|Exporting High-Value Food Commodities: Success Stories from Developing Countries (WB, 1993, 119 p.)|
|Appendix The development and performance of case study commodity systems|
Chile has been able to use its comparative advantage in production (excellent agroclimatic conditions, extended growing season and production cycles counter to those in the Northern Hemisphere, and relatively low-cost labor) to respond to a significant and steadily upward trend in world demand for fresh and processed horticultural products, particularly in the U.S., the EEC, and Japan. Booming export earnings from the subsector exceeded $717 million by 1989, representing nearly 9% of Chile's merchandise exports and 70 % of its agricultural and livestock exports. Coverage is provided here for two commodity systems-the temperate fruit system which has accounted for most of the expansion and the system for processed tomato products which has undergone a rapid expansion in the past few years.
Temperate Fruits, Chilean exports of temperate fruit date to the 1920s, when small consignments of apples were sent to North America. By the 1950s, when initial investments in cold storage and refrigerated transport were made, small trades in table grapes and pears also developed. However, the industry was poorly organized and remained insignificant in the rapidly expanding Southern Hemisphere fruit trade, then dominated by Argentina, South Africa, Australia, and New Zealand.
This Southern Hemisphere temperate fruit trade would continue to expand rapidly during the 1960s, with Chile barely participating. Investment in fruit production and trade was undermined by widespread rural labor unionization, a significantly overvalued currency, inefficient transport and port handling, and heavy government controls on both imports and exports. The change in government in 1974 was followed by a devaluation of the peso, a liberalization of the trade regime, a reversal of the labor unionization process, and an implementation of reforms in the banking, research, and other sectors. These policy changes, together with an inflow of capital from international development institutions, provided an impetus to private sector investment in the Chilean agriculture and industry.
Investment in fruit production increased substantially in the mid-to-late 1970s, with the planted area growing 30% and fruit production increasing 51% between 1973/74 and 1980/81.4° The industry faced favorable international market conditions with U.S. and EEC import demand for temperate fruits continuing to expand, while the export industries of Argentina, South Africa, and Australia encountered financial, technical and/or political problems, leading to a stagnation or decline in shipments. With the presence of similar growing conditions in California and with many Chileans obtaining their scientific training at the Californian agricultural universities, many of the production technologies used in California's fruit industry were effectively transferred to Chile. This resulted in a significant improvement in Chilean yields and product quality, especially for table grapes. The Chilean industry also benefitted from the fact that table grapes, apples, and other temperate fruits were well-known commodities for which demand was well-established in North America. Chile would merely extend seasonal availability, making use of existing distribution channels for domestic and imported fruits.
While adversely affected by the early 1980s recession, the Chilean fruit subsector experienced a boom during the mid-to-late 1980s, becoming the leading Southern Hemisphere temperate fruit supplier and the world's leading exporter of table grapes. Taking the major temperate fruits together, Chile's share of Southern Hemisphere exports increased from only 9% in 1974-76 to 25% in 1979-81 to 42% in 198788.43 Between 1980 and 1989, increases in Chile's fruit plantings, production, and export volume were 102%, 154%, and 308% respectively--signifying that significant gains were achieved both in production yields and in the proportion of the crop of exportable quality.
Table grapes and apples account for the largest share of Chile's fruit exports, although recent growth has been achieved in the exports of pears, nectarines, plums, peaches, and kiwifruit. With Chile's labor costs only one-third 1° one-fourth those prevailing in New Zealand and Australia, Chilean fruit production has remained profitable despite a reduction in real prices, while many orchards in the other two countries are being uprooted. The decline in prices which have largely been a result of Chile's greatly expanded exports, will make it more difficult for other countries to enter this market. In addition to the partial crop diversification, the Chilean industry has moved to diversify the planted varieties of table grapes and apples so to extend the export marketing seasons for both commodities. While basing their early expansion on table grape exports to the U.S. market, Chilean exporters have successfully penetrated additional markets, each having different tastes, quality requirements, and commercial practices. New market outlets have been developed in Europe, the Middle East, the Far East, and Latin America. Expanded grape production has also given rise to a booming wine production and export industry.
Chile Temperate Fruit Exports
Sources: Barriga (1990); Jarvis (1991)
Technological change both in production and in marketing has been rapid. While Californian technologies are still important, over the past decade Chilean universities and the semi-public, semiprivate Fundacion Chile have developed a local research capacity and are training and employing many agronomists. Marketing technologies have also been upgraded, with the introduction of computerized temperature controls on packing sheds, electronic sizing, and advanced cooling techniques.
The fruit industry now generates gross annual foreign exchange earnings of nearly $700 million, provides employment for about 12 % of the active labor force, and accounts for 46 % of agricultural GDP. Its development has stimulated considerable private and public investments in storage and transport facilities, ports and airports, and communications infrastructure. It has also spawned the development of a large fruit processing industry which, in the future, may be able to take advantage of the already developed fresh produce marketing infrastructure and institutions to compete in international markets.