Global Value Chains in Agriculture and the Middle-income Trap: A Framework for Analysis Applied to Peru’s Boom

Abstract

We analyze to what extent engagement with fresh produce global value chains (FP-GVC) may contribute to a country overcoming the middle-income trap (MIT). We propose a conceptual framework for analyzing the FP-GVC-MIT nexus and apply it to Peru, which has become a global powerhouse in FP exports. The framework connects GVC and MIT analysis, two areas generally discussed in separate literatures. It highlights the role of global and product-specific factors, which are a given for any country, and country-specific factors, which may change as a result of government interventions and political economy considerations. We show that FP-GVC participation can only make a limited contribution to overcoming the MIT due to conflicts between production expansion and water availability and inclusion, as well as limited sector-transcendent impacts. While global and product-specific factors circumscribe the possibilities of a FP-GVC-MIT nexus everywhere, government policies can expand the boundaries in some areas. We conclude that an escape from the MIT warrants active industrial policies for a multi-pronged strategy, where FP-GVC participation can be but one element.