Extending Digital Innovation to Small Holders in Latin America

Panos Loukos, Senior Insights Manager, GSMA

In Latin America and the Caribbean, digital agriculture solutions, from mobile-based agri advisory to digital financial services and agri e-commerce platforms, have the potential to transform current food systems by making them more productive, cost-efficient, transparent, and agile. They also have the power to transform rural communities by increasing yields, improving access to new markets, enabling access to credit, and strengthening resilience to climate change.

Agriculture is a key employer in the region. In rural areas, 54.6 percent of the labor force is engaged in agricultural production. Latin America produces a range of crops ranging from coffee and cocoa to flowers and a broad range of fruits and vegetables. The region’s agriculture sector is facing several barriers that prevent it from achieving its full potential, especially in Central American and Andean countries which see strong reliance on smallholder farming for crop production. Among the most important barriers affecting farmers are some of the world’s lowest productivity levels, low financial inclusion, and a lack of resilience to external shocks, such as those caused by climate change and the global COVID-19 pandemic.

Digital agriculture is increasingly being adopted to address major challenges faced by the agricultural sector and, within it, by the 16.6 million smallholder farms throughout Latina America. The GSMA AgriTech program partnered with IDB Lab, the innovation laboratory of the Inter-American Development Bank (IDB), to produce a landscape analysis of the most prominent cases of digital disruption in Latin America and the Caribbean. We spoke to Alejandro Escobar, Lead Investment and Operations Officer with IDB Lab, to discuss the potential of digital innovation in agriculture to improve smallholders’ livelihoods.

What was IDB Lab’s motivation to commission this GSMA study?

“The COVID-19 pandemic showed us the critical role of well-functioning food systems globally. In Latin America, several large and medium-sized economies, like Mexico and Peru, partly depend on smallholder farmers for their food supply. In some smaller-sized economies of Central America – like Honduras and Nicaragua – where the agriculture sector represents more than 30 percent of the labor force and 10 percent of GDP, smallholder farming is prevalent. The pandemic also exposed the need to identify new ways of doing business in rural areas and transform farming communities, not just for the benefit of organizations that provide services and have commercial relationships with farmers, such as financial service providers and agribusinesses, but also for those who rely on the sector for the long-term sustainability of food supply chains.

IDB Lab can play a catalytic role in the adoption and scale of digital agriculture services in Latin America and enable different actors along the ecosystem to support smallholder farming with more innovative and enhanced services”.

Can you discuss IDB Lab’s interest in digital agriculture?

“For the past three years, IDB Lab has supported a number of projects in Latin America targeting the adoption of new digital technologies or innovation using existing technologies to improve the productivity and income of smallholder farmers. For example, the IDB Lab invested in digital traceability projects for crops such as coffeecocoa, and alpaca wool, and in agri digital financial services to address the credit needs of smallholder farmers.

Especially after the spread of COVID-19 across the region, we have seen a number of traditional agribusinesses adopt new models of digital integration to support services in the agricultural last mile. For example, companies like Aldea Global in Nicaragua and PERHUSA in Peru have benefited from IDB Lab support aimed at leveraging digital technologies to enhance supply chain services for smallholder farmers. Aldea Global, a leading agricultural cooperative in Nicaragua, expanded the capacity of the in-house data management platform to provide digital advisory services to farmers. Peru’s largest coffee exporter, Perhusa, tested the use of georeferencing to improve bean quality, and production data to offer better prices and services to farmers supplying coffee to the agribusiness.

These examples demonstrate that agribusiness-led services are being redesigned to take advantage of the potential of digital technologies to deliver social and commercial impact”.

How is IDB Lab planning to support smallholder farmers in Latin America and the Caribbean?

“Industry analysts have recently recognized an upward pressure on agricultural commodity prices that ignited talks of a possible price boom in the future. If it materializes, farmers will have to make smart decisions on which crops to grow and what digital agriculture tools can best support their farming activities for higher yields and quality. For IDB Lab, this presents a unique opportunity to broaden the scope of technological innovation not only at the farm level but also at the level of business systems and processes that underpin crop procurement and logistics operations. In Latin America, this change is most evident in the intensive, large-scale farming systems of Brazil and Argentina and in vertically-integrated food conglomerates. However, the verdict is still out on whether small and medium-scale farmers in other Latin American countries will be able to reap the benefits of technological innovation and which crops, and farmers will become early adopters of digital innovation. We are not just hopeful but committed to seizing opportunities that, in partnership with market actors, can accelerate the adoption of innovation for the benefit of smallholder farmers. We believe that Latin America holds great potential to adequately respond to future challenges in the agricultural sector”.

Find out more about the findings of the research by reading the complete report: Landscaping the agritech ecosystem for smallholder farmers in Latin America and the Caribbean, which offers a market mapping and landscape analysis of the most prominent cases of digital disruption in the region; highlights some of the major trends observed in five digital agriculture use cases; and identifies opportunities and recommendations for future engagement that could deliver long-term, sustainable economic and social benefits for smallholder farmers.

Alternatively, watch the video that highlights the importance of digital innovation in addressing key challenges faced by smallholder farmers in Latin America and the Caribbean.

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