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Review of international efforts aimed at development of new products, trials, alternative measures of success, and success stories Chile (and a little on Latin America) William Foster

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Review of international efforts aimed at development of new products, trials, alternative measures of success, and success storiesChile(and a little on Latin America)

William Foster

Can new products and new international and domestic marketing channels increase rural incomes? Ideas, models, and evidence.

Sonoma, June 19-20, 2005


The ABCs:azúcar, banano, café – the proportion of sugar, bananas and coffee in total agricultural exports in Latin America.


Indices of diversity

  • Entropy (Shannon)

  • Simpson-Herfindahl


Indices of agricultural export diversity in South America (SM).


Decomposing the change in agricultural export diversity: within primary products, within processed, and between primary and processed.

Total change in export diversity index.

Due to primary product diversity

Due to processed product diversity

Due to the diversity between primary and processed products.


Decomposing the change in agricultural export diversity: within primary products, within processed, and between primary and processed: Chile.


Decomposing the change in agricultural export diversity: within primary products, within processed, and between primary and processed: Brazil.


Mexico

Chile

Jamaica

Costa Rica

Honduras

Agricultural export diversity and trade openness in LCR 2000


Diversity versus total value of agricultural exports (SM/V = 1 in 1961)


GMM estimation of the determinants of agricultural export diversity: panel data LCR 1961-2002


Synthesis of Chilean processed agricultural exports by continent and category 2003, 2004. Thousands of US$. (no wine, US$800 million)

Conserved, jellies, jams, concentrates, etc.

Dehydrated, dried: prunes, etc.

Frozen

Juices

Source: FEPACH, CHILEALIMENTOS


Synthesis of Chilean processed fish and shellfish, and sweets exports by continent and category 2003, 2004. Thousands of US$.

Note: does not include salmon (≈ US$1.5 billion)

Source: FEPACH, CHILEALIMENTOS

Conserved fish and shellfish

Frozen fish and shellfish

Caramels and chocolates

Total all processed, ag plus fishy items


Following new, “non-traditional” exports: government allows drawback of tariffs on imported inputs for exports based on value. Below about US$20 million, now 3% drawback.

Exports of two lines of non-traditional exports in US$1000s.

Successful, lost support

Note: question about WTO


From a domestic base: Meats

  • In the 1980s there was an shift in production from many small producers to industrial production of poultry and pork. Surge in domestic consumption of pork and poultry.

  • Rapid recent growth in exports, doubling over three years to US$386 million.

  • Pork represents about 60% of exports, poultry about 25%.

  • Net beef importer (about half), but US$23 millions and growing niche exports (oddly, kobe beef too).

  • Lamb exports, with kosher and Mid-East buyers.


Evolution of the Pork and Poultry Sectors in Chile, 1979-1998


From a domestic base: Dairy

  • In the 1970s, Chilean milk industry stank.

  • With reforms, milk industry was revolutionized. Better milk, new products for consumers, per capita demand surged with income and lower prices per quality of product.

  • Small producers sloughed off as quality and timing requirements got tougher.

  • Recently a net exporter both in volume and value.

  • Profit (and psychic) shock as reference price went from cif to fob (at least 20%). (Aside: This would make a good economic sociological study.)


Search for exportable product with little thought to domestic market: salmon.

  • The result of a deliberate search by investors and Fundación Chile.

  • Once technical problems solved, private monies flowed. Now many firms. 2004: US$1.4 billion.

  • Rural employment generated by firms along the supply chain: from eggs to processing.

  • Not part of official agricultural GDP due to processing, but highly important to rural income in southern fiord areas.

  • Domestic consumption a residual, much more than fruits. (US dumping charges plain silly.)


Very high-tech, foreign impulse: seeds and bulbs. Take bulbs:

  • Lilies, tulips, etc. 2000-2004 exports grew 126% - but from a very low base.

  • 2004: 51 million bulbs exported US$10 million. (Holland, USA, Japan, Taiwan, China, others.)

  • 300 has., only 8 producers, two firms.

  • High tech: Chile just now part of the production chain to enlarge bulbs. Micro-propagation just starting.

  • Substantial investments and long gestation.

  • Maybe up to US$100 million exports in 2010.


Expansion for export markets with small domestic base: most berries.

  • Blackberries always around, but expanded for export market as

  • strawberries, raspberries, blueberries exports grew:

  • sophisticated coordination of quality control, transport and management of a range of products and continuous supply to markets (through sources in Guatemala, Mexico, and now California).

  • Cranberries completely for export – pushed by single US costumer at first. Domestic consumers baffled.

  • Berries built on reliability of Chilean supply of longer-stored fruits: apples and table grapes.

  • Traceability and supplier (and to a degree, country) reputation very important today. Coordination rents.


Designed for export markets using domestic base as platform and test market: olive oil.

  • Wineries heavily involved.

  • Spanish and Italian expertise in selection of varieties and design of product.

  • Marketing efforts in Santiago to build scale.

  • Promise of rural employment in some areas that benefited less from fruit boom.

  • Large up front investments and longer-term planning.


From 30,000 women in agriculture production sector to 100,000, since 1980. From 600,000 men to 750,000.


Concentration in purchases or own production


Some opinions-hypotheses

  • Foreseeable future: climate and not brand that will increase the diversity of agricultural products in Chile.

  • Diversity & total value growth dependent on sophisticated investors, mainly domestic.

  • Rural household income mainly from production and processing employment, less from self-employment as producer.

  • Chile is California-izing, but with only 15 millions and a ppp income of about US$9000: exports to north will drive structure of agro-food sector.

  • Don’t expect much extra rent to land or rural fixed factors. One possible exception: Mapuches.


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