Towards a modern rural policy for Chile

This second chapter presents the key pillars of “Modern Rural Development Policies” in OECD countries based on 10 dimensions and examines how Chile’s economy could benefit by implementing this framework to its rural areas. The chapter consists of four main sections. The first starts by describing three general types of rural areas, also present in Chile, and how the role of the rural economy changes through the process of economic development. It then follows with a section describing modern approaches to rural policy in OECD countries highlighting the importance of integrating rural with urban polices in addition to promoting rural development based on the New Rural Paradigm and targeting the enabling condition for growth in rural areas. The third section describes the main rural sectors in Chile and identifies possible areas for growth potential. The final section describes the benefits that are associated with adopting a modern rural policy in Chile.

Introduction

The design and the implementation of rural policies in OECD member countries is changing. Increasingly, policies for rural regions across OECD countries embrace a holistic approach that considers the growth potential of the area based on a more diversified economic base and not just the agricultural sector, then tailoring policies to suit. This “modern” approach to rural development is welcome and is even more significant as countries increase overall levels of development, as in the case of Chile. Typically, this occurs in stages. In the first stage, the modernisation of agricultural activities dominates the rural economy. Policies targeted to rural areas in this stage are mainly social and agricultural. As countries move into higher levels of development, the second stage, rural regions become more diversified and interlinked with urban activities. In this stage, policies in rural areas go beyond social and agricultural policies and target the broader growth potential of rural regions.

  • • What is rural policy?
  • • How are OECD countries managing it?
  • • What is rural policy in Chile?
  • • Its potential - where could rural policy go?

Chile has been rapidly moving into higher levels of development during the past decades. Conceptualizing the role of rural policy becomes more important as a country achieves a higher level of development because the role of rural regions and people becomes more complex and they make an increasingly diverse set of contributions to national economic growth. For this reason, the approach to rural development in Chile must adapt to these changes and evolve beyond the current narrow focus. Specifically, rural policies should adopt a broader vision and, where relevant, contribute to synergies with urban areas to ensure that rural regions reach their growth potential. Moving in this direction would better mobilise the assets and resources in rural regions and ultimately lead to higher levels of productivity, improving living standards and quality of life.

Constructing a coherent rural development policy can help to address some of the regional and territorial challenges in Chile. The OECD Territorial Review of Chile (OECD, 2009a) recommended: moving towards a solid regional governance structure, strengthening multi-level governance arrangements and establishing a governance system for metropolitan areas in order to ensure co-ordination in the delivery of key public services across the communes of the functional metropolitan areas. Maintaining Momentum: OECD Perspectives on Policy Challenges in Chile (OECD, 2011a) highlights some important challenges to territorial development, such as: the need for more context-specific territorial policies, a vulnerability to regional imbalances and a need to shift from “sectoral agriculture policies to comprehensive rural development programmes”. At the same time, the report notes that the country was “gradually evolving towards a model which gives more ‘voice’ to regions”. The OECD Urban Policy Review of Chile (OECD, 2013a) called for a more “coherent policy design and implementation in urbanism”. The study noted that “the highly siloed nature of ministerial activity, a strong centrist approach to sub-national governance and municipal resource gaps have resulted in policy incoherence at the urban level”. This report on the potential for rural development policies builds on previous reviews and adds new strategies as it seeks to provide direction on how to better tap the potential of rural areas in Chile and better align rural, urban and regional policies.

Box 2.1. Key findings from recent OECD studies on urban and regional policies in Chile

  • • The agricultural sector plays a key role in Chile’s economy, but to improve the prospects of rural areas, a shift towards a multi-sectoral place-based approach of rural development is needed. Chile could benefit from greater economic and geographical diversification while continuing to add value to established sectors to make them more competitive. Chile’s lack of economic diversification and over-dependency on commodity goods makes the economy vulnerable to sudden changes in international commodity prices and secular shifts in demand, and may constrain its long-term growth potential. Regional performance varies widely, revealing under-utilised regional potential in Chile (OECD, 2009a).
  • • Place-based policies should be promoted as the potential for regional growth depends largely on how public policies adapt to the specific and varied characteristics and opportunities of the different Chilean regions. Improving access to infrastructure, basic services and telecommunications in rural areas and peripheral regions represents a potential source of growth that would increase the country’s overall growth performance. To improve the prospects of rural areas, there is a need to shift from sectoral agricultural policies towards comprehensive rural development programmes. Chilean regions would benefit particularly from policies aimed at boosting productivity, such as those targeted at innovation and entrepreneurship, and at improving education and training. It will be important to give extended competences to regional governments to allow them to be active in the discussion, planning and co-ordination of regional development policies (OECD, 2011a).
  • • Develop a single and clear definition of urban versus metropolitan areas to more effectively guide policy and decision makers. Ensure that growth-oriented initiatives and policies (e.g. infrastructure investment, active competitiveness policies, education policy, and jobs and skills policy), are targeted as much to medium-sized and small cities as to metropolitan areas. Identify whether policy-based responses are needed to slow poverty growth, for example though further research into the underlying causes of poverty and by determining possible links with domestic migration (OECD, 2013a).
  • • Chile has been remarkably successful in turning its natural resource endowments into a generator of growth and modernisation via strong exports and fiscal discipline, the latter being particularly important in mitigating the impact of external shocks and containing “Dutch disease” pressures. However, specific challenges remain for its mining regions, which often bear the environmental and other costs associated with resource extraction, while reaping only a portion of the benefits. Like many natural resource-intensive regions in the OECD, they face the challenge of successfully developing a critically important primary sector in a manner that can contribute to regional development, including not only economic growth but broader measures of well-being (OECD, 2013b).

Source: OECD (2009), OECD Territorial Reviews: Chile 2009, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264060791-en; OECD (2011), Maintaining Momentum: OECD Perspectives on Policy Challenges in Chile, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264095199-en; OECD (2013), OECD Urban Policy Reviews: Chile 2013, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264191808-en; OECD (2013), OECD Territorial Reviews: Antofagasta, Chile 2013, OECD Publishing, Paris, http://dx.doi.org/9789264203914-en.

Economic growth is relatively common in the rural regions of OECD countries. This suggests that enhancing the growth prospects of rural regions can make a useful contribution to achieving national growth objectives. Accordingly, this chapter looks at the role of rural policy in Chile through the prism of the “modem” approach to rural policy that is visible in OECD countries. The first section sets out a conceptual framework for organising a national rural economic development strategy by looking at the rural economy and economic development, and the changing role of rural areas in Chile as the country evolves into a modern industrialised democracy. Important elements of this analysis include: the different types of rural territory in Chile; the different forms of capital; and the link between the rural economy and the national economic development process. The second section sets out the OECD approach to rural development and suggests how it can play a role in guiding the development of a new rural policy in Chile. The final section analyses some of the key policies in Chile that influence rural development to demonstrate the importance of undertaking a new vision for rural policies.

 
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