Policies for the Future of Farming and Food in Peru

Peru’s agricultural sector is currently guided by the National Agricultural Policy 2021-2030, which outlines the strategic direction for public intervention over the coming decade. The policy seeks to address the key structural challenges faced by producers by enhancing service provision and institutional support, with the overarching aim of strengthening the sector’s contribution to national development. One of its central targets is to raise the sector’s competitive performance by 36% by 2030. Its key objectives include (MIDAGRI, 2021[1]):

• Increasing the level of vertical integration among agricultural producers into commercial value chains. Efforts to strengthen Peru’s agricultural sector should focus on improving market access conditions and enhancing both technical and commercial capabilities for family-based and corporate producers alike. Reducing reliance on intermediaries through the development of direct marketing channels – at both national and international levels – can help producers capture greater value from their output. Expanding access to digital information systems is also critical, as these tools support more effective production planning, enable the design of business strategies tailored to profitable markets, and provide timely data on market prices and other key variables essential for informed decision making.

• Support the transition of family agricultural producers from subsistence-level farming toward commercially oriented systems. This includes ensuring they have access to productive supply chains and are integrated into value chains focused on higher quality and more profitable products. Achieving this requires targeted efforts to strengthen agricultural health systems, facilitate direct access to markets and improve the availability of agricultural information. Enhanced access to timely and relevant data enables producers to take informed decisions throughout the production cycle, improving planning, market orientation and overall competitiveness.

• Improve natural resource management to achieve sustainable agricultural production. Enhance the environmental sustainability of agricultural production systems, including crop, livestock and agroforestry activities, by promoting practices that safeguard natural resources and prevent environmental degradation. This objective aims to strengthen the long-term competitiveness of the farming and irrigation sectors by supporting output growth that is ecologically responsible and resource efficient.

Alongside the government’s objectives focusing on support to small-scale farmers, it continues to also prioritise the expansion of its agribusiness sector by leveraging the Costa region’s productive agricultural sector and advanced technologies. This reflects Peru’s commitment to maintaining its global competitiveness and attracting investment in its thriving export-oriented agricultural sector.

Given the global nature of the triple challenge, it is pertinent to assess Peru’s performance − beyond its declared policy objectives − concerning productivity, sustainability and resilience (OECD, 2020[2]). This section focuses on benchmarking environmentally sustainable productivity performance, analysing the path that the Peruvian agricultural sector is taking in terms of productivity growth and the main environmental outcomes, in particular GHG emissions. The overall assessment of Peru is undertaken in the assessment and recommendations chapter.

Solving the triple challenge requires co-ordinated and synergic policies that generate the innovations to meet the policy objectives. Innovation not only encompasses the number of technological advances but also the pathway through which they transform a country’s agricultural production system. Policies need to enhance productivity growth in an environmentally sustainable way. That entails achieving high TFP growth while ensuring that the efficiency gains are oriented towards creating a production system that fosters environmental sustainability.

Agricultural TFP growth reflects the ability of the sector to use inputs more efficiently, thus achieving a higher output per unit of input. Productivity growth is also desirable because a more efficient use of resources is in line with the main objectives for agricultural policies in Peru: strengthening sector competitiveness, ensuring a viable income for farmers, creating new businesses and job opportunities in rural areas, and protecting the environment.

Peru’s agricultural output has grown substantially and steadily since 1990, while the overall growth in the use of agricultural inputs has increased at a slower rate (Figure 6.1). The high average growth rates of TFP indicate a high decoupling of outputs and inputs (i.e. growth in outputs is less dependent on input growth). Several factors can help explain the observed output trends, including the shift to high-value crops, particularly after free trade agreements were signed, and the modernisation and intensification of agriculture, which have driven productivity growth.

Figure 6.2 shows the breakdown of average agricultural output growth over three decades. Between 1991 and 2000, TFP growth played an important role in explaining output growth, but growth rates of inputs, particularly variable inputs, remained the main drivers. Agricultural output experienced high annual growth, driven by a TFP of 2.6%. This reflects the implementation of policies encouraging efficiency and competitiveness, generating a favourable environment for agro-export production. This included driving infrastructure investment and tax incentives (see Chapter 2).

During the 2001-10 decade, output growth was lower than in the previous decade, but remained high, at almost 5% per year. During this decade, TFP growth, at an average rate of 3.21%, was the main driver of output growth. The contribution of inputs was lower and was mainly driven by the growth of variable inputs, reflecting the growth in fertiliser use in the sector.

Between 2011 and 2022, the annual output growth rate continued to decline while TFP also grew at a much more moderate annual rate than the previous decade: 1.1%.1 Capital use increased in agriculture, linked to private-public investments driving Peru’s agri-food export boom for high-value products, notably blueberries, which had not been produced previously, but also asparagus, avocado, etc. (see Chapter 1).

However, there are important variations associated with Peru’s diverging farm characteristics. Agricultural productivity growth in the Costa has been robust in recent years due to large-scale farms producing crops targeted to export markets, productivity growth in the Sierra has been stagnant (Dudenhoefer, 2018[4]). A World Bank study calculated a significantly higher TFP value of 7.2% for the Costa for the 2007-15 period, compared to 0.2% for the Selva and -0.2% for the Sierra, with a consistently widening gap between the different regions (World Bank, 2017[5]). The same study found the Costa’s output growth was mainly driven by TFP growth as a result of the expansion of high-value crops. Output growth in the Selva was partly driven by TFP growth and input growth, particularly animal feed. Low productivity levels of recently deforested land in the Selva could have also impeded productivity.

Throughout the rest of the Selva and most of the Sierra, the agricultural systems in place have low levels of productivity and the subsistence-oriented agricultural systems are poorly integrated into both the local and international markets (FAO, European Union and CIRAD, 2022[6]). Limited use of technologies, fertiliser, crop chemicals, machinery and irrigation systems, and land fragmentation partially explain the low productivity levels. Smallholder farmers often have limited access to credit and inputs and rely on family labour. The Sierra especially sees output growth driven by increased use of labour, reflecting the limited opportunities to work outside the agricultural sector (World Bank, 2017[5]). Thus, Peru’s productivity frontier underscores the structural dichotomy between advanced agribusiness and marginalised smallholders.

During the period 2001-10, Peru had one of the highest rates of agricultural productivity growth among its peers (Figure 6.3). Its average annual TFP growth of 3.21% was almost double the OECD average (1.63%). While the next period shows a reduction in productivity growth, it still compares favourably with the OECD average and Peru’s regional peers. This period also reveals shocks in specific years, with a particularly destructive El Niño in 2017 and the COVID-19 pandemic in 2020.

Notably, a study looking at the entire Latin American and Caribbean (LAC) region has seen agricultural productivity growth plateauing in all subregions, with many regions, including the Andean Group (with Peru) experiencing volatility since the late 2010s (Salazar, Tadeo Ruesta and Alvarez, 2024[7]). Whilst the 1990s and 2000s saw productivity growth representing a significant role in output growth for the LAC region, the last decade has seen a reversal in this pattern with a sharp decrease in TFP growth and an increase in input use, indicating that agricultural productivity growth is facing a challenging time.

Given the triple challenge, countries need to find pathways to decouple GHG emissions growth from output growth so that agriculture also contributes to climate change mitigation. This can occur when innovation enables the farming sector to produce more with fewer inputs or helps to reduce the GHG intensity of the inputs. The GHG intensity of inputs is captured by the emissions factor, which measures the amount of agricultural GHG emissions per unit of input. Emissions can grow less than output either because fewer inputs are needed per unit of output (higher TFP) or because fewer polluting inputs are being used (lower emission factor). However, in the case of Peru, it is important to note that on-farm emissions are not the sector’s primary contribution to GHG emissions, but rather land-use change as a result of agricultural expansion is (see Chapter 3). These significant emissions are not included in the following calculations.

Peru’s on-farm agricultural GHG emissions have been declining since 1991, from an initial point of 2.88% to 0.41% (Figure 6.4). However, agricultural GHG emissions followed the same direction as output growth, which declined in each decade.

Emissions intensity is calculated as GHG emissions per unit of output. As such, it is a measure of the changes in the level of decoupling between GHG emissions and output. Decoupling GHG emissions from production is important for achieving mitigation objectives as a country works towards increasing its competitiveness. Peru has a much lower emissions intensity than the OECD across all decades and has managed to decrease its emissions intensity over the past decade at an annual rate of -3.08% since 2011 (Figure 6.5). Thus, Peru has successfully achieved a partial decoupling of GHG emissions from production.2

Peru’s National Agricultural Policy sets the vision, strategic objectives and indicators of evaluation for the agricultural sector for 2021-2030. The objectives aim to boost vertical integration among agricultural producers, reduce subsistence-level farming among small-scale farmers and enhance natural resource management for sustainable agricultural growth while continuing to support export-oriented agriculture.

Peru’s agricultural productivity has been growing significantly since 1990, with a high decoupling of outputs and inputs. This is driven by the sector’s diversification into high-value crops for agro-food exports. Output growth is primarily driven by the growth rate of inputs, notably variable inputs such as fertiliser. While the TFP growth rate has declined during the most recent decade, Peru remains ahead of most of its regional peers and the OECD average.

Peru’s agricultural sector currently exhibits low GHG emissions intensity, a strength that should be preserved as the country pursues greater competitiveness. Peru managed to decrease its emissions intensity over the past decade at an annual rate of -3.08% since 2011. Thus, Peru has successfully achieved a partial decoupling of GHG emissions from production.

The agricultural sector’s productivity sees opposing trends according to region. The impressive productivity growth reflected in TFP values is driven by large-scale, export-oriented farming in the Costa. On the other hand, the Sierra and most of the Selva have near-zero or negative rates. These disparities reflect a deep structural divide between modern agribusiness and subsistence-based farming, with limited market integration and access to technologies.

[4] Dudenhoefer, D. (2018), “As Peru’s agricultural production grows, smallholders long for better markets”, World Bank Blogs, https://blogs.worldbank.org/latinamerica/peru-s-agricultural-production-grows-smallholders-long-better-markets.

[6] FAO, European Union and CIRAD (2022), Perfil de sistemas alimentarios: Perú. Catalizar la transformación sostenible e inclusiva de nuestros, Food and Agriculture Organization of the United Nations, Rome; European Union, Brussels; CIRAD, Montpellier, France, https://doi.org/10.4060/cc2239es.

[8] FAOSTAT (2024), “Emissions totals [data set]”, https://www.fao.org/faostat/en/#data/GT (accessed on 28 August 2025).

[1] MIDAGRI (2021), Decreto Supremo N.° 0017-2021-MIDAGRI, Ministry of Agricultural Development and Irrigation, https://www.gob.pe/institucion/midagri/normas-legales/2061745-0017-2021-midagri.

[2] OECD (2020), OECD Agro-Food Productivity-Sustainability-Resilience Policy Framework: Revised Framework, OECD, Paris, https://one.oecd.org/document/TAD/CA/APM/WP(2019)25/FINAL/en/pdf.

[7] Salazar, L., D. Tadeo Ruesta and L. Alvarez (2024), Agricultural Productivity in the Latin America and Caribbean Region: 1961-2021, Inter-American Development Bank, https://doi.org/10.18235/0013335.

[3] USDA (2025), International Agricultural Productivty, https://www.ers.usda.gov/data-products/international-agricultural-productivity (accessed on 3 September 2025).

[5] World Bank (2017), Gaining Momentum in Peruvian Agriculture: Opportunities to Increase Productivity and Enhance Competitiveness, https://documents1.worldbank.org/curated/en/107451498513689693/pdf/P162084-06-26-2017-1498513685623.pdf.