By Andrea Pronti, Eduardo Zegarra, Dolores Rey Vicario and Anvil Graves[1]
Global agricultural trade and export specialization has transformed the geography and the economy of many low-middle income countries, which have become major players within global food value chains. One of these is Peru, which is now a global leader in the export of water-intensive crops such as asparagus and grapes, at the expense of scarce water resources and with a heavy reliance on groundwater (Salmoral et al., 2020). Whilst this agro-export boom has supported employment, rural development and economic growth for some people, significant social and environmental challenges for others limit its sustainability. In particular, heavy abstraction for irrigation is likely to increase pressure on groundwater reserves, particularly given the ever increasing demand for water intensive export crops (Schwarz and Mathijs, 2017). One of the areas where these conflicts are starting to manifest is the Ica Valley in Peru, which after liberalisation of the agricultural land market has seen large agricultural corporations focused on international crop production (mainly asparagus, grapes, onions and avocados) acquiring large areas of land from smallholders (Williams and Murray, 2019). These corporations have developed large areas of intensive irrigation leading to prolonged water crisis for other stakeholders (Muñoz, 2016; Schwarz and Mathijs, 2017; Williams and Murray, 2019). Whilst drip irrigation systems have been deployed to increase productivity, the high value of the crops produced has led to a ‘rebound effect’ (Berkhout et al., 2000; Sorrell and Dimitropoulos, 2008) since the water savings obtained have encouraged expansion of the irrigated area for high value crops, such as asparagus and grapes, increasing the overall withdraw of groundwater rather than conservation of the water resource itself (Berbel et al., 2015; Berbel and Mateos, 2014).
Based on the findings from Salmoral et al. (2020), this paper aims to examine what factors are driving the unsustainable use of groundwater in the Ica Valley and what implications this has for sustainable development in the area by applying an econometric approach.
Our dependent variable is the sustainability of groundwater use in each tract measured with the Groundwater Sustainability Index (GWSI) based on the approach of Salmoral et al. (2020). The index shows the ratio between the level of groundwater used for irrigation that is not covered by natural water recharge over the total groundwater used for irrigation for each area. Our unit of observation is the census tract level with an unbalanced panel of 130 observations (2015 to 2018).
We focus on three key drivers: i) the expansion of drip irrigation measured by calculating the annual ratio of drip irrigation over the total irrigation per census tract in each year, ii) the specialization in exporting crop commodities identified by determining whether the cultivation of export-oriented crops (avocados, asparagus, grapes, onions or pecan nuts) in the tract was greater than 70% of the total cropped area of the tract in each year; and iii) the concentration of land by big exporting farms measured as the ratio of the cropped area of large farms to the total cropped land of the tract in each year. Moreover, we used socio-economic and average climatic conditions (i.e. rainfall and temperature) as controls.
Since our dependent variable is bounded between 0 and 1, we used both the two-limit Tobit model, (Wooldridge, 2010) and the fractional model of Papke and Wooldridge (2008, 1996). Moreover, we controlled for unobserved heterogeneity using a correlated random effect model as in Wooldridge (2019, 2010), Shunck (2013) and Arslan et al. (2014).
The results of our analysis indicate that: a) the extension of drip irrigation as a share of total land reduce GWSI; b) higher level of specialization in exporting commodities affect negatively GWSI; c) the proportion of large farms in tract reduce the level of GWSI.
Furthermore, we repeated the econometric exercise focusing only on the two most important export crops in the area grape and asparagus. Our findings support that specialization grape reduce GWSI, whereas we did not find statistically significant effect of tract specialization in asparagus on GWSI.
These results are in line with previous studies on the sustainability issues of agricultural development in the area (Boelens et al., 2014; Chiarelli et al., 2022; Dell’Angelo et al., 2021, 2018, 2017; Franco et al., 2014). The proliferation of large farms focused on the production of agroexport commodities increases the level of groundwater extraction which does not return to the aquifer due to the intensification of drip irrigation. Highly efficient irrigation technologies (drip) produce an intensification and expansion effect on users which causes additional overall demand on natural resource causing a general over-use of water at regional level. This is a clear example of the “rebound effect” due to the commodification of the area, which on one hand is creating job opportunities, local development and economic growth but on the other hand is depleting water resources, so crucial for the local economy. Moreover, land use specialization in export crops is an evident factor influencing unsustainable water use due to a high level of groundwater extraction.
Groundwater resources extracted from the Ica-Villacuri aquifer are “transformed” into agricultural commodities which are then exported abroad as “virtual water”. Also, most of the value created in the value chain (logistics, transport, marketing and retailing) is captured abroad and the return on the capital invested by large farms is “exported” abroad, as most large farms have a financial base in western countries (Borras et al., 2020, 2012a, 2012b). The Ica Valley is therefore participating in the global value chain, via its natural capital, but with low levels of return, whilst conversely, its groundwater is undergoing increasingly high levels of marginal depletion as the profitability of the regional agricultural market grows.
The current development path of the Ica Valley is a clear “win-lose” situation with divergent interests (local vs global and public vs private) and exposes the local economy to international trade through groundwater use. The water management institutions need to intervene with remedial actions, in particular, to reduce over-exploitation of groundwater using policy tools, such as water prices, local water markets, or water withdrawal permits to reduce groundwater abstraction. In combination with these policy measures, additional infrastructure, such as small dams or artificial water basins could be established to reduce pressure on water resources.
The situation of the Ica Valley as shown in this paper is similar to other studies dealing with Large Scale Land Acquistions and ‘water grabbing’ such in the studies of Raimondi and Scoppola (2022), Chiarelli et al. (2022), Dell’Angelo (2018, 2017) and Wegenast et al. (2022).
This is a challenge affecting many countries in Latin America and not just Peru and the Ica valley. The findings from this work help to understand the factors promoting unsustainable agricultural expansion in developing countries. The Ica Valley is an example of a wider international pattern of trade, which exploits territories and natural resources in less developed countries, and we strongly believe that this area of research should be further explored.
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