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(Agrawal and Perrin 2008).We define “institutions” in the broad sense, as formal or informal systems of social interactions that (a) regulate access to production factors (land, labor, capital, and information), (b) facilitate transactions, and (c) permit economic cooperation and organization (Wiggins and Davis 2006). In drylands, because of the importance of variability and risk, the dominant institutions tend to be flexible enough to allow for variable and complex use of resources (Morton 2007). Markets for produce and consumer goods that operate in dryland societies may function flexibly through institutions such as shopkeeper credit and long-distance trade networks linked by specific ethnic groups, within which trust and information can flow. Markets function alongside informal institutions for allocating resources, which also tend to operate flexibly. Examples include traditional patterns of loaning livestock and sharing their produce, rights to use wells of different kinds, seasonal use of fallows and crop residues, collective labor parties, families as institutions for regulating migration, and networks for sharing information. Smallholder farmers in marginal areas experiencing climatic variability and climate change often distrust government and other external institutions (Young and Lipton 2006). In contrast, they tend to view community institutions as providing reliable support, information, and expertise in times of need and risk. Local governments should thus seek to support household and community initiatives. The ability of local governments in Latin America and the Caribbean to perform in this manner has in general been improved by changes that have led to greater democracy and more decentralized decision making. It is part of the role of central government to help local governments develop asset-based adaptation strategies. For the agricultural sector, these strategies need to focus on helping smallholder farmers to improve water use and maintain soil fertility. It is also very important for central government to support transport infrastructure and agricultural research and extension, since such facilities are critical for effective adaptation to climate change. In many of the region’s poorest countries, such support and development have been neglected over the past 20 years (Binswanger 2007). In particular, greater political focus is needed on supporting local governance in vulnerable dryland societies—whether governance is provided by formal or informal institutions (Eakin and Lemos 2006). Policies affecting land, soil, water, nutrients, agrochemicals, energy, genetic diversity, research capacity, information systems, culture, infrastructure, and market