What’s Ahead for Peruvian Agriculture?
The impact of the El Niño phenomenon on agriculture-The road to formalize the agricultural sector in Peru.
In Diálogo Abierto, a TVPeru Noticias program, host Maite Vizcarra interviews Gabriel Amaro, president of AGAP, about the impact of the El Niño phenomenon on agriculture.
Amaro is the president of the Association of Agro-Export Unions of Peru, Asociación de Gremios de Agroexportación del Perú, which represents the producers, processors, marketers, exporters and guilds of the Peruvian agricultural sector.
The association advocates for the advancement of Peru’s agricultural sector, aiming to enhance its competitiveness, expand market access, and refine the legal framework.
Amaro is the author of the book, Agro: Peru’s Great Bet.
Following, we share translated highlights of the interview along with a link to the full original interview in Spanish.
The State of Agriculture in Peru
The inspiration for the interview stemmed from a recent remark by Mr. Julio Velarde, the President of the Central Reserve Bank of Peru, which has generated significant attention. He has suggested that 2023 will be the most challenging year in the past 26 years for the agro-export sector.
“This really worries us, because we all know that along with mining, agro-export is another engine that not only drives growth but is a great source of work. Is the situation this dire?” Vizcarra asked.
Gabriel Amaro: Well, yes, I think that Mr. Julio Velarde has expressed what is really happening in the agricultural sector today. Not only in agro-export, but in the entire agricultural production chain, which has to do with small family farming, but also with modern agro-industrial and agro-export agriculture.
It’s true. A series of factors have come together adding to the climatological effects of Yaku, the global Niño and now the Coastal Niño. The impact will probably affect this year, the next and the one after that.
Maite Vizcarra: And this is obviously going to have an impact on a very simple thing. When we go shopping at the market, are we going to find food, vegetables?
Gabriel Amaro: Yes, you will find products, but in smaller quantities, which is why the prices will be high. We are going to have higher prices this year. And this is not just temporary, this is a more structural issue.
The weather issue has exacerbated the challenges within the agricultural sector. This situation has its roots in the deterioration of agrarian public policy. In 2020, we witnessed the repeal of the Agrarian Promotion Law, which, though not exclusively focused on agro-exports, encompassed the formal agricultural sector, including agriculture, agro-export, and agro-industry, covering both crop cultivation and livestock.
This law was replaced by another agrarian regulation that is not well-suited or adapted to the needs of the agricultural sector. Consequently, this change has led to various risks, increased costs, and hindrances to promoting agricultural labor, investing in the agricultural sector, and fostering job creation.
Maite Vizcarra: Sure, so this is like a kind of snowball. At some point it started out as small, it grew and now we are in this situation. Can this be reversed now? We are understanding that the following years are also going to be complicated, not only this one, but 2024 and 2025. Will there also be price increases?
Gabriel Amaro: And we tend to overlook global warnings. The FAO, for instance, has issued an alert about the ongoing food crisis. Among the various global risks highlighted, such as those discussed during events like the Davos global summit, the issue of global climate problems stands out.
Beyond these concerns, food security remains a critical global issue. So, what is the FAO advocating for? The organization recommends that countries collaborate closely with both their public and private sectors to find solutions and foster growth in the agricultural and food industries.
Furthermore, the FAO calls upon countries to offer support and assistance to businesses within the agricultural sector, not just limited to the local markets or small-scale enterprises, but throughout the entire production chain. Why is this crucial? It is to ensure the sector’s sustainability and prevent it from collapsing during these challenging times, given that we are in the midst of a crisis.
Unfortunately, these measures are not being effectively implemented. While there are programs like the Plan Punche Peru initiative aimed at benefiting small-scale agriculture through bonuses and various incentives, there remains a significant gap when it comes to addressing the modern and employment-generating agricultural chain. This chain includes agro-export, agrarian, and agro-industrial sectors, which currently support the limited formality prevalent in the country. It’s essential to remember that informality has been on the rise, reaching over 75% overall and a staggering 95% within the agricultural sector.
Maite Vizcarra: Yes, for those who are watching us at home, some may say, why help the large agro-export companies? But it is true that they are also the ones that generate the most employment and there are already some that have indicated that they are reducing their staff. How can we collaborate precisely with agro-export companies, which are the ones that provide the most work?
Gabriel Amaro: Approximately two months ago, prior to July 28, we put forth a plan for economic reactivation to the government. This plan encompasses several strategic initiatives, and we have diligently presented these proposals to various ministries, including the Ministry of Economy, the Ministry of Mincetur, Midagri, and the Ministry of Labor. What we urgently require is swift action and approval of these measures, as there have been no concrete steps taken to address economic recovery.
It’s worth noting that the recent move by the government to seek expanded powers in the realm of citizen security is indeed commendable, given the severity of the current situation in the country. However,
“Even more critical is our economic growth, which is currently stagnating at less than 1%, and the concerning 2% decline in the agricultural sector,” Gabriel Amaro.
Therefore, it is imperative for the government to also seek broader powers in the domain of economic reactivation. This is an urgent matter that must be addressed promptly, with a specific focus on bolstering the modern employment-generating sectors.
By doing so, we can ensure employment sustainability, mitigate informality, combat poverty, and reduce unemployment rates effectively.
Agriculture Outlook for the Coming Months
Gabriel Amaro: The Minister of Economy started with a reactivation plan two, three days ago. He has issued a rule where he has expanded the My Peru Impulse Plan and is giving some lines for financing access to credit and has included medium-sized companies from all economic sectors up to 1 million soles, which is very good and helps the reactivation a little.
It is not the only measure, but it has to cover the entire production chain. Look, I started by explaining that in the face of the global food crisis, the FAO talks about how governments have to support and provide sustainability to their companies in the agricultural sector. This is for the entire productive chain, because it is precisely the companies that generate the employment that we need so much in the country today and especially in rural areas, which is where there is more poverty.
“Growing 1% in the country or less than 1% means that unemployment, informality and poverty will grow. We have to grow more than 5% in the country and we can do it with the agricultural sector,” Gabriel Amaro.
Solutions
“We must establish the corresponding reactivation measures and on the other hand, we must fix the promoting nature of agricultural regulation to give it a structural change so that it can bring investment back and develop, incorporate more and more small family farming each year into this modern chain, for the local market, but also for agro-export,” Gabriel Amaro.
Maite Vizcarra: Let’s say that the most suitable measure to try to reverse the situation is for the law to continue being promotional. Regulations that are promotional imply that there is flexibility in some types of situations.
Gabriel Amaro: Yes, of course. The issue at hand is the adaptation of regulations from other sectors to one that is unique and vital, a sector that all countries strive to promote and protect.
“The agricultural sector has been unduly burdened by such regulations. The consequences of this approach are evident today: Shortages, escalating prices, unemployment in rural areas, and a decline in the agricultural sector, which is expected to contract by 2% this year. Such outcomes are unacceptable,” Gabriel Amaro.
“It’s important to recognize that a well-managed agricultural sector has the potential for growth, as exemplified by the positive impacts of the now-repealed Agrarian Promotion Law. Investing in effective agricultural public policy is akin to implementing the best social program for the country, given that it represents one of the largest employers in the nation. Furthermore, the sector boasts an economically active population numbering between four and five million people, making it a significant contributor to the nation’s workforce,” Gabriel Amaro.
Maite Vizcarra: Exactly, what is the promotion policy? In other words, when we talk about flexibility, does it have to do with the type of contract, the type of taxation?
Gabriel Amaro: This issue encompasses taxation, labor regulations, and adapting to various regulations, including environmental standards. It’s important to note that the agricultural sector is among the least polluting industries and plays a significant role in maintaining a healthy environment.
However, the challenge lies in the adaptation of regulations from other sectors. To illustrate, consider the discrepancy in the scale of fines imposed by OEFA, where almost uniform treatment is applied, compared to what was in place under Midagri. Some fines have surged by over 15,000-20%.
“The question that arises is whether we aim to undermine the agricultural sector or foster its development towards full formality. What ultimately benefits all Peruvians is the pursuit of formality. This path ensures the provision of higher-quality food from small-scale agriculture and integrates this sector into a productive cycle that benefits everyone, generating wealth within the country,” Gabriel Amaro.
Maite Vizcarra: We look forward to delving deeper into these topics with Mr. Amaro, who has authored a book on agriculture, likely covering many of these aspects. Agriculture is indeed a sector that has expanded significantly thanks to promotion, and we hope it continues to flourish, considering the multitude of individuals employed in various roles within the agricultural industry.
Watch the Interview.
See Also, Strategies for Economic Reactivation in Peru
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