Rural poverty in Latin America

This paper argues that rural poverty in Latin America is a product of the system of labor controls and in particular of the monopsonistic control of the labour force exercised by large landowners in small, fragmented local markets. It states that the large proportion of unutilized and poorly utilized land and the consequent low volume of production are the inevitable products of a system in which landowners do not exploit their land fully in order to be able to obtain cheap labor. Paradoxically, however, the low wages and incomes of 'campesinos' are associated with a low labor intensity of production on the large farms. It is through the reduction in the demand for labor that causes wages and the share of output received by tenants to be low and the degree of inequality in the distribution of income to be great.

Finally, despite the low wages and crop shares, the marginal cost of labor to large landowners is high, and this reduces the incentive of large landowners to invest in agriculture, thereby reducing the rate of growth of agricultural output below what it otherwise would have been.

[Adapted from Author]