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Research throughout the developing world has shown a potentially strong relationship between agro-industrial investments and growth in smallholder agriculture and poverty reduction. This paper suggests that agro-industrial investments, if properly structured to relate to smallholder producers, can play a very important role in rural poverty reduction strategies in Mozambique. Current agro-industrial investments in the country demonstrate various degrees of connectedness with rural households. The choice of how, and how closely, to relate to smallholders is determined by the characteristics of the commodity, by the physical, political, and economic environment in which the investment takes place, and by the knowledge, skills, experience, and preferences of the smallholders and of the investors and company management. Given the breadth of factors involved, different approaches can emerge under apparently very similar circumstances, each with differing implications for rural poverty reduction. Therefore, knowledge of the likely effects of alternative investment options in the food and fiber industries on rural incomes and firm profits becomes an important asset in the design of rural poverty reduction strategies.


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