Infrastructure investments, regional trade agreements and agricultural market integration in Mozambique

Abstract

Integration of agricultural markets has been a topic of great interest in Mozambique. Numerous studies have been conducted to assess both domestic and regional integration of maize markets in the country, though with some contradictory results. In this study domestic and regional market integration in Mozambique is assessed, focusing on maize markets as the main crop in the country. In contrast to previous work, this study takes into account new investments in infrastructure as well as changes in regional trade policies, using vector autoregressive (VAR) and vector error correction (VEC) models. The main findings suggest that maize markets in Mozambique are not efficiently integrated. This is particularly true between the deficit markets in the South and the surplus markets in the Centre and North of the country. At the regional level, market integration is also inefficient in many cases. Nonetheless, investments in infrastructure, such as the Zambezi River Bridge, linking the north to the rest of the country, as well as changes in trade policies over the years are shown to be significantly impacting to maize price changes, particularly in the north. The overall results suggest there is room for improvements in the maize value chain performance, particularly there is scope for farmers to engage more in trade and for reducing food loss. Action may include investments on training programs and incentives to shift farmers from the current subsistence farming to a more commercial farming system approach.