Trade and poverty in Paraguay: the case of an agribusiness value chain

We propose a methodology involving surveys carried out among a group of small producers linked to a cooperative (Capiibary) to analyse the link between trade and poverty via the inclusion of small family farmers in a value chain headed by a large exporter in Paraguay, Frutika, to which they sell their output of passion fruit (mburucuyá) and other fruits. The cooperative and the firm are located in one of Paraguay's poorest regions, with a poverty coefficient of 41.8% and an even higher incidence of 46.3% in the rural part of the region. The main focus is on evaluating the impact of the linkage between small farmers and Frutika, the control being a group of family farmers in the cooperative who have no ties to it. The findings as regards the factors accounting for the different levels of poverty and the income effects of participating in the value chain indicate that belonging to the fruit farming chain has a very large influence in explaining why both the poverty gap and the severity of poverty are lower among producers who are in the chain than among those who are not. Poverty falls by much more in the group of producers within the fruit farming chain than among those outside it. Although belonging to the chain improves the relative position of the farmers concerned, it is not a sufficient condition for poor families (which a proportion of these producers are) to be lifted out of poverty. This can only happen if one or more members of these families are also employed as wage-earning agricultural or non-agricultural workers. The findings of the study yield important recommendations for the way in which a virtuous link can be developed between family farming and global value chains