Diversification of economic portfolios

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Diversification of economic portfolios to deal
with climate variability Case study of
livelihoods strategies in two Andean communities
Carolina Barreda1Corinne Valdivia2 Roberto Quiroz1
1 International Potato Center. Lima, Perú 2
University of Missouri. Columbia, USA
Prepared for presentation at the Open Meeting of
the Global Environmental Change Research
Community, Montreal, Canada, 16-18 Octubre, 2003.
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Introduction
High level of uncertainty typifies the lives of
people in peasant farm household in developing
countries. Variation of climate tend to be more
severe in their impact on crop yields in the
tropics.

Diversification is considered a mechanism to deal
with the effect of climate in the Andean region.

There is a complex interaction between diversifica
tion poverty and income distribution

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Santa Maria Population 77 families Extension 340
ha.
Anccaca Population 67 families Extension 1091 ha.
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Natural Capital
Altitude Map
Land Cover and Use Map
Thermopluviometric Map
Source Quiroz, R. et al. CIP Program report
1999-2000
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Productive Capital
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Human Capital
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Financial Capital
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Theoretical Framework
This work is embedded in Peasant Household
Agricultural Production framework that describe
the ways people in peasant families make use of
the resources at their disposal for production
family survival and where possible for
improving the quality of their lives.
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Objectives Determine if a relationship
between diversification and income levels
exist Identify livelihood strategies and their
relations with the nature of the portfolio


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• Methodology
• A production-consumption survey to 110 households
  randomly selected was conducted during October of
  2000.
• A typology was identified through cluster
• analysis, grouping households according to
• the income levels and to the first canonical
  variables for diversification and income
• sources.

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Canonical correlations were used to analyze the
relationship between portfolio diversification
and income levels.
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Results
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Livelihood strategies by types of household
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(No Transcript)
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Diversification and Income Levels
When the entire dataset was included in the
analysis, only a linear positive trend between
the first canonical variable of the explanatory
and response sets was found.
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Group 1
For the first group analysis, only a linear
positive trend between the first canonical
variable of the explanatory and response sets
was found.
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Group 2
For the second group analysis, a better adjusted
linear positive trend between the first canonical
variable of the explanatory and response sets
was found.
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Group 3
For the third group analysis, a better linear
positive trend between the first canonical
variable of the explanatory and response sets
was found.
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Conclusions
The study showed that there is a relationship
between diversity and income levels. The
strength of the relationship is a function of
the livelihood strategies. When the strategies
are based mainly on production for consumption,
diversification explains only a limited portion
of the changes in the levels of income. The
relationship between diversification strategies
and income levels seemed to be more robust when
sales and remittances were incorporated in the
portfolio.