ABSTRACT
Latin America has had a long and unusually rich experience with rural development projects (RDP). This chapter reviews the conditions under which RDPs have been made privately profitable at the project level. It examines logic of the accounting needed to capture linkage, ecological, and social externalities and deals with specific RDP experiences in Latin America. The chapter discusses some of the specific difficulties which emerge in the management of RDPs that involve the internalisation of an externality so that the recommendations made to project beneficiaries can be made privately profitable. RDPs which compensate for chronic disequilibria have their origins in two types of situations: underinvestment in public goods and constrained access to markets and institutions. There are types of RDPs that create strong external effects in the rest of the economy through backward, forward and final demand linkages. The existence of positive externalities associated with RDPs creates a broad set of opportunities to extend their field of profitable application.
