reform are affecting the design of policies and the structure of policy making institutions. The authors conclude that agricultural policy reforms in the last decade can be characterized as a process of preponderance of macroeconomic policy over sectoral policy i.e., of trimming and cancelling government programmes and policies in agriculture that could not be justified under the free market-free trade paradigm. For this reason, despite, or perhaps because of the retrenchment of the state, there is an emerging consensus on the need for a more active role of the state in redressing the social failings of the market system.

Part II addresses the macroeconomic and agricultural sector performance of Latin American and the Caribbean region between 1970 and 1994. The analysis is divided into three different periods according to macroeconomic performance, for each country, and broadly associated with different policy regimes. The authors' conclusion on this topic is that during the three periods, the rate of expansion and contraction of agricultural value added per capita was less than the one for GDP per capita, but the growth in labor productivity was in all cases greater than the per capita agricultural growth rates. Therefore, while total output for the sector could barely keep up with the growth in population, labor productivity in the sector was increasing, implying economic restructuring, rural out-migration, and higher average rural incomes. With regard to the performance of the agricultural sector, the document concludes that the successful macroeconomic reforms and the associated changes in agricultural policies resulted in a higher growth of agricultural output than the one achieved under import substitution industrialization and debt accumulation.

Part III analyses the evolution of agricultural policy in the specific areas of trade, product and factor markets, land reform and land markets, research and extension, and irrigation. For each topic the authors discuss the recent policy reforms, giving examples of how they have been implemented; the transitional issues surrounding the adoption of reforms, including obstacles to their adoption and policies used in facilitating the transitions; and the new market compatible policies, including examples of how they are being implemented, how they differ from old approaches to the same problems, and what types of new challenges they raise for policy makers and rural constituencies.

Part IV explores emerging trends, issues, and challenges that define current policy debates and impact on the organization of policy making institutions, including local responses to globalization, policy differentiation, new approaches to poverty reduction, institutional reform and reconstruction, and the sequencing of reforms. The authors conclude that, in recent years, considerable emphasis has been placed on the implications of the heterogeneous nature of the rural population for the analysis of the differentiated impact of policy reforms and for the design of differentiated policies and interventions. Differentiated interventions are not new, but recent progress in decentralization, democratization, and increased participation of civil societies through representative grassroots and corporativist organizations give new potential for differentiated intervention to play a more effective role in favor of the rural poor.

Finally Part V summarizes the main themes of the paper and presents proposals for the future direction of agricultural policies in the Region, and concludes that presently there is a vast array of opportunities for new initiatives toward a more effective agricultural and rural policy compatible with, but not subordinate, to macropolicy reforms.

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