The longstanding urban bias that had characterized the post-Second World War strategy of import substitution industrialization has been weakened. Market relaxation thus stimulated a positive response from agriculture which typically outperformed other sectors in the 1980s. Farmers with a marketed surplus of tradables were often the main beneficiaries of the policies and reforms introduced. In terms of rural welfare, a key question is whether the rural poor have been able to shift their resources to or find employment in the production of these tradables. On the other hand, stabilization and adjustment have also implied a contraction of the role of the state.
Fiscal austerity requires reductions in current and investment expenditures.
Welfare spending on social security, education and health have fallen. More important, significant reductions have been made in public investment in agriculture such as irrigation, infrastructure, technological progress and public extension, thus seriously compromising the long-term performance of the sector. Adjustment programmes have required the foreclosure or privatization of a number of public institutions that had been created to manage marketing, the delivery of credit, the provision of inputs and the provision of insurance. In some situations, disengagement of the state can give rise to a rapid emergence of private sector alternatives either through the privatization of public institutions or because important parallel markets exist. In other cases, state disengagement creates a vacuum that is not filled by the private sector and can be devastating to the performance of agriculture.