Crop insurance for agricultural development

issues and experience

P. B. R. Hazell, Carlos Pomareda, Alberto Valdes

Many countries have ambitious crop insurance programs to assist farmers in coping with risks. On a global basis, several billion dollars are spent each year on public subsidies for such programs. Given the high costs and the alternative uses of these public funds, especially in developing countries, there is a need to take a careful look at the benefits of crop insurance and its alternatives.

The Inter-American Institute for Cooperation on Agriculture (HCA) is involved in many aspects of agricultural development in Latin America and the Caribbean. An important question IICA has tried to answer is how credit insurance might assist farmers and agricultural lending institutions to cope with the risks posed by new agricultural technology. In collaboration with the governments of Panama, Bolivia, and Ecuador, IICA has experimented directly with credit insurance schemes and has provided technical assistance to a number of other Latin American and Caribbean countries. This book draws heavily on IICA’s experience.

The International Food Policy Research Institute (IFPRI) has a broad mandate for researching policies to facilitate increased food production in developing countries, with the particular objective of alleviating poverty. IFPRI’s research on risk in agriculture has included studies of policies to enhance national food security, price stabilization schemes, and strategies for managing risk at the farm level. This work has provided a useful backdrop against which crop insurance is evaluated in this book.

A conference on crop insurance and agricultural credit, sponsored jointly by IICA and IFPRI, was held at IICA’s headquarters in San Jose, Costa Rica, in February 1982. Participants discussed the desirability of government subsidies for insurance, and the impact of insurance on the allocation of farm resources, the stability of farm income, and the lending policies of agricultural banks. They presented detailed evaluations of crop insurance programs in Brazil, Mexico, Costa Rica, and the United States and reviewed pilot insurance programs in Panama, Bolivia, Ecuador, and Chile. Selected papers from that conference plus papers commissioned to summarize other countries’ experiences are the substance of this volume. It is our hope that it will stimulate debate and research on the important topic of crop insurance and that it will lead to improved policies for coping with agricultural risks.