Agricultural and trade policy reforms in Latin America: impacts on markets and welfare

Abstract

For decades, earnings from farming in Latin American countries have been depressed by pro-urban and anti-trade biases in own-country policies and by governments of richer countries favoring their farmers with import barriers and subsidies. These policies have reduced national and global economic welfare, hampered agricultural trade and economic growth, and may well have added to income inequality and poverty in the region. Since the mid-1980s, however, the region has reduced its sectoral and trade policy distortions and some high-income countries also have begun reducing market-distorting aspects of their farm policies. This paper synthesizes results from a World Bank research project that provides (a) price-comparison based measures of the extent to which national policies have changed farmers’ price incentives since the 1960s in eight Latin American countries, (b) partial equilibrium indexes of the impact of national farm policies on agricultural trade and economic welfare, (c) general equilibrium estimates of national trade, welfare and poverty effects of global reforms retrospectively since the early 1980s and prospectively as of 2004, (d) comparisons with similar estimates for Asia, Africa and high-income countries, and (e) a discussion of prospects for further pro-poor policy reform of agricultural price and trade policies.