DRIVERS OF RURAL GROWTH AND PRIORITIZATION OF PUBLIC INVESTMENTS IN CENTRAL AMERICA

A conceptual, asset-based framework is presented in this chapter, in order to analyze the factors determining rural growth in Guatemala, Honduras and Nicaragua. The remarkable inequalities in the distribution of productive assets limit the way how the poor share in the benefits of growth, even under suitable policy regimes. SIG mapping, quantitative analyses of households and assets and qualitative analyses of livelihood are used to generate a description of rural territories and identify combinations of assets that may increase the well-being of families. In the three countries, investments have been allocated to the more favored areas and people outside these areas have lagged behind. However, the economic potential of the area does not automatically translate into higher well-being for all households. A strong overlap was detected between economic potential and poverty rates and densities in Guatemala and Honduras, but not in Nicaragua. While in Guatemala and Honduras public investments must be targeted to the Western highlands and to hillside areas, respectively, in Nicaragua the high poverty rates but low poverty densities in the Atlantic zone and the slightly lower poverty rates but high poverty densities near urban centers pose a dilemma that further complicates decision-making processes related to the targeting of funds. In addition to their direct effect on well-being, assets have indirect effects through the impact on livelihood, which in turn influences the final conditions of well-being. Assets related to agriculture and the effects of location have different impacts on well-being, depending on the country in question. Education and access to organizations have a positive impact on well-being. External organizations help promote a sustainable agricultural production. A series of interaction effects between different types of assets was identified, including access to markets, land, credit and education. The diversification of livelihood strategies produces dividends in the way of more consumption and higher income. However, once assets are taken into account, livelihood selection barely affects the well-being of households, which suggests that instead of investing in specific "sectors" of the economy, the public sector must invest in assets, but particularly in human assets.