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It’s bigger than we thought

Agriculture’s performance and its contribution to economic development has traditionally been undervalued, according to a recent study commissioned by the Inter-Agency Working Group for Rural Development in Latin America and the Caribbean. As measured by Agricultural Gross Domestic Product, agriculture only includes information about the sale of raw materials, mainly crops and livestock. Its upstream and downstream linkages with agroindustry, services and trade, are not considered, nor the value added generated by these linkages throughout the economy.

The study, by the Inter-American Institute for Cooperation on Agriculture (IICA), proposes a new, “extended” indicator to assess agriculture’s weight in the economy. The new indicator suggests that extended agriculture’s true contribution to GDP is considerably greater than traditionally estimated, ranging from three times more (in the case of Costa Rica) to a maximum of 11.6 times more for the United States.

The study focuses on 11 countries in the western hemisphere: Argentina, Brazil, Canada, Chile, Colombia, Costa Rica, Mexico, Peru, United States, Uruguay and Venezuela.

The current agricultural gross domestic product (AgGDP) in Argentina is 4.6 percent; but when calculated taking into account its interdependence with the food and agroindustry sectors, the figure increases to 32.2 percent of the GDP! In Brazil, the figure grows from 4.3 percent to 26.2 percent, in Chile from 5.6 percent to 32.1 percent and in Mexico from 4.6 percent to 24.5 percent.

Developed countries don’t show such dramatic swings, but the trend is still sizable. The United States AgGDP, for instance, is 0.7 percent when only primary agriculture is calculated; integrating backward and forward linkages, it increases to 8.1 percent.

On a regional level, primary agriculture represents on average 8 percent of the region’s total economy, said Rubén G. Echeverría, Chief of the Rural Development Unit at the IDB’s Sustainable Development Department. The “extended” agriculture represents something closer to 30 percent of the regional GDP, however, and accounts for more than 40% of total exports from the region, Echeverría highlights.

The study shows how methods traditionally used to measure agriculture’s contribution also overlook its role in meeting the growing demand from urban centers for environmental goods and services.

In addition to properly measure agriculture’s performance and contribution, account must be taken of its effects on the distribution of income among rural and urban households, wage earners and owners. This is key to evaluate its impact on poverty alleviation strategies and, in particular, on the livelihoods of rural dwellers.

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