Beyond market failures : irrigation, the state, and non-traditional agricultures in Northeast Brazil

Abstract

This dissertation analyzes the role of the state in the economic transformation of three regions of irrigated agriculture in the San Francisco River Basin in Northeast Brazil. It focuses on understanding the reasons why only one of these three regions (Petrolina-Juazeiro) successfully turned into a modern agricultural economy based on high quality, non-traditional export crops, at the same time that wages and labor standards among rural wage workers increased without compromising the access of producers to export markets, and in spite of all three regions having received similar heavy government investments in large-scale irrigation infrastructure. Findings show that the economic transformation of Petrolina-Juazeiro does not relate to market-friendly policies, nor can it be fully explained by government investments in public goods (irrigation infrastructure) or the influence of "good leadership" at the local level. The key role of the state consisted of federal government agencies applying innovative practices in three major areas: 1) the management of large-scale irrigation investments, including the type of beneficiaries selected, the management of subsidies to irrigation, and the pressures on growers who received subsidies to perform well; 2) the relationship with growers' associations to solve collective action problems associated with exporting; 3) the introduction of high-value crops and new technologies among small tenants in government-sponsored irrigation schemes; and 4) wage negotiations between growers and rural wage workers. In addition, research results show that the globalization of food markets and the growth of nontraditional export crops can be accompanied by positive effects on rural employment, wages, and labor standards. These positive outcomes relate to: 1) the type of crops involved and their demand for skilled workers to meet high quality demands from consumers; 2) the supply of skilled workers in the region involved; 3) the presence and previous experience of rural unions; 4) the consumer concerns for the labor conditions of production; and 5) how rural unions and consumer concerns affect the balance of power between growers and rural wage workers and their respective organizations.