In developing countries, financial uncertainty has deep repercussions on both households' welfare and investment in productive activities. Bolivia is characterized by the prominence of agriculture in its economy. More than 30% of its labor force works in agriculture, and according to the last available agricultural census, 94% of Bolivian productive units are owned by families whose output surpasses 6 million tons. Thus, being of paramount importance for Bolivian food security.
This sector is challenged by growing climate risk in the South American region and a mean altitude of 1,192 meters. The Inter-American Development Bank estimates that, in 2100, assuming a moderate climate change scenario, climate-related losses will be 12%. Under a worse scenario, losses could reach 50%. A United Nations report estimates that, over the last decade, El Niño has generated losses between 400 and 500 million dollars. Furthermore, the Bolivian population is affected by high poverty rates, with a GDP per capita of 3,076.8 USD, as per World Bank estimations, the lowest in the South American region. Therefore, uncertainty about the returns to agricultural investments, especially for smallholder farmers, can have significant impacts on the decisions and the welfare of the poorest families.
In this context, the project proposes to better understand the role of agricultural insurance in Bolivia, which hypothetically, could alleviate concerns towards climate risk, and incentivize investment and consumption. These activities will be sponsored by the 3ie Thematic Window on Agricultural Insurance.