Structural Transformation in the
Agricultural Sector
Diversity in exports of Moquegua, Peru
Bachelor thesis in Development Economics (15 credits)
Department of Economics Spring 2014
Authors Daniel Delgado & Niklas Olausson
Supervisor Professor Dick Durewall
Acknowledgements
We express our sincerest gratitude to Oscar Guzman that with his passion for development in
Peru served as a great source of inspiration throughout the project.
The authorities of Moquegua deserve recognition for providing the necessary data and we
especially thank José Sarolli for introducing us to them.
Lastly, we are thankful to the Swedish International Development Agency for granting us the
Minor Field Studies scholarship and to our supervisor Professor Dick Durevall for his adequate
and valuable feedback.
Abstract
Economic development does not mean producing more of the same; instead, according to
Rickardo Hausmann and his colleagues, it means to diversify and to produce more sophisticated
goods. This thesis analyzes how this can be done in the non-traditional agricultural sector of Peru.
Export data is obtained from the region of Moquegua and used to trace the development of the
sector. The finding is that the exports of the non-traditional agricultural goods increase in
diversity mainly because of larger production in the fishing industry. The diversification of
exports may help Moquegua and Peru to be less dependent on the mining industry and to
structurally transform the economy. This is important since the current exports generate few jobs
and leave the country vulnerable to shifts in world prices for minerals.
Contents
1. Introduction .............................................................................................................................. 1
2. Theoretical Framework ............................................................................................................ 2
2.1 What You Export Matters .................................................................................................. 2
2.2 The Product Space ............................................................................................................. 3
3. Background .............................................................................................................................. 6
3.1 Structural Transformation in Peru ..................................................................................... 6
3.2 The Agricultural Sector of Peru ......................................................................................... 9
3.3 The Agricultural Sector of Moquegua ............................................................................. 10
3.4 Industrial Policies in Peru and Moquegua ....................................................................... 12
4. Approach and Data ................................................................................................................. 12
5. Results .................................................................................................................................... 13
5.1 Non-Traditional Agricultural Exports ............................................................................. 13
5.1.1 Fishing Exports ........................................................................................................ 15
5.1.2 Agricultural Exports ................................................................................................. 16
5.2 External Factors ............................................................................................................... 18
5.2.1 Restrictions on Capture of Anchovies ...................................................................... 18
5.2.2 World Market Prices ................................................................................................ 19
5.2.3 Gross Production Value ........................................................................................... 21
5.2.4 Characteristics of the Peruvian Agriculture ............................................................. 22
5.3 Policies in Ilo ................................................................................................................... 23
6. Conclusion .............................................................................................................................. 23
7. References .............................................................................................................................. 26
Appendix ........................................................................................................................................ 28
1
1. Introduction
Peru is currently experiencing an unprecedented time of economic growth which is a
result of an increase in exports. These exports are mostly made up by minerals and gas which,
like other natural resources, tend to be both a blessing and a curse for a country. Should the
exports of minerals and gas fall it could lead Peru into an economic crises; a scenario which
occurred in the past. Moreover, the existing export basket is capital intensive and thus generates
few jobs. It can therefore be argued that the country needs to export new goods to have
sustainable growth.
Rickardo Hausmann and his colleagues maintain that what separates rich countries from
poor are that the latter produce fewer and less sophisticated goods. In the light of this, the exports
of Peru need to become more diverse and sophisticated. This process should be done step by step
and be based on possessed capabilities. Peru has the possibility to achieve this in the non-
traditional agricultural sector which consists of fishing and agricultural goods. The definition of
non-traditional agricultural goods is: “goods traditionally produced for domestic consumption but
now exported”.
The purpose of this thesis is to identify the development of the non-traditional agricultural
export in the region of Moquegua, Peru. More specifically, the research question is: Has the
diversity of the non-traditional agricultural export increased? The research question is addressed
by using data of the exports from this sector. The development of it is put under spotlight to see if
and why the export diversifies.
The findings show both an increase and a decrease of diversity in the non-traditional
agricultural sector. The fishing sector diversifies while the agricultural sector does not. An
attempt is then made to explain the causes behind these findings where it is found that some of
the development can possibly be explained due to market increasing market prices and market
characteristics.
Next section introduces the theoretical framework and explains the concepts diversity,
product space and the industrial policies connected to this area. The theory is followed by the
background that describes the issues of the Peruvian export, Moquegua and the agricultural sector
2
and industrial policies. The approach then presents how to answer the research question. Next,
the results analyze the development of the non-traditional agricultural sector. Finally the theory,
background and results are put together in a conclusion of the findings.
2. Theoretical Framework
2.1 What You Export Matters
An enormous income gap is today found in the world between poor and rich countries
(Hausmann & Hidalgo 2011, p.2). The result is varying living standards which may be illustrated
by what countries export. Poor countries produce simple goods while rich countries produce
simple goods and sophisticated goods. On this notion poorer countries need to diversify and
produce more sophisticated goods, a process called structural transformation (Hausmann &
Klinger 2006).
Countries are what they export (Hausmann, Whang & Rodrik 2005). As displayed in
Figure 1, there is a positive relationship between GDP per capita (see x axis) and how
sophisticated the exports are which is an indicator to how much income they generate (see y
axis). This is measured by EXPY1.
1 See appendix for EXPY
3
Figure 1: GDP per Capita and Level of Sophistication
Note: X axis shows GDP per Capita, Y axis shows the sophistication of exports (EXPY)
Source: Hausmann & Klinger 2007
In order to understand why for instance Sweden can produce more sophisticated goods
than Peru, you need to look at the capabilities possessed by the two countries (Hausmann &
Hidalgo 2011, p20). These are any requirements or inputs needed to produce something and can
be anything from social norms and human capital to infrastructure, well working political
institutions and so on. A different combination of capabilities are needed for every product, in the
same way as different inputs are needed for manufacturing computers compared to growing
flowers. Consequently the capabilities can be seen as building blocks and the more of them you
have the more diverse you become (Hausmann & Hidalgo 2011, p 20). In other words, Sweden
has more building blocks than Peru which allows it to have a more advanced export basket.
2.2 The Product Space
While traditional theory, like the Rickardian model, suggests that a country should
specialize in goods that it is good at producing, the theory by Hausmann and his colleagues has a
4
different approach. Countries should, instead of producing more of one good, diversify and find
new more sophisticated goods by using the capabilities possessed by the country (Shaw 2010).
This process however, going from a simple to more advanced production, cannot happen over a
night. For example, a country that produces mainly shoes does not have the means to produce
computers. As previously mentioned, diversifying needs to be based on what the country already
knows. Having this stated, how does a country diversify?
To answer the question knowledge is needed about the basics of how the goods in an
economy are connected to each other. For this purpose the concept product space has been
developed (Hausmann & Klinger 2006). Figure 2 identifies the goods produced in a country and
goods it can move to. The model does not account for services in an economy.
Figure 2: The Product Space
Source: Barábasi, Hausmann, Hildago & Klinger 2007
5
The product space can be explained with the following metaphor: Think of the product
space as a forest. In the forest there are trees representing goods and monkeys representing firms.
The monkeys live from the trees and may jump from one tree to another. When this happens, it
means that a firm starts producing a new type of good and that the country diversifies. However,
making the jump may be more or less difficult depending on where the monkeys live. In poor
countries the monkeys live in the peripheral parts of the forest where it is far between the trees,
while in rich countries the monkeys live in the dense parts where they can make the jumps easily.
Figure 2 illustrates this where vehicles are found in the dense parts and has many other goods
nearby. Oil or mining on the other hand are not well connected to the rest of the forest, making it
difficult to jump from here. The reason behind this is that the capabilities used to acquire oil
cannot be used to produce as many other goods whereas the capabilities needed to produce
vehicles more easily can be redeployed to fit other goods.
When jumping to a new good, i.e. to diversify, it means that capabilities are either
reorganized or created. The newly created capabilities may have a spillover effect so that other
industries can use them (Hausmann & Klinger 2006). A well trained labor force or a new railway
system may be used by other industries than the intended one. Creating and reorganizing
capabilities like these need policies designed to support the acquirement of needed
capabilities(Hausmann, Rodrik & Sabel 2008).
Figure 3 shows how the product space is different between poorer and richer countries.
The black squares indicate where the country has a Revealed Comparative Advantage2 or put
differently what the country exports. Notice how the product space of Latin American countries
is found in the periphery, where it is more difficult to jump to new goods, in contrast to the
industrialized countries (Barábasi et al 2007).
Figure 3: A Product Space Comparison
2 See appendix for RCA
6
Source: Barábasi et al 2007
Industrial policies can help achieving structural transformation. They can happen on
either a local or a global level, depending on if smaller or larger capacity leaps is the objective.
Industrial policies on the local level try to improve existing industries through stepwise increases
in their capacities, smaller leaps in the forest, whereas industrial policies on the global level
happen through strategic bets on new industries, larger leaps in the forest (Hausmann et al 2008).
Industrial policies should be formed in dialogue, where economic activities and instruments are
selected, between the public and private sector (Hausmann et al 2008).
3. Background
3.1 Structural Transformation in Peru
With growth at an average rate of 7% over the last eight years, Peru is one of the most
rapidly growing economies in Latin America (World Bank 2013). See figure 4.
7
Figure 4: Real GDP 1961-2012
Source: World Development Indicators, 2014
The exports of minerals and gas, which make up more than three quarters of the exports,
are behind this economic progress. Large foreign investments are made in these industries (The
Economist 2013). With an increasing GDP, the level of employment has risen and improvements
have been made in areas such as poverty, infrastructure and education (Hausmann & Klinger
2008a).
In the Peruvian economy there has been a lack of structural transformation which has
limited the welfare benefits of the export-led growth. This can be explained by how few goods
that are connected to the mining and energy industries in the product space. Peru has been unable
to jump to other goods that would have made the exports of the country more diverse. In addition
to this issue, the mining and energy industries are capital intensive which means that they
generate few jobs. An example of this is the period 1991-2000 when the mining investments
boomed while the level of employment shrunk in the sector(Hausmann & Klinger 2008a).
It is important to put the current economic development in an historical perspective.
Twice in the past exogenous factors lowered international prices on Peruvian natural resources. It
caused a shock in terms of trade that brought inflation, a balance of payment crisis and debt
deficits upon the country (Hausmann & Klinger 2008a). This is another reason why the exports
of Peru need to diversify; the current export package leaves the country vulnerable to falling
prices on natural resources.
0
5E+10
1E+11
1.5E+11
2E+11
2.5E+11
3E+11
1
9
6
1
1
9
6
4
1
9
6
7
1
9
7
0
1
9
7
3
1
9
7
6
1
9
7
9
1
9
8
2
1
9
8
5
1
9
8
8
1
9
9
1
1
9
9
4
1
9
9
7
2
0
0
0
2
0
0
3
2
0
0
6
2
0
0
9
2
0
1
2
N
u
e
vo
s
S
o
le
s
8
Figure 5 shows how the mining and hydrocarbon sectors employ 1.3 % of the working
population in 2007. In contrast the agricultural sector is more labor intensive. Figure 6 shows
what the exports are composed of when the growth accelerates in the period 1993-2005. During
this period mining and energy make up 74.2 % of total exports.
Figure 5: Economically Active Population Peru 2007
Source: INEI, Censos de Población 1981, 1993 y 2007.(own calculations)
Figure 6: Composition of Exports 1993-2005
Source: Hausmann & Klinger 2008a
36.4
1.8
10.5
51.3
22.6
1.3
8.9
67.3
0
10
20
30
40
50
60
70
80
Agriculture &
Fishing
Mining and
Energy
Industrial
manufacturing
Other
P
e
rc
e
n
t
Sector
1981 2007
63.60%10.60%
0.80%
6.10%
18.90%
Mining
Energy
Non-Traditional Fishing
Non-Traditional
Agriculture
Other Sectors
9
The non-traditional agricultural sector can help diversify the exports of Peru. Table 1
points out the high potential sectors of Peru. They are: “the sectors that have most unexploited
sectors nearby, that Peru could conceivably move to” (Hausmann & Klinger 2008a, p 20). Most
of them belong to the non-traditional agricultural sector, indicating that the sector has unexploited
opportunities and is important for diversification3. (Hausmann & Klinger 2008a)
Table 1: High Potential Sectors of Peru
3.2 The Agricultural Sector of Peru
Three topographic regions can be found in Peru: the pacific coast, the Andean highlands
and the tropical rainforest. They make Peru one of the most ecologically diverse countries in the
world which enables it to produce almost any agricultural goods. In the coast, in the river alleys,
the most of the agricultural output is produced. In the highlands and in the amazon, the
agriculture is usually at a much smaller scale serving almost only to feed the population living
there (Zorilla 2013).
Despite the great opportunities to produce agricultural goods, Peru imports large amount
of food products such as grains and other basic crops. Peru has therefore a deficit on its
3 See Appendix on Open Forest
10
agricultural trade, fish excluded. The agricultural exports have been growing far less than the
exports of minerals and gas (Zorilla 2013).
Peru has the world’s largest single-stock fishery which accounts for around 10% of total
global marine catch (Paredes 2010). Most of the income is from fish meal that with fish oil makes
up the traditional fishing exports. The non-traditional exports mostly consist of captured fish
(Anuario Estadistico Agropecuario 2012).
3.3 The Agricultural Sector of Moquegua
Moquegua, one of 25 Peruvian regions, is located on the southwest pacific coast and has
175 000 inhabitants. The exports are transported by land or sea. The Inter-Oceanic and Pan-
American highways both pass through the region and carry goods to Central America and across
the continent to the Atlantic sea. The city Ilo, which is important for the fishing sector in the
region, there is a port from which exports are shipped to other countries. Moquegua contributes
with 1.2 % to the total GDP of Peru (Carpeta Georeferencial del Departamento de Moquegua
2013).
Table 2 shows that the manufacturing and mining sectors make up 44 % of the GDP in the
region. Since the manufacturing sector uses many metals much of it can be accounted to the
mining sector (Carpeta Georeferencial del Departamento de Moquegua 2013). It can be
concluded that like Peru, the region Moquegua has a high proportion of mining and a small
proportion of agriculture, 5.6 % of the GDP. Consequently it can be said that the economy of
Moquegua represents the economy of Peru quite well.
Table 2: Value added per sector to GDP Moquegua 2010
Activities % of GDP Examples
Manufacturing 22,4 Chemicals and fish meal
Mining 21.7 Copper, gold & silver
Construction 16.5
Services 10.2
Non-traditional Agriculture 5.6 Fish, vegetables & dairy products
Others 23.5
≈100
Source: Carpeta Georeferencial del Departamento de Moquegua, 2013
11
The agricultural sector divides in two categories, the traditional agricultural sector and the
non-traditional agricultural that has two subcategories. The traditional agriculture, as previously
mentioned, only consists of fish meal and fish oil. The non-traditional agriculture is split in two
subcategories; the fishing sector and the agricultural sector. The fishing goods are aquatic
animals like fish, squid, octopus, mollusks and the goods made out of these (Gobierno Regional
de Moquegua 2013). The non-traditional agricultural goods are varied and could be fruits,
vegetables, grains and dairy goods (Anuario Estadistico Agropecuario 2012). Table 3 shows
some non-traditional agricultural goods that were exported in 2013.
Table 3: Non-Traditional goods 2013 in Moquegua
Agriculture sector Fishing sector
Avocado Squid wings
Chili Squid tentacles
Sweeting-product Giant squid fillets
Wine Mahi-mahi, fish fillets 3,5kg
Mineral water Octupus fillets
Source: Anuario Estadistico Agropecuario, 2012
A potential threat that may limit the non-traditional agricultural sector is the urbanization
that takes place in Peru (Hausmann & Klinger 2008a). People move away from the opportunities
that the sector offers. This is also the case in Moquegua. Figure 7 demonstrates how the urban
population of Moquegua increases over time. Meanwhile the rural population decreases even
though the trend since 1993 is positive.
Figure 7: Evolution of population in Moquegua
Source: INEI, 2014
0
50,000
100,000
150,000
1940 1961 1972 1981 1993 2007
P
o
p
u
la
ti
o
n
RURAL URBAN
12
3.4 Industrial Policies in Peru and Moquegua
Hausmann’s and Klinger’s policy message is that “the public sector must act to encourage
the development of new export activities that better utilize the human resources of the country”
(Hausmann & Klinger 2008a, s 2). This means that it is up to the public institutions to promote a
diversification of the Peruvian export through using the knowledge, skills and capabilities among
the people. In industrial policies, the goal in is not to pick the winners as in supporting single
companies but to create beneficial business conditions for existing sectors. An example is a new
highway connecting a railway system to the airport making exports to new markets possible.
Another example is to improve legal framework to lower market barriers for firms. These
potential measures could help achieving structural transformation.
Peru needs to create a fund for development of capacities by using the generated income
from the export of natural resources. This fund would focus on industrial policies on the global
level by making so called strategic bets on certain industries or activities, and then back them up
with the public input needed (Távara 2010). On the local level, decentralizing the execution of
industrial policies would strengthen existing regional clusters. At least one example of this can be
found in the region of Moquegua. In 2012 a competitive plan was created in cooperation between
the public sector and the private sector (Plan Competetividad Región Moquegua 2012). The
purpose of this public-private cooperation was to create a vision for 2021 by setting measurable
goals for macro-economic conditions, the development of clusters for firms and for social
development.
4. Approach and Data
The definition of non-traditional agricultural goods is: “goods traditionally produced for
domestic consumption but now exported” (Thrupp 1995). This could include any crop that is
originally produced for domestic purposes but is now exported. Knowing this definition, data
going 13 years back is analyzed to identify the exports of non-traditional agricultural goods.
The approach is to first look at the value and diversity of fishing and agricultural goods
which provide a view on the development of agricultural exports goods from Moquegua. Second
is to identify the greatest contributors, in terms of goods, to the exports. The development 2009-
2013 is under focus because this is the latest period and the period where most of the change
13
takes place. Third is to discuss factors that may influence the findings from 2001-2013 such as
policies, world market prices and crop yield. The approach ends with a semi-structured interview
with the mayor of the city Ilo. The intention is to give a qualitative view that may complement
the findings and to compare theory with practice in respect to policy.
This thesis does not trace causation or correlation between industrial policies and
outcomes in the exports of the non-traditional agricultural sector. Nonetheless, key policies are
searched for to complement the results since they are relevant and could explain the development
of the exports in the non-traditional agricultural sector.
The data used to determine the value, diversity and exports is obtained from the Dirección
Regional de Comercio Exterior y Turismo en Moquegua. The available information is from 2001
to 2013 and includes definitions of traditional and non-traditional goods that are taken into
account. The data provides a detailed view on the exports of Moquegua. It includes information
such as value and quantity of the exports, means of transport, destination, industrial codes and
commercial classifications. The data has shortcomings. Notably, the year 2011 is not available
which gives a less complete view of the investigated period. Data on social and economic
indicators originate from the Peruvian public service for statistics, Instituto Nacional de
Estadistica e Informatica and the World Bank.
5. Results
5.1 Non-Traditional Agricultural Exports
Figure 8 shows how the share of non-traditional agriculture exports develops over time as
a share of total agriculture exports. There is a slight upward trend from 2002 and the share
escalates 2010-2013 when it goes from 3.33 % to 17.35 %.
14
Figure 8: Non-Traditional Export as a share of Total Export
The agricultural exports of Moquegua become less dependent of traditional goods over time.
Figure 8 does not reveal what goods or sectors that are behind the growth of share.
Figure 9 shows that the total exports grow 2001-2013, except for 2002 and 2008 when
they fall. The figure indicates that the exports of agricultural goods are constantly lower than the
exports of fishing goods, 2002 disregarded. In 2009 the exports of agricultural goods increase but
goes back to previous levels the year after. Simultaneously, the export of fishing goods booms
from 2009 and onwards. From here the fish export make up almost all of the non-traditional
agricultural export.
Figure 9: Real Value of Export from Non-Traditional Agriculture Sector
Source: World Bank 2014 & Reuters 2014
2.06%
1.16% 1.22% 1.88%
3.21% 2.76% 3.08%
3.64%
5.50%
3.33%
14.99%
17.35%
0.00%
5.00%
10.00%
15.00%
20.00%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013
0
2000000
4000000
6000000
8000000
10000000
12000000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013
$
1
0
0
0
Fishing Agriculture Total
15
The boom of the fishing sector 2009-2013 explains the increasing share of the non-
traditional agricultural exports seen in figure 8. To see how and why the export develops this way
it is motivated to identify the cause of the increase and to look at the reason why the agricultural
sector does not grow. 2009-2013 is a short period of time and because of this it will be difficult to
make any overall conclusions.
5.1.1 Fishing Exports
Figure 10 displays the fish goods that are exported 2009-2013. The mahi-mahi fillet is the
main contributor to the exports 2009-2012. In 2013 the good steps back and the export of squid
becomes worth more than the entire exports of the previous year. Throughout 2009-2012 the
number of aquatic animals decreases because the exports of mollusks, roe and other fish cease.
From 2012 the exports is only based on three types of aquatic animals.
Figure 10: Fishing Exports
Table 4 presents some examples of varieties of exports that are made of squid. It shows
that it is possible to make many goods from one aquatic animal. These varieties can also be found
in the exports of mahi-mahi fillets and octopus.
M
ah
i M
ah
i(fish
fillet)
M
ah
i M
ah
i(fish
fillet)
M
ah
i M
ah
i(fish
fillet)
M
ah
i M
ah
i(fish
fillet)
M
u
llu
sks
Sq
u
id
Sq
u
id
Sq
u
id
Sq
u
id
O
ctu
p
u
s
O
ctu
p
u
s
O
ctu
p
u
s
O
ctu
p
u
s
R
o
e &
o
th
er fish
R
o
e &
o
th
er fish
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
2009 2010 2012 2013
$
1
0
0
0
16
Table 4: Example of Squid Exports
Squid skin of
wings
Squid wings
Raw squids
wings
Raw squids
wings
Squid tentacles
Squid fillets
Squid fillets of
membrane
Giant squid
fillets
Giant squid wing Squid mantle
The diversity of goods in the fishing sector is illustrated in figure 11. The exports increase
from 16 in 2009, when the boom of the fishing sector starts, to 43 in 2013.
Figure 11: Diversity of Fishing Goods
The result establishes that the boom in the fishing sector 2009-2013 is driven by an
increase in the exports of mahi-mahi fillets and squid. The observed drop in the number of
exported aquatic animals does not indicate that fewer goods are exported. On the contrary, more
goods are exported because the variety of goods of mainly squid and mahi-mahi fillets increase
2009-2013.
5.1.2 Agricultural Exports
Figure 12 shows the agricultural goods that are exported 2009-2013. It is observed how
some goods cease to be exported. Oregano is the great contributor to the exports of 2009 but is no
longer exported in 2013. A similar occurrence happens for conserved olives and olive oil that
disappear in the exports after 2010. Avocado on the other hand, sees a positive trend and prevents
the sector to fall further. The good has its best year in 2013 when it makes up nearly all of the
exports accounted for in the sector. The avocado is only exported in one variety, in contrast to
0
10
20
30
40
50
2009 2010 2012 2013
N
u
m
b
e
r
o
f
G
o
o
d
s
17
squid, in the fishing sector, that is exported in different varieties. This characterizes the sector as
most of the goods come with little or no variation.
Figure 12: Agricultural Exports
Figure 13 demonstrates how the diversity of the exports changes 2009-2013. The trend is
downward and reaches the lowest level in 2013 when 5 agricultural goods are exported.
Figure 13: Diversity of Agricultural Goods
The findings indicate that the decline of the sector 2009-2013 happens because the export
of oregano, olive and olive oil stops.
O
regan
o
O
regan
o
O
regan
o
C
o
n
served
o
lives &
o
live
o
il Co
n
served
o
lives &
o
live
o
il
A
vo
cad
o
fresh
A
vo
cad
o
fresh
A
vo
cad
o
fresh
A
vo
cad
o
freshC
h
ili p
ep
p
er d
ried
C
h
ili p
ep
p
er d
ried
O
th
ers(W
in
e, sp
ices etc)
O
th
ers(W
in
e, sp
ices etc)
O
th
ers(W
in
e, sp
ices etc)
0.00
200,000.00
400,000.00
600,000.00
800,000.00
1,000,000.00
1,200,000.00
2009 2010 2012 2013
$
1
0
0
0
0
2
4
6
8
10
12
14
16
18
2009 2010 2012 2013
N
u
m
b
e
r
o
f
G
o
o
d
s
18
5.2 External Factors
While the development in terms of diversity and value has been determined, the
remaining question is: what is behind the increase in exports from the non-traditional agricultural
sector? Why is there a boom in the fishing industry and a drop in the agricultural sector? Below
are some of the factors that could influence the development.
5.2.1 Restrictions on Capture of Anchovies
The Peruvian anchovies are used to make fish meal and fish oil, which make up the
traditional agricultural exports. It is possible that changes in the exports of anchovies during
2001-2013 helped to increase the non-traditional agricultural exports.
In 1992 the government, motivated by environmental purposes, introduced a total
allowable catch system which set a maximum quota for the catch of anchovies. However, since
no individual property rights were assigned, this triggered a race for fish among fishing firms.
Overcapitalization followed that caused reduced profits and forced the government to lower the
permitted fishing days per year which in turn lead to displacement of workers 2007 (Paredes
2010). The displaced fishermen from the fish meal and fish oil sectors might have started to fish
squid, mahi-mahi or other fish that were observed in the exports of non-traditional agricultural
fishing sector. It seems more likely that a fisherman would look for new opportunities for fishing
rather than changing profession. However, to find causation more information is needed on where
in Peru fishermen were displaced.
The fishing days went from 250 in 2001 to 50 in 2007 (Paredes 2010). In 2008 individual
property rights were introduced and defined as shares of the total allowable catch – system. This
helped increase the number of permitted fishing days back to 250 days per year in 2010 (Paredes
2010).
Figure 14 shows how the values of the exports of fish meal and fish oil develop 2001-
2013 in Moquegua. The value increases 2001-2007 and decreases 2007-2013.
19
Figure 14: Real Value of Fish Meal Exports from Moquegua
Observe that the values of the exports increase as the number of days permitted for fishing
per year declines 2001-2007 and that the values of the exports decline, 2007-2009, when the
number of days permitted for fishing increase 2007-2010. This aspect does not help explain the
boom seen in the fishing industry 2009-2013.
5.2.2 World Market Prices
In 2013 Moquegua exported non-agricultural goods to South America, North America,
Europe and Asia. China and the U.S. made up around half of the exports in value that year. The
goods were shipped to 20 countries, and as a result world market prices of goods influence the
exports.
In figure 15 there is an increase in the world price of fish from capture 2001-2013, which
could have contributed to the increase of fishing exports. The change 2009-2013 is close to 10 %.
0.00
20,000,000.00
40,000,000.00
60,000,000.00
80,000,000.00
100,000,000.00
120,000,000.00
140,000,000.00
200120022003200420052006200720082009201020122013
$
1
0
0
0
20
Figure 15: Real World Market Price, Fish from Capture
Source: Stats.oecd.org
Figure 16 below shows how the net weight of fish exports in Moquegua increases 2001-
2013. The value of the exports depends on the quantity and price. Figure 15 gives an idea of the
price of fish and figure 16 shows the exported quantity of fish. When looking at years 2009-2013
where the fishing sector increases, both price and quantity increase and this may explain the
boom 2009-2013.
Figure 16: Fish Exports of Moquegua
0
200
400
600
800
1000
1200
1400
1600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
U
SD
/T
o
n
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013
N
et
W
ei
gh
t
(K
g)
21
5.2.3 Gross Production Value
Gross Production Value (GPV) measures the output value of production. Figure 17 shows
the agricultural output value in Peru 2001-2012. The output value increases yearly and could
suggest that the non-traditional agricultural exports increase; however, this does not occur in
Moquegua. In our findings, an explicit correlation between GVP and the exports does not seem to
exist.
Figure 17: Real Gross Production Value in the Peruvian Agriculture
Source: FAOSTAT 2014
The lack of growth in the exports of agricultural goods 2001-2013 may be explained by bad yield
caused by, for instance, a dry climate. Figure 18 below shows that the crop yield of fruits and
vegetables in Peru has increased 2001-2013. It does not seem like the yield can be accountable
for the lack of growth among agricultural export goods.
0
2000000
4000000
6000000
8000000
10000000
12000000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013
$
1
0
0
0
22
Figure 18: Yield of Fruits and Vegetables in Peru 2001-2012
Source: FAOSTAT 2014
5.2.4 Characteristics of the Peruvian Agriculture
No agricultural policies made during 2001-2013 are obtained but some factors are worth
mentioning that may explain the direction of the exports of non-traditional agricultural goods
from Moquegua during this period.
The biggest export goods from the traditional agricultural sector of Peru are coffee and
cotton, which are produced along the coast line of Peru (Ministerio de Agricultura y Riego 2014).
This may indicate that exports of coffee and cotton push the non-traditional agricultural goods
aside in Moquegua. However, since neither exports of coffee or cotton appear in the results this
cannot be the case, Moquegua does not export any of these goods.
More likely to explain the development seen 2001-2013 are the difficulties experienced in
the Peruvian agricultural sector. The sector is characterized by disorganized production,
decreasing profits and competition. Although highly diverse, the agricultural sector is poorly
interconnected between the coast, Andean highlands and jungle, and therefore difficult to control
from a central authority. The sector has problems with erosion and salinization but also with
small sized lands which elevate transportation costs. The agricultural sector is in need of
technical assistance and economic support, and commercial organizations formed by workers
need to be encouraged (Ministerio de Agricultura y Riego 2014).
0
20000
40000
60000
80000
100000
120000
140000
160000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
H
g/
H
a
Fruit (Melons excluded) Vegetables
23
The Ministry of Agriculture state that goods from the non-traditional agricultural sector in
Peru have great potential but that few reach the international market (Ministerio de Agricultura y
Riego 2014). In Moquegua 2001-2013 there is much variation when it comes to what non-
traditional agricultural goods that are exported and this might exemplify what the ministry states.
5.3 Policies in Ilo
The mayor of Ilo, Jaime Valencia Ampuero, shares some of the views of Hausmann &
Klinger. He sees human capital as the key for Peru to develop and argues that Peru needs a better
educational system more similar to Cuba´s. Ampuero claims that there is a good dialogue
between public authorities and companies in Ilo, which in his view is equal to fewer worker-
protests. Clearly, his perception of public-private cooperation is different from the ideas of
Hausmann & Klinger, where this is emphasized as a process for achieving structural
transformation.
The mayor agrees that the non-traditional agricultural sector is important for Peru. He
believes that the fishing sector will be more important than the mining sector in the future
because wealth of fish stays with the population while wealth of mining goes abroad. Meanwhile,
he admits that there currently are no public strategies to help the fishing sector. On the other
hand, decisions on restrictions are decided by the national government which could defend the
lack of policies from the mayor. He distrusts large private companies that exploit natural
resources to promote growth. Ampuero has invested in some infrastructure and water facilities
that may help new companies.
Ilo needs a good educational system and lacks policies promoting non-traditional exports.
It seems that the fishing sector is held back by restrictions on fishing and lack of strategies on
local public policies.
6. Conclusion
This thesis aimed to answer if the diversity of the non-traditional agricultural exports
increased. The findings suggest that there is more diversity in the fishing industry than among
agricultural goods. Further, it is shown that increased exports of fishing goods raised the total
value of the non-traditional agricultural sector, while exports of agricultural goods contributed
24
little to the sector’s total value. The increase in exports of fishing goods seems to be driven by an
increase in exported varieties of fish. In contrast there is a halting development found in the
agricultural sector which could be the result of goods appearing sporadically in the exports. This
could indicate that the exports of agricultural goods are unstable. Knowing this, the agricultural
sector may need to look at what made the fishing sector successful; a great variety of goods.
In an attempt to explain the findings external factors were taken into account. In Peru,
restrictions on fishing days of anchovies per year caused displacement of labor and may therefore
have led fishermen into non-traditional fishing. In Moquegua, this could explain the increase in
exports of non-traditional fishing exports. However, these assumptions may not be true because
fish meal exports and permitted fishing days do not seem to be related in the region. 2001-2013
there is an increase in both world prices and quantity of fish exported from Moquegua. This
indicates that the observed increase of exports could be more than a result of shifts in world
prices and this may be worth analyzing further. This could be done by performing a regression
analysis to determine to what extent world price levels and other variables affect fish exports
from Moquegua.
Despite an increase of output value and crop yield in the Peruvian agriculture,
Moquegua´s agricultural exports have not grown, which may indicate low relatedness between
these variables. The development seen in the agricultural sector of Moquegua could be explained
by the characteristics of the Peruvian agricultural sector. It is unstable, has low profitability and is
difficult to control. If this also is the case in Moquegua, then this could be a part of why the
exports do not grow 2001-2013.
The Mayor of Ilo was interviewed to complement the findings as he provided another
perspective on policies. It became evident that he had a different view on the dialogue and
cooperation between public and private institutions than theory suggests. In addition, it was found
that Moquegua had little power in shaping policies in the fishing sector 2001-2013 since these are
controlled by the government.
The increase of non-traditional goods could be a sign of structural transformation.
However, the thesis is looking at a relatively short period of time which makes it difficult to tell
whether the findings are short trends or indicate structural transformation.
25
As a share of the total agricultural exports, the exports from the non-traditional
agricultural sector increased with around 2 % in 2001 to 17.35% in 2013. Despite this, the non-
traditional agricultural sector remains small in comparison to the mining sector. The increase of
the exports can therefore be questioned as being significant when looking at the entire economy
of Moquegua. The increase is however important in another way. It means that the sector is
becoming more important to the region. Since this sector is more labor intensive than mining, an
increasing variety in the export of fish and agriculture could create more jobs.
Theory suggests that there are opportunities in the non-traditional agricultural sector and
that the findings of this thesis show that this sector is growing in Moquegua, but this should be
carefully interpreted when it comes to industrial policies. Assuming that the urban population
keeps rising there will be few left to run the fishing and agricultural sectors. It may therefore be
more relevant to focus policies on promoting urban based industries.
The Peruvian economy is currently growing mainly because of its mining industry ;
however there is a need of structural transformation to diversify exports and thereby stimulate
long term growth. The non-traditional agricultural sector, with its relevance for larger and often
poorer parts of the population, may contribute to this. This thesis, despite its limits, has given an
insight in that respect. In future studies it would be interesting to search for causality between
current policies and those leading to structural transformation, which could be done in the non-
traditional agricultural sector of Moquegua but also in other regions or sectors.
26
7. References
Balassa, B.1986. Comparative Advantage in the Manufactured Goods: a reappraisal. The
Review of Economics and Statistics 68(2), pp. 315-19.
Barábasi, A-L., Hausmann, R., Hildago, C & Klinger, B. 2007. The Product Space
Conditions the Development of Nations; Science, 317, pp. 482-487
Dirección General Parlamentaria. 2013. Carpeta Georeferencial Moquegua 2013. pp. 6-7
Direccion Regional Agraria de Moquegua. 2013. Anuario Estadistico Agropecuario 2012.
pp. 17-18
Gobierno Regional de Moquegua. Direccion de Comercio Exterior e Turismo. 2013.
Available at: < http://dirceturmoquegua.gob.pe/dircetur/> [Accessed 2014-01-14]
Gobierno de Peru. Ministerio de Agricultura y Riego. 2014.
Available at: < http://www.minag.gob.pe/ > [Accessed 2014-05-01]
Hausmann, R. & Hidalgo, C. 2011. The Atlas of Economic Complexity. 2011 Edition.
New Hampshire: Puritan Press. pp. 7-20
Hausmann, R. & Klinger, B. 2006. Structural Transformation and Patterns of
Comparative Advantage in the Product Space. Center for International Development at Harvard
University, Working Paper 128, pp. 1-28
Hausmann, R. & Klinger, B. 2007. Structural Transformation in Chile. Quantum
Advisory Group. pp. 4
Hausmann, R. & Klinger, B. 2008a. Growth Diagnostics: Peru. Center for International
Development Harvard University. pp. 25-54
Hausmann, R. & Klinger, B. 2008b. Achieving Export-Led Growth in Colombia. John F.
Kennedy School of Government - Harvard University, Working Paper No 182, pp.7-34
Hausmann, R., Rodrik, D. & Sabel, C. 2008. Reconfiguring Industrial Policy: A
Framework with an Application to South Africa. Harvard Kennedy School. p 5.
27
Hausmann, R., Whang, J. & Rodrik, D. 2005. What You Export Matters. Center for
International Development at Harvard University, Working Paper 11905, pp 1-2
Iguíñiz, J. & Távara,J. 1986. Reflexiones y propuestas sobre la industrialización en el
Perú. Torres-Rivas & Deutscher (Editors), Industrialización en América Latina -Crisis y
perspectivas. San José de Costa Rica: FLACSO-CEDAL, p, 25.
INEI (Instituto Nacional de Estadistica e Informatica). 2014. Available at:
[Accessed 2014-02-
05]
Paredes, C. 2010. Reformando el Sector de la Anchoveta Peruana: Progreso Reciente y
Desafíos Futuros. Instituti del Peru. Universidad de San Martín de Porres.
Reuter. 2014. Available at: [Accessed 2014-03-18]
Shaw, J. 2010. Complexity and Wealth of Nations. Harvard Magazine, March-April
2010.
Távara, J. 2010. Opciones de Política Económica en el Perú: 2011-2015. Fondo Editorial
PUCP.
The Americas, 2013. Peru´s roaring economy: Hold on tight, The Economist, feb 2nd
edition.
Thrupp, L. 1995. Bittersweet Harvests for Global Supermarkets. Challenges in Latin
America’s Agricultural Export Boom. Washington, D.C.: World Resources Institute.
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[Accessed 2014-1-12]
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Rome. FAO.
28
Appendix
Determining the Revealed Comparative Advantage
𝑅𝐶𝐴𝑐,𝑖 =
𝑥(𝑐, 𝑖)
∑ 𝑥(𝑐, 𝑖)𝑖
∑ 𝑥(𝑐, 𝑖)𝑐
∑ 𝑥(𝑐, 𝑖)𝑐,𝑖
⁄
Defines if a country, c, exports more good, i, than other countries do on average. RCA>1
indicates an RCA (Balassa, 1965).
Determining the level of sophistication for a good
𝑃𝑅𝑂𝐷𝑌𝑖,𝑗 =∑
(𝑥𝑣𝑎𝑙𝑖,𝑐,𝑡 𝑋𝑐)⁄
∑ (𝑥𝑣𝑎𝑙𝑖,𝑐,𝑡 𝑋𝑐⁄𝑗
𝑐
𝑌𝑐
Where xval is the export of the good i by the country, c, in one year. Xc equals the total export of
country c. Xy is GDP per capita in country c. Determines the income level of a good. It only
determines the sophistication based on the countries that export the good. The fewer countries
that export the good, the higher PRODY. (Hausmann & Klinger 2007)
Determining the level of sophistication for the export of a country
𝐸𝑋𝑃𝑌𝑐,𝑡 =∑(
𝑥𝑣𝑎𝑙𝑐,𝑖,𝑡
𝑋𝑐,𝑡
)
𝑖
𝑃𝑅𝑂𝐷𝑌𝑖,𝑡
EXPY is the aggregated PRODY, weighted by the share of that good in the export package Xc.
Determines the value of country´s export. (Hausmann & Klinger 2007)
Determining how valuable the nearby goods are in the product space
𝑜𝑝𝑒𝑛_𝑓𝑜𝑟𝑒𝑠𝑡𝑐,𝑡 =∑∑[
𝜑𝑖,𝑗,𝑡
∑ 𝜑𝑖,𝑗,𝑡𝑖
(1 − 𝑥𝑐,𝑗,𝑡)𝑥𝑐,𝑖,𝑡𝑃𝑅𝑂𝐷𝑌𝑗,𝑡]
𝑗𝑖
Taking the proximity in product space between the goods I and j, 𝜑𝑖,𝑗,𝑡 , if RCA>1 x=1 RCA<1
x=0, and the level of sophistication PRODY into account. (Hausmann & Klinger 2007)
29
The open forest is a country measure. The more sophisticated goods that are close to already
produced goods, the higher open forest value a country has. In the paper, table 1 looks at what
that are in Peru´s open forest.