The European Union, Agriculture, and the Tropics: Public Financial Incentives to Enhance Food Security and Expansion of Production Contracts

Member States of the European Union have strong historical ties to agriculture in tropical regions based on colonial history and accompanying trade flows. Attempts to reverse the extractive nature of these relationships through public finance investments in sustainable intensification and the linking of smallholders to new markets could enhance food security and rural development. Public sector financing of public-private partnerships to support these efforts, however, may create dominant positions for large agricultural companies. Moreover, the expanded use of agricultural production contracts by these firms may give rise to a variety of legal and social issues, especially when one party to the agreement lacks economic bargaining power. On the other hand, production contracts can enable small-scale farmers to mitigate risk, establish more predictable income streams, and access new market opportunities. Public development funds promoting reformation of smallholder farming operations need to consider the consequences of the expanded use of production contracts.