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464 Cristóbal Kay
© Blackwell Publishers Ltd, Henry Bernstein and Terence J. Byres 2002.
Journal of Agrarian Change, Vol. 2 No. 4, October 2002, pp. 464 –501.
Chile’s Neoliberal Agrarian Transformation
and the Peasantry
CRISTÓBAL KAY
In the mid-1970s, following the early shift to neoliberalism, the Chilean
rural sector was restructured dramatically, becoming one of the most successful
cases of non-traditional agricultural export (NTAE) growth. However, many
analysts fail to discuss the problematic nature of Chile’s integration into the
global market. Underpinning this rapid growth of NTAEs is the exploitation
of cheap peasant labour, especially seasonal female wage workers. This article
examines the elements of continuity and change in agrarian policy since the
transition to democracy in 1990. In particular, it presents the policy debate on
the future of the peasantry: capitalization or proletarianization? The dilemma
that policy makers face over maintaining high rates of NTAE growth while
at the same time attempting to reduce poverty and income inequalities are also
highlighted. The Chilean case can be considered as paradigmatic insofar as
it exhibits key characteristics of the classical capitalist transformation of agri-
culture: the emergence of a new class of dynamic agricultural entrepreneurs,
renewed proletarianization and land concentration, and intensification of
social differentiation.
Keywords: agrarian capitalism, neoliberalism, non-traditional exports,
peasants, Chile
INTRODUCTION
The agrarian problem in today’s Chile is characterized by the continuing uneven
impact on the rural economy and society of the country’s opening to the world
market since its early neoliberal turn in the mid-1970s. Peasant farmers in particular
face increasing difficulties to remain competitive and the working conditions of
rural wage labourers continue to be precarious. Although poverty has been reduced
significantly since the democratic transition in 1990, it still is a major problem as
over a quarter of the rural population continue to be poor.
Cristóbal Kay, Institute of Social Studies, P. O. Box 29776, 2502 LT The Hague, The Netherlands.
e-mail: kay@iss.nl
This is a much enlarged, updated and revised version of a paper published in the Bulletin of Latin
American Research, 16 (1), 1997, 11–24. I am grateful to the participants of the ‘International Conference
on Agrarian Relations and Rural Development in Less-Developed Countries’ held in Kolkata, 3–6
January 2002, for their comments. I am particularly appreciative of Terry Byres, who was the
discussant of my paper at the conference. They are, of course, not responsible for any remaining
shortcomings of the article.
JOA2.4C02 9/10/02, 10:15464
Chile’s Neoliberal Agrarian Transformation and the Peasantry 465
The resolution of the agrarian question in Chile cannot be left to market
forces alone, but requires the active intervention of the state. However, this does
not mean a return to the centralized type of state intervention of the populist
period before 1973. Today’s state needs to facilitate local initiatives that enhance
the process of democratization, thereby strengthening civil society, and implement
policies that spread the benefits of growth and modernization especially to those
groups that during the authoritarian period from 1973 to 1989 were excluded and
marginalized. It is undeniable that the market, especially in today’s globalizing
world, is a major force of change. It offers potentially great opportunities for
growth, but it often also exacerbates inequality and dependency. Thus new state
policies have to be designed so that these market forces can be harnessed for
sustainable development by promoting participation, equity and environmental
protection.
The Chilean case discussed in this article may be of wider interest as Chile is
the first country to have started implementing neoliberal economic and social
policies since the mid-1970s in such a consistent manner. It is the most compre-
hensive neoliberal transformation yet achieved by any developing country. Before
the neoliberal period, Chile was a relatively closed economy where agriculture
(including forestry) contributed less than 5 per cent to the value of total exports.
By the 1990s, Chile had become one of the most open economies in the world
and agriculture (including forestry) generated about 30 per cent of the value of
total exports. Chile is the only country in Latin America where the share of
agricultural exports in total exports increased significantly (David et al. 2000,
1675), while in most of Latin America it continued to decline (Spoor 2000).
Indeed, Chile is considered by many analysts as one of the most successful cases
of non-traditional agro-export (NTAE) growth (Barham et al. 1992; Meller and
Saéz 1995; Gwynne 1996).
With the election of the centre-left coalition of parties of the Concertación
(‘Concertation’), which has been in government since 1990, the country has
attempted to shift to a ‘growth with equity’ development strategy. The govern-
ment has sought to tackle the negative distributional and social consequences of
the neoliberal heritage, while at the same time furthering Chile’s competitiveness
and integration into world markets. Thus the article also attempts to examine
some of the problems faced by a ‘growth with equity’ development path within
the contemporary process of globalization. The neoliberal agro-export model as
well as the subsequent endeavour to pursue a growth with equity model might
provide some insightful lessons to other developing countries.
To understand the transformations of Chile’s rural economy and society since
the shift to neoliberalism and opening to world markets, it is useful to provide a
brief historical background. The essay thus starts by giving an overview of the
transformations since the crisis of the 1930s and highlights the changes during
the agrarian reform period from 1964 to 1973 as they set the stage for subsequent
developments. It then proceeds to discuss the changes under ‘neoliberal author-
itarianism’ from 1973 to 1989, including the agrarian counter-reform, and finishes
by analyzing some aspects of the ‘growth with equity’ policies pursued since
JOA2.4C02 9/10/02, 10:15465
466 Cristóbal Kay
1990. In particular, the paper examines the debate on reconversión (‘reconversion’),
which is the name given to a set of government policies, designed since the early
1990s, which are aimed at promoting the transformation of peasant agriculture
and seeking to strengthen its productive capacity and competitiveness. Finally, the
outstanding challenges facing rural Chile, especially with regards to the peasantry,
are discussed.
AGRICULTURE FROM THE 1930S TO THE AGRARIAN REFORM
PERIOD OF 1964–1973
The great depression of the 1930s struck a devastating blow to the Chilean
economy, which depended greatly on mineral exports, leading to its restructur-
ing. The fall in export earnings and the resulting scarcity of foreign exchange
gave an advantage to local manufacturing over industrial imports. From the late
1930s, the state furthered this domestic industrialization process through pro-
tective tariff barriers, investments in infrastructure and by channelling financial
resources to industry. In this way the state became the chief promoter of an
import-substitution-industrialization (ISI) process and of an inward-looking
development strategy geared towards the internal market. In 1964 government
expenditure reached about 40 per cent of gross domestic product (GDP) and the
state financed approximately half of total investments. Industrial production grew
at an average yearly rate of 5.1 per cent between 1937 and 1964 (Muñoz 1971, 38)
and industry accounted for 25 per cent of GDP in 1964. The agricultural sector
increasingly failed to supply enough food to the expanding urban sector. Agri-
cultural output grew at an annual average rate of 1.8 per cent between 1930 and
1964, while the population increased by 2.2 per cent and agricultural demand
rose by over 3 per cent yearly (Kay 1992). During the 1930s, agricultural exports
still exceeded agricultural imports, but thereafter the agricultural trade balance
became increasingly negative due to rising food imports as domestic production
failed to keep up with the rising internal demand. By 1964 agricultural imports
already consumed a fifth of the country’s foreign exchange earnings, creating pro-
blems for the rest of the economy, especially for industry which had to restrict
its import of raw materials, equipment and so on. This low rate of agricultural
growth is reflected in the diminishing contribution of agriculture to GDP, falling
from 15 per cent in 1930 to 10 per cent in 1964. However, agriculture continued
to contribute labour to other economic sectors, thereby dampening wage rises in
the rest of the economy. The high rate of rural–urban migration meant that the
percentage of agricultural labour in the total labour force fell from 35 per cent to
20 per cent during this period (Kay 1977).
Two important reasons explaining agriculture’s failure are the highly unequal
land tenure structure and the excessively favourable treatment given to industry
with the shift to an ISI policy that resulted in a relative neglect of agriculture. As
for the distribution of land, this was indeed extremely unequal. Minifundistas,
small peasant landowners, accounted for 37 per cent of the farms, but had only
1 per cent of the arable land. Latifundistas, large landed estate owners, constituted
JOA2.4C02 9/10/02, 10:15466
Chile’s Neoliberal Agrarian Transformation and the Peasantry 467
only 7 per cent of farms but owned 65 per cent of arable land in 1955 (CIDA
1966, 42). This extraordinarily unequal agrarian structure resulted in an inefficient
allocation of resources as well as encouraging a rent-seeking attitude among
landlords with negative consequences for agricultural investment. While the
minifundia had too much labour and too little land, the reverse was true of the
latifundia. In other words, while land productivity was high and labour product-
ivity low on the minifundia, the contrary was true on the latifundia. As the country
had a relative surplus of labour and a relative shortage of land, it was more
important from an economic development perspective to prioritize increases in
land productivity rather than labour productivity. It was thus argued that a more
egalitarian land tenure structure would yield higher rates of agricultural growth,
as well as offering more employment opportunities for rural labour. Agrarian
reform increasingly came to be regarded as a precondition for achieving satisfactory
long-term rates of growth in the agricultural sector, as well as for improving the
miserable standard of living of the peasantry.
With respect to the impact of ISI on agricultural performance, the foreign
exchange and trade policy certainly favoured industry and hampered agriculture
by encouraging food imports as well as discouraging agricultural exports. This
also contributed to the increasingly negative net foreign trade balance of agriculture
(Valdés 1973). As far as public investment policy is concerned the record is
dismal for the agricultural sector. Nevertheless, taxation and credit policies were
relatively beneficial to agriculture. Furthermore, the domestic commodity terms
of trade were not markedly unfavourable to agriculture. On balance it is perhaps
fair to say that agriculture was discriminated against by public policy (Valdés
et al. 1990). But the impact of ISI policies cannot just be analyzed in sectoral
terms as they affected the various social classes in the countryside differently.
Peasants and rural workers were the main social groups to be affected adversely
by government policy. For example, credit policy almost exclusively favoured
landlords and the large capitalist farmers as they received the lion’s share of
subsidized credits. Small landowners and peasants had to resort to the informal
credit system, which frequently charged exorbitantly high interest rates. Taxation
policy favoured large landowners far more than the peasantry, as no wealth tax
existed and landlords were more adept at tax evasion. Public investment in
agriculture, though small, also mainly benefited large farmers as, for example, in
the case of irrigation works. Although agricultural price controls affected all
producers, large landowners were generally in a better position to obtain higher
prices for their products than smallholders. Therefore, instead of talking of a bias
against agriculture, as neoclassical economists tend to argue, it is more appropri-
ate to speak of a bias against peasants and in favour of landlords.
From the 1950s, when successive electoral reforms widened electoral parti-
cipation, the agrarian sector became increasingly a field of social and political
contestation. The centrist Christian Democrat government (1964–70) promised
to tackle the twin problems of agricultural stagnation and social exclusion of
peasants and rural workers. The government aimed to deepen the existing ISI
process by modernizing agriculture through land reform and unionization policies,
JOA2.4C02 9/10/02, 10:15467
468 Cristóbal Kay
among other measures. The main purpose of Christian Democratic agrarian policy
was to make the latifundia more productive by transforming it into a modern
capitalist farm. The government encouraged large landowners to become effici-
ent commercial farmers with a carrot and stick policy, providing economic and
financial incentives to landlords to modernize and expropriating only those who
failed to do so. So as to avoid a negative impact of farm investment, the govern-
ment guaranteed that farms below 80 ‘basic irrigated hectares’1 (BIHs) would not
be expropriated. Furthermore, expropriated landlords could under certain condi-
tions retain a farm of up to 80 BIHs as a reserva (reserve). Some landlords avoided
expropriation by dividing up their estate into several farms smaller than 80 BIHs.
By 1970, only a quarter of the farms above 80 BIHs had been expropriated.
The new organizational structure that emerged from the expropriated latifundia
was the asentamiento (settlement), a type of rural cooperative. This was envisaged
as a transitional structure, as after a trial period of 3–5 years the beneficiaries
could choose between continuing as a cooperative enterprise, dividing the land
into individual family plots, or forming a mixed enterprise. At the end of the
Christian Democratic government in 1970, only about 30,000 out of the 100,000
agricultural workers who had been promised land were settled. The beneficiaries,
who were about 7 per cent of the total agricultural labour force, gained control
over 17.6 per cent of the total land, averaging about 10 BIH per beneficiary. This
is an estimated nine times more land than owned on average by a minifundista
(small peasant farmer). Furthermore, over a third of the agricultural labour force
was still landless, constituting the rural proletariat (Kay 1978).
As for unionization, the number of agricultural workers belonging to unions
increased from about 2000 in 1965 to more than 140,000, or over a third of all
agricultural workers, in 1970. Initially, union demands largely related to claims
for better wages and working conditions. However, strikes became more com-
mon as left-wing controlled peasant unions channelled the feelings of frustration
of those peasants excluded from land reform. While in the past strikes by farm
workers were uncommon due to legal restrictions, they numbered 648 by 1968
and 1580 in 1970 (Silva 1992). Peasants also began to seize latifundios demanding
their expropriation, an action unheard of in the past. This explosion in peasant
conflicts was the result of the emergence of a more tolerant political climate, the
absence of violent repression, of successful organizing efforts and the influence of
left-wing political parties.
Under the socialist government of Allende (1970–3), the agrarian question
became almost exclusively a social and political issue as the struggle for power
intensified. The main aim of Allende’s government agrarian policy was to elimin-
ate the latifundia by expropriating all farms above 80 BIH regardless of whether
they were well farmed or not. This reflected the government’s political will to
destroy what it considered to be one of the main enemies of the country’s socialist
1A ‘basic irrigated hectare’ (BIH) is a unit of good quality land which is used for standardizing land
of differing quality. Thus, for example, a farm of 500 ha of poor quality soils could measure less than
80 BIHs and thus be exempt from expropriation.
JOA2.4C02 9/10/02, 10:15468
Chile’s Neoliberal Agrarian Transformation and the Peasantry 469
transformation – the landlord class. However, the government was prepared to
support medium producers, who were typical capitalist farmers, and were defined
as those farmers who owned between 20 and 80 BIH. In the first year of Allende’s
government, about 1300 farms were forcefully taken over by peasants demanding
that they should be expropriated. In comparison, less than 600 farms were seized
and a total of 1408 farms were expropriated during the 6 years of the Christian
Democrat administration. Although Allende’s government was against farm
seizures, it was unwilling to repress peasants, responding instead by accelerating
expropriations. By 1973, the government had expropriated over 4000 farms.
The latifundia had ceased to exist and the reformed sector accounted for 40 per
cent of total land, making it the largest farm sector (Kay 1978).
The development of a socialist reformed sector proved more difficult than
anticipated. Inadequate administrative resources and the greater independence of
the peasantry from state patronage allowed for the spontaneous expansion of the
peasant economy within the reformed sector, a development that ran counter to
the collective economy. This tendency was partly due to the traditional desire
of peasants for individual land, but largely due to insufficient resources and
incentives with which to develop the collective economy. A scarcity of farm
machinery and equipment partly resulted from the right of landlords to sell these
to others or retain them for working their reserva. The problem of incentives
is more complicated. CORA – the government’s agrarian reform agency – paid
peasants in the reformed sector a monthly anticipo (advance). This advance was
to be deducted at the end of the agricultural year from profits, and the remainder
distributed to each member according to the number of days worked on the
collective. However, an initial lack of capital and also often poor management
meant that the reformed units accumulated large debts with CORA. As the
government did not enforce a strict debt repayment policy for fear of losing
peasant support, peasants came to view the anticipo as an acquired right, like a
monthly wage. The amount of anticipo did not vary according to hours or days
worked, or tasks performed. Nor did it differentiate between the economic per-
formance of the collectives, the same amount being paid regardless of profits or
losses. The scarcity of administrative resources and capital equipment together
with the lack of incentive systems conspired against the development of the
collective economy. Peasants preferred to develop their own peasant enterprise
where effort was rewarded according to economic result. Furthermore, as the
black market spread, peasants had the additional incentive of selling produce
from their household plot at prices way above the official level. Peasants of the
reformed sector, however, were not in favour of legally subdividing the collect-
ive, where part of the produce was sold through state commercial channels at
official prices, as this would have eliminated the monthly advances and state
benefits that they received. Furthermore, they would have then been responsible
for settling any accumulated debts and paying for the land.
In summary, Allende’s government succeeded in abolishing the latifundia and
in organizing the peasantry and landless agricultural workers. Certainly, agrarian
reform and unionization gave rural workers a new dignity and standing, but
JOA2.4C02 9/10/02, 10:15469
470 Cristóbal Kay
much remained to be done in terms of achieving gender equity (Tinsman 1996),
reducing rural poverty and tackling the discrimination against Chile’s ethnic
communities (Bengoa and Valenzuela 1984). During the second year of Allende’s
regime, the economic situation deteriorated and political opposition to the govern-
ment became increasingly violent. Although the Allende government retained
significant popular support, the military coup d’état of September 1973 brought it
to a sudden and violent end.
NEOLIBERAL INTEGRATION INTO THE GLOBAL
ECONOMY (1973–1989)
The military government violently repressed and disarticulated the peasant move-
ment and the various peasant organizations, eliminating most of the social and
political gains they had achieved, particularly since 1965. As for its economic
policy, it pioneered the neoliberal transformation in Latin America, as the govern-
ment of General Pinochet was the first to implement a comprehensive set of
neoliberal policies, as from the mid-1970s.2 This was done with absolute deter-
mination, ruthlessness and with little concern for the negative consequences. The
agrarian policy itself was totally subordinated to the main macroeconomic strat-
egy of fully liberalizing and integrating the Chilean economy into the world
economy. The key policy makers determining agrarian policy were located in
the Ministries of Finance and Economics and not in the Ministry of Agriculture.
Distinguishing features of the agrarian policy were the counter-reform; the pri-
vatization of the reformed sector and state agro-industrial, service and marketing
enterprises; the drastic reduction and, in some instances, elimination of tariff
barriers and other protectionist measures; and the downsizing of the state in
general, except for its repressive apparatus.
Two phases can be distinguished in Chile’s neoliberal transformation. The
first phase, which I refer to as ‘dogmatic neoliberal’, lasted until the crisis of
1982–3. During this phase agriculture’s performance was very erratic, but the
key elements of the neoliberal strategy were put in place. The subsequent phase
can be characterized as ‘pragmatic neoliberal’ and lasted until the end of the
military government (Echenique 1993). During this second phase, agricultural
exports boomed and agriculture became the most dynamic sector of the economy.
But first, and foremost, the agrarian counter-reform has to be highlighted, as it
was a key factor in the neoliberal strategy.
The Agrarian Counter-Reform
The changes in the land tenure structure are shown in Table 1. Comparing the
years 1965 and 1972, which indicate the distribution of farms at the beginning
2For competent, but conventional, analyses of Chile’s neoliberal or neoconservative experiment, see
Edwards and Cox Edwards (1987) and Bosworth et al. (1994). A more critical discussion can be found
in Foxley (1983), O’Brien and Roddick (1983), Ramos (1986), Collins and Lear (1995) and Green (1995).
JOA2.4C02 9/10/02, 10:15470
Chile’s Neoliberal Agrarian Transformation and the Peasantry 471
Table 1. Chile, land distribution of farms, by size categories, 1965–86 (in percentages)
Size categories 1965 1972 1976 1979 1986
Below 5 BIHa9.7 9.7 9.7 13.3 14.0
5–20 BIHa12.7 13.0 37.2 29.0 26.0
20– 80 BIHa22.5 38.9 22.3 36.3 31.0
Over 80 BIHa55.3 2.9 24.7 16.9 26.0
Public agencies 0.0 0.0 0.0 4.0 3.0
Reformed sector 0.0 35.5 9.5 0.0 0.0
Totalb100.2 99.8 103.5 99.5 100.0
aBIH stands for ‘basic irrigated hectares’. The physical hectares of a farm are
transformed into standard basic irrigated hectares to ensure that farm size is measured in
units of equivalent land quality.
bColumns may not sum to 100 due to rounding errors. However, these is a non-
rounding error in 1976 which appears in the original.
Source: Jarvis (1992, 199).
and almost at the end of the agrarian reform, respectively, it can be observed that
the latifundia, roughly equivalent to the private farms over 80 BIH in size, practic-
ally had been eliminated. By contrast, the reformed sector, which did not exist
in 1965, gained control of 35.5 per cent of the country’s land by 1972 and by the
time of Allende’s overthrow, on the 11 September 1973, had over 40 per cent of
the land, thereby becoming the dominant farm sector. The growth of the 20–80
BIH farm sector is explained by the formation of reservas, as in some instances
landlords were able to keep part of their expropriated estates as a so-called ‘reserve’
whose size could not exceed 80 BIH and usually varied between 40 and 80 BIH.
Comparing 1972 with 1979, by which time the counter-reform had been com-
pleted, it can be seen in Table 1 that the 5–20 BIH farm sector more than doubled
its control over land, while the over 80 BIH farm sector had regained almost a
third of the land it possessed in 1965. This change in the land tenure structure is
explained by the counter-reform by which many landlords regained if not all at
least part of their former estates. The remainder of the reformed sector was
subdivided into family farms, referred to as parcelas, averaging about 10 BIH in
size. The parcellization of part of the reformed sector resulted in a more equal
size distribution of land in 1979 as compared to 1965. But thereafter the liberal-
ization of the land market stimulated a new process of land concentration as the
farms over 80 BIHs increased their share of the country’s land from 16.9 per cent
to 26 per cent in 1979 and 1986, respectively, as shown in Table 1. However, the
farms of over 80 BIH have today little in common with the former latifundia. The
average farm size in this sector is far smaller than before but, more importantly,
the social and technical relations of production have been transformed completely.
The privatization of the reformed sector led to the expulsion of almost half of the
original agrarian reform beneficiaries; the emergence of a new entrepreneurial class
of medium-sized and large commercial farmers, many of whom would form part
JOA2.4C02 9/10/02, 10:15471
472 Cristóbal Kay
of a rapidly developing agro-industrial- and export-oriented sector (Gómez and
Echenique 1986); and the formation of the parcelero family farm sector, many of
whose members would not survive, as will be discussed further on ( Jarvis 1992).
The ‘Dogmatic’ Neoliberal Phase (1973–1983)
In the first neoliberal period, the agricultural sector oriented towards the domestic
market deteriorated sharply, while agricultural exports expanded greatly. The
paradox is that the state performed a crucial role in the success of agro-industrial
and, particularly, forestry exports despite the anti-statist stance adopted by the
military government. Such a success also benefited from earlier state measures,
implemented since the 1930s, but especially from the 1960s onwards, in which
the foundations for it were laid. The measures ranged from the establishment of
state-owned agro-industrial and forestry enterprises to enhancing the country’s
research and technological capabilities in these fields. But the neoliberal exchange
rate policy, which no longer overvalued the local currency as during the ISI pro-
tectionist era, certainly helped to boost agricultural exports. A more competitive
foreign exchange rate provided new economic incentives to agricultural exporters
as the devaluation of the domestic currency increased their economic returns
(Hojman 1990a, 61).
Major transformations in the land-tenure structure took place in this period,
as already mentioned. Furthermore, over the years well over half of the parceleros
sold their land as they could no longer afford to run their family farms (Echenique
and Rolando 1991a). Also, some of the landlords who had received part or all of
their former property back with the counter-reform decided to sell part or all of
their land, as many of them were unable to adjust to the new competitive situ-
ation created by the neoliberal opening of the economy. This was particularly the
case for farmers whose production was oriented towards the domestic market.
These land sales enhanced the land market greatly, allowing the entry of new
entrepreneurs and creating a more flexible and competitive agrarian system. This
was, of course, a major aim of the neoliberal policy makers. But the initial
impulse of the counter-agrarian reform was political, as it aimed to destroy the
reformed sector and most of the peasant organizations, so as to eliminate any
possible source of opposition to its policies.
Priority was given to export agriculture, particularly to NTAEs, by drawing
upon past developmentalist state policies that had established the institutional,
commercial and agro-industrial infrastructure for the expansion of fruit and for-
estry plantations. Furthermore, in the case of forestry plantations there was heavy
subsidizing by the state through a 75 per cent reforestation subsidy established in
1974 (Gwynne 1993). By contrast, the agricultural sector of the so-called ‘basic,
annual or traditional crops’ and the livestock sector were neglected completely.
About four-fifths of the crop area was cultivated with cereals, mainly wheat. The
producers of these crops were left at the mercy of the neoliberal macroeconomic
policy that drastically curtailed internal demand for these food products due to
the steep fall in wages and the dramatic rise in unemployment. The devaluation
JOA2.4C02 9/10/02, 10:15472
Chile’s Neoliberal Agrarian Transformation and the Peasantry 473
of the domestic currency also increased the cost of their inputs, as many were
imported. The opening of the economy at the same time exposed them to the
vagaries of the international market and the unfair competition of cheap food
imports, which were subsidized by the rich exporting countries such as the USA
and the European Union. This had a negative impact on capitalist as well as
peasant farmers, some of whom went bankrupt.
A major conflict erupted between the neoliberal policy makers3 and the capitalist
farmers’ organizations of the southern region that were representing mainly the
wheat and milk producing sectors. These farmers were facing an extreme eco-
nomic crisis during the mid- and late-seventies due to cheap imports of wheat,
flour and milk. A neoliberal spokesperson caused a furore among farmers by pro-
claiming that milk producers should ‘eat their cows’, by which this person meant
that they should slaughter their cows and shift production from loss-making to
profitable activities (Gómez 1979). This conflict was an embarrassment to the
government as these southern farmers had been among the strongest supporters
of the military and had been a major opposition force to the socialist government
of Allende, being one of the most vociferous groups in calling upon the military
to overthrow it.
The ‘Pragmatic’ Neoliberal Phase (1984 –1989)
In the post-1983 agrarian policy, the neglect of the traditional food-producing
sector was rectified, although largely in favour of the capitalist farm sector. The
area under food crops partially recovered, but above all their yields improved
substantially. However, the peasant farm sector did not have the technical or
financial means to achieve such improvements in yields.
Thus an agrarian policy that recognized the specific problems facing the agri-
cultural sector emerged for the first time since 1973. This new policy jettisoned
the shock-type economic measures and sought to achieve a more gradual pro-
ductive transformation by stimulating the modernization of the capitalist farms
and, to a lesser extent, those peasant farms considered as ‘viable’. This was done
through a series of measures offering a degree of protectionism for some of the
‘basic, annual or traditional crops’, such as raising tariff barriers and by establishing
price bands or a range of minimum prices. By setting up a state fund to finance
the minimum support prices for some key products, the government now also
provided income support measures to farmers (Palma 1995). Newly established
technical assistance programmes, especially for the ‘viable’ peasant farmers, were
also an indication of a new attitude to at least the better-off section of the peasantry.
The aim was to bring about an increase in yields so as to make the traditional
farm sector more competitive. But the export-promoting macroeconomic policy
continued unchanged, allowing agro-forestry exports to thrive.
3The neoliberal policy makers and advisors were often referred to as the ‘Chicago boys’, as many
of them had followed postgraduate studies in economics in the University of Chicago, the hotbed of
neoliberalism (O’Brien 1981; Silva 1991; Valdés 1995).
JOA2.4C02 9/10/02, 10:15473
474 Cristóbal Kay
Those capitalist farmers who were mainly producers of traditional crops
and/or livestock for the first time adopted, on a big scale, green revolution-type
technologies and intensified their production.4 It was during these years that the
‘easy phase’ of agriculture’s modernization took place. The protectionist measures,
albeit limited, together with the recovery of the domestic economy, gave a new
lease of life to the flagging traditional crop farm sector, as these measures turned
out to be crucial for its modernization and thus survival. No government official
had the arrogance any more to dictate to farmers that they ‘should eat their
cows’, or welcome the collapse of sugar beet farmers and the sugar industry in
the name of some abstract and static notion of ‘efficiency’ (Gwynne and Bee
1993). Instead, the livestock and sugar beet sectors staged a remarkable recovery,
as will be seen later on.
BETWEEN NEOLIBERALISM AND NEOSTRUCTURALISM
(1990–2002)
This period begins with the democratically elected government of the ‘Con-
certación’, which first took office in 1990 and continues to be in office, having
been re-elected twice. The economic policy since the democratic transition can
be characterized as pursuing ‘continuity with changes’, ‘neoliberalism with a
human face’ (Hojman 1995a) or ‘neoliberal structuralism’. With the transition to
democracy, the pragmatic neoliberalism was continued, but greater emphasis
was given to peasant agriculture and social policies. This current stage of ‘continu-
ity with changes’ falls somewhere between a ‘neoliberalism with a human face’
and a ‘neostructuralist’ position.5 The Concertation governments would contend
that they are pursuing a ‘growth with equity’ development strategy, but to qualify
for such a characterization government policy would have to achieve better results
concerning equity. The consistently high rates of economic growth attained by
the Concertation government, while reducing poverty substantially, failed to
improve Chile’s highly unequal income distribution, which had greatly worsened
during the era of the Pinochet government.6 A neostructuralist position would
also put greater emphasis on environmental issues than hitherto has been done
by the Concertation governments. Given the overriding concern of the Con-
certation governments with international competitiveness and the lesser priority
given to equity and sustainability, it is possible to characterize their development
strategy as ‘neoliberal structuralist’. Purists at both ends of the spectrum would
consider this as contradictory and as an unsustainable hybrid situation, which
sooner or later would evolve into one or the other, but ‘pragmatic neoliberals’
and ‘neostructuralists’ could probably live with it (Kay and Gwynne 2000).
4Farmers had started introducing high-yielding-variety (HYV) seeds already in the 1950s and
1960s, but it was limited to certain crops and the more progressive farmers.
5On structuralism and neostructuralism, see Kay (1989).
6The average annual growth rate of GNP per capita was 5.9 per cent between the years 1989 and
1999 as compared to 1.0 per cent in the period 1979– 89 (World Bank 2001).
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 475
To what extent does the post-1989 agrarian policy differ from that of the
Pinochet years? What are the main components of continuity and change? As
for continuity, the following factors can be highlighted, among others. First,
the policy of keeping macro-economic stability is maintained so as to gain the
acquiescence, if not support, of the capitalist class and to create an even more
favourable climate for foreign investment (Cox 1994). Second, the emphasis on
agricultural exports is retained. Thus the Concertation governments have been
reluctant to undertake any major economic and social initiatives that might
endanger the continuing growth of these exports, such as trade union legislation
favourable to rural workers. Third, a further aspect of continuity is the mainten-
ance and even deepening of Chile’s exposure to and insertion in international
markets. Foreign competition has intensified, particularly for the traditional crop
and livestock farm sector, with Chile’s association in 1996 with MERCOSUR,
the Southern Cone Common Market of Argentina, Brazil, Paraguay and Uru-
guay (Daher 1997). Chile is also seeking membership of NAFTA, the North
American Free Trade Agreement, which would put further competitive pressure
on Chilean agriculture (Olavarría and Rojas 1996).
A remarkable aspect in this continuity of economic policy is the conversion of
many left-wing policy makers who have embraced several elements of the neo-
liberal economic model and the Washington Consensus (Williamson 1990; Silva
1993).7 But they try to marry the positive elements of neoliberalism with their
concerns about equity and sustainability. Such a compromise is encapsulated in
the neostructuralist phrase ‘productive transformation with equity’, which is often
used by the Concertation’s government officials (ECLAC 1990). The emphasis is
now on competitiveness rather than protectionism, on private entrepreneurship
rather than state interventionism or ‘developmentalism’ (‘desarrollismo’), on limit-
ing social demands to what is economically and politically feasible, on continuity
rather than change, on technical competence rather than ideology, and so on.
A neoliberal social democratic-type consensus is developing in Chile through
the political alliance of the Concertación coalition of parties. But to what extent it
is possible to marry neoliberalism with social democratic ideas remains to be seen.
However, there are many left-wingers who wish to go further in the democrat-
ization process and have a greater concern for tackling social problems and for
empowering the lower classes. But only few on the left think of returning to the
pre-authoritarian days, and a new version a ‘Chilean road to socialism’ is certainly
not on the agenda. Thus it is not surprising that key issues of past agrarian policy
agendas, such as land reform, expropriation and unionization are not mentioned
in the contemporary political discourse of the left. On the contrary, little has
been done so far with regards to unionization of seasonal workers, strengthening
peasant organizations and so on (Petras and Morley 1990b). This, of course, is
partly due to the limitations inherent to the democratic transition that inherited
an authoritarian legislative framework designed to prevent any radical changes.
7For a critique of the conversion or ‘renovation’ of left-wing thinkers and politicians, see Petras and
Morley (1990a).
JOA2.4C02 9/10/02, 10:15475
476 Cristóbal Kay
There are, of course, also major differences between the policies of the military
and democratic governments. These concern above all the democratic context
within which economic policy is shaped and implemented. There is still a long
road to follow in deepening this democratic context, but the political break with
the authoritarian past is undeniable. The Concertation governments have thus far
been concerned with issues of social equity, poverty alleviation, regional decentral-
ization and with incorporating the peasantry in the benefits of Chile’s economic
achievements (Hojman 1993a; OIT 1998). Wherever possible, the democratically
elected governments have attempted to extend the benefits of existing legislation
to small-scale producers. In some of these tasks, they have been moderately suc-
cessful but new legislation and more drastic initiatives are required for tackling
the more persistent problems of poverty, equity, exclusion and sustainability. In
this respect, much indeed remains to be done.
GLOBALIZATION AND THE RESTRUCTURING OF
CHILE’S AGRICULTURE
In the next section, I will discuss the Concertation government’s policies aimed
at the peasantry’s ‘reconversion’. In this section, I will present, as a backdrop to
the debate on reconversion and the future of the peasantry, an overview of the
striking transformations of Chile’s land use, production pattern, and labour and
gender relations since the shift to neoliberalism and the embracing of global
capitalism.8 This remarkable economic and social restructuring of Chile’s agri-
culture was driven principally by capitalist farmers with the peasantry’s role
being reduced to providing the labour force and even some of their own land to
the capitalist farmers.
The Performance of ‘Traditional’ Crops
During the ISI period from the 1930s to the early 1970s, agriculture performed
poorly and was driven mainly by the growth in internal demand. The neoliberal
policies after 1973 shifted incentives towards exports, thereby encouraging the
rapid expansion of fruit and forestry exports. At the same time, the negative
effects of neoliberalism on employment and wages reduced the internal demand
for food. Domestic food production reached its lowest level during the eco-
nomic crisis of the early 1980s. While the area cultivated with traditional crops
during the years 1968–72 was on average 1,263,000 ha this fell to a record low of
877,000 ha in the agricultural year 1982–3, a drop of 31 per cent (Gómez and
Echenique 1988, 289). During the ‘dogmatic neoliberal’ period (1973–1983) food
security was indeed endangered as per capita food availability declined, despite
rising food imports. Food consumption fell particularly sharply for the poor,
whose numbers had increased dramatically.
8For useful analyses of Chile’s agrarian change since 1973, see Hojman (1990b), Kay and Silva
(1992), and Hojman (1993b).
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 477
Traditional crops only began to recover when the military government changed
its dogmatic neoliberal policy by introducing a variety of mildly protectionist
measures. This encouraged farmers to improve yields as well as to adopt better
farm management practices. Yields for most crops hardly changed between the
late 1960s and the early 1980s, except for maize and sugar beet, but rose signific-
antly thereafter. As can be ascertained from Table 2, some of the biggest yield
improvements were achieved in wheat and maize (accounting for about 60 per
cent of the sown cropland), which more than doubled between the periods
1980–2 and 1992–5. Sugar beet cultivation, which was in terminal decline due to
cheap imports, staged a remarkable recovery.
Although the area cultivated with traditional or annual crops has fallen con-
tinuously over the last decade or so, output has not always declined: in most
years it has risen due to the substantial increases achieved in yields. Yields of
some crops are now similar to those achieved by advanced countries with a
highly developed (and subsidized) agriculture, such as in the United States and in
Western Europe. In recent years, the crop area has stabilized but so too have
yields as the easy phase of yield increases has largely been exhausted.
The Shift to Non-Traditional Exports
The switch to agricultural and forestry exports has been truly remarkable. While
in the mid-1970s these exports contributed about 2 per cent of the country’s total
exports, by the mid-1990s this proportion had increased to 28 per cent. Agricul-
tural and forestry exports increased by over 20 times during the military govern-
ment of 1973– 89 and have grown by an average yearly rate of 14.5 per cent
Table 2. Chile, yields of traditional crops, selected years 1968 –2000 (metric quintals
per hectare; average yields)
Crops 1968–72 1980–2 1988–90 1992–5 1997–2000 % Change a
Wheat 17.4 17.0 30.8 34.4 39.1 130.0
Oats 14.0 17.4 25.3 30.0 29.7 70.7
Barley 20.6 20.7 34.4 36.7 36.5 76.3
Maize 32.6 40.5 76.6 87.6 91.0 124.7
Rice 28.0 30.2 42.2 43.4 43.7 44.7
Beans 10.9 10.9 12.5 12.2 12.7 16.5
Lentils 6.0 4.3 5.8 8.1 6.2 44.2
Potatoes 93.0 107.5 146.9 154.0 157.9 46.9
Sunflowers 12.0 14.0 21.8 19.6 15.6 11.4
Rape seed 12.7 12.9 18.5 22.4 24.8 92.2
Sugar beet 364.7 463.3 575.2 669.6 586.4 26.6
aThe percentage change in yields has been calculated for the period 1980–2 to 1997–2000.
Sources: ODEPA (1995b). For the 1968–72 period, Gómez and Echenique (1988, 291);
for the years since 1995, ODEPA (2001, 71).
JOA2.4C02 9/10/02, 10:15477
478 Cristóbal Kay
between 1990 and 1996. In the period 1986–96, the Gross Domestic Product grew
at an average yearly rate of 7 per cent, agriculture at 5.9 per cent, and agricultural
and forestry exports at 16.9 per cent (ODEPA 1997). In the mid-1990s, forestry
exports contributed almost half of the total agricultural and forestry exports,
while the share of fruit exports was over a third (ODEPA 1996, 25). It is this
export dynamism that has given a boost to agricultural growth and has brought
about a major transformation in agriculture’s productive structure.
With the shift to an agro-export model during the military government, it
was the fruit and forestry sectors that expanded rapidly at first, while the livestock
and crop sectors declined due to the drop in internal demand and competition
from cheaper imports (Gómez and Echenique 1988, 295). Between 1975 and 1994,
the average yearly growth rate of agricultural exports was 17.9 per cent and was
19.3 per cent for forestry exports (Donoso and Figueroa 1995, 3–4). The extra-
ordinary rise in forestry exports was much encouraged since 1974 by generous
government subsidies and fiscal incentives for reforestation that mainly benefited
large corporations. But it should be borne in mind that most plantations harvested
before the late 1980s stemmed from investments undertaken before the military
government. A large proportion of these earlier plantations was started with
financial and technical support from the state National Forestry Corporation,
CONAF (Gwynne 1993). Furthermore, CONAF used to own many of them,
but with neoliberalism some foreign capital has also been attracted to invest in
this sector, contributing to the rapid expansion (Gwynne 1996). Chile is credited
with having created one of the world’s most competitive forest industries over
the last 60 years by transforming comparative advantages into competitive advant-
ages (Clapp 1995). However, the environmental cost associated with the forestry
industry, especially with regard to the destruction of the native forest and the
pollution created by the cellulose plants and the paper mills, has been high. Never-
theless, reforestation has had some positive environmental impact in those areas
that previously had severe problems of erosion (Gómez-Lobo 1992, 104–5).
Changes in Land Use
The neoliberal period brought about a remarkable transformation in the coun-
try’s land use pattern. What is surprising is that the changes in the land use
pattern have continued with the Concertation governments to an even greater
extent than before, as can be seen from Table 3. This has been due largely to
foreign competition and the fall in prices for most traditional crops. For example,
real prices received by domestic farmers fell, between 1987 and 1993, by 25 per
cent for wheat, 18 per cent for maize, 30 per cent for rape seed and 29 per cent
for sugar beet (Ortega 1994a). Consequently, the area cultivated with traditional
or annual crops declined significantly. Capitalist farmers have now learned to
adjust more swiftly to changing price signals by altering their production pattern
and seeking ways to improve productivity so as to remain competitive. Farmers
have become aware that even a civilian and democratic government is not going
to reintroduce major protectionist measures for agriculture, even if they protest
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 479
Table 3. Chile, agricultural land use (Regions III to X), 1986/7–1997/8 (selected years) (000 hectares)
Category 1986/7 1988/9 1990/1 1991/2 1992/3 1993/4 1994/5 1995/6 1997/8 % Change
Annual crops 1.157 1.040 914 911 794 780 787 755 776 –32.9
Fruits & vineyards 227 245 247 254 266 273 274 221 301 32.6
Horticulture & flowers 72 75 85 85 88 90 84 71 91 26.4
Artificial pastures 329 408 451 423 449 476 459 423 425 29.2
Fallow land 180 173 221 201 186 162 168 131 158 –12.2
Total cultivated (A) 1.965 1.940 1.919 1.874 1.783 1.781 1.772 1.601 1.751 –10.9
Improved pastures 381 395 360 367 452 506 479 605 615 61.4
Natural pastures 3.936 3.661 3.749 3.674 3.688 3.587 3.244 2.960 3.109 –21.0
Total pastures (B) 4.317 4.055 4.109 4.042 4.140 4.093 3.724 3.565 3.724 –13.7
Forestry* (C) 1.140 1.218 1.345 1.436 1.484 1.568 1.614 1.650 1.737 52.4
Total pastures & forestry
(B + C) 5.457 5.273 5.454 5.478 5.624 5.660 5.338 5.215 5.461 0.0
TOTAL (A + B + C) 7.422 7.214 7.372 7.352 7.407 7.442 7.110 6.816 7.212 –2.8
*Forestry refers to pine and eucalyptus plantations.
Source: ODEPA (1994), ODEPA <http://www.minagri.gob.cl/base-datos/estadísticas/produ/suelo/suelo-psa.html> (November 2001).
JOA2.4C02 9/10/02, 10:15479
480 Cristóbal Kay
vigorously, as they have done continuously throughout the years. Any conces-
sions they have gained have tended to be temporary. They are thus forced by the
competitive pressures of liberalized markets to modernize their farm enterprises
constantly.
As can be observed from the last column in Table 3, the cultivated area declined
by 10.9 per cent between the agricultural years 1986–7 and 1997–8. There has been
a steep fall of 32.9 per cent in the annual cropped area (i.e. traditional crops),
which is largely accounted for by the dramatic decline in the area sown to wheat.
While during the 1960s Chile cultivated around 740,000 ha of wheat, this had
fallen to an all time low of 362,000 ha in 1993 (Ortega 1994a). However, the area
cultivated with fruits and vineyards grew by 32.6 per cent, while horticulture
and flowers increased by 26.4 per cent between 1986–7 and 1997–8 (see Table 3).
Another major transformation has been the shift from natural pasture to im-
proved pasture and the expansion of ‘artificial’ pasture (such as alfalfa and clover).
While natural pastureland declined by a significant 21 per cent, improved pastures
grew by a remarkable 61.4 per cent and artificial pastures by 29.2 per cent in the
period 1986–7 to 1997–8 (see Table 3). This enhancement of pastures has led to
the recovery of the cattle and milk industry, which was in deep crisis from the
mid-1970s to the mid-1980s. The dramatic transformation of the livestock sector
was much helped by measures such as the establishment of price bands for milk,
which have stabilized prices; the use of improved feeds and electric fencing; and
the reinforcement of strict sanitary measures, which have kept Chile free of foot-
and-mouth disease. However, in recent years, the prices of milk and milk products
have declined significantly due to Chile’s association to the Common Market of
the Southern Cone Countries (MERCOSUR), which has led to cheap food
imports from Argentina.
Impact of Agricultural Exports on Farmers, Workers and Women
The agro-export model has had an uneven impact on regions, farmers and workers.
The boom in fruit exports has been concentrated largely in Central Region. The
employment effect of fruit production has been positive, as it is much more
labour-intensive than cereal, pasture and livestock farming, which it has partially
replaced. Wages in the fruit-export localities have increased gradually over the
years as labour shortages have arisen, especially during the harvest season. Mean-
while, the net employment effect of forest plantations has been negative, thereby
accelerating rural outmigration in the South Region. The rapid expansion of
forestry plantations has furthered land concentration due to economies of scale.
This has exacerbated income inequalities, as many peasants sold their land to
large forestry companies, often becoming proletarians in the process.
Within the Central Region the benefits were concentrated largely in the hands
of capitalist fruit farmers and agro-industries. The fruit export boom encouraged
land concentration as capitalist entrepreneurs bought land from peasant farmers
(principally parceleros) who generally did not have the capital to shift from crop
cultivation to fruit farming (Carter et al. 1996). In the few instances where
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 481
peasant farmers did manage to engage in fruit production, a significant proportion
later sold part, or all, of their land to capitalist farmers or fruit agro-industries as
they could not repay their accumulated debts resulting from their initial investment
in fruit trees (Murray 1997; Bee 2001). This has led to a reconcentration of land
in the fruit-growing regions (Gwynne and Ortiz 1997). While in 1986–7 peasant
farmers still had 21.5 per cent of the country’s land with fruit trees, this had
fallen to 15.2 per cent in 1993–4 (AGRARIA 1996).
The neoliberal restructuring of Chilean agriculture has had a dramatic effect
on the composition of rural labour (Rodríguez and Venegas 1989). While in the
early 1970s about two-thirds of agricultural wage labour was permanent and a
third temporary, by the late 1980s these proportions had been reversed (Falabella
1991). It is estimated that 60 per cent of these temporary wage workers are
employed in export fruiticulture (Stephen 1991).
The fruit export boom has also had a remarkable impact on the gender com-
position of the agricultural labour market, as well as changing gender relations
within the peasant household (Bee and Vogel 1997; Valdés and Araujo 1999). While
in the past wage employment for rural women was very limited, it expanded
considerably with the growth in NTAEs (Venegas 1992). Male agricultural wage
labour declined by almost a fifth, while female wage workers increased by over
a fifth between 1986 and 1994 (Carrasco and Véliz 1996). It is estimated that
between 52 and 70 per cent of temporary workers in the fruit labour market are
female (Barrientos 1997, 76). These are the temporeras who constitute a new form
of agricultural labour and who played a key part in the rapid expansion of fruit
exports. While most of the permanent fruit employees are male, women still com-
prise almost half of total fruit employees, as most work is temporary. Capitalist
farming has tapped this new source of cheap rural labour from the peasantry’s
reserve army of labour (Tinsman 2000). Female workers have become a key
ingredient in the success of Chile’s fruit export agribusiness sector (Barrientos
et al. 1999).
Another significant transformation has been the increasing proportion of rural
labour of urban origin. It is estimated that between 20 and 30 per cent of the
agricultural labour force resides in urban areas, thereby breaking down the tradi-
tional rural–urban duality. This percentage swells to 50 per cent in some regions
during the fruit harvest season. About a third of temporeras come from urban
areas, which reflects the increasing ‘urbanization’ of rural labour markets since
the dissolution of the latifundia system, with the agrarian reform and the sub-
sequent counter-reform (Venegas 1993).
In short, the neoliberal agro-export model has led to an increasing shift from
permanent to seasonal wage employment as well as to a feminization and urban-
ization of rural labour markets.
DEBATES ON RECONVERSION AND THE PEASANTRY’S FUTURE
One of the more distinct and novel policy initiatives of the Concertation govern-
ments has been the attempt to modernize peasant agriculture, thereby hoping to
JOA2.4C02 9/10/02, 10:15481
482 Cristóbal Kay
raise peasant living standards and to ensure its survival. I will focus my analysis
on one such attempt, generally referred to as ‘reconversion’ (reconversión), but also
as ‘productive reconversion’, ‘productive transformation’, ‘readaptation to more
profitable options’, ‘new productive and market options’ and ‘adjusting the pro-
ductive structure’. In a broad sense, reconversion means changing agriculture’s
traditional cereal–pasture–livestock productive structure to one that is geared to
more profitable and dynamic markets such as fruit and forestry exports (Bravo
1994). During the military regime, it has been the capitalist farmers who, as
a result of a variety of stick and carrot measures, have learned to change their
productive structure according to changing market conditions. Due to the disad-
vantaged position of the peasantry, they have been less able to adjust to the new
market conditions and thus increasingly have lost their competitive position.
Government policy, land and credit markets, commercial networks and access to
new technologies all favoured capitalist farmers and further marginalized peasant
farmers. The Concertation governments, through a series of reconversion meas-
ures, aimed at enabling and improving peasant agriculture’s ability to adapt to
Chile’s increasing exposure to global competition and to enter into the more
dynamic export market. This was to be achieved by enhancing efficiency and
shifting traditional production and land use patterns to new and more profitable
products, thereby increasing the peasants’ competitiveness. Although no com-
prehensive and coherent programme of reconversion for peasant agriculture has
so far emerged, the Concertation governments have taken a series of measures
that have pursued this objective, albeit in a haphazard way.
According to the Ministry of Agriculture (ODEPA 1993, 5), reconversion
pursues the following three aims. The first is to increase yields and lower unit
cost for those principal crops that producers find difficult to substitute, such as
wheat, maize and rice, so that they can remain competitive compared with for-
eign producers. The second is to promote new and more profitable alternatives.
However, to achieve this aim is more difficult, due to soil, climatic, financial,
technological and other restrictions. This reconversion option takes more time to
achieve as well as being more expensive. The third is to improve the economic
efficiency of the various stages of the production process and the marketing
chain, both at the input and output levels.
While reconversion is aimed at all producers, the government singles out peasant
farmers for special assistance, although they believe that it is the medium-scale
capitalist farmers, defined as those owning between 20 and 80 BIH, that have
the greatest productive potential. But the reconversion programme for peasant
agriculture is limited to those whose income is mainly derived from on-farm
agricultural and livestock production, and which provides them with at least a
yearly minimum income (ODEPA 1993, 7).
Although the peasant farm sector has largely been unable to reap the benefits
of the agro-export boom, it is still important within the rural economy. It con-
trols 39 per cent of the land and contributes about 26 per cent to the marketed
agricultural output, while providing employment for roughly 36 per cent of the
agricultural labour force. Meanwhile, the capitalist farm sector has 61 per cent of
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 483
the land, supplies 74 per cent of the marketed agricultural output and employs
64 per cent of agricultural labour (World Bank 1994, 33–39). However, three-
quarters of the labour employed by the capitalist sector is of a temporary kind,
thereby overestimating the real contribution of this sector to total agricultural
employment (Klein 1995, 3). Thus, in terms of residence, about two-thirds of
the rural labour force are attached to peasant households (Ortega 1994a).
In view of the increasing competitive pressures facing Chilean agriculture, it is
imperative that the government’s agrarian policy is targeted towards peasant
farmers and rural labourers, as they are the most vulnerable groups within the
rural economy and society. One would expect that this would be the case, especi-
ally for the Concertation governments, which proclaim that they are concerned
not only with growth, but with equity and poverty alleviation as well. It is
within this context that the debate on reconversion was beginning to be linked to
peasant farming (Bahamonde 1993). The so-called reconversion of the peasant
economy is referred to by some experts as the ‘second modernization’ of Chilean
agriculture; the ‘first modernization’ was limited to capitalist agriculture (Gómez
1993). Whether this second modernization will have much significance remains
to be seen, but it is unlikely ever to match the first modernization achieved under
the neoliberal policies of the military government and continued during the Con-
certation governments.
Ambiguities of Reconversion
The discussion about reconversion or transformation of production patterns
in agriculture reflects perhaps the most serious attempt by policy makers of the
democratic governments since 1990 to set out a distinct agrarian policy. It is a
debate full of ambiguities, revealing the differences within the coalition of centre-
left political parties forming the Concertation government. It reflects many of
the dilemmas and problems faced by the democratic governments that wish to
continue the process of Chile’s integration into the world market and favour the
agro-export capitalist sector, but at the same time aim to reduce inequalities by
strengthening the peasant sector. The debate is a way of coming to terms with
the fundamental continuity of neoliberal agricultural policy under the democratic
regimes. It is an attempt to design agricultural policies that not only minimize
the negative impacts of neoliberal policies, but also reduce the technological and
widening income gaps between capitalist farming and peasant farming.
Ambiguities remain as to the meaning of reconversion, as to who should be
the main beneficiaries or target groups, as to the length of the process, as to the
resources required, as to the extent to which reconversion should be linked to
poverty alleviation, and so on. While government policy makers and experts
have made much reference to reconversion, to date no integrated and properly
funded programme of reconversion for the peasantry has emerged.
In the first years of the Concertation governments, no mention was made to
reconversion but the discussion became particularly intense in the years 1993 and
1994, when the Concertation coalition political parties tried to design the agrarian
JOA2.4C02 9/10/02, 10:15483
484 Cristóbal Kay
policy of their presidential candidate, Eduardo Frei ( Jr), who duly was elected. The
more technocratic or market-oriented wing of the Concertation takes a broader
view of reconversion. They define it as any process by which the agricultural
production structure adjusts to the new international and domestic market con-
ditions by either shifting from less profitable activities for more profitable ones,
or by increasing efficiency of existing agricultural activities, or a combination of
both. Meanwhile the more socially oriented or ‘peasantist’ wing of the Concerta-
tion limit the use of the term exclusively to the peasant sector, as they argue that
the government’s agrarian policy should concentrate on supporting the peasant sec-
tor in its efforts at adjustment and survival. In their view, the new agrarian policy
should strengthen peasant farmers rather than capitalist farmers, as in the past (Rojas
1993). This requires a differential agrarian policy that favours peasant farmers so
as to overcome market obstacles and the anti-peasant biases of earlier policies.
The openness of the Chilean economy makes this adjustment through recon-
version and increased efficiency a continuous process, as this is the only secure
way of remaining competitive. Producers adjust to changing profitability in two
ways: by changing their land use pattern, thereby shifting from less to more
profitable activities and by raising yields. As analyzed earlier, both types of
adjustment have taken place in Chile. But it is necessary to point out that the
ability of producers to adjust varies greatly, depending on entrepreneurship,
farm size, access to capital, technical knowledge, agro-climatic factors, and on
the type and biases of agricultural policy. Capitalist farmers can adjust more
swiftly than peasant farmers, who are constrained by the need to secure a sub-
sistence income and to reduce risks.
While in the past small farms often had higher yields than large farms, with
the spread of the green revolution and the new technologies yields increased
mainly on capitalist farms. These latter thereby overtook peasant farms and the
differences in yields between the two widened continually (Echenique and Rolando
1991b). In the agricultural year 1986–7, wheat yields of large farmers in the
irrigated and dryland Central Region, and in the South Region, were respect-
ively, 18, 59 and 27 per cent higher than those of small farmers (Gómez and
Echenique 1988, 294). Similarly, maize yields of large farmers in the irrigated
Central Region were 46 per cent higher than those achieved by small farmers in
the same region. However, with the introduction of technical assistance and
credit programmes since the late 1980s, some peasant farmers have managed to
improve yields substantially. They have even managed to reduce their yield gap
with capitalist farmers in maize, beans and potatoes. However, it continued to
widen in wheat, rice and sugar beet (Aguirre 1996, 6).
Capitalist farmers were also able to alter more drastically their production
system by reconverting to more profitable agricultural activities as compared to
peasant farmers. However, this does not mean that peasant farmers did not
change their land use pattern. They substantially reduced the land cultivated with
annual crops, while increasing fodder crops for livestock. But the rise in fodder
crops only compensated to a minor extent for the fall in annual crops (AGRARIA
1996). The greater adjustment difficulties faced by peasant agriculture therefore
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 485
call for a more differentiated agrarian policy, which instead of favouring capitalist
farmers, as particularly during the military regime, should ‘take an option’ for
peasant farmers as well as rural wage labourers (Echenique 1992).
Peasant producers have particular difficulties in shifting to more profitable
activities as they have less financial, technical and entrepreneurial resources at
their disposal compared to capitalist farmers. In particular, smallholders are also
tied into subsistence production for food security reasons and can ill afford to
become too specialized or market oriented, as this exposes them to greater risks.
During the military government little was done to remedy this state of affairs, as
economic ideology dictated that the market, and not the state, should drive the
adjustment process. However, due to the severity of the economic crisis of 1982
and 1983 and the increasingly precarious political support for the military regime,
it began to introduce technical assistance schemes mainly for the richer peasant
farmers. This had a restricted impact due to the limited scope of the programme,
but it provided a starting point for the democratic government, which from 1990
started improving the programme of technical and credit support to peasant
producers, while at the same time extending substantially its coverage.
Viable and Non-Viable Peasant Farms
In the discussion on reconversion, a vital distinction is made between viable,
potentially viable and non-viable peasant farms.9 Definitions of what is meant by
these various terms, as well as the estimates of the total number of peasant units,
differ among analysts. Thus the estimates of the numbers of peasants falling into
each category also differ. Sotomayor (1994a, 19) estimates that 100,000 peasant
farm units (50 per cent of the total) have a minimum productive potential for
being viable as agricultural producers. Of these, he considers that 50,000 peasant
units are already viable and a further 50,000 peasant units are potentially viable.
The remaining 100,000 peasant units, or 50 per cent of the total, are too small in
size and generate too little agricultural income. To survive they have to engage
in non-agricultural activities and/or seek wage employment. The peasants that
are deemed to have no productive potential are the minifundistas, or smallholders,
who I would consider as forming a semi-proletarian peasantry, as about half or
more of their yearly income is derived from wage employment. Meanwhile,
Ortega (1993a, 7) mentions the figure of 240,000 peasant farmers, of which, in
his estimate, 140,000 are minifundistas with little potential for productive devel-
opment, while the remaining 100,000 peasant farmers have sufficient resources
for modernizing their enterprises and embarking on alternative, more profitable,
productive activities.10 Despite the variations in estimates and categorizations of
peasant farmers, most authors agree that at least half of the peasant units (largely
9Criteria for calculating and determining a minimum viable farm unit are given in Namdar-Irani
and Quezada (1994, 19–22). Some authors, like Aguirre (1994) and Sotomayor (1994b), prefer to
speak of peasant farmers with productive potential and those without productive potential.
10 The latest official estimate of the number of peasant farmers is 278,000, but they are no longer
differentiated by their productive potential (Minagri 2001a, 96).
JOA2.4C02 9/10/02, 10:15485
486 Cristóbal Kay
the minifundistas) have too few resources to be able to make a meaningful adjust-
ment in their production process that would secure their future as producers.
PEASANT RECONVERSION PROGRAMMES
According to Leiva and Sotomayor (1994, 1), about half of the peasant farmers are
linked to some development project of the government and/or non-governmental
organizations (NGOs). While during the dictatorship most NGO rural develop-
ment projects were financed by foreign donors, today most of them are financed
by the Concertation government (Sotomayor and Leiva 1995). There has been a
vast increase in rural development projects aimed at the peasantry as compared
with during the military government, but it has to be recognized that resources
are thinly spread and many of these projects have only a limited, and at times
temporary, impact upon the peasant economy. Most of these projects are not
specifically aimed at reconversion, although they often support it, but they indic-
ate the far greater degree of commitment to the peasantry of the democratic
governments compared with the Pinochet regime.
Many of the peasant reconversion projects are accompanied by technical
assistance as well as credit and marketing services through the Programme of
Technological Transfer (PTT). In 1995, the government provided credit to over
80,000 peasants and about 10 per cent of them were women (INDAP 1996, 25,
40). However, not all smallholders qualify for PTT assistance, as it is restricted
to only those enterprises that generate as a minimum an on-farm surplus equivalent
to the annual minimum wage (Namdar-Irani and Quezada 1994, 19). Accord-
ing to a World Bank (1994, 37–8) study, for almost 150,000 peasant households
on-farm income constitutes only 30 per cent of total income, while 40 per cent
originates from wages and most of the remainder from state subsidies and trans-
fers. This indicates that the PTT programme can only be used for at most one-
quarter of peasant farmers as a route to reconversion and already seems to have
reached its limit. Indeed, while between 1990 and 1993 its coverage increased
rapidly from over 32,000 peasant farmers to about 50,000 in 1993, the number of
recipients then stabilized, rising only slightly thereafter (INDAP 1996, 28). While
before 1990 the PTT recipients were confined largely to the richer peasant
farmers, since 1990 additional beneficiaries have included poorer smallholders,
although, as mentioned, not the poorest as these failed to qualify for the PTT
(Berdegué et al. 2002).
As part of its reconversion strategy, the government has also been seeking to
incorporate peasant farmers into the benefits of the subsidy system for reforesta-
tion (Decree Law 701), which previously was restricted almost exclusively to
capitalist farmers and forestry companies. By 1994, 1400 peasant enterprises cov-
ering 3600 ha participated in the peasant forestry programme of INDAP and
CONAF (Ortega 1994b, 11). The main obstacle for the forestation of peasant
land is lack of finance, as it involves major initial investments that take years to
yield any benefits. For example, a typical forest in Chile can only be harvested
after 10–15 years for cellulose or 20–25 years for timber.
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 487
In furthering reconversion, the government is also encouraging linkages
between agro-industry and peasant farmers. For example, a horticultural devel-
opment plan linked to more than 100 food processing plants is envisaged.
The former Minister of Agriculture, Emiliano Ortega (1994a) estimated that the
country could expand horticulture from 110,000 ha in 1994 to no less than
250,000 ha over a period of 15 years. The government has also initiated projects
that stimulate the cultivation of NTAE like flowers, seeds and bulbs. Flowers
have so far been destined largely for the local market, while seeds and bulbs have
begun to penetrate the export market in a significant way. It has been shown that
those peasant farmers who enter into contract farming agreements have achieved
substantial increases in yields, reaching levels similar to those of capitalist farmers,
as the agro-industry supplies the necessary finance, modern inputs and technical
assistance (Apey 2000, 20). The significance of this experience is that it does
reveal that some peasant farmers have the capacity to raise yields substantially
and become competitive if they are given the appropriate means (Schejtman
1994). But this practice has often been limited to the richer peasantry and has as
yet failed to reach the poorer peasantry.
A note of caution has to be sounded, as agribusiness is not the panacea for
peasant development that many government policy makers believe it to be.
Some agro-industries have abused their market power to the detriment of the
peasantry. For example, a detailed study of tomato cultivation under contract
farming argues that it has not led to the widespread modernization of peasant
agriculture, but has instead reinforced existing processes of socio-economic dif-
ferentiation (Peppelenbos 1996, 156). In the case of grapes, a researcher has found
that contract farming has accelerated differentiation and disintegration by con-
verting rich peasants into peasant capitalists, while furthering the proletarianization
of poorer peasants (Korovkin 1992). However, in other instances experiences of
contract farming with agribusiness have been more positive (Pietrobelli 1993;
Casabury 1999). Thus the following is suggested:
Contract farming is not simply a dynamic partnership benefiting two equal
partners, nor is it an exploitative relationship between dominant agroin-
dustries and disguised proletarianized farmers. Contract farming is rather a
many-sided, complex phenomenon played out by very heterogeneous cat-
egories of actors, which entails multiple realities and differential outcomes and
consequences for different groups and which should be assessed in specific
spatial-temporal contexts. (Peppelenbos 1996, 155)
That may be an appropriate assessment.
Some of the reconversion projects are aimed at strengthening the productive
capacity of women in the countryside. Although these are few and far between,
they at least introduce in a more explicit way a gender dimension to reconver-
sion. They tend to focus on rather traditional activities such as the development
of garden plots and the construction of relatively cheap and simple greenhouses
near to the house for the cultivation of vegetables, flowers, seeds, etc. There are
also small projects that seek to encourage and improve the methods of raising
JOA2.4C02 9/10/02, 10:15487
488 Cristóbal Kay
small animals and of developing other productive activities such as bee keep-
ing (Barría 1992). Many of these projects are aimed specifically at indigenous
women.
Irrigation projects do greatly facilitate farmers’ productive transformation,
particularly in dryland areas. Greater security and continuity in the supply of
irrigation water leads to increases in yields and allows the introduction of new
crops and other productive activities, which previously were either unfeasible,
too risky or unprofitable (ODEPA 1995a). In 1985, the military government
published Law No. 18.450 (Promotion to Private Investment in Irrigation and
Drainage Works) with the aim of expanding the country’s irrigated area. This
law provided a substantial subsidy to those private entrepreneurs undertaking
irrigation and drainage works. However, only 5 per cent of the total government
subsidies were allocated to peasant farmers during the military regime (Jeria et al.
1994) and rural capitalists captured the remainder. The Concertation government
designed a Peasant Irrigation Programme in 1990 so as to extend the benefits of
Law No. 18.450 to farmers with less than 12 BIHs. The aim is to assist peasant
farmers in reducing the technological gap between them and capitalist farmers.
By 1994, 679 projects had been submitted involving 31,439 peasant families and
contemplating the irrigation of 157,661 ha, i.e. on average 5 ha per beneficiary,
and costing on average US$1400 per peasant unit (Furche 1995, 39).
An evaluation of the government’s technical assistance programme (PTT)
revealed that peasant farmers situated in favourable agro-climatic regions and those
with irrigated land were able to report substantially greater benefits compared to
those located in less favourable regions and especially in dryland areas. However,
the introduction of new and potentially more productive agricultural activities
was less successful even with the better-off peasant farmers (Sotomayor 1994b).
Furthermore, any extension of the PTT would require substantial additional
economic resources, as the cost for deepening, and especially widening the pro-
gramme to the poorer smallholders, would escalate enormously (Comité Inter-
ministerial de Desarrollo Productivo 1998, 40). This reveals the difficulties that
any programme of reconversion will have to face if it wishes to be successful and
incorporate a larger number of peasant farmers.
CONCLUSION: OUTSTANDING DILEMMAS AND CHALLENGES
Chile’s agrarian transformation has indeed been remarkable. Within the Latin
American context it has achieved the highest rate of NTAEs over the last quarter
of a century, becoming a major exporter of fruit and forestry products on a
global scale. Neoliberals claim that this achievement is due to the market reforms
introduced by the Pinochet government. But they tend to either ignore or
downplay the underside and high social costs of this transformation, such as the
repression of labour, the counter-reform, the increase in rural poverty, the rising
inequality and the environmental damage. Structuralists argue that the picture is
more complex. They not only remind neoliberals of the costs of such trans-
formations, but also point out that the developmentalist state sowed the seeds
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 489
for them and that many of the costs could have been avoided. In particular, the
governments of Frei (Sr) (1964–70) and Allende (1970–3) brought about some
key changes in the rural economy and society without which the subsequent
neoliberal policies would have faltered or been far less successful in terms of the
growth achieved by agriculture and particularly by the NTAEs. For example,
they argue that the agrarian reform broke the stranglehold which landlords had
over land and other resources, thereby facilitating the subsequent development
of a land market and the emergence of a new class of capitalist farmers and rural
entrepreneurs. Furthermore, earlier investments by the developmentalist state
helped to set up an agro-industrial sector, an agricultural research and technolo-
gical capacity, forestry plantations, and a string of storage and marketing facil-
ities, among other enterprises. Many of these enterprises were state-owned and
together with other public–private ventures they had laid the foundations for sub-
sequent developments in the neoliberal period (Murray 1999). But it cannot be
denied that neoliberals had far greater faith in the world market than structuralists
and thus ventured with far greater determination than hitherto in exploiting the
possibilities for NTAEs.
The achievements of the Concertation governments have been to continue
with the NTAE success of the previous regime, obtain reasonable rates of growth
in agriculture and, above all, substantially reduce rural poverty. Rural poverty
has fallen from 39.5 per cent in 1990 to 23.8 per cent in 2000 (Mideplan 1999a;
Feres 2001). This is the result of the social policies introduced by the Concertation
governments and the important improvements made in the provision of basic
rural services such as education, health, housing, clean water and electricity. The
rural poor are concentrated among the seasonal wage workers and the smallholders
or minifundistas, especially in areas of poor quality land and areas where the
indigenous people (largely mapuches) are concentrated. What is worrying is that
the rate of decline in rural poverty, especially of extreme poverty, has not been
sustained in recent years, indicating that the development model is failing to get
rid of poverty altogether. While extreme rural poverty or indigence fell from
15.2 per cent in 1990 to 9.8 per cent in 1992, since then it has been reduced to
only 8.3 per cent (Barril 2001).
A further matter for concern is the lack of improvement in equity. For the
country as a whole, the Gini coefficient, which is generally used as a measure for
income distribution, has practically remained constant at around 0.56 (Mideplan
1999b, 130; Feres 2001, 35). While in 1990 the richest quintile of households had
an average income 12 times higher than the poorest quintile, in 2000 this had
been reduced to only 11.5 times. In the countryside, the income distribution was
slightly better, but the richest quintile of rural households still had an average
income 8 times higher than the poorest quintile in 2000 (Feres 2001, 34). But the
distribution of income in the rural sector deteriorated slightly. In 1987, the poorest
20 per cent of rural households received 6.9 per cent of the total income, but in
1996 they only received 6.3 per cent. Meanwhile, the richest 20 per cent of rural
households increased their share of total income from 48.1 per cent to 48.4 per
cent during the same period (Portilla 2000, 69–70).
JOA2.4C02 9/10/02, 10:15489
490 Cristóbal Kay
Government policy has also failed so far to reduce the technological gap
between capitalist farms and peasant farms. On the contrary, this gap has con-
tinued to widen, exacerbating the ‘new dualism’ in contrast to the old dualism.
In the past, the difference between the minifundia and latifundia was largely based
on the amount of land each possessed and small farmers generally had higher
yields than large farmers. Meanwhile, today farm size inequality is significantly
less than in the past, due to the agrarian reform and parcelization of the reformed
sector, but capitalist farmers have achieved major improvements in yields, while
most peasant farmers have remained locked into their old crop patterns and
farming practices. As mentioned earlier, the government’s reconversion policy
has largely failed to reach the minifundistas and no clear and comprehensive policy
has yet emerged regarding how best to tackle the admittedly difficult problem of
the smallholders. While Chile continues to widen and deepen its integration into
world markets, the size of the farm enterprise and its level of capitalization is
going to become even more important as new technologies and new economies
of scale favour larger enterprises. Thus there seems to be an inevitable tendency
toward continuing land concentration and the further relative, and even absolute,
decline of peasant farming. This leads to the following questions. Should the
government abandon peasant farmers completely to market forces or, on the
contrary, should it launch a major development programme that would radically
strengthen peasant agriculture? The latter option does not seem feasible at present,
as it would entail reviving the agrarian reform issue, require huge transfers of
economic resources to peasant farmers as well as a series of protective measures.
These pro-peasant programmes would mean abandoning much of the remaining
neoliberal traces in government policy as well as partially reversing Chile’s open-
ing to world markets.
In the meantime, the government is still unable to confront fully the dilemma
facing the peasantry: capitalization or proletarianization?11 Should INDAP, the
Ministry of Agriculture’s agency responsible for peasant farmers, concentrate
the limited resources it is allocated in assisting those peasant units that have a
greater chance of success, i.e. the already viable and richer peasant farm sector?
Or should it be targeting the minifundia or poorer peasants where success would
be more limited and require more resources, but where state assistance is most
needed? This is the quandary that the government and specifically INDAP is still
seeking to resolve (Ortega 1993b). Meanwhile, it has continued putting more
emphasis in its development programmes on those peasant producers that have
greater productive potential and they thus consider have greater chances of suc-
cess, while leaving the remainder to be dealt with by other institutions that have
poverty alleviation programmes. However, in the last few years INDAP has
shifted its emphasis to micro-regional and local development projects that are
characterized by certain agro-ecological homogeneity and where a certain degree
of organization exists among peasant producers. This has the advantage of
11 For a discussion of the trajectories of the peasantry in the developing world, see Bryceson et al.
(2000). A succinct overview for Latin America is presented in Kay (2000).
JOA2.4C02 9/10/02, 10:15490
Chile’s Neoliberal Agrarian Transformation and the Peasantry 491
concentrating resources more effectively and of incorporating most peasants of
that particular area into these rural development projects, thereby allowing the
inclusion of minifundistas or smallholders (INDAP 1999).
While the government continues to dither as to how best to deal with the
peasant question, some scholars, like Larraín (1996), predict further land concen-
tration due to new opportunities for exploiting economies of scale. They argue
that Chile’s association with regional integration schemes, like MERCOSUR,
will lead to greater competitive market pressures resulting from lower tariffs and
reduction or elimination of other protective measures. Many small farmers will
be unable to survive and this, in my view, could result in an ‘agrarian-reform-
in-reverse’, as liberalization and regional integration processes are continually
enhanced. It would indeed be ironic if the same centre and left-wing parties that
implemented the state-driven agrarian reforms from 1964 to 1970 and 1970 to
1973, respectively, would allow such a silent market-driven counter-reform to
happen. To avoid such a scenario, the Concertation government has to take
more effective preventive counter-measures. Already, in recent years, land con-
flicts have intensified due to land encroachment by forest plantation companies
and other large farmers, as well as increasing land scarcity. Indigenous groups in
southern Chile have started to invade land belonging to capitalist farmers, claim-
ing that the land used to belong to the peasant community sometime in the past.
At times such land invasions have resulted in violent clashes, last witnessed
during the agrarian reform years. These land occupiers demand that the govern-
ment expropriate the land and transfer it to them. But so far they have had only
limited success in achieving their goal, as the government does not wish to
antagonize capitalist farmers and resurrect the ghosts and traumas of the past.
Is there going to be then a market-induced process of contraction of the
peasant economy, especially of the so-called unviable or low productive poten-
tial peasant farm sector (i.e. the minifundia)? Different tendencies are at work and
the net outcome is difficult to predict. Smallholders will cling on to their land as
long as they cannot find a better alternative or unless they are forced to sell due
to indebtedness. Most smallholders, it seems likely, will not give up their land
but instead will seek, increasingly, temporary employment outside the farm and/
or engage in a variety of non-farm activities so as to be able to make a living.
Indeed, an increasing proportion of the smallholders’ income is being generated
from wages, thereby indicating their increasingly semi-proletarian condition.
According to some estimates, about half of smallholders’ income comes from
on-farm agricultural activities and most of the remainder is wage income
(Mideplan 1999c). Other surveys still find that small farmers’ dependence on off-
farm wage work is even higher, as these wage earnings contribute almost two-
thirds of their total household income (López 2000, 188). Some of these peasants,
no doubt, will become fully proletarianized. This is happening particularly in
poor rural areas, where the rate of outmigration from small farming commun-
ities is highest (World Bank 1994).
Peasant organizations are today still extremely weak in terms of membership
and their influence on employers, despite the democratic transition (Gómez 1996).
JOA2.4C02 9/10/02, 10:15491
492 Cristóbal Kay
Their impact on government policy is also very restricted, at least by comparison
with capitalist farmers, although the latter group has less influence on govern-
ment policy than in the years of military rule. Only 7 per cent of the workers
employed in the agricultural, forestry and fishery sector are affiliated to a trade
union (Rayo 1999, 27). Thus rural wage workers have little negotiating power
regarding their conditions of employment and level of wages. Increasingly,
seasonal wage workers are not even directly employed by capitalist farmers or
agro-industrial entrepreneurs, but by contratistas who are subcontractors. These
subcontractors take advantage of the labour legislation inherited from the dicta-
torship years that makes it very easy to hire and fire workers. In recent years, the
Concertation governments, after fierce opposition from employers, have man-
aged to introduce legislation that leaves agricultural workers slightly less unpro-
tected than in the past. But still much remains to be done. Given that a significant
proportion of the rural population are wage workers and that half or more of the
smallholders’ income derives from wage work, it is imperative that the govern-
ment continues to support rural trade unions in their efforts to increase member-
ship and bargaining capacity with employers. Above all, the government should
continue to remove the remaining legal obstacles for rural workers to organize
and strike. It is likely that once these obstacles are removed and rural trade
unions are able to increase their negotiating power with employers, this will
stimulate rural workers to join trade unions in greater numbers and engage more
actively in their activities. Under such conditions, it is possible that employers
will have to offer better working conditions as well as higher wages, thereby
contributing to the further reduction in rural poverty.
There are some uncertain years ahead for the agricultural sector, as the ‘easy
agro-export phase’ is showing signs of exhaustion and farmers face increasing
international competition, both in the export market and the domestic market.
While some capitalist farmers might rise to the challenge, peasant farmers might
find the going tougher and some might have to give up farming altogether. In
this sense, reconversion of peasant farmers cannot be considered as a panacea
either, as even after reconversion some may still be unable to withstand the
increasing competitive pressures that a further integration into the world market
entails. Nevertheless, a properly funded and supported reconversion programme
could become an important option for ensuring a future for some peasants.
Other measures, such as the development of agro-processing, ecological farming
and non-agricultural activities (for example, rural tourism and other services),
may also offer new opportunities for peasant farmers (Razeto 1999; Cox 2001).
The consistently high rates of economic growth achieved by the Chilean
economy since the mid-1980s have to a large extent been obtained by ‘mining’
the country’s natural resources. The country was able to exploit its comparative
advantages due to the richness of its minerals and seas, as well as the favourable
agro-climatic conditions for fruit and forest plantations. However, little value
added was created, natural resources have been partially depleted and the envir-
onmental costs have been high. For example, forestry exports have led to the
destruction of much of the native forest. Furthermore, little processing was
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Chile’s Neoliberal Agrarian Transformation and the Peasantry 493
involved, as most of the wood was sold as cellulose and wood-chips. The cellu-
lose and fruit processing plants, as well as the fish farms, have polluted rivers and
lakes, and fruit farming has damaged the health of workers through its heavy use
of harmful pesticides and other chemicals (Quiroga and Van Hauwermeiren 1996).
Thus some authors are beginning to question the sustainability of this primary-
export growth model (Claude 1997). This is certainly a discussion that is going
to gain increasing importance in Chile and is particularly relevant for those
countries that wish to learn from the Chilean experience.
While Chile has become a model for many countries, and its achievements
have indeed been remarkable, this should not lead to complacency in view of the
above criticism, as well as others, and the outstanding problems.12 To resolve
these problems is no easy task, due to the relative weakness of today’s state
resulting from the neoliberal reforms and the wider process of globalization. In
the pre-1973 period, the state controlled far more economic resources, especially
during the 1964–73 years, and the economy was more insulated from interna-
tional economic events. With the opening of the Chilean economy to global
market forces, the interests of transnational agro-industrial and finance capital
have also an increasing influence on the country’s economic and specifically
agrarian policy. Politically, the democratic governments since 1990 have also less
room for manoeuvre than in the pre-1973 period, as the Pinochet dictatorship
created a new Constitution that severely restricts the possibility of introducing
legislation favourable to workers and peasants. Thus today’s state needs to acquire
additional economic resources, to strengthen its institutional capacity and effici-
ency, and to gain greater support and legitimacy if it is minded to tackle these
fundamental problems. The government will have to obtain important conces-
sions from those sectors of society that most benefited from the dictatorship and
have continued to benefit during the democratic transition. For the Concertation
to achieve some of its more radical goals, it would need to change the Constitu-
tion, for which it would require the support of some of the opposition parties so
as to obtain the required two-thirds majority in both houses of parliament. The
prospects for such a scenario are not very promising at present, as the Concertation
coalition of parties has lost some electoral support in recent years, while the
right-wing opposition has gained electoral strength and are poised to win the
presidency in the next elections.
A radical and comprehensive programme in support of smallholders and rural
wage labourers, especially seasonal workers and women workers, is required if
rural poverty is to be eliminated (SERNAM 1997). Some authors even call for
measures that go far beyond reconversion, calling for the Concertation govern-
ment to shed the last remnants of neoliberalism altogether (Murray 2002). This
12 For a critical analysis of ‘Chile’s free-market miracle’, see Collins and Lear (1995), and Martínez
and Díaz (1996). A more upbeat account on Chile’s development performance, especially in compari-
son to the rest of Latin America, is given in Stallings and Peres (2000). For a powerful analysis of the
dark side of the Concertation governments, see Petras and Leiva (1994), Facio (1996) and Leiva
(1996). The question of whether Chile has become a new ‘tiger’ or is just another ‘cat’ is discussed in
Hojman (1995b).
JOA2.4C02 9/10/02, 10:15493
494 Cristóbal Kay
necessitates fresh and bold political initiatives from the government as well as a
major commitment to channel additional resources to the rural sector. The country
should be able to afford this transfer of resources, given that the annual income
per capita is close to US$5000 (World Bank 2001). Furthermore, the amounts
involved would not be too large, as the non-agricultural sector generates over
90 per cent of the total GNP and less than 15 per cent of the total labour force is
employed in agriculture (ODEPA 2001).
No process of modernization and democratization can be complete unless the
country has tackled, if not fully resolved, the outstanding agrarian question. In
the mid-1990s, a debate on the ‘new rurality’ has started in Chile that has brought
together representatives of different political parties and organizations as well as
different social groups in the countryside who are united in their common defence
of the rural sector (Comisión Técnica Especial Agrícola 1995). They argue against
the neoliberal technocrats in government who do not attach a special value to
rurality and are thus not particularly concerned with the country’s rapid derural-
ization and all that goes with it in terms of changing livelihoods, culture, landscape,
village life and so on (Echenique 1999). It is high time that this debate was joined
in view of the persistence of rural poverty, ecological problems, increasing global
competitive pressures and the continuing rural depopulation (Gómez 2002). In
response to the widespread mobilization in recent years of capitalist and peasant
farmers, due to the increasing economic difficulties they have encountered and their
fears of further competitive pressure from abroad, the government engaged in long
negotiations with their representatives and key parliamentarians. These protracted
negotiations resulted in two major accords that go some way in addressing their
concerns (Minagri 2001b, 2001c). The government, influenced by the debate on
new rurality, belatedly is recognizing the more fundamental and special prob-
lems facing the rural sector. One of the accords is specifically directed at the
development of peasant family farming. It was signed in October 2001 by six
Ministers, the Director of INDAP (the government office in charge of peasant
issues), and the national leaders of the major peasant, rural women and ethnic or
indigenous organizations. To what extent these on-going agreements will be able
to tackle the problems that have been outlined in this article remains to be seen.
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