Agricultural policies in Uruguay: specific support quantification in 2017-2020 and its link to greenhouse gas emissions

Agricultural policies in Uruguay: specific support quantification in 2017-2020 and its link to greenhouse gas emissions. Felipe García (OPYPA), Maria Noel Ackermann (OPYPA), Ángela Cortelezzi (OPYPA), Natalia Barboza (OPYPA), Nicolás Costa (OPYPA), Natalia Román (OPYPA), Gonzalo Muñoz (BID), Carmine Paolo De Salvo (BID) The Agricultural Policy Office (OPYPA) of the Ministry of Livestock, Agriculture and Fisheries (MGAP) of Uruguay, with support from the Inter-American Development Bank (IDB) under the AGRIMONITOR program, has applied the Producer Support Estimates (PSE) methodology, developed by the Organization for Economic Cooperation and Development (OECD), to generate indicators and information to monitor the evolution and composition of agricultural policy support. In line with the methodology, the questions answered are: What is the level of policy support provided to the agricultural sector and how has it evolved between 2017 and 2020? What is its composition and how does it compare to other countries? On this occasion, direct support was quantified by specific products. Additionally, it was included a chapter referring to general policies in the economy in which the agricultural sector is also beneficiary. These supports are not included in the quantification by the PSE methodology, since they are not specifically designed for the agricultural sector, and they should not be considered (OECD, 2016). However, it allows broadening the scope in order to have a comprehensive picture of the support received by the sector. Likewise, and continuing the study conducted in 2017, the coherence between the objectives of these policies and the national objectives related to climate change was studied. Therefore, the following question was incorporated into the study: what is the relationship between the products that contribute most to GHG emissions and their levels of support? Total Support Estimate (TSE) in Uruguayan agricultural sector averaged US$430 million per year between 2017 and 2020, equivalent to 0.76% of the economy's GDP. General support predominates (41% average 2017-2020), with special emphasis on those associated to innovation and knowledge transfer. Next in relevance are those related to inspection services (of great importance in a food exporting country), infrastructure spending and, with a marginal participation, public support for marketing. The remaining percentage refers to support granted to producers either through budgetary transfers (i.e. direct support for extension services, inputs, fixed assets, income subsidies) or through prices supports, with a share of 25% and 34%, respectively, in the TSE. In the international comparison, Uruguay is situated in the group of countries with low levels of support in relation to the value added of the sector and the income received by producers. Thus, it is in line with countries such as Brazil, Australia, New Zealand and Chile. According to the contribution of each product to total emissions, it is possible to infer the consistency between the transfers to each one and country’s goals related to climate change. It is concluded that agricultural policies that generate differences between producer prices and the international reference are focused to activities with less impact on climate change. Exports items, which are the ones with the highest amount of GHG emissions, do not have border policies that distort prices and, although they have direct support, these are low in relation to the income generated and are in some cases are related to adaptation or mitigation of climate change effects. This information is a useful input for various public policy applications in OPYPA, in other areas of the MGAP and in public institutions in general. It is considered a relevant tool for the diagnosis, design and management of agricultural policies, as well as for generating a comprehensive picture of the level and evolution of agricultural support as a whole and disaggregated by product. Finally, it is a tool of great potential for government dialogue and negotiations with other countries (especially on trade issues) and with producers. This compilation could be an interesting input for future studies, comparing, for example, with the tax contributions made by the agricultural sector, or to discuss about the efficiency of spending that support the sector. It could also be an input for further regional or international comparison and generate specific analyses on the composition of public spending on research, education and inspection and control. In turn, it could be complemented with a more comprehensive approach of the environmental dimension, beyond the GHG emissions, and visualizes the impact on other resources such as the use of water, soil and energy.