Farm Size-Productivity Relationships in Paraguay’s Agricultural Sector
As discussed in Chapter 3, the character and structure of rural land use is key in determining the capacity of the sector to contribute to growth and poverty reduction. Most of the growth generated by agriculture in recent decades has involved soybeans or cotton, two crops with very distinct production characteristics. Soybeans are produced in large plots of land with a relatively high degree of mechanization and capital inputs, while cotton is produced almost exclusively in small plots and relying on available labor inputs. Growth of the cattle industry, like that of soybeans, creates very few jobs. Meanwhile, poverty has been on the increase during most of the last quarter century and the great bulk of extreme poverty and the majority of overall poverty are still found in the rural sector, in particular in smallholder agriculture (Chapter 3). There is a close association between poverty and smallholder agriculture. Thus sustained and significant improvement of productivity in small-holder agriculture could be expected to have very positive benefits in the reduction of poverty in Paraguay. It is argued here that it would, in addition, have a positive effect on overall agricultural productivity and hence growth.