The “Troika” and the Portuguese agriculture

During the nineties of last century a new concept emerged in the agricultural economics literature: rural renaissance. In a simplified way this new concept can be defined as a specific phase in the economic development process of affluent societies, in which the rural world gains higher relative importance. The rural world now includes not only the traditional agricultural activity, but also many of the economic activities usually located in the large urban communities. In other words it means the migration of industries and services from large centers to rural areas. And this movement is also accompanied by the renaissance of agriculture itself, both in terms of new farmers and new technologies.

References to renewed agricultural practices have recently been made in Portugal. More specifically it has been said that a few subsectors within agriculture have witnessed important rates of growth in production. 

In order to test the existence of such evolution, we looked at the main economic indicators for agriculture in the twenty first century, namely the Output of Agricultural Industry (OAI), the Gross Value Added (GVA), the Gross Fixed Capital Formation (GFCF) and Agricultural Labor Input (ALI). Moreover we tried to identify the subsectors where a notorious production growth could have taken place.

 In Table 1 it is not possible to detect clear tendencies of growth or contraction either for OAI or GVA. The fluctuations observed must be due to weather randomness rather than any other factor. On the contrary GFCF registers a fall of 2.3% during the period.

These same performances are well illustrated in Figure 1.

Table 1 - OUTPUT, VALUE ADDED, FIXED CAPITAL FORMATION AND LABOR USE IN AGRICULTURE, Portugal, 2000 -2013

Year	Output of the Agricultural Industry (basic prices)	Gross Value Added	Gross Fixed Capital Formation	Agricultural Labour Input
	Constant prices of 2006			Total	Salaried	Non-salaried
	106 Euro			103 AWU
2000	5,926.0	2,684.0	869.5	496.8	80.8	415.9
2001	5,971.9	2,585.6	951.4	500.1	81.5	418.7
2002	6,272.9	2,897.2	914.0	473.7	77.2	396.5
2003	5,986.5	2,666.0	840.9	472.6	78.2	394.4
2004	6,429.5	2,967.3	891.4	446.8	78.8	368.1
2005	5,908.2	2,529.2	769.2	437.3	79.4	357.9
2006	6,040.3	2,713.9	751.6	425.9	77.8	348.1
2007	6,031.3	2,616.0	772.4	416.1	73.4	342.7
2008	6,189.0	2,735.4	727.5	409.8	72.7	337.1
2009	6,150.8	2,642.5	635.5	403.5	69.6	333.9
2010	6,116.4	2,613.8	658.1	371.3	70.8	300.5
2011Po	6,036.6	2,556.3	648.5	356.8	68.0	288.8
2012Po	6,021.0	2,494.9	642.5	355.8	65.2	290.6
2013f	6,048.8	2,585.2	x	354.1	62.4	291.6

Source: INE

AWU – annual work units; Po – provisional data; f - forecast

In Table 1 it can also be seen that, contrary to output, total labor input, suffered a fall of about 2.6% annually. Curiously, and has in Figure 2 shows, there is a slowdown in the fall of labor input in the last three years of the period (2011-2013), which has to be attributed to the light increase in non-salaried labor in those years.

Can it be the case that the increase in self employed labor denotes some renaissance in the Portuguese agricultural sector? And if yes is it a reaction to the unemployment increase in other sectors of the economy as a consequence of the policy measures of the “Program of Economic and Financial Adjustment” imposed by the Troika?

The empirical evidence above does not seem enough for a clear cut positive answer, even because the level of total agricultural output did not show significant changes. At most it can be said that the effects of the policy measures had a positive indirect impact on the establishment of new farmers. And this new blood (both in terms of entrepreneurs and technology) may be responsible for the growth dynamics felt in some subsectors of production.

Table 2 shows the performance of some of the most important subsectors of crop production, as well as the three classic subsectors of animal production.

Table 2 – EVOLUTION OF AGRICULTURAL OUTPUT IN SELECTED SUBSECTORS,

Portugal, 2000-2013

Year	Crop Output						Animal Products
	Total	Fresh Vegetables	Fresh Fruits (except citrus, subtropical, grapes and olives)	Wine	Olives	Olive Oil	Total	Meat	Milk	Eggs
	106 Euro (constant prices of 2006)
2000	3,192.3	502.7	446.5	401.3	136.5	5.2	2,455.8	1,603.9	741.5	91.0
2001	3,243.1	505.5	433.1	449.2	93.2	3.5	2,442.1	1,607.5	717.8	96.6
2002	3,442.0	567.0	513.5	357.5	106.2	3.1	2,523.0	1,652.9	752.4	97.5
2003	3,267.8	579.7	460.2	356.5	108.9	2.8	2,424.5	1,600.3	706.8	99.0
2004	3,478.7	581.7	479.5	384.0	132.7	5.2	2,645.9	1,799.0	728.0	102.9
2005	3,014.6	539.6	474.7	385.7	114.1	4.5	2,594.9	1,736.7	750.9	90.5
2006	3,317.2	534.5	506.3	398.5	147.8	3.9	2,417.7	1,582.4	727.0	91.5
2007	3,274.4	552.9	454.0	383.6	227.4	6.4	2,464.0	1,637.1	717.3	91.9
2008	3,348.1	563.2	492.3	372.7	254.4	7.0	2,517.9	1,676.1	731.8	93.3
2009	3,425.0	585.1	573.8	365.8	336.0	13.9	2,442.0	1,607.2	725.7	92.4
2010	3,450.3	600.5	526.5	419.4	376.4	15.3	2,398.6	1,572.0	708.1	98.8
2011P	3,421.6	597.3	569.4	345.6	419.9	18.8	2,355.2	1,538.9	704.9	92.9
2012P	3,435.6	607.5	512.5	372.1	380.3	14.9	2,332.4	1,516.5	710.5	90.6
2013f	3,583.7	592.5	580.9	376.2	462.8	17.9	2,242.0	1,444.1	682.1	95.4

Source: INE; P – provisional data; f - forecast

The table shows that total crop production growth is almost entirely matched by the decrease in animal products, thus confirming the above mentioned stagnation of total agricultural output. But it is also evident that vegetables, fresh fruits and olive trees production have sizable increments (from1.3% annually for vegetables to 9.9% for olive oil).

These results definitely helped the good performance of the trade balance in recent years. It was in fact in the crop subsectors of Table 2 that exports grew more significantly. Figures in Table 3 cannot be compared with the above data because the lack of direct information on exports in national and EUROSTAT Statistics forced us to use FAO figures. Besides being expressed in US dollars, product typology does not coincide.

Table 3 – EVOLUTION OF EXPORTS OF SELECTED AGRICULTURAL PRODUCTS,

Portugal 2000-2011

Year	Wine	Olive Oil	Preserved vegetables	Frozen vegetables
	1000 US dollars
2000	468,958	58,326	13,145	13,188
2001	435,559	50,101	16,548	15,335
2002	480,770	46,478	18,027	19,157
2003	602,619	55,582	X	20,516
2004	660,693	94,474	24,361	26,919
2005	653,608	117,959	24,411	30,026
2006	665,775	144,378	X	41,044
2007	818,494	151,790	35,831	53,422
2008	851,038	191,323	55,578	70,473
2009	760,776	168,612	55,187	57,269
2010	806,723	211,555	51,446	43,955
2011	907,464	271,056	57,341	55,571

                                   Source: FAO

The information in the table entirely confirms what was said. To point out only the fact that the value of olive oil exports in 2011 allowed for a first positive trade balance.

We can then conclude that the policy measures in the “Program of Economic and Financial Adjustment” did not directly affect the Portuguese agricultural sector. On the contrary the dynamic behavior of some subsectors of crop production definitely fitted one of the objectives of such program:  the improvement of the Portuguese trade balance.

Author: Fernando Brito Soares