The case studies show that it is possible to develop agribusiness linkages in order to be actively incorporated into a globalized and highly competitive environment. In this way, associative organizations can compete in demanding foreign markets.
The case studies indicate that the development of agribusiness linkages on the strictly individual initiative of small producers is a new phenomenon and does not have the complexity and diversity demanded by the competitive environment. However, where they merge with organizational structures that incorporate relationships that reflect the changing business environment, small producers establish more complex connections.
The agribusiness linkages required for a more competitive environment need to focus on: business management; connections with new links of added value, such as agro-industry and services; and the development of new markets.
Some new types of agribusiness linkages may arise marginally or collaterally. Where they are promoted explicitly through the intervention of public and private entities (e.g. religious organizations and international cooperation), norms and instruments, these linkages may turn into efficient mechanisms for integrating small producers into the economy. For the purposes of this analysis, and in view of their importance, this type of linkage is called "emerging".
Another possibility with great potential in agribusiness linkages could be emulated in populations with a collective or community orientation, as analysed in the Salinas dairies case. This case shows the possibility of establishing a wider relationship of support between communities and organizational structures, be they religious, civil or governmental. This case shows that indigenous or rural populations with mainly collective institutions can link successfully with the market.
A number of factors favour the development of agribusiness linkages. At the macrolevel, a solid regional, national or international market is a necessary condition. This market depends on: population size, purchasing power, the growth rate of the economy, and equal distribution of income.
At the sectoral level, the formulation of an explicit policy of alliances and agreements on public-private linkages for the development of competitiveness and added value is another necessary condition. Formulating policy is not enough, rather it must be given priority at the level of the small producers in the most dynamic niches and links of the food market. It is also necessary to define the programmes, projects, instruments, resources and organizations that lead this kind of process, as Chile has done.
The technological level permeating the structure of agribusiness linkages is another important factor. Producers have to use modern technology in competitive markets even where they have an intensive labour force. The studies highlight three options for technological development that can be applied separately or combined within a chain organization:
Improved artisanal processes whose products are for special niches or exclusive markets; these products can generate greater added value as cultural products and original products, while at the same time targeting cultural markets.
Industrialized processes, with technologies that use scale economies, whose products are for globalized markets where they have to comply with the requirements of homogeneous quality and low prices.
Combined processes that use products made artisanally in subsequent stages of an industrial nature. The case studies refer to cassava starch, indigo, chilli paste, dehydrated lemon and seeds.
Knowledge, which is expressed in improved levels of education and skills, favours long-term agribusiness linkage fixation. Where producers have a higher level of education, they participate in more complex agribusiness linkages through which supply is planned, risks reduced, and the quality and quantity requirements satisfied.
Another factor is explicit intervention. This may be public, through policies, and/or private, through leadership, interaction with agents and organizational development. It can focus on trade integration, protection of foreign markets and support to value-generating linkages. These interventions have a potentially favourable effect as they give rise to or consolidate "matrix" linkages through which other derived linkages are developed. This process favours the insertion of the organization into markets. The matrix linkages include those that generate innovations at the technological level, in supplying productive factors and services, integrating chains and organizing. Chile provides an example of an explicit policy in this respect, with institutions created with the express goal of engendering an innovative environment in many of the above-mentioned aspects.
Profitable prices for producers and expanding markets favour the consolidation and fixation of agribusiness linkages. Critical situations in the economy could affect the survival of the associative structures, as seen in most of the cases analysed. An option in developing agribusiness linkages, which is not seen in the cases with small producers but is known in cases of entrepreneurial producers, is to use price-stabilization funds. These can be used as instruments to reduce risk and negative impacts on markets.
The presence of organized agents such as enterprises with organizational and accumulative capacity would favour the development of agribusiness linkages. This hypothesis tends to be proved to the extent that services to producers, private investors, processor enterprises and new chain and commercial segments generally emerge through the actions of entrepreneurial agents that intervene actively and frequently through coordinated actions with the associated organizational systems.
Although entrepreneurial capacity is necessary for linkage success, it is not sufficient. As the cases studied show, the clear will of government and an organized private sector are what enable the long-term development of matrix linkages, with a wide and sustained impact on all agribusiness relationships. With the presence of government alone, without the necessary entrepreneurial capacity, its leaders and organizations, sustainable and successful development of agribusiness-linkage relationships is not achieved.
The case studies indicate that leadership, which is necessary for developing the associative organizations, may not always be responsive to spontaneous and favourable conditions, or to initiatives emerging in an exogenous way at the margin of producers. The case of FECOAGRO shows that with mutual agreement between a foreign agent and a group of producers, it is possible to resolve major problems and create new processes incorporating scientific knowledge and practical experience.
Another area with great potential for developing agribusiness linkages concerns the legal and normative aspects of developing contracts and instruments of contractual agreement that incorporate aspects of a participatory nature. In most of the cases, informality predominates, even in countries with a tradition of legal compliance, e.g. Chile. Informality hinders the clear fulfilment of the established agreements. There are often deficiencies and gaps in the regulations required for incentives, sanctions, investment returns, agreements, redistribution and organizational consolidation.
At the level of financing, government pull-back has had an overall negative effect on most of the cases studies. This is seen in the shortfall in the supply of financing. Financing has not been provided by the private sector to the extent that was initially hoped. This shortfall restricts progress and modernization and also affects the development of new and vital agribusiness linkages, such as new forms of trade negotiation. In countries such as the United States of America, there are myriad ways of local financing, which include possibilities of saving, credit and investment. In the cases studies, some associative organizations have overcome their funding problems by innovations of their own, such as the Salinas dairies through direct credit negotiation with the IDB, and Moras del Oriente with the creation of its promotion fund.
The supply of skilled and unskilled labour also affects the development of agribusiness linkages. In general, with the exception of Chile, there are no major requirements for the work force that participate in agribusiness linkages at the production stage of artisanal processing. Workers have low levels of education. The need for of skilled labour is still growing slowly, in part because of the absence of innovative processes and technological improvement. However, in all the cases, interest is being shown in setting up training mechanisms and improving skilled or family labour. This field could be open to innovations at organizational and normative level that could have an impact on the development of labour skills, productivity and grading.
All the above-mentioned linkages of a matricial nature are liable to create new linkages that favour competitiveness. However, in most of the countries studied, there is no direct connection between entities or research programmes with many of the associative organizations towards progress at the technological level, developing markets or integrating links in the chain.. Adaptation mechanisms have predominated, with technical and training support, but their limited methods are shown in stagnating supply and rapid technological obsolescence. There are cases that show far-reaching innovations in Chile (Chacay and COOPEUMO), Argentina (FECOAGRO) and in Guatemala (Cuatro Pinos and El Limón). The support of research centres and national technological centres there shows the great potential of such linkages with an associative organization of small producers.
In the cases studied, the linkages with an innovative content have all originated within the organizational structure, with the support of government policies, private programmes (with leadership from religious organizations or international cooperation) or regional programmes. From the associative organization, and in accordance with their capacity, new technological, trade and managerial skills have developed. No innovative linkages are seen as the isolated initiatives of producers or private enterprises. The innovations were generally introduced by the government on the basis of its policy priorities, by clients of the organization in accordance with market demands, or by the same organization under the intense pressures of the moment.
Producers are usually a passive element that benefits from new skills acquired by the organization. In the absence of organizations that perform mediation, the development of new skills by the producers is minimal (e.g. the case of Ecuador with its cassava-processing enterprises). On the other hand, the organizations provide a process of change and consolidation (including state support, as in Chile). They encourage more active participation by producers in the development and use of instruments, information, quality control, marketing, and risk prevention. A high level of education contributes to the successful development of new skills among producers.
Agribusiness linkages involve the following important actors:
third parties, which negotiate with producers, the associative organization or government.
As governments have reduced their direct intervention in most countries, the agribusiness linkages are preferentially established linkages between producers and the associative organization, and between the associative organization and third parties. In most of the cases studied, a relationship of public-private complementarity is observed more often than an active relationship of interaction and synergies. With the exception of Chile, in cases where linkages from the public sector predominate, the linkages with the private sector are deficient, and vice versa.
Third parties or private enterprises are of two classes: (i) for-profit commercial or entrepreneurial agents; and (ii) not-for-profit organizational agents. There is a greater presence of for-profit private enterprises in trade and services to the chain. Not-for-profit organizational agents such as regional universities and international cooperation have focused on the producer with government backing, or supported governmental projects for training, and technological and organizational support.
International cooperation has played an important role in some of the cases analysed. It has been more important than government in managing and fostering associative organizations. In time, the type of linkage established with associative organizations has tended to change and promote entrepreneurial and commercial development. International cooperation can also act as a catalyst in the way it promotes activities, programmes and new linkages for the benefit of the neediest rural populations.
A greater presence of horizontal chains in a region is advantageous for developing agribusiness linkages. To the extent to which these chains exist, third parties and private enterprises play an important role in supporting education, training, technology and cheaper financing for the associative organizations. The wealth of links at the regional level is shown in the Salinas and Moras del Oriente cases.
The associative organizations can establish agreements with third parties, form linkages with producers, or leave the initiative to the producers to set up important linkages. The associative organizations tend to make these linkages endogenous where they consider redistribution or innovation proposals among their objectives. They also have supports that reaffirm these goals, either public or private. They prefer to establish links with third parties where the service is reliable, low-cost, available and sufficiently experienced. The producer is free to negotiate with profitable organizations that pay according to market conditions and do not claim to carry out redistribution or savings or other functions that intervene in the producer's decisions. However, these cases can be highly vulnerable as they may disappear easily in a market crisis.
Changes in the content of the agribusiness linkage are more notable than the form. Concerning content, the producers should commit themselves to requirements of quality, quantity, opportunity and frequently, stockpiling. At the same time, the associative organizations should be involved with producers in sales volumes, remunerative prices, input supply, and delivery of advances. To this end, the use of planning tools is needed for sowing, production negotiated with traders, and quality control. Violations of these commitments affect the development of agribusiness linkages.
Moreover, negotiations of agribusiness linkages by associative organizations are becoming increasingly complex as they involve new fronts that had not previously been penetrated, such as quality control, productive alliances, agreements with traders and processors, and commercial development. This complexity puts pressures on them to adopt the best aspects of the entrepreneurial structures such as planning, anticipation, and negotiation capacity, along with the need to represent the interests of the beneficiary producers.
The progress, diversity and innovation of agribusiness linkages do not always correspond with the economic sustainability of the associative organizations and the beneficiary producers. The macro variables and those of the national and international environment determine economic success. The agribusiness linkages that are created and developed enable each of the parties to profit from opportunities, and to consider new markets or market niches that are particularly profitable. In the case studies, such arrangements show greater economic sustainability: (i) where the entrepreneurial ingredient is important; (ii) where agribusiness linkages are simple; or (iii) where third parties participate more and, therefore, lessen administration costs for the organizations. For policy results, a selected focus could be adopted to promote and actively support the most promising agribusiness linkages with transferred resources.
It was not possible to calculate the costs that endogenous agribusiness linkages entail for the organization. However, some data indicate that they can range from 1 to 20 percent of the product value. These costs are financed with contributions from government and international cooperation, and, to a lesser extent, covered by the economic benefits of the activity. When the organization lacks theses sources of funding, these linkages are maintained exogenously and financed by the philanthropic participation of third parties and through complementarity and reciprocity agreements.
The impact of agribusiness linkages on producers can be analysed from various perspectives. In terms of skills, the new skills that emerge in linkages are: technical, business management, organizational and redistributive. The technical skills depend on the degree of complexity of the productive process, in accordance with the level of market development. This type of skill is not likely to develop through training only, rather it requires education, systematic classification, and the effective use of productive processes. These abilities are acquired empirically and through training. Organizational skills harmonize the interests of associate producers with those of the associative organizations, as well as public and private support for the community. Equally, priorities are developed and assigned to the type of agribusiness linkage according to its cost and impact. Redistributive skills ensure the long-term sustainability of the organization. This is a condition for survival in countries with high indices of misery, poverty and violence.
Concerning progress in the level of training and learning skills, the case studies show that producers should show new management, organizational and quality-control skills. They should also acquire negotiation capacity within the associative organization. However, where the level of education is low, these skills may not be developed sufficiently. This explains why, once the organization disappears, producers frequently return to levels of production that are poorly organized in a collective manner.
In turn, the associative structure gains skills in organizational development, and with new agribusiness linkages, it acquires new skills in commercial negotiation and business management that enable it to cope with more demanding markets.
The beneficiary producers generally agree that agribusiness linkages, beginning with the associative structures, allow them to acquire negotiation ability. This process translates into higher, more remunerative, and frequently more stable prices, as well as preserving a competitive market position. Contributions also include: supplying inputs under favourable pricing conditions; providing services to production that affect production quality and its timely supply; and the positive impact of scale economies.
Most of the time, where agribusiness arrangements are not predominantly profitable, their action extends to improving the living standards of beneficiaries, shown by the higher level of education of children, and improved health, housing and nutrition. In most cases, the favourable effects continue to benefit the local population through generating employment and creating infrastructure.
One limitation to the development of agribusiness linkages is the lack of an explicit policy to support innovations that can lead to matrix linkages and a complex network of favourable interactions for agribusiness agreements. Small producers frequently do not benefit from basic research in different fields, or from innovative pilot programmes aimed at promoting their competitive conditions in relation to other entrepreneurial producers. With the exceptions of Argentina, Chile and Guatemala, the cases studied show the urgent need for such policies.
Another limitation is the lack of an explicit education and training policy for new generations of families participating in agribusiness linkages. This is an indispensable condition to stabilizing the progress made through the innovative agribusiness linkages.
In precarious circumstances, as in most of the countries analysed, part of the linkages aimed at promoting a redistributive and equitable labour should be the responsibility of government, with the consequent administrative surcharges. However, the benefits of the agribusiness linkage are being used to remedy part of this precariousness in living conditions by programmes for improving nutrition, health, housing, etc. Low living standards among producers and their families prevent accumulation and investment. Income is frequently used to address deficiencies in health, housing, nutrition and infrastructure.
Another limitation concerns the lack of active interaction that establishes synergies between the public and private sector for the benefit of small producers. One positive intervention in this sense means that the public sector actually promotes those agents with the capabilities required in agribusiness linkages (in certification, quality control, transportation services, financing, etc). Similarly, within the framework of a relevant policy of incentives, private agents could take on risks after a pilot stage has proved the viability of their intervention.
The associative organizations are limited in their negotiation ability with agents of greater economic capacity and power, such as the supermarket chains, large processors or international traders. Contractual development could incorporate participatory aspects of associative organizations, which should be more explicit where negotiation is asymmetric. It is also necessary to develop skills in the areas of export and trade development in general.
Other major limitations found in the agribusiness linkages include informality and benefits offered to agents concerning tax evasion and usufruct of favourable economic conditions. However, in some export cases, the recent crisis in international markets has enforced re-adjustments and limited the type of linkages developed.
There is a lack of clear criteria to enable associative structures to set priorities in the form, content and costs of agribusiness linkages. Most of them act as producer beneficiaries through a process of trial and error. A systematization of similar experiences in the agribusiness linkages could help them evaluate different intervention possibilities: public or private; endogenous or exogenous; fundable by government, the associative organization, producer or jointly; etc.
