Innovation for Resilient Food Systems (Alianzas Rurales - PAR III) Project

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Bolivia has made significant progress in reducing poverty and inequality in the past two decades, propelled by large public expenditures during the commodity boom that contributed to increasing labor earnings. Economic growth and social gains have nonetheless slowed down. From 2002–2014, some 96,000 people exited poverty annually and gross domestic product (GDP) growth averaged 4.6 percent. Progress was driven by household earnings because the private sector generates 73 percent of jobs in Bolivia and labor earnings drive both reduced poverty and greater equality. From 2014 to 2018, GDP growth decelerated, the average annual number of people exiting poverty fell significantly to 35,000, and the public sector’s ability to boost progress declined in parallel. The COVID-19 crisis hit Bolivia hard at a time when there is limited fiscal space to respond. Bolivia’s output is estimated to have contracted by 7.8 percent in 2020, its first recession since 1986, and poverty is expected to have increased along with a decline in labor earnings for many households. In May 2020, just after the onset of the COVID-19 crisis, 70 percent of workers interviewed in a World Bank phone survey reported that they had not worked or had lost their jobs during the quarantine period. In addition, the combination of the COVID-19 health and economic emergency and the sharp decline in commodity prices has put macroeconomic stability under further strain, as Bolivia entered the crisis with increasing fiscal deficits and declining international reserves.Agriculture and agribusiness remain key sectors of the economy, accounting for 13 percent of GDP (in 2021), and employing nearly a third of all workers, with a significant impact on poverty reduction. Agriculture is an important source of exports in Bolivia (15 percent of goods exports in 2019) and employment (24 percent in total and 75 percent of rural employment). Santa Cruz, Cochabamba, and La Paz Departments generate 72 percent of total agricultural value added nationwide. Average farm size in the Highlands, Amazon, and Sub-Andean Regions is less than 3 hectares (Ha). Land fragmentation is most acute in the Highlands, where 60 percent of farms are now smaller than 1 Ha. Some 45 percent of total harvested area is industrial commodity production (e.g., soybean), increasing to 80 percent when cereals are included. More productive and climate-smart agriculture reduces negative environmental impacts while increasing the income opportunities of the rural population and promoting food security. Given current global concerns around food security and climate risks, maximizing the high potential of this sector will require an integrated approach, carefully managing land and water resources while increasing outputs. A 2019 Bolivia-specific Stochastic Frontier Analysis recommended the following investments that could effectively increase agricultural technical efficiency and aid less-efficient farmers to reach their technical potential: (a) greater collective action, especially in regions with high land fragmentation; (b) expanded and more inclusive credit programs; (c) leveraging mobile phones for technical and business intelligence; and (d) increased irrigation adoption to increase agricultural intensity, productivity and water use efficiency, promote on-farm diversification and tap into non-traditional markets. Through increased yields and crop intensity, Bolivia can sustainably double agricultural production. Bolivian climate conditions allow for two planting seasons annually (winter and summer). The total harvested area was 3.9 million ha in 2019 covering an annual surface area of 3 million ha, equivalent to a crop intensity of 1.3. Crop intensity could nearly double to 2.03 (or 6.1 million ha of harvested area) through investments in irrigation and improved management practices while protected areas within the official soil use plan boundaries could be preserved.The proposed Project would contribute to adopting climate-smart approaches and increased market access for project beneficiaries in selected agri-food value chains. The design features of the proposed project include:Collective action: The small farmer, acting alone, is unlikely to effectively compete in a market dominated by intermediaries with asymmetric bargaining power and information. Through their participation in value chains, organized rural producers and community organizations can benefit from (a) collective bargaining power in negotiating with other actors in the chain, (b) greater technology uptake, and (c) reduced individual risks through risk spreading.Agricultural transformation: Increased land and labor productivity through fixed investment and improved farm management practices.Resilience: Strengthen the capacity of rural producers and community organizations to withstand climate volatility through investments to adapt and mitigate climate change impacts.Commercial viability: Productive alliances must verify a minimum financial return on their associated business plans to qualify for financing. Participatory innovation: Greater collaboration between rural producers and agricultural research to effectively translate scientific advances into improved farm practices, particularly for small-scale producers targeted under the proposed project.