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A common trait of the Poverty Reduction Strategy Papers (PRSP) in Bolivia, Honduras and Nicaragua is the relative lack of priority assigned to the rural sector despite the high incidence of poverty found there, as well as their inability to focus on the key determinants of rural poverty. The dynamics of the PRSP process and their impact on rural poverty are analysed. Although the factors accounting for the poor results attained by poverty reduction strategies vary between the countries discussed, a common factor is the limited capacity of the State to design and implement development strategies that are able to tackle the structural causes of poverty, and hence achieve substantial and sustainable reductions in poverty. This conclusion is reinforced by a comparative analysis with South Korea and Taiwan, which have succeeded in significantly reducing poverty through a growth with equity developmentalist strategy. [PUBLICATION ABSTRACT]
Introduction
This article discusses the contribution of the Poverty Reduction Strategy Papers (PRSPs) to the design, implementation and impact of public policies aimed at reducing rural poverty in Bolivia, Honduras and Nicaragua from the early years of this millennium until 2007, by which time the PRSPs had either been abandoned or substantially changed and replaced by other anti-poverty programmes.1
To what extent were the PRSPs able to reduce rural poverty? Only a partial answer can be given to this question as a series of factors intervened in the observed changes in rural poverty during this period. However, given the aims and expectations that the PRSPs aroused at the time, it is useful to evaluate their impact on rural poverty despite the tentative nature of the conclusions. It is argued in this article that so long as public policies fail to tackle the structural causes of rural poverty, little progress can be made in a sustainable reduction of poverty. The analysis reveals that the lack of stability, continuity and coherence of public policies and a fragmented State apparatus have limited the capacity for action by the various governments. Furthermore, the particular class character of the State is an important determinant in its commitment to reduce poverty. The main conclusion is that countries are more likely to succeed in substantially reducing poverty if governments pursue a development strategy that seeks a more equitable distribution of economic resources that creates and enhances synergies throughout the economy and society that promote growth with equity.
A common feature of the PRSP experience in the three countries is the scant importance accorded to the rural sector, even though rural poverty is much higher than urban poverty. The rural sector has gradually acquired more visibility through revisions made to the PRSPs or when the PRSPs have been replaced by other public policies and development plans.
The article starts with a comparative analysis between the development strategies of some East Asian countries and Latin America. The aim of this comparative analysis is to achieve insights into the causes of poverty and the development strategies that have proven to overcome poverty. The article then proceeds to examine the cases of Honduras, Nicaragua and Bolivia by focusing on the PRSPs and subsequent development strategies in terms of their design, implementation and outcome. The analysis attempts to identify the structural causes of rural poverty and evaluate the extent to which the PRSPs have been successful in reducing rural poverty on a sustainable basis. The article concludes with some general reflections on development and rural poverty. It is argued that the PRSPs were seriously flawed as they failed to focus on the structural factors of poverty and ignored the historical lessons of development strategies that succeeded in drastically reducing poverty.
Contrasting Experiences in Poverty Reduction: East Asia and Latin America
It is instructive to compare, although very generally and briefly, the development strategies of some East Asian countries with those of Latin America. Although historical development processes cannot be repeated, it is possible to learn some lessons from them that may lead to the design and implementation of more successful development strategies. In my view, the different development strategies pursued, the different timing and extent of agrarian reform, and the different sequence of the industrialization process followed by the two regions had profound effects on their development performance and ability to drastically reduce poverty. For the East Asian region, the experiences of South Korea and Taiwan are selected as they are the most relevant for the purpose of this comparative analysis. Over the course of nearly three decades, these two countries managed to radically transform their economy, multiply several times their living standards and, more importantly, practically eliminate poverty (World Bank, 2006, p. 290). Meanwhile, in Latin America poverty remains a persistent problem, particularly in Bolivia, Honduras and Nicaragua, which have the highest rates of poverty. How to explain this contrasting performance?
State Capacity and Development Strategies
In South Korea and Taiwan, the State played a pivotal role in creating both the conditions for productivity growth in agriculture and for securing the transfer of much of the economic surplus resulting from this growth to the industrial sector via mechanisms such as taxation and the manipulation of the terms of trade in favour of industry. Not only did the State play a crucial role in the process of industrialization, it also had an absolute grip over the agricultural sector, especially as the landlord class had lost their land and political power with the agrarian reform. Although peasant farming was extended even further after land reform, the State exercised control over the peasantry through a variety of economic, political and institutional mechanisms. The State changed class relations and established the economic and political conditions favourable to rapid industrialization while at the same time ensuring agriculture's sustained growth.
Before the world crisis of the 1930s, the Latin American State, with few exceptions, was controlled by the landed oligarchy that ruled in coalition with merchant and mining interests. It was only after the 1930s, and in Central America after the 1950s, when governments shifted from a primary-product and export-oriented economic policy to an inward-directed-industrialization development strategy that power moved towards the emerging industrial bourgeoisie and sectors of the middle class. But landlords still exercised a major influence on the State, being able to block most attempts of reform in the countryside and limiting its room for manoeuvre.
Agrarian Reform
The foundations for a more equitable income distribution were laid by an agrarian reform. Income inequalities in Taiwan, and to a lesser extent in South Korea, are probably among the lowest in the world and this has not only had positive effects on social and political stability, but has also provided a solid underpinning for their industrialization. This relative equitable income distribution widened the size of the domestic market for industrial commodities, which is particularly important in the initial stages of an industrialization process, as well as in stimulating rural industry. According to White (1987, pp. 64-65), 'perhaps the single most important element in the East Asian success has been the implementation of rather comprehensive agrarian reforms' which also had 'powerful growth-releasing and poverty-reducing effects'.
By contrast, the partial and limited extent of agrarian reform in Latin America, coupled with the fact that it was implemented several decades after industrialization had started, denied the region this potential widening of the internal market. It also created a distorted and inefficient industrial structure that produced commodities largely catering to high-income groups and required capital-intensive and foreign-exchange intensive technologies. This meant that a large proportion of the surplus rural population, which migrated to the urban centres, was unable to find industrial employment. Meanwhile, in South Korea and Taiwan the industrial structure was geared to the production of mass consumer goods, where greater possibilities for using labour-intensive technologies exist.
Increases in agricultural productivity in South Korea and Taiwan were achieved with only limited capital requirements, such as the greater use of fertilizers and improved seeds. Changes in agricultural productivity in Latin America, by contrast, were more demanding of scarce capital resources and often required more foreign exchange. Governments favoured the large-scale commercial farm sector, which invested in technological innovations of a mechanical kind and required the importation of tractors, combine harvesters and other machinery. By contrast, in South Korea and Taiwan, technological change in agriculture was widely diffused among peasant farmers as a consequence of the redistributionist agrarian reform and the active promotion of improved technologies by the State. Furthermore, rural expenditure was disbursed in a far more egalitarian manner, and the State made far more substantial investments in rural infrastructure, such as irrigation and roads (Aoki et al , 1997).
Agriculture-industry Synergies
The South Korean and Taiwanese policymakers were aware that to achieve enduring economic development, it was necessary to ensure sustained increases in efficiency in agriculture and in industry. They thus had a dynamic view of the interaction between agriculture and industry. Governments hence ensured that the conditions were conducive to the adoption of new technologies and stimulated shifts in production patterns to higher value crops over the whole of the farming community. As for industrialization, they tried to ensure that any resources transferred to industry were invested in industries that had great potential for growth and for success in export markets. In contrast to Latin America where protectionism was generally exercised across the board, in South Korea and Taiwan it was highly discriminatory.
These Asian governments also encouraged the creation of industries that would allow improvements in agriculture such as chemical fertilizers, farm machinery and equipment industries. Furthermore, agricultural-supporting industries received a higher allocation of foreign aid funds than other types of industry. Although in several Latin American countries the fertilizer industry was also promoted, it only benefited some capitalist farmers as most smallholders could not afford to purchase fertilizers. Thus, the use of fertilizers was far less common in Latin America, and subsequently crop yields remained low. Much industrialization in Taiwan was also rural based and therefore more attuned to the needs of the agricultural sector. Meanwhile, in Latin America industry was largely concentrated in a few major cities. Once a successful industry is established, the need for extracting a surplus from agriculture diminishes; the flow of resources might even revert. This has been the case in post-war Japan and also, in recent decades, in South Korea and Taiwan as comparative advantages shifted from agriculture to industry.
By contrast, Latin American policymakers generally failed to create such synergies. They were unable to resist the pressures from industrialists for higher rates of protectionism and lacked a sufficiently vigorous export-oriented industrialization (EOI) strategy, if any at all (Ranis and Orrock, 1985). Hence, Latin America's economic growth continued to be hampered by foreign exchange constraints, which limited the import of capital goods and thus the country's investment rate (Jenkins, 1991). The inabilities to achieve broad-based rural development and to shift earlier to an EOI strategy are some of the key reasons why Latin America fell behind.
As policymakers in South Korea and Taiwan decided early on to become competitive in international markets, this created an industrial structure that took advantage of their cheap labour supply. This was a major factor in their initial comparative advantage relative to the industrial countries where labour was expensive and at the time in short supply. The transformations in South Korea's and Taiwan's agriculture enabled surplus labour to be released to the industrial sector. This kept wages low and ensured that agricultural production continued to grow so as to provide an adequate supply of food to industrial workers. This satisfactory supply of food meant that food continued to be relatively cheap, and thus an upward pressure on industrial wages was avoided. This in turn allowed industrialists to reap high profits, remain competitive and use these profits to finance industrial investment, thereby sustaining a high rate of industrial growth. Furthermore, the high rate of labour absorption of South Korea's and Taiwan's industrial sectors meant that at a certain point the labour surplus was reduced or even eliminated, and thus wages began to rise. Thus, after some time, growth did trickle down and further improved equity (Kuznets, 1988).
Some Key Lessons
In sum, three key factors explain the difference in performance between the Asian Newly Industrializing Countries (NICs) and Latin America. The first is South Korea's and Taiwan's superior State capacity and policy performance. The second is their ability to implement a radical land reform at a critical stage of development. The third is South Korea's and Taiwan's greater ability to design an appropriate industrial policy that developed synergies between agriculture and industry, as well as a competitive and dynamic industrial structure. All the three factors are closely interconnected. South Korea and Taiwan managed to develop the positive linkages between them, whereas in Latin America these factors were often in conflict.
Although the experiences of South Korea and Taiwan are not replicable because of the different contexts, some lessons can be drawn from them. A key ingredient for poverty reduction is the commitment of the dominant political forces for such a project. To design and implement development strategies able to achieve 'development and equity' also requires strengthening social, political and economic institutions, as well as the capacity of the State to govern the market. This lesson is even more relevant today in the face of the world economic crisis, which started in 2008 and is still unfolding at the time of writing.
The analysis, which follows, of the three country cases will discuss the extent to which these lessons were headed by the PRSPs and the development strategies pursued, as well as examining their impact on rural poverty and development.
Rural Poverty in Honduras: Limited Priority, Targeting and Implementation
A certain amount of progress in poverty reduction was observed between 1991 and 2001, during which time rural poverty in Honduras declined from 79.6 per cent to 73.8 per cent. Paradoxically, the outcomes for the first 5 years of implementation of the PRSP (2001-2005) were disappointing, as the rural poverty rate dropped only slightly to 71.5 per cent in 2005, while extreme rural poverty remained virtually unchanged (PNUD, 2007). However, since 2006 rural poverty has fallen annually, reaching 63.1 per cent in 2008. At the same time, the urban-rural gap with regard to poverty narrowed as urban poverty hardly changed (INE, 2008).
The 2001 PRSP was proposed as a long-range government policy whose main objective was to achieve significant and sustainable poverty reduction based on accelerated and sustained economic growth (Gobierno de Honduras, 2001). Equitable distribution of this growth would be accomplished by improving the access of impoverished groups to education, health and other social services, as well as through the trickle-down effect of growth. Although growth was the crucial factor in poverty reduction, the PRSP failed to specify which sectors would be the most dynamic drivers of growth for the poorest regions of Honduras. There was also little discussion about what type of economic growth should be the priority, if the trickle-down theory was to work and the newly created jobs and other benefits were to reach the poorest of the poor. Moreover, despite the strong correlation between poverty levels and limited access to land, the land reform issue advocated by civil society organizations was left aside.
It is worth noting that after many years of PRSP implementation, there is little evidence of efforts to prioritize actions geared towards increasing employment and improving the distribution of, and access to, strategic production factors such as land and capital, particularly in rural areas. Furthermore, a relatively small proportion of PRSP resources were channelled to the rural sector. While 70 per cent of poor families live in rural areas, only about 13 per cent on average of the total PRSP funds were allocated specifically to the reduction of poverty in rural areas (Gobierno de Honduras, 2006a). However, it must be noted that other PRSP funds, especially those allocated to health and education, also benefited the rural population.
Before the PRSP, and as a consequence of the devastation caused by Hurricane Mitch in 1998, the government created in 2000 The National Programme for Sustainable Rural Development (PRONADERS), which was supposed to play a central role in rural poverty reduction efforts through projects to improve production based on local opportunities for participation. According to the agreement between the International Cooperation Agencies (ICAs) and the Government of Honduras, PRONADERS would enjoy relative autonomy from the Ministry of Agriculture and Livestock in order to acquire technical capacity free from the usual political pressures. Before PRONADERS, rural development projects had been implemented in a dispersed manner following the particular interests of each of the donors. During 2000 and 2001, PRONADERS undertook regional consultations that run parallel to the consultations of the PRSP. As a result of such consultation, PRONADERS was able to forge links with a variety of rural and peasant organizations, as well as with local and regional NGOs. These consultations revealed that problems of access to land and the high degree of bureaucratization and lack of effectiveness of rural development projects were of major concern to the rural population, but because of the disconnection from the PRSP consultative process, these concerns did not reappear in the PRSP.
The PRSP incorporated the ongoing PRONADERS projects but this proved problematic. Efforts to coordinate pro-poor rural development projects were fraught with power struggles with ministry officials and with representatives of the ICAs, who both were unwilling to become involved in projects under the technical coordination of PRONADERS. In their attempts to learn about and coordinate implementation of the PRSP in the field, the Ministry of the Presidency and the Technical Support Unit (UNAT), entities responsible for the PRSP, were met with strong resistance to their leadership from the Social and Economic Cabinet ministers - the agriculture minister and head of PRONADERS in particular - as well as from the National Party leadership and parliamentary deputies from different departments.
The new liberal government that took office in 2006 initially felt that in view of its restricted approach the PRSP was no longer relevant, and proposed to replace it with a broader national development plan (NDP). A comprehensive review of the PRSP was conducted during the latter half of 2006. This review acknowledged the inadequate outcomes in poverty reduction, particularly in rural areas, and strongly questioned the growth-centred policy framework. It spotlighted the need for a critical review of the orthodox premise of growth as the main source of poverty reduction. The review also pointed out serious problems with the way projects were prioritized and interventions targeted, asserting that the PRSP had a vision but lacked a strategy and that most of the projects had been isolated and disjointed. The report further stated that because of growing inequality in the country, it was necessary to prioritize pro-poor growth, giving preferential treatment to labour-intensive economic sectors (Gobierno de Honduras, 2006a).
The UNAT proposed a new social security net programme for poor rural households inspired by similar programmes in Mexico and Chile. UNAT proposed to serve 80 000 families in 2006 and progressively expand its coverage to 200 000 families in 2008. Although the original idea was to coordinate social and productive programmes offered by different State entities, the 'Red Solidaria' programme is primarily oriented towards social assistance (Gobierno de Honduras, 2006b). This programme seems to be partly responsible for the significant reduction in extreme rural poverty, which declined from 60.3 per cent in 2006 to 49.5 per cent in 2008 but is still very high (INE, 2008). However, several other factors account for the decline in rural poverty since 2006, such as the rise in some key export commodities such as coffee, melons, African palm and shrimps. Although these products are not necessarily produced by all smallholders, the price rises had a favourable effect on rural employment and wages. The government has also widened the coverage of subsidies for seeds and fertilizers to small peasant farmers with less than 3.5 h, as well as increasing the amount of rural credit through its agricultural development bank. In addition, remittances from abroad continued to rise at least until early 2008.
The targeting of resources to the poorest families remains a central challenge, despite some recent advances. The methodology and targeting of the projects designed before the approval and execution of the PRSP were not always oriented towards the poorest. PRSP resources have generally not been assigned to the poorest regions as planned. Instead, they have been concentrated in regions less affected by poverty and diverted towards medium-sized and large-scale producers. Projects were targeted towards agricultural regions with the most agroexport potential, where the neediest people generally are not concentrated. Agricultural policies mainly benefited better-situated regions with higher quality lands, where the return on investments is higher. Moreover, many of the funds allocated to the PRSP supported cumbersome administrative structures and consultancies and paid local technical companies that were hired by means of powerful partisan political influences (Gobierno de Honduras, 2006a). This is indicative of self-serving nature of the bureaucracy, its limited administrative capacity to disburse funds more productively and inability or unwillingness to target resources to the poorest people in the countryside.
Finally, in terms of the three factors identified in the comparative analysis as being central for the reduction of poverty, the conclusion is not encouraging. First, Honduras, despite implementing a series of agrarian reform measures during the 1960s and 1970s, these involved only a small number of beneficiaries and a small proportion of the land. These mild attempts at land redistribution were unable to reverse the process of land concentration as indicated by a further deterioration in the Gini coefficient, which increased from 0.7573 in 1952 to 0.7699 in 1974 and 0.7858 in 1993 (Thorpe, 2002, p. 112). As already mentioned, the PRSP did not contemplate land redistribution measures. Second, as for State capacity, this has not been strengthened substantially over the last few decades and might have even deteriorated as a consequence of the neoliberal reforms. Although the PRSP contained some measures for improving governance and the administrative capacity of the State, these had little impact as clientelism and factionalism continued to prevail, hampering the implementation of pro-poor policies. Last, but not least, while in the last few decades a policy of industrial export promotion was implemented that had some success, it remained confined to the production of some consumer goods like textiles and failed to progress further up the value added chain. The PRSP did not propose an industrialization strategy able to develop the synergies between agriculture and industry so as to give a new impulse to growth that might have reduced rural poverty (Cuesta, 2003). In short, it is not surprising that poverty continues to be a major problem in Honduras as no major progress was made in the three factors mentioned nor did the PRSP address them to any significant extent.
Poverty Reduction Strategies in Nicaragua: Changing Policies and Priorities
There was a downward trend in poverty and extreme poverty levels from 1993 to 2001. During this period, rural poverty fell from 76.1 per cent to 67.8 per cent, while extreme rural poverty dropped from 36.3 per cent to 27.4 per cent. Paradoxically, the direction of this trend changed following the implementation of the Reinforced Economic Growth and Poverty Reduction Strategy (ERCERP) - the Nicaraguan version of the PRSPs - from 2001 until 2005. By 2005, the rural population living below the poverty line had risen to 70.3 per cent and those living in extreme rural poverty to 30.5 per cent (INEC, 2007).
One strategic element of the ERCERP was the modernization and integration of the rural economy (Gobierno de Nicaragua, 2001). The ERCERP included certain programmes inherited from the pre-PRSP period that could contribute to poverty reduction even though they had not been designed specifically for that purpose. These included an agricultural land census; titling and registration programme, although with a market-centred approach, to address problems of distribution; and, an agricultural technology training programme. The strategy aimed to boost incentives for rural development by eliminating distortions in commodity prices and input costs to farmers, improving the operation of rural factor markets, increasing investments in rural infrastructure, and implementing marketing and technology programmes for small- and medium-sized producers with growth potential.
Although consultations with a variety of actors did take place, as required by the PRSP process, these were not very far reaching. For example, the Association of Rural Workers, which campaigned for better wages and employment conditions, as well as for greater access to land for the rural poor, was not consulted. Hence, it is not surprising to find that the ERCERP did not address the problem of landlessness of the rural poor (Trocaire, 2004). Another shortcoming of the ERCERP is, despite the title, its lack of strategy; it was more a collection of a variety of programmes and projects with unclear priorities, sequencing and integrations of the various initiatives (Wiggins and Mendoza, 2005).
The NDP, first proposed in 2003, contained a general outline for growth, but lacked programmatic details. The Operational NDP was developed in 2004 in part to correct this weakness (Gobierno de Nicaragua, 2004) and was finally approved and accepted by the International Monetary Fund/World Bank in 2005 as the second PRSP, although reluctantly (Government of Nicaragua, 2005). In this final version of the NDP, poverty reduction and job creation are among the express objectives of the plan. The NDP proposed three overlapping policy areas regarding rural poverty: agroindustry, rural development and food security. From the standpoint of the NDP, a focus on production conglomerates and commodity chains was the way to develop rural territories as this would strengthen their advantages and integrate producers into a specific conglomerate served by suppliers, external markets and domestic research institutes. As poverty and inequality are concentrated in rural areas, the NDP proposed to establish a differentiated system of policies based on the producers' income and wealth, according priority to those operating at a disadvantage. The NDP also aimed at incorporating the rural poor to the assumed benefits of the Free Trade Agreements.
In 2005, the government introduced the Productive and Rural Development Programme (PRORURAL) (MAGFOR, 2005). This was done in close collaboration with the ICAs and adopted a sector-based approach that was expected to improve ownership, alignment and harmonization (MAGFOR, 2006). PRORURAL's potential contribution to poverty reduction over its planned implementation period (2006-2010) can be discerned in the following areas: (i) the importance of poor producers (relative to the total pool of producers that are potential programme beneficiaries) in the two priority commodity chains, that is, coffee and dairy; and, (ii) the importance placed on the creation of salaried, permanent and seasonal jobs in priority regions. PRORURAL includes territories that have been classified as uncompetitive, and thus discarded by the NDP even though these contain a high proportion of rural poor.
However, a limitation of PRORURAL is that it does not sufficiently recognize the importance and diversity of livelihood strategies followed by poor and extremely poor rural households. To ensure income diversification, these families combine agricultural and rural non-agricultural pursuits in rural areas or urban centres with migration. Migration is, therefore, a deliberate family strategy to address economic deprivation. But PRORURAL does not propose exactly how to make the connection between trade liberalization, regional integration processes, rural development, migration and poverty reduction.
A new government, headed by President Daniel Ortega, took office in January 2006. His administration has criticized the ERCERP, NDP and, to a lesser degree, PRORURAL. It has established new national priorities in all areas of public policy, which will guide the Socioeconomic Development Plan (GRUN/SETEC, 2007). This plan approaches the struggle against hunger and poverty by capitalizing the poor so that they can play a protagonist role in solving their own problems and in contributing to the country's development. In order to achieve its objective, the government has designed capital formation programmes for impoverished small-scale producers. It also intends to increase access to credit by small and medium-sized agricultural producers and processors, provide more effective technical assistance and develop more favourable marketing channels for small-scale producers, and create a political and legal framework leading to the use of arable lands currently not under cultivation.
Regarding rural development and poverty, two initiatives are worth highlighting. The first is the Basic Grains Programme to supply smallholders from the poorest municipalities with a packet of improved seeds, inputs, urea, technical assistance and funding to enhance their productivity and expand production. The second is the Food Security and Sovereignty Programme that includes the 'Zero Hunger Programme', a 5-year programme, to reshape production and promote food security and sovereignty. Through the distribution of food production grants, it seeks to revitalize the peasant farming economy and to galvanize the domestic market (GRUN/SETEC, 2007). Although in principle this is a very commendable programme, the government clearly did not have a realistic sense ex ante of the complexities, the implications, the many enormous challenges it would face in implementing it and whether the programme was flexible enough to suit the different requirements of peasant households (Cáceres, 2007). It will only be able to reach a proportion of those living in extreme poverty in the countryside (Kester, 2009, p. 32). The Programme has been criticized for its unequal distribution in rural areas as some regions with the highest extreme poverty incidence receive proportionally less than some of the regions with lower poverty levels. Furthermore, it appears that within each region, those families closer to the governing party are given preference in the allocation of the resources (Kester, 2009, pp. 4-5, 34).
Given the enormous magnitude of rural poverty in Nicaragua, the fight against rural poverty had to be a centrepiece of the PRSP. This issue, however, was not explicitly conceptualized in the ERCERP but has become more central in the programmes of the Ortega government. Although the new priorities stress the allocation of public resources with preference for the most impoverished sectors, the challenge for the government and for ICAs is to work together to strengthen the State and public institutions by aligning foreign resources with public policy instead of pursuing old and new feuds over clients in rural areas. One possible explanation for entrenched poverty rates has to do with the lack of access to productive resources by the rural poor, the lack of adequate employment opportunities and the lack of commitment by governments to tackle these problems. The failure of successive governments to generate employment opportunities, income and services spurs migration to other countries. Monetary remittances from the emigrant population have served as a solid and growing financial base for macroeconomic stability. Remittances have stimulated economic growth, contributed to financing the current account deficit and prevented further deterioration of poverty levels.
To conclude, the PRSPs did not contemplate any major land redistribution measures, any major industrial development strategy and strengthening of the developmentalist capacity of the State. While the Sandinista government implemented a major agrarian reform (1979-1990), this was partly reversed subsequently as some former owners were able to reclaim their properties. Furthermore, the neoliberal policies after 1990 gave a new impulse to land concentration and withdrew most of the supportive policies to smallholders (Thiesenhusen, 1995). Hence, inequality in the countryside remained a major problem. No significant synergies have been developed between agriculture and industry, except for some industrial exporting zones, which have created some employment for rural labour. The political elite have also continued to use the resources of the State to promote their own interests (sometimes even for their own personal enrichment) rather than using them for implementing a development strategy that tackles poverty. Although the PRSPs did highlight the issue of poverty, it did not propose a synergetic developmentalist strategy as it was largely embedded within a new neoliberal post-Washington consensus (Guimarães and Avendaño, 2008).
Rural Poverty and the PRSP Process in Bolivia
Bolivia has one of the highest poverty rates in Latin America: 78.5 per cent of the rural population was living in poverty in 1997 compared to 77.7 per cent and 76.6 per cent in 2001 and 2006, respectively, while the figures for extreme rural poverty were 61.5 per cent, 59.7 per cent and 62.3 per cent, respectively (CEPAL, 2007, pp. 317-318 and Statistical Annex Table 4). The Bolivian PRSP argues that these high rates of rural poverty are due to the low productivity of agriculture, the limited productive infrastructure and the restricted demand for agricultural commodities (Republic of Bolivia, 2001, p. 35). Furthermore, the low productivity is explained by the poor quality of seeds and other inputs, the lack of investment and the limited qualifications of the labour force. While reference is made to the extreme unequal distribution of land, there is no analysis as to whether the problems mentioned are due to it. Instead, the PRSP highlights the uncertainty surrounding many property titles as being mainly responsible for the lack of investment and the low efficiency of agriculture. It thus focuses on regularizing land titles instead of redistributing land.
As originally designed in 2001, the PRSP process did not have much life in it after 2003. But Bolivia did follow in a way the PRSP cycle with another 'dialogue' or consultation process and plan in 2004. The PRSP cycle was brought to final closure under the Evo Morales administration in 2006. A number of policies, strategies and plans have been designed over the past 10 years to fight poverty and invigorate rural areas. Despite similarities of intent and action, these efforts were discontinued and were implemented in only a limited fashion. As can be gauged from the data mentioned above, the PRSP and related anti-poverty policies have been unable to significantly reduce rural poverty.
In 2003, the Sánchez de Lozada administration, in accordance with the PRSP, designed the National Agricultural and Rural Development Strategy, an initiative that continued under the Carlos Mesa government in 2004 (República de Bolivia, 2004). It was later enriched by the outcomes of the Productive Bolivia National Dialogue, which included participatory consultations and mobilization from the local to the national levels. Its guidelines include improving productivity and competitiveness through an approach based on local economic development and agroindustrial commodity chains (Kay, 2005). However, the strategy is mainly directed towards those profitable producers in areas where there is proven productive potential. Furthermore, because of its emphasis on external markets, it excludes most of small agricultural producers who are still involved in a subsistence economy in the highlands and valleys. By not reforming the agricultural commodity chains, those who benefit are largely the capitalist farmers, agro-industries and transnational corporations who already have control of certain sectors of the system. In addition, the topic of land and territory and the conflicts over land regularization and redistribution are not properly addressed by these various anti-poverty programmes, thereby exposing one of their major limitations, as well as the lack of coordination between public policies.
Efforts at reducing poverty are hampered by the country's institutional fragility and weakness of public institutions. Political agreements and pacts among parties and government coalitions that constantly distributed 'quotas' of power among partisans posed serious difficulties and hampered efforts to develop careers in public administration and an efficient civil service. This 'quota setting' certainly was not exempt from corruption or from a clientelistic approach to politics fostered mainly by the political system and the State, but also sustained and tolerated by wide swaths of Bolivian society (Gingerich, 2009). Constant political turnover has led to readjustments in the organization of the executive branch and in a lack of continuity in public policies. In addition, a serious lack of coordination is observed in public administration at the national, departmental/prefectural and municipal levels. There are no, or limited, vertical links among the different levels of public administration and between the central government and the provincial governments. This has limited opportunities for concurrent investments and integrated actions to benefit society, and poses constraints for rural development and poverty reduction efforts in particular.
Owing to the economic crisis facing small peasant and indigenous producers, they are forced to pursue a variety of livelihood strategies, including temporary migration (or the permanent migration of some members of the family unit), and engage in various activities in the labour market, whether in more economically vigorous areas of the country or abroad. Emigration flows have intensified over the last decade, especially in the highland and valley regions, leaving behind only the elderly and children in some rural communities. Remittances from emigrants are growing in volume and influence, but these have declined since the start of the world economic crisis in 2008.
Historically, the structure of land tenure has been a decisive factor in rural poverty. As a consequence of the revolution in 1952, a drastic agrarian reform was implemented as from 1953, which expropriated most landlords and distributed land to the peasantry in the highlands. However, it failed to introduce major supportive measures for the beneficiaries, such as credit and technical assistance, and abandoned them to their fate, thereby perpetuating rural poverty. Paradoxically, while in the highlands peasants gained access to land, in the lowlands a new form of latifundism was emerging, leading to renewed land concentration. Hence, by the turn of the century, 90 per cent of landowners owned 11 per cent of available lands, while the remaining 10 per cent owned 89 per cent of the land (Kay and Urioste, 2007). The 1996 agrarian reform law, generally referred to as the 'Ley INRA' since the Instituto Nacional de Reforma Agraria (INRA) was charged with its implementation, was enacted to address the inequitable distribution of lands for peasant and indigenous communities and the concentration of lands in few hands, especially in the lowlands. However, it was mainly directed towards regularizing the land holdings of entrepreneurs demanding legal guarantees of their property rights. Moreover, it proceeded very slowly and by 2006 only 43 per cent of the total lands requiring such action had been dealt with (Rojas, 2006).
Successive governments also failed to use the wealth of its mineral resources for launching a major industrialization drive, as well as for promoting peasant agriculture. Although after the revolution the State substantially expanded its activities, it largely failed to use productively its increased economic power. Furthermore, the country continued to be plagued by political instability, limiting the developmentalist capacity of the State. With the shift to neoliberalism in the 1980s, the State gave up many of its developmentalist functions, expecting the free market to deliver growth, which eventually was expected to trickle down to the poor. As shown at the beginning of this section on Bolivia, those policies did not manage to tackle poverty and may have even contributed to it.
When President Morales took office in 2006, he launched the 'National Development Plan 2006-2010', which is critical of the development plans of the preceding period and of the PRSPs specifically. The new plan intends to confront poverty by suppressing the underlying causes of inequality and social exclusion in the country (República de Bolivia, 2006). In the framework of the plan, the Morales administration enacted Law 3545 entitled 'Community Renewal of Land Reform', which amends the 1996 'Ley INRA' so as to expedite the redistribution of land. As part of his proposed agrarian revolution, President Evo Morales asserted that the government would enforce land laws, complete the regularization and titling process, and proceed with the reversion of large unproductive holdings, which would then be redistributed to landless peasants and indigenous people (República de Bolivia, 2007). The proposed changes will affect mainly large holdings in the lowlands. The State will be vested with the power to expropriate and proceed with the reversion to the State of lands that fail to fulfil an economic and social function such as abandonment of the agricultural property or if the land is not being worked properly.
In sum, public policies, and particularly the PRSPs, have failed to produce the desired results. The gaps have widened, leading to greater inequity and exclusion. In a country with serious shortfalls in terms of human capital, it is essential to develop a critical mass of skilled human resources to strengthen the design of public policy and, most importantly, its implementation so as to ensure that it reaches the poorest sectors. A new Constitution was approved in February 2009. It gives more rights to the indigenous people, creates mechanism for social inclusion and strengthens the legitimacy of the State. This should facilitate the implementation of the policies aimed at raising the welfare of the rural poor.
Finally, the lessons from the comparative analysis suggest that the prospects for Bolivia are more hopeful. The PRSP did little to curtail poverty, and paradoxically it is by jettisoning it in recent years that the foundations for poverty reduction are being set. The Morales government has dismantled the neoliberal economic policies, shifted to neostructuralist developmentalist policies and strengthened State capacity. It is also attempting to improve access to land and other resources for the rural indigenous people, although with some difficulties. What are still missing are policies that develop rural-urban synergies and promote a rural-friendly industrialization process. These should improve farm productivity, create more employment in new activities with a higher value added and hence lead to higher wages and incomes for the rural poor. However, the Morales government faces the continuing opposition from those provincial authorities controlled by the opposition, and its programme of land redistribution is meeting fierce resistance from landlords in the lowlands. Although the prospects for poverty reduction look better than in the past, the outcome remains uncertain.
Conclusion
The foregoing analysis leads to the conclusion that the PRSPs did not succeed in generating a sustained and profound effort to reduce rural poverty. The PRSPs initially lacked a focus on rural poverty, and only later was the rural sector accorded greater importance. This is surprising given that the largest proportion of poor people, and in particular of those living in extreme poverty, live in rural areas. Ultimately, the PRSP process in Bolivia was overtaken by the political changes and the election of a new government critical of the PRSPs. Only in Honduras, and to a lesser extent in Nicaragua, does a PRSP continue to have a presence, but its lingering influence is also gradually fading away owing to changing circumstances.
Why is it that the PRSPs and rural development policies failed to reduce rural poverty? Clearly, rural poverty is due to a multiplicity of factors including low agricultural productivity, inadequate infrastructure and an unfavourable international agricultural trade policy for developing countries, among others. The PRSPs only acted marginally on these factors and utterly failed to attack the underlying cause of rural poverty, particularly the enormous unequal distribution of wealth. Hence, ultimately, an assault on rural poverty requires a radically different development strategy in which the State assumes a greater developmentalist role, governs the market towards social goals and the poor, rather than private gain for the rich, and seeks a new compact between the State and civil society so as to overcome social exclusion and discrimination. For this to happen major political changes are necessary.
Obstacles to implementing some rural development programmes were another important factor in the failure of governments to significantly reduce rural poverty. The incapacity of governments to surmount such obstacles stems from the weakness of the State and its limited capacity to implement public policies, in particular those requiring structural reforms. Although the design of the PRSPs and other policies aimed at reducing rural poverty could have been improved, one of the main problems was the lack of commitment by the governments. While the PRSPs were framed within a neoliberal context, their implementation paradoxically required strengthening the State. But the neoliberal conversion of the State in Latin America, beginning in the 1980s, had significantly reduced its scope of action. Many State-owned enterprises were privatized and public employees were cut back drastically, along with the national budget. Moreover, economic liberalization and opening up to the world market compelled governments to adjust their public policies in keeping with the requirements of international forces and globalization processes rather than domestic needs or priorities. The lack of stability, continuity and coherence of public policies and a fragmented State apparatus also weakened the government's capacity for action.
High levels of inequality, social exclusion and ethnic discrimination, coupled with fragile social cohesion and national integration, also limit the government's ability to act. In societies permeated by endemic ethnic, class and/or regional conflicts, the political class must have unique skills in order to surmount poverty. What is more, the capitalist class in all three countries is relatively weak, has limited entrepreneurial capacity, and has been unable to provide leadership for an inclusive national development project capable of raising the standard of living of all citizens. In such a panorama, many of the positive initiatives and the potential for certain development projects cannot possibly bear fruit. New governments frequently started from zero or reversed previous policies even when they had been, or could have been, beneficial for the country. In this way, valuable institutional memory has been lost, along with experiences, technical skills, professional capacity and lessons learned about which types of efforts bear fruit and which should be discarded. The institutional capital that could have enriched operational capacity and contributed to the State's credibility is thus wasted.
The failure of the governments of Bolivia, Honduras and Nicaragua to make any significant progress in rural poverty reduction is very discouraging, particularly in light of the favourable international economic conditions in the 5 years before the 2008 crisis. It is paradoxical, ironic and tragic that perhaps a major contribution to rural poverty reduction, or preventing its further deterioration, has come from the poor themselves, especially from those who have migrated to richer countries and sent remittances to their families. While 29 and 27 per cent of the remittances-receiving households were located in the lowest income quintile in Bolivia and Honduras, respectively, in Nicaragua this rate was only 12 per cent (Fajnzylber and López, 2007, p. 7). Nevertheless, both international migration and remittances significantly reduce the level, depth and severity of poverty (Adams and Page, 2005, p. 1645). Ultimately, the rural poor have to design their own livelihood strategies to ensure their subsistence and perhaps even lift themselves out of poverty. Lack of access to productive resources, especially land, coupled with the dearth of job opportunities and a decent salary in the countryside and in the city, has pushed many people, especially youth, to seek better opportunities in other countries. This large-scale and persistent emigration not only reduces the number of poor in the country of origin, but also creates an important source of income for poor people who remain behind and receive remittances. Migration has reached such extremes that the value of remittances received in some countries surpasses the value of their agroexports. In 2005, remittances from abroad were equivalent to 58.5 per cent of total export earnings in Honduras and 54.6 per cent in Nicaragua (Edelman, 2008, p. 248).
To conclude, the solution to the problem of rural poverty will not have been found in the PRSPs, even if these had been properly implemented. Our analysis revealed a story of a death foretold. The main limitations of the PRSPs were their inability to focus on the key determinants of rural poverty, as well as being embedded within a neoliberal framework. A major reduction and eventual elimination of poverty will only be obtained through profound transformations that attack the structural causes of poverty in these countries.2 Rather than impose or prioritize their own designs and schemes, ICAs could be more effective if they helped facilitate the structural transformations demanded by the most disadvantaged social groups that are struggling to overcome poverty and social exclusion in Bolivia, Honduras and Nicaragua.
[a] International Institute of Social Studies, Erasmus University Rotterdam, The Netherlands. E-mail: [email protected]
Acknowledgements
I am grateful for the helpful comments received by Kristin Komives and Geske Dijkstra and for the detailed and useful comments made by three anonymous referees. I am especially indebted to René Escoto, Orlando Lara and José Antonio Peres, who wrote the country cases on Nicaragua, Honduras and Bolivia, respectively, for the comprehensive study on rural poverty and development, which I coordinated (Kay et al , 2008) and which I used for this article. However, none of the above is responsible for the views expressed in this article.
1 For an analysis of the background, aims and outcome of the PRSPs in Bolivia, Nicaragua and Honduras, see the various reports published by the International Institute of Social Studies (www.iss.nl/prsp), as well as other contributions to this special issue of the journal.
2 Rural poverty in Latin America is still persistently high despite falling from 65.4 per cent in 1990 to 54 per cent in 2006. Brazil and Chile experienced the steepest fall from 70.6 per cent to 50.1 per cent and from 38.8 per cent to 12.3 per cent, respectively (Graziano da Silva et al , 2009, p. 54). These significant reductions in rural poverty were achieved largely by extending the benefits of social security to the rural poor and by conditional cash transfer programmes such as the Bolsa Familiar in Brazil and Chile Solidario in Chile. Hence, the question arises about the sustainability of these reductions in rural poverty.
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