News & Insights
Expanding opportunity for farmers in Paraguay
by Mark Coffey, chief investment and operating officer, Global Partnerships
Last week I traveled to Paraguay to meet with social enterprises, agricultural producers and a government official as part of our research into new investment opportunities. Nearly a quarter of Paraguay’s population lives below the poverty line, but the country’s underdeveloped economy is currently experiencing rapid economic growth. With this kind of growth comes the chance to catalyze and expand opportunity for people living in poverty. As I flew over much of the small, land-locked country in a tiny Beechcraft plane, I noticed the flatness of the land, its many rivers, and the countless tracts of well-watered but unused farmland. It is evident that Paraguay’s agricultural sector has tremendous potential for growth.
During my five days in Paraguay I was able to visit four social enterprises:
• BioExport and ARASY, two agricultural organizations that provide technical assistance and access to (and processing for) export markets. They serve smallholder farmers growing sesame and chia as well as more traditional products like cotton and rice;
• Fundacion Paraguaya, which provides credit and integrated services to people living at the base of the economic pyramid; and
• Elevate Business, which provides business training to young, emerging small and micro entrepreneurs (SME’s) who have high potential to absorb and implement concepts for markedly improving their business. Some of their clients include Fundacion Paraguaya’s clients.
In the past decade, many farmers with land holdings under 8 hectares (approximately 20 acres) have realized the benefit of enriching their soil and their incomes by converting from one traditional crop (such as rice, beans, corn, and cotton) to higher priced products such as sesame and chia. Thanks to the efforts of social enterprises such as BioExport and ARASY, hereafter referred to as “outgrowers,” there is a developing export market for these higher-priced products. To scale the opportunity to more farmers, we need to build up an ecosystem where access to financing, technical assistance and markets is readily available.
I also met with a number of farmers as well as cooperative and association leaders. In a meeting in Liberacion, an area with high poverty levels, I learned that the farmers had formed an association to better allow them to:
• form ties with buyers and providers of technical assistance (such as BioExport and ARASY);
• and to purchase and share equipment.
In another meeting at Cooperativa La Nortena, in the northern state of San Pedro, I learned about the coordination efforts between the various “tecnicos” (agronomists) who provide education and technical assistance, some of whom are staff of the outgrowers.
In another meeting in the southern state of Itapua, I attended a technical assistance meeting of about 50 farmers. The topics included the rotation of crops, the weather forecast and the planting of sesame seeds, proper soil preparation, etc. I found the farmers to be very attentive to the conversations and some of them were active in asking the tecnicos questions.
Some of the farmers were new to the sesame and chia crops, while others had experienced the benefits of the development of these markets over the past few years. My hosts told me that Paraguay currently has only about one percent of the world sesame market, but a much larger share of the Japanese import market and a growing share of the US and European markets. The Japanese are particularly interested in the expansion of supply from Paraguay, since the Paraguayan varieties are considered sweeter and of higher quality, and since Japan does not buy product from India, the world’s largest sesame producer.
The farmers told me about the importance of the technical assistance provided directly at the farm level as well as at community, association, and cooperative-level education sessions. With regard to financing, some of them wondered why it is so difficult to get long term financing rather than the type of seasonal financing they receive either in the form of seeds from outgrowers or in the form of loans from cooperatives.
A meeting with the vice minister of agriculture
After these visits I had the opportunity to meet in Asuncion with Vice Minister of Agriculture Mario Ruben Leon. After a discussion of our interest in Paraguay and some of my observations about the potential for improved output and earnings by small-holder farmers, he emphasized two keys to the development of smallholder farmers in Paraguay:
(1) Greater mechanization: This doesn’t have to mean large equipment mechanization, but can be as simple as some US-manufactured products such as plastic tables or huge plastic bags that keep farm products from being damaged in the fields, or semi-mechanized planters. He also noted that because of the lack of mechanization, young people see their fathers work all day long in the hot sun, with very little reward. As a result they don’t want to work the farm, but at the same time, they are unprepared to go to the city.
(2) Crop rotation: Mr. Leon specifically focused on the value for the farmer of planting sesame and chia, and then rotating into more “old school” products for the rest of the year-long growing season. We agreed that there is plenty of cultivable land, and favorable conditions (long growing season, warm weather, water). But until greater training and mechanization occur, Paraguay will not retain young people in farming and not grow incomes and outputs like it should. Some BioExport agronomists would go further and say that mechanization is optimally effective only when accompanied by technical assistance.
I came away from my meetings in the agricultural sector with an appreciation for all the actors and tools that are required to create markets and lift a sector: cultivable land, reasonable mechanization, technical assistance, access to both seasonal and longer term capital, promotion of products in export markets, modern and low cost processing technology, government support of the sector, and investors that understand how to locate and finance the key value chain players. At Global Partnerships, our role is limited but essential to making the value chain work; without it, farmers will produce less sesame and chia in Paraguay and households will not realize the earnings potential and the extent to which their daily lives could improve.