Essay on How did globalization affect Senegal
It is known that financial globalization must permit for more officious international risk sharing. It gives more and more chances for countries to use growth in the face of country specific instability increase of income. Financial globalization has to generate prosperity gains by abating the inconstancy of total consumption. Participation in international trade has been defended as a main machine of growth in poor and low-developed countries. Besides, developing countries are said to gain importantly from the emptying of foreign straight investment through growing influences and a range of growing spillover effects. But there is much less agreement about how foreign investment and trade specially touch the poor people in such countries. Someone consider foreign investments as an efficient instrument in the struggle against poorness while others state this is overestimated. Some studies present prove of negative connections between foreign investments, inflows and difference in countries that called developing. But others have shown the absence of such a connection. In general it is definitely, that there is no exact conclusion about how the markets impact poverty and income differences in such countries. The lack of agreement has prompted a call for more persuading empirical evidence that must concentrate on the connection between globalization and poverty acting at the home level.
The sector of agri-food has separate relevance to arrange influence of economic globalization on poverty. Сountries that considered as developing have, actually, been shut out of this gain. The most interesting consequence is that even developing market economies, which have experienced huge increases in cross-border capital courses, have seen little transformation in their capability to share risk. The formation of flows may give an opportunity to describe why developing markets have not been able to understand this presumed gain of financial globalization. Especially, consequences mean that portfolio liability, which has dominated the external debt stocks of most developing markets until this time, is not favorable to risk sharing.
Could measurement error in the consumption data for emerging markets be driving our puzzling results for this group of countries? It is highly unlikely that the temporal evolution of risk sharing patterns can be explained by measurement error. Indeed, if consumption is becoming better measured over time, it should be getting mechanically disconnected from output, which would drive up estimates of risk sharing. Another approach to
dealing with measurement error is to look at income smoothing, on the logic that income (measured as GNP or GNI) is better measured than consumption and reflects risk sharing via
International financial flows.
Senegal is a poor African country with many market problems and incompleteness in general. Fruit and vegetative sector faced quickly tightening and now very strict standards on processes of manufacture and production. The export tomato chain is extremely consolidated. One company controls all the production and trade. The different stages in the supply range are fully integrated.
Small farmers are completely excluded. All tomatoes for export are made on the large-scale farms that belong to the exporting company. The sector of agri-food has separate relevance to arrange the influence of economic globalization on poorness.
On the one part, stimulation of export of agri-food and attraction of FDI in this sector has been advanced as pro-poor strategy of growth because the sector is straightly connected with country economy. Rural economy levels are much higher that in urban places mainly because of use of unqualified labor in the sector (Aksoy and Beghin, 2005; Anderson and Martin, 2005; Carter et al., 1996; World Bank, 2008). On the other part, the enlarged globalization of the sector of agri-food has been discussed to be harmful to global reduction of poverty as the poorest countries and the poorest farmers more and more excluded and considered minor.
Quickly growing foreign investments in food sectors and propagation of strict food standards that is consequent from these investments and from growing attention to food quality in financially safe countries causing moves in global food supply chains with the enlarged domination of greater multinational companies of food (Farina and Reardon, 2000; Reardon et al., 1999; Swinnen, 2005 and 2007; Swinnen and Maertens, 2007; Weatherspoon and Reardon, 2003). What are the main problems of these recent achievements? Firstly, those standards operate as new not tariff obstacles redacting the export possibilities of the poorest countries. But for such countries compliance expenses are incredibly high. Secondly, poor farmers are maintained in vertically coordinated circuits of delivery of food because of the reduced market authority vis-à-vis greater multinational companies of food. Third, poor suppliers are excluded from high standards global circuits of food delivery due to their inability to execute high standards. This is quite debatable topic. Some studies have specified cases where increasing standards of food are applied to the competitive advantage of developing countries (Jaffee and Henson, 2004 & 2005; Henson and Jaffee, 2008; Maertens and Swinnen, 2007).
Instead of been maintained, small farmers can benefit significantly in vertical diagrams of coordination with an agricultural industry through the expanded access to the inputs, reduced manufacture, the developed technology and productivity, and finally to higher incomes.
Another point is that degree of the small farmer exception in the incorporated circuits of food delivery is a controversial problem. Some experiments show, that restructuring of global circuits of food delivery has led to variation from smallholder production to agro-industrial production (Danielou and Ravry, 2005; Farina and Reardon, 2000; Weatherspoon and Reardon, 2003).
Remarkable, that not so many researches have focused on the general poverty results of globalization in agri-food sectors.
Most of the studies concentrated only on production when analyzing the results of increased and investments and agri-food trade. Nevertheless, the poor can gain through labor markets also. The heavy use of low qualification labor in sectors of agri-food has been taken as the main potential source of poverty lessening. Almost no attention has been paid to labor markets in the discussion on the connection between globalization in the sector of agri-food and poverty. Miet Maertents, Liesbeth Colen, and Johan Sweinnen in their work “Globalization and Poiverty in Senegal: A worst case scenario?” have demonstrated some of their significant reveals on this research. The investigators noticed that tomato exports from Senegal to the Europe have increased over the last years, in spite of increasing standards in the European Union. The nest point is that despite of vertical integration and extreme consolidation in the supply chain and exception of small farms from export tomato manufacture, tomato export further significantly to poor incomes of and reduction of poverty of the tomato producing areas through effects of employment. The researchers’ state that they do not find any proves that unqualified individuals are somehow hurt in accessing employment.
Fruits and vegetable exports from Senegal have increased extremely in the past ten years: from 4,800 ton in 1998 to almost 25,000 ton in 2007. It also became more modified. In 1997 Senegal exported mainly the only product – French beans. From the early 2000s the export of mango and tomatoes has increased. The huge majority of exported products are intended for the market of European Union (Netherlands, Belgium, France, Luxembourg mainly). Some volumes of fruits are exported to neighboring countries.
Foreign investments have played a main role in the growth of tomato exports. In 2001 a French holding company – Grands Domaines du Senegal, entered the fruits and vegetables export market in Senegal. Soon, this company began to export high volumes of tomatoes to the Europe. So the market structure importantly changed.
Grands Domaines du Senegal is exporting tomatoes (cherry type of it) from the area of Senegal River Delta in the region of Saint-Louis in order to avoid problems of land and water shortage. It is important that Senegal has tested the accelerated export growth to European Union during the period when quality standards and requirements have increased essentially, particularly for vegetables and fruits. First, exports to the Europe have to suffice a series of safety standards: the marketing ones for vegetables and fruits, health control of products, labeling standards, and general conditions of keeping food, hygiene rules, and other requirements. The private standard plays a significant role in fruit and vegetables trade.
Private traders, brokers and food combines participated in initiatives to establish private more strict standards. These requirements have become compulsory because almost all buyers from Eropean Union markets is demanding pliancy with such standards.
Grands Domaines du Senegal belongs to the multinational holding. So, factually, it aspires to compliance the high European demands: environmental and food safety standards and so on. For all its plantations the holding is certified according to several private diagrams including the Ethical Trade Initiative,
British Retail Consortium, European Retail Produce Working Group, International Organization for Standardization and others. Many researches have stressed on significant structural changes in structures of supply chains to be exported. Circuits of agri-food delivery became more and more incorporated, with less and greater firms at the time when the level of vertical coordination in the chains is growing. In some points, growing standards have led to grand innovations, such as vast monitoring. In other points, it is connected with variation from the small farmer manufacture on the basis of the contract to the large-scale integrated manufacture.
Growing quality and safety demands are usually represented as the main impelling factor behind the supply chains transformations. An example of tomato exports in Senegal demonstrates a tremendous case of consolidation in food supply chains and increased vertical coordination in it. Ninety-nine percent of the tomato exports from Senegal are managed by one company. Moreover, at several units in circuits, vertical coordination accepts the special form of full integration of the property.
The transport, downstream trading and activity of propagation are completely incorporated in multinational holding with own branches, transport and subsidiaries. The marine company of the group has eight courts and organizes abroad transport between 3 ports of West-Africa, Dakar and a few ports in the European Union, mainly the UK, Belgium and France. Directly from there later distribution in Europe is managed by several trading branches of the group. Also upstream the tomato circuit of delivery is completely vertically incorporated. The company figures fully on their own integrated agro-industrial product for the supply of primary output. In the Senegal River Delta,
Grands Domaines du Senegal has built a station for managing and processing vegetables and two production sites. It includes field production and greenhouse production. The company made investments in high-technology techniques, irrigation, fertilization and sanitary care. Together with the demanded standards such as fertilizers and phytosanitary outputs these technologies are imported from the European Union. The tomato export circuit of delivery excludes the small farms manufacturers completely as manufacture is understood extremely on large-scale plantations of the exporting company. However, it is remarkable, that type of farming, agroindustrial one, was not matured by taking or renting land from small farms. It was developed by investing in beforehand uncultivated land divided to them by the government. An extra 400 ha of land in the area of the Senegal River Delta has been appointed to Grands Domaines du Senegal by the government in order to dilate its production and make exports in the future. Two basic cases were given for this strategy. First is that it is in boundary with the course of the French corporation to which Grands Domaines du Senegal belonges to and which possesses common vertically complex production and exporting opportunities in other countries which consider as developing. The second, high European demands on food quality and safety united with the restricted access to resources of the local small farmers prompted the company to composite the production level of the chain and establish their own agro-industrial farms. Besides, vertical integration is discussed to limit possibilities of additional favorable effects of progress through effects of surplus in downwards and upstream activity. The investigators of this problems, Miet Maertens, Liesbeth Colen, and Johan F.M. Swinnen in their research tell that many would think over a “worst-case-scenario” of supply chain development (Miet Maertens, Liesbeth Colen, and Johan F.M. Swinnen).
The influence of developing countries’ integration in global markets on poverty and income difference in these countries stays the subject of many important polemics. In their paper Maertens, Colen, and Swinnen have analyzed the home level effects – including reduction – of growth of foreign investments in the tomato sector in Senegal. Their work shows that FDI in the sector and sharply expanded tomato exports has significantly benefitted poor country households through employment. Using different techniques they find important and large positive influences on poverty reduction income. But these conclusions are obviously made from the special sector which was investigated. The researchers convinced that these findings are especially important, cause of providing evidence at the home level of a positive and straight link between poverty reduction and globalization. The results of their work demonstrate that significant gain may come through labor market influences. The authors show that employment in the agro-industry is arduous for less skilled households and resource-poor ones, proving that country employment foundation might be a significant poverty redacting strategy. Besides, the main point demonstrated in this work shows that despite of many arguments, pro-poor globalization is probable, even in poor countries. Eventually, it must be also mentioned that the benefits from investments in the given sector and dilated exports from Senegal are focused in some areas and not shared justly all over the whole country. The consequences made Maertens, Colen, and Swinnen demonstrate that there is purpose for current investments in other areas of the country to result in enlarged poverty-redacting influences.
