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OECD Review of Agricultural Policies: Chile 2008

image of OECD Review of Agricultural Policies: Chile 2008

This Review measures the level and composition of support provided to Chilean agriculture, and evaluates the effectiveness of current measures in attaining their objectives. The study finds that Chile provides much lower support and protection to its agricultural sector than most OECD countries, even though government expenditures on the sector have trebled in real terms over the past ten years. About half of that spending is on public goods such as infrastructure and irrigation, while the other half consists mostly of measures that seek to make Chile’s poorer farmers more competitive.

This report suggests ways in which the effectiveness of these policies might be enhanced, including by systematic evaluation of policy performance, by closer co-ordination across government agencies, and by framing policies for smallholders and salaried farm workers in an economy-wide context, so that agricultural policies can focus on potentially competitive farmers and be effectively distinguished from other development and social policies.

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The Policy Context

Chile was a pioneer of liberalising reforms. The reforms introduced by the military government were swift and dramatic, and broke down rigidities associated with decades of import substitution policies. Resources shifted into more competitive sectors, and, with time, consistently stronger growth rates were achieved. However, the implementation of reforms was uneven, the process of adjustment was far from smooth and there were concerns about the social costs of liberalisation. Since the restoration of democracy in 1990, successive governments have adhered to orthodox macroeconomic policies, but attempted to balance this with a more pro-active social agenda. Over the last 20 years, Chile has recorded impressive income growth and the incidence of poverty has fallen dramatically. However, low incomes remain a concern, and – despite some recent improvement – the country’s distribution of income remains among the most unequal in Latin America and indeed the world. Agriculture as a whole has clearly benefited from improved macroeconomic stability and from the liberalised policy environment, but remains vulnerable to outside shocks, especially exchange rate fluctuations. The sector also remains a significant locus of poverty and underdevelopment.

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