vulnerability (Vulnerability Analysis and Mapping, or VAM), both defined at the municipal level, this paper is a first step to guiding policy recommendations on food security in the country.

The analysis generates several key findings: (i) public agricultural spending is associated with high levels of vulnerability, which may imply that resource _allocation_ decisions in agriculture take into account food insecurity; (ii) incremental public spending in agriculture has a (statistically significant) _impact_ towards reducing vulnerability, but in the short run this association is negligible in magnitude; (iii) the _composition_ of public expenditure matters, as the effects of resource allocations in agriculture are not uniform across its categories; and (iv) there are important department specific effects across Bolivia.

# **2. Agriculture and Food Security in Bolivia**

Agriculture plays an important role in the economy of Bolivia and it is one of the key components of the government‘s poverty reduction strategy, particularly in rural areas. The sector accounts for 13 percent of GDP or 27 percent if agribusiness is considered. Despite the decline in rural population (currently 33 percent of the total population), the sector employs almost 90 percent of the economically active people living in rural areas (World Bank, 2010b). The vast majority of the rural population employed in agriculture is poor: 85 percent live in poverty and 75 percent in extreme poverty (UDAPE, 2006).

Agriculture is a very spatially heterogeneous sector and its importance varies across regions. This reflects both the agro-ecological diversity of Bolivia as well as differences in the orientation of production. The traditional agricultural sector, with small units of production, is concentrated in the western highlands and valleys, and focuses on food production primarily destined for domestic markets. The sector‘s contribution to departmental economies in this region ranges between 4 percent and 9 percent of GDP, with a high level of non-agricultural income. On the other hand, the eastern lowlands are characterized by more intensive agricultural production and agribusiness, with a mixture of large and small producers, focusing primarily on export markets. In the lowlands, the contribution of agriculture (excluding agribusiness) to departmental GDP ranges between 16 percent and 32 percent, and the weight of agricultural income in total household income is very large (World Bank, 2010c).

Despite the sector‘s potential, agricultural productivity in Bolivia is among the lowest in Latin America. Agricultural output growth has exhibited higher volatility due to adverse climatic pressures and lack of adequate mechanisms to respond to risk. Recurrent climate disasters related to the _El Niño_ and _La Niña_ phenomena affect the volume of agricultural production. Climate disasters explain around 5 percentage points of the 17 percent food price inflation rate observed in 2003, due to their effects on agricultural output (World Bank, 2010a). Risk management interventions have been recent and led by the state. A state-owned enterprise, the Food Production Assistance Company ( _Empresa de Apoyo a la Producción de Alimentos_ —EMAPA), was created in 2007 to support food production by small and medium size producers through financing, intermediation of inputs and final products and access to machinery. A universal agricultural insurance policy, proposed by the Government Plan 2010-2015, is currently being designed as an incentive for agricultural production and food security.

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