Antônio Márcio Buainain Institute of Economics - University of Campinas Brazil

Transcription

1 Determinants of investment in agriculture: policies to increase investment in agriculture and food production and elements for the design of training programme Antônio Márcio Buainain Institute of Economics - University of Campinas Brazil

2 Document prepared for the Seminar "Determinantes de la inversión en la agricultura: políticas para incrementar la inversión en la agricultura y la producción de alimentos, organized by FAO and Fodepal Proyect, with the collaboration of the Centro de Estudios Económicos, El Colégio de México. The seminar was carried out in Mexico, DF, during 12 13, Abril It relied on a bibliography quoted at the end and have draw in particular from FAO documents.

3 What are the determinants of investment in agriculture? DEPENDS

4 Depends on what? Or from whom? Overall investments are influenced by multiple factors, ranging from the availability of natural resources, prior accumulation of capital, institutions, economic policy orientation, economic situation, entrepreneurship and innovation, objective perspectives and expectations of farmers, traders and entrepreneurs in particular To examine the issue we must distinguish, initially, what are we talking about

5 What investment are we talking? Investments have different meanings What type of investment are we talking about? Public investments? Private investments? What are the objectives of the investments? Business? Social Investments? Creation Infrastructure? Development in general? Who are the direct beneficiaries of the investments? What is the time frame of the investments? What is the size of the investments?

6 Possible levels of analysis General constraints / determinants / conditionings on investment Investment capacity Investment decision

7 Macro - Condicionantes generales - Capacidade de inversión - Decisión de inversión Meso Micro

8 General Constraints / Conditionings Macroeconomic conditions Political stability Macroeconomic policies Exchange policies Fiscal Tax Income Insertion of the national economy into the global economy Institutions Situation of the economy

9 WHAT DETERMINES THE ABILITY AND CAPACITY TO INVEST?

10 Determinants of investment capacity Credit and external financing (outside funds mobilized as loans, throwing shares in the capital market, commercial papers and other papers resulting from the sophisticated financial engineering and donations) Macro factors (stability, liquidity, confidence level, positive expectations, monetary policy etc.). Micro factors (access to funding, financing conditions, availability of warranties etc.).

11 Determinants of investment capacity Self-financing (availability of money and financial assets by the investor) Macro factors, prior savings, net income from previous production cycle, protection mechanisms and risk management; Non agricultural sources of income; Endogenous funds from the profit. Transfers and donations Family, government, external

12 WHO MAKES THE DECISIONS?

13 Who makes the decisions? Governments at various political and administrative levels that correspond to the political organization of each country Central, federal, regional, provincial, municipal and local Private agents Companies, commercial farmers and peasant family, financial funds, families, agents from outside the sector External investors responsible for Foreign Direct Investment (FDI) Each decision unit is bounded by different factors and motivated by different incentives and carrots

14 FACTORS THAT DETERMINE INVESTMENT DECISIONS

15 Factors that affect investments decisions - Socioeconomic profile of agents - Level of organization - Land distribution and tenure - Level of indebtedness - Risk Aversion - Systemic and macroeconomic - Production systems - Prices, rate of interest - Market situation and perspectives - Idiosyncratic factors Incentives Payment Capacity

16 Multiple meanings of investments Economists consider the investment expenses as a flow that creates new wealth and affects the productive capacity of society Some definitions Investment is capital formation in the economy; Investment is a change in the capital stock of the economy, which can be positive or negative; Investment is a change in fixed capital stock of the economy that is useful and productive life for more than cycle or period of production (land, equipment, machinery, plants, animals, forests etc). Application of capital in means of production, in order to increase productive capacity (factories, machinery, transportation, infrastructure), i.e. capital goods.

17 Multiple types of capital It is a complex concept, imprecise, vague and slippery, and differing definitions have also different implications in terms of policies and strategies to promote economic and social development Fixed capital Financial capital Operating capital

18 Capital and Development Capital formation is an essential element in the development process. However, the formation of physical capital explains only a small part of the growth and development, so it is necessary to include other dimensions of capital Human Capital Social Capital Knowledge as capital (or human capital?) Institutional Capital Environmental Capital

19 MULTIPLE DIMENSIONS OF INVESTMENT AND CAPITAL

20 Multiple dimensions of investment A central question says about the definition of priorities, the sequence of priorities and actions, the specific focus of investment, as: The limits of resources to invest The limits of physical capital, human and institutional capacity and conditional investment results The political will and support of different actors Once again, this DEPENDS

21 Strategies depend on the Focus and Context Agriculture's role in the economy of the countries Structural configuration of society Development goals Priorities of the same society in relation to their future

22 THE PUBLIC SECTOR AND INVESTMENTS IN AGRICULTURE

23 Investment options in agriculture Agriculture and the rural have been historically neglected by the State Lack of investment in infrastructure development Lack of investment in services Lack of investment in people Lack of investment in production

24 A central role of public sector Imperfect markets and investment Specificity of assets and investments under uncertainty, a tendency to under-investment and divestment periods are generally longer than the investment cycles Public expenditure and investment. What is the boundary between them? Investment Infrastructure Investment in R&D and Innovation

25 Difficulties to invest High levels of risk Ad hoc intervention and politicization Unclear property rights High specialized assets Mobilizing capital Access to credit Fragility of capital accumulation

26 AND FINALLY

27 Agricultural investment strategies Depends directly on the role of agriculture in the economies of countries, the structural configuration of the society, the development objectives and priorities of society itself about the future

28 Determinants of Investments in Agriculture: elements for the design of training

29 RELEVANT ISSUES FOR THE DESIGN

30 Prior questions Who are the participants of the training? How many courses we are planning to deliver? What are the objectives of the course(s)? What are the main issues we are dealing with? Of which investments are we talking about? Strictly on agriculture? Agroindustry? Rural development? What abilities we want to develop and or strenghten? What is the profile of the participants? What is the duration of the training? How about the pedagogical approach? Practical work, case studies, working with databases?

31 Possible Structure of the Course Module 1: Insertion and roles of agriculture in the national and international economy Module 2: Basic concepts? Module 3: Determinants / condionings of investments in agriculture Module 4: Policies and strategies to promote investments in agriculture Module 5: Methodologies and analytical instruments Module 6: Instruments for promotion of investments, experiences, best practices and case studies

32 Expected Results A. Better understanding of country development goals and strategies B. Better understanding of roles of agriculture in the national economy, insertion in the international markets, potentialities and restrictions C. Preliminary identification of investment needs at general level taking into account national and sectorial development priorities D. Domain of instruments for promotion of investments

33 Insertion and roles of agriculture in the national and international economy MODULE 1

34 Macroeconomics and general view / assessment of agricultural sector Main macroeconomic indicators Socioeconomic structure and recent performance of agricultural sector Insertion of agriculture in the national economy and world markets Identification of main potentialities, bottlenecks, possible ways to overcome, opportunities for sectorial growth and roles within national development strategies and goals

35 Elements for a rapid assessment of macro context and agricultural sector Territory and population Macroeconomic and sectorial indicators (GDP, trade balance, evolution of inflation, level of indebtedness, employment and occupation, rate of exchange, fiscal situation etc.) Orientation of macro policies (main aims of macroeconomic policies, orientation of fiscal and monetary policies, basic and market rate of interest, availability of credit in general and for the agricultural sector, rate of exchange regime etc.)

36 Agriculture in the national economy Information on social and productive structure Natural resources and environment conditions and availabity (quantities, maps, agro ecological zones etc) Land distribution and tenure systems Production structure (main crops and products, geographical distribution), employment and occupation in agriculture, participation of small holding / family farm agriculture etc. Rural poverty

37 Agriculture in the national economy Evolution and recent performance of agriculture Rates of agricultural growth, evolution of food and non food agricultural products prices, production of main items, exports and imports, contribution to balance of trade Agricultural prices, inputs, terms of trade Evolution of factor productivity (total, land and labour) Food security status Problems and potentialities of the development of agriculture

38 Agriculture in the national economy Mapping Rural Territory (if available) Where and what is produced in the main rural territories? In which conditions? Who produces what? What is the available infrastructure? To whom? Local, domestic or international markets? Through which channels? Agricultural and rural development policies

39 General concepts MODULE 2

40 Orientation / approach This module would deal with concepts but also with practical approach and participants would be oriented to understand the main concepts and to work with the basic data available in their countries

41 What are the relevant concepts? Capital Fixed capital, financing, operational, social, institutional, environmental etc.? Capital and investments in national accounts? Investments On farm and off farm investments, public goods, R&D, education? Gross fixed and net investments, Gross formation of fixed capital Savings and investments Factor productivity and determinants Profitability???

42 Theory and controversies? Savings, investments and development controversy? Neoclassical, Keynesian, Schumpeterian and evolutionists views on competition and investment determinants? Mensuration problems? Sources of investments? Others?

43 Determinants of investments MODULE 3

44 Determinants of investments Macro and institutional level Determinants at meso, territorial and local levels Conditionings at micro or farm level

45 Agricultural and Rural Development Policies MODULE 4

46 Policies, strategies and investments in agriculture On the basis of the elements dealt with in modules 1 and 2, the aim is to discuss main strategies and policies to promote inclusive investments in agriculture

47 Analytical Instruments and sources of information MODULE 5

48 Analytical Instruments and sources of information Sources of information Computerized tools Basic analytical models Value chain approaches Others

49 Instruments for promotion of investments, experiences, best practices and case studie MODULE 6

50 BIBLIOGRAPY

51 Documentos de FAO, CEPAL e IICA, Panorama y perspectivas 2011 Políticas para la agricultura en América Latina y el Caribe. Oportunidades y desafíos en un mundo globalizado. Documento de CEPAL, en preparación. Estudio de caso de las determinantes de la inversión en agricultura: síntesis de países de Asia. Elaborado por el Dr. Saifullah Syed (FAO) y presentado en este seminario.

52 Estudio de caso de las determinantes de la inversión en el sector rural de México. Elaborado por Jorge Mora ITESM y Jesús Arellano y Edgar Mendoza, Financiera Rural, México y presentado en este seminario. Banco Mundial (2008). Agricultura para el Desarrollo. Informe sobre el Desarrollo Mundial Washington D. C.