analyze and operationalize strategies and investments to promote sustainable povertyreducing economic growth in rural areas of Central America.

A central theme of this reappraisal of rural development strategies is that agriculture can not serve as the sole engine of poverty reducing growth in the rural economy, and that a more balanced and integrated multi-sectoral and spatial approach to rural development is needed; one that considers supply and demand linkages with non-agricultural activities in rural areas, along with rural-urban linkages, and migration. See box 1.2.

# **Box 1.2: Agriculture as an “Engine of Growth”**

A recent ODI Briefing Paper on “Options for Rural Poverty Reduction in Central America” states: “The main hope for agriculture as an engine of growth may lie with diversification. There have been some successes .... But diversification is not straightforward. ... In sum, apart from a few non-traditional export crops, the agricultural sector does not currently exhibit ‘engine of growth’ characteristics. Can the policy and institutional obstacles be reversed? (ODI 2003, p.1-2)” There is a need to recognize the “pluriactive” nature<sup>5</sup> of the rural economy (de Janvry and Sadoulet 2000; 2001; Lanjouw and Feder 2001; Haggblade and others 2002). Furthermore, the heterogeneity of such factors as agro-ecological zones, access to infrastructure and services, climatic and environmental conditions, household assets (broadly defined) and livelihood strategies, formal and informal institutions within countries points to the need for more attention to sub-national areas and households within geographic areas. This requires improved geographic analyses that consider the heterogeneity of areas and households within areas.<sup>6</sup> The need for area- and householdspecific strategies adds to the complexity of formulating rural development strategies, investment priorities and the design of project interventions.<sup>7</sup> See table 1 for highlights of the World Bank’s new rural development strategy for Central America.

Four basic “paths” have been identified for reducing rural poverty in Central America (see de Janvry and Sadoulet 2000; de Janvry and others 2002; USAID 2002). Payments for environmental services have been identified as a fifth potential strategy for a poverty exit path (CCAD 2002).

- _Agricultural path_ : Increased productivity and diversification to higher value enterprises for both: a) commercially oriented small farmers (primarily household employment and income), and b) larger commercial farmers (owner operated with hired labor).

- _Pluriactive path_ : Focus on off-farm economic activities (including labor on larger farms), and also attempt to generate basic food staples for home consumption.

> 5 The pluriactive nature of the rural economy refers to the multiple activities that take place in rural areas. 6 See Jalan and Ravallion 1997; Hentschel and others 1998; Wilcox 1999; Bigman and Fofack 2000; IFPRI 2000; de Janvry 2002; de Janvry and others 2002; Demombynes and others 2002; Davis 2002.

> 7  To date, much of the focus on mapping efforts and spatial analyses for Central Americahas centered on identifying ecological zones and environmentally sensitive areas (see World Bank and CCAD 2001; Vreugdenhil and others 2002).

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