F-TUFRN To RESTRICTED EPOFfTS D)E.S Report No. WH-170a WITHIN K This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION ECONOMIC DEVELOPMENT AND E'ROSPECTS OF CENT RAL AMERICA (in eight volumes) VOLUME III AGRIC ULT URE June 5, 1967 Western Hemisphere Department EQUIVALENTS Currencies = 1 Central American peso (a unit of account) ) = 1 Guatemalan quetzal U.S. dollar 1 ) = 2. 5 Salvadorean colones ) = 2. 0 Honduran lempiras = 7. 0 Nicaraguan cordobas = 6. 62 Costa Rican colones Weights and Measures 1 manzana = 1. 727 acres = 0. 69 ha. 1 (60 kilo) coffee bag = 132 pounds 16. 6 coffee bags = 1 metric ton 1 short ton = 2000 pounds 1 quintal = approximately 101 pounds Approximately 20 quintals = 1 short ton (sugar) 1 banana box = 42 pounds 1 banana stem = approximately 1. 35 banana boxes 1 banana stem = approximately 57 pounds 1 (cotton) bale = 480 lbs. net VOLUIE III - AGRICULTURE TABLE CF CONTETNTS CHAPTER Page No. I BAECKGROUTD AND MAIN F_ATURES 1 Land use 2 II EXPORT PRODUCTS 4 A. Coffee 4 B. Cot-ton 7 C. Bananas 9 D. Minor export products 11 E. Public policy and export products 16 ITI FOODSTUFFS 17 A. General features of the peasant economy 17 B. Trends in output and imports 18 {V PUBLIC POLICY APTD PR`SFECTS FOR FOODSTUFFS 19 A. Introduction 19 B. Rural credit to sv!Iall famrers 19 C. Colonization and settlement 20 D. Storage and marketing arrangements 21 E. General prospectz 23 APPTDENDI A. Coffee B. Cotton C. Bananas STATISTICAL APPENDIX AGRICULTURE I. BACKGUOIND AND NIAN PThRES 1. Agriculture provides t.he major share of income and employment for the five Central American economies. khile there are differences between the five agricultural sectors of the five countries, especially as regards the level of skills cf labor in agriculture and the potential for growth of the agricultural tector itself1 the structure and past performance of agriculture in thie five countries have been broadly similar. In the last decade, the agricultural sector did not grow as fast as the overall economies: the share of' GDP in agriculture in the region fell from about 4O percent in 1955 to about 33 percent in 1965,1/ and at present varies from L4 percent in Honduras to about 30 percent in El Salvador. Even w.th this moderate relative decline, each of the five economies continues to depend upon the movements in production and prices of the major export crops for 80 percent or more of their foreign exchange earn- ings, and the growth of foreign exchange earnings had undoubtedly been the main determinant of income growth. In the case of Central America as a whole, after making allowance for items traded between the countries, the dependence on agricultural exports is even higher, and agricultural and related products probably account for over 90 percent of the value of merchandise exports to the rest of the world (Volume II, Table 25). Employment in agriculture probably accounts for at least 60 percent of identifiable employment: -while the share of agriculture in total employ- mLent has tended to fall, the ex)ansion of export crop production in recent years has been the main absorber of wage labor. 2/ 2. T.Ihile export crops have accounted for the major part of the 5.1 percent a-verage annual increase in agricultural output in the last decade, th.e production of fodsftuffs, i-neluding bananas, increasing by 3.1 percent anunually on an average, has almost kept up with an average annual population growth of 3.14 percent. But with rising income levels, however, domestic demand has not only risen, but tended to shift consumer preferences. Hence, imports of foodstuffs from the rest of the world have risen from $4L million in :L961 to $59 million in 1965, but have fallen as a percentage of total imports and represent less than 10 percent of total merchandise imports. 'rhe major increase has been in imports of hard tTheat, whieh cannot be grogm in Central America, and of flour: rising incomes have been reflected in a higher consumption of bread, which is consumed largrely by the more prosperous and urbanized sectors of the population in preference to cornmeal. 1/ Tables 5a-e, Volume 11, give a breakdown by countries for 1955-65. The share cf agriculture, forestry and fisheries in the GDP fell be- tween 1955 and 1965 from 31 percent to 28 percent in Guatemala, 37 percent to 30 percent in El Salvador, 52 percent to 414 percent in Honduras, 41 percent to 35 percent in Nicaragua, and 39 percent to 31 percent in Costa Rica. 2/ Estimates of employment by sector in 1950 and 196h are sho-n in Table 6, Volume II (Statistical Appendix). - 2 - 3. Major developments in the agriculture sector center on production for export, which is largely well organized, almost entirely by the private sector, and has achieved some of the highest yields in the world for coffee and cotton production. The export sector is the one which has benefited froin the major agricultural change of the last decade, namely the opening up of new lands mostly on the Pacific coast, and the accompanying diversi- fication of production for export. The opening of the fertile Pacific coastal plains in Guatemala, El Salvador and Nicaragua, was made possible by the construction of new roads which placed these areas within easy driving time from the main economic centers and ports of the various countries, and by the accelerated control of malaria in the early and mad-fifties. These factors, conbined with the drop in the profitability of coffee production as a result, of the fall in coffee prices starting 1957, provided the incentive for the rapid increase in the production of cotton which began in 1961-62. The expansion of cotton production on the Pacific coast, together with the development of cattle and sugar production, has enabled the Central American economies to lessen their dependence on coffee for export earnings and has been the main factor in raising total export earnings. Whereas in 1955, 75.8 percent of total Central American exports to the rest of the world of $413 million were coffee and bananas, this proportion fell to 58.7 percent out of total exports of $63h million in 1965. 4.. No such major changes have affected the production of crops for the domestic market, which remain largely in peasant hands in small holdings, mostly in the highland areas. Of about 800,000 farms which existed in Central America in the mid-fifties, about 80 percent could be classed as "minifundia," or very small farms. With an average size of 2 .4 hectares, they accountecl for 13 percent of the area in farms (Table 8). The largest proportion of grains production probably comes from these small farms, which are largely primitive subsistence operations, but part of whose prcduction neverthleless enters commercial channels. The small producers have therefore not remained unresponsive to price move- ments and to a larger market as has been shown by the rise in grain production in Costa Rica in the late fifties in response to better prices to the producer, and by the rise of Honduran corn production following the opening of the Western Highway to El Salvador in 1963 and the stag- nation in El Salvador's corn output after 1962 due to the expansion of cotton production. Land Use 5. The availability of land has not so far been a major bottleneck to the increase of agricultural production in the last decade in the Central American countries, with the exception of El Salvador. The expansion of foodcrops has been largely achieved through increasing acreage in existing production areas, and the easilyr accessible Pacific coast has permitted the development of new export crops. In all countries there has been a marked increase in the acreage in annual crops: from the early fifties to the early sixties the acreage in annual crops or fallow rose from about 2.7 million hectares to about four million hectares or about one-tenth the land area of the region as a whole (Table 7). Over one-third of the - 3 - increase is probably due to the expansion of cotton production. The remainder of the approximately 15 million hectares estimated to be in farms was in largely unimproved ipasture, in about one million hectares of perennial crops, or unused. rhere is evidently still much land to be used in Central America, although sizeable investments in transport are probably necessary to open uo these new areas. There are, however, some signs of increasing pressure of population on certain areas, par- ticularly in El Salvador, where the number of squatters and of small farms has risen substantially 1/in the last decade, and the inflow of rural population into the metropolitan area of San Salvador has accelerated in the last five years. 2/ A similar phenomenon is also becoming apparent although less so, in the traditional agricultural areas of the Central Plateau of Costa Rica, Western Honduras and some areas of the Guatemalan highllands. Increasingly aware of these developments, the various Govern- men-ts, which have in the past largely limited their assistance for agri- cultural development to road construction, have drawn up plans for coloni- zat:ion, credit and road construction to bring new areas into production, particularly on the Atlantic seaboard of Central America. W4hile the merits of such plans vary as between the countries, it is generally recognized that the Atlantic areas are not of such uniformly recognizable potential as the Pacific coastal areas. The climate is generally less hospitable, the land more broken and less well endowed than the Pacific plains with their alluvial soils of volcanic origin, and the costs of road and land development in dense tropical fcrests are higher in comparison. Neverthe- less, the development of certain, definite areas for forest products and for cattle over the next decade merits high priority as a means of expanding and further diversifying exportE. Among these areas are northern Costa Rica, in the area south of Lake Nicaragua, and some of the plains in eastern Guatemala and northwestern Honduras. 1/ Table 8a. 2/ From 1950 to 1960, the population of the capital city of San Salvador grew at an annual average of 4.3 percent; in 1960-64, the rate accel- erated 7.6 percent, with rural migrants accounting for the bulk of the increase. II. EXPORT PRODUCTS A. Coffee 6. Coffee production is thae largest industry in Central America and the largest single employer in the economy. In 1965 it accounted for 8-12 percent of GDP in the three major producing countries, Guatemala, El 'Salvador, and Costa Rica. At harvest time, the coffee sector possibly employs up to 400,000 workers in Guatemala and the same number in El Salvador. Production has grown by 75 percent over the last decade, largely because of the planting made in 1955-57, at the end of the period of high prices; this began to have a substantial effect on production beginning with the 1959/60 crop. The rapid rise in output has led to a moderate increase in the share of the five countries in world coffee exports, from an annual average of 8.9 percent in 1950-52 to 10.5 percent in 1963-65. 7. With rich volcanic soils in the moderate altitude highland areas, marked dry and wet seasons in these areas, and relative proximity to ports for shipping, Central America has special advantages for coffee production for export. Coffee trees act as a conservation agent in the sloping ter- rain of much of the highland areas, and coffee is one of the few crops which can economically be grown on such terrain. These factors, together with the high returns to the producer compared to virtually all other crops in most of the post-war period, provide the bases for the growth of production. Aside from the natural advantages, the main factors which have contributed to high returns at recent world prices have been the relatively low cost of labor, although this has increased somewhat in recent years, and the low taxation of the coffee sector. Moreover, the larger coffee planters, who account for the bulk of production, reacted to the pronounced fall in prices which began in 1957 and ended in 1963 (from an average of US .65 cents per lb. in 1956 to .36 cents in 1963), by modernizing their methods and substantially increasing yields per acre through double-planting, better pruning, new varieties, and vastly in- creased use of fertilizer. Central American imports of fertilizer, the major part of which is used for coffee production, have more than doubled in the last decade. 8. Until now, the Central American countries have not faced major prcblems in disposing of their exportable production. Sales abroad above the effective quotas under the International Coffee Agreement have not been substantial, except in 1962/63, when total sales of the region abroad were about 15 percent of above total of the quotas for the coffee year (Table la). But Guatemala exceeded her quotas then by a third while Costa Rica fell short by a third. This generally favorable marketing situation has, however, in a large degree been the result of special factors, in particular the sharp drop in Costa Rica production in 1964/65 as a result of a volcanic eruption and disease, and smaller crops than originally expected in Guatemala and El Salvador because of poor weather and disease. In addition, both the latter countries have also obtained - 5 - special supplementary quotas. T'he surpluses of El Salvador and Guatemala may in some years have been larger than shown in Table la, and may have been disposed of through sales iria Honduras, which did not belong to the Agreement until July 1966. However, these sales have probably not been significant. Sales to "new markets" (eg. Japan, Lebanon) outside the quota have been very small. The beginnings of a longer-run surplus problem are appearing in 1965/66, although the carry-over, mostly in E:L Salvador and Guatemala, at the end of the 1965/66 coffee year will still be relatively small. Over the next five years, however, a sub- stantial exportable surplus (about 20 percent over the likely export quotas in 1970/71) is likely to develop as a result of the double- planting of the last two or threse years and also, because of the recent increase in acreage which has taken place in some countries. Since Costa Rica and Honduras are unlikely to have significant surpluses at that tine, it would probably malke sense, from the point of view of the five countries, to have a commonl export quota, so that shortfalls in one Central kmerican country could be met by a surplus country. If world exports are not kept in chLeck through some form of Agreement and as a result prices fall substantially below present levels, a substantial n-uber of Central American producers would be faced with difficult cost adjustment problems, since production costs are on an average probably higher than in some other major producing countries. 1/ 9. Coffee export earnings are unlikely to be a major factor in the growth of export earnings over the next five years, except for Costa Rica, where production is rapidly recovering from the very low crop of 1964/65, partly caused by the volcanic eruption of 1963/64. On the basis of the mission's projections (see Table 1), which envisage only a small drop in price from an average of US .44 cents in 1965 to US .L1 cents in 1970, export earnings would reach about $300 million in 1970/71, compared to 283 million in 1965. Virtually the whole of the increase is attributable to the recovery in Costa Rican output. The longer-term outlook beyond 1970 depends in large part on whether the authorities are willing and able to take measures to discourage exportable production beyond likely quota levels. In most of the countries the monetary authorities forbid the granting of long-term credit for expanding coffee acreage, but this pro- hibition has in fact done little to discourage increases in production at rresent prices, whether through greater acreage, closer planting, or hilgher yeilds. The authorities are now increasingly interested in studies of possible projects to diversify agricultural production in coffee areas. 1/ Some data on costs are shown. in Appendix A page 2. For reasonably efficient plantations, production costs might average about US .22 cents per lb. of green coffee equivalent, although there are undoubtedly plantations with substantially lower costs of the order of US .15 cents per lb. -6- Coffee Diversification and Prospects 10. In the broader sense cf agricultural diversification, rather than diversification simply of coffee areas, the Central American Countries have made substantial progress in recent years with the ex- pansion of cotton, meat, and sugar production. The prospects for the lessening of the dependence on coffee for export earnings are good over the next decade, once sufficient improvements can take place in the cattle industry and the development plans for forest products can be implemented. The prospects for diversifying production in areas now devoted to coffee are less certain, however, because for that terrain there are few crops as well suited and as remunerative as coffee. Even at less than average yields, -'t is still probably significantly more remunerative than other products which could be grown there. The study cf the diversification of coffee areas in Guatemala being carried out since the end of 1964 with UNiDP/FAO assistance, has found in a prelimin- ary way that low returns in coffee are not principally a function of the ecological conditions of that area, but of the level of management com- petence in individual farms. Such a finding, if it were applicable to other Central American countries, would already mean that the idea of diversifying "marginal" areas will, with some exceptions, be difficult to implement. The recom,mendations of the Guatemalan study are not yet available. The Nicaraguan authorities have with their own resources been elaborating a plan to shift coffee cultivation away from low alti- tude areas and substitute it in those areas with other products, mainly cattle. At the same time, they plan to intensify coffee production in mnore suitable areas. The generally low level of yields in Nicaragua may justify such an undertaking, although the result could in the end be a substantial increase in coffee production, if the low altitude areas (1o -not in fact reduce their output significantly. 21 Sa2vador has received a &rant from UTIDP for assistance in 2 study sir.aar to that being made in CTuatemala and the study has begun. 11. If the aim of diversification programs is to limit the growth of coffee production and enccurage the growth of other products, these programs should not only endeavor to make other products more attractive- the approach of the studies mentioned above - but also, in view of the fact that the returns on coffee production appear to be substantially higher than for other products, endeavor to make coffee less attractive through taxation, especially in periods of higher prices. With the excep- tion of El Salvador, the Governments of the five countries have captured little of the increase in the value and average price of coffee exports in the last three or four years, and the tax burden on the coffee sector is generally low: the level of export taxes at present prices does not exceed 15 percent of f.o.b. prices and the burden of income taxes on the coffee sector is probably rather low. lJ In fact, the coffee export taxes actually paid in recent years appear to have been somewhat lower than what should have been collected (at the rate applicable at a given f.o.b. price): lJ In El Salvador, income f:.om coffee production is free of income taxes, and in Guatemala a large initial deduction for agricultural producers in effect also exempts coffee income from income taxes. - 7 - the highest effective coffee export tax rate in 1965 was 10.8 percent in El Salvador, and the lowest 2.5 percent in Nicaragua (Appendix A, para. 12). VWhile the taxes are progressive in relation to price in Guatemala, El Salvador and Costa Rica (the taxes in Honduras and Nicaragua are specific), the progressivity is very mild and they have probably not been significant in diminishing the incentive to expand production in the period of higher prices since 196h. While in 1962 and 1963, export taxes collected were 9.2 percent of export earnings for the three countries, they had risen to only 11.6 percent in 1965. 12. The mission, in projecting exports of coffee from 1970 to 1975 has had to assume that the Governments will have (Table 1) taken action which would adjust production to possible exports under the International Coffee Agreement. More specifically, this means that they would have substantially increased taxation of the coffee sector by the late 19S0's, through export or income taxes or both, or taken other steps to restrain a further increase in output. Otherwise the non-saleable surplus is likely to become such that it would be unmanageable and the financing of such surplus stocks would divert substantial funds which could be used for higher priority tasks. The prospects for achieving such an increase in taxation are admittedly very uncertain in view of the vocal political opposition of coffee growers to increased taxation. However, a concerted approach by the five Governments together might help dampen the strong opposition of the coffee growers. Alternatively, coffee growers face the prospect of other and more direct controls on plantings, difficult and arbitrary in enforcement, or the prospect of being unable to dispose of stocks unless they are willing to see the International Coffee Agreement price structure break and prices fall substantially, or forego the advantages accruing from the Agreement, including access to markets of member importing countries. E. Cotton 13. Substantial expansion of cotton production has provided the major element in the diversification of agricultural production and exports since 1961 for El Salvador and (;uatemala. Nicaragua was already a signi- ficant producer in the fifties but doubled its output from 1961 to 1964. The cotton boom has been made possible by the completion of the coastal highways in the three countries., which have attracted cormercial farmers, many of tnem professionals from the capital city who are thus within a short driving time from the city to their farm. Transport to the main ports for export has also improvred. The development of production has been aided by dynamic private cooperatives, which are responsible for arranging spraying, ginning and marketing, and by an assured foreign market: Japan has in the last four years taken up to 60 percent of Central American exportable production. In addition, the availability of credit for crop planting and also for investment in clearing land has been a key factor: crop financ:Lng has been channeled not only by the cormmercial banks, partly with anmual financing from U.S. Banks, but also by the Cotton Cooperatives, particularly that of El Salvador. At the height of the last two cotton p:Lanting seasons, or roughly at the end of 1964 and 1965, about $45 milliona in bank credit was outstanding for cotton - 8 - in Nicaragua, El Salvador and Guatemala, mostly but not exclusively for crop loans. This accounted to about 30 percent of total credit outstanding for agriculture and livestock. In addition, the El Salvador Cotton Co- operative had at the same time about US$35 million outstanding to growers, mostly financed by acceptance credits from U.S. Banks (Table lab). 14. The development of production in Honduras has also been rapid after initial reverses in the late fifties, but has been limited by the small area of its coastal plainS on the Pacific coast. Costa Rican pro- duction for export has begwu to expand on a significant scale only in 196h/65: the high local support price for rice, with which cotton partly competes for land, has until now held back the development of cotton pro- duction. The support price for rice is being lowered in 1966/67. 15. As a result of the cotton boom, Central America has developed into a significant supplier in the world market, accounting for 7 percent of world exports in 1964/65 compared to an insignificant proportion ten years ago. The rise in production has been accompanied by steadily high yields; although yields have remnained steady or declined slightly since 1961/62, they are still the highest for rain-fed plantations in the world and in 196h/65 averaged 778 kg. of seed cotton per hectare, compared to 662 kg. in Ilexico and 579 kg. in the U.S.A. for the same year. 16. The cotton boom has shown signs of a slowiing down since 1964/65, and in 1965/66 Central American production actually fell by about 10 percent, largely as a result of drought and pests, especially in El Salvador. The deceleration and decline of the last two years hav been due, aside from the weather, to rising production costs 1/ in the face of the beginning of a decline in world cotton prices. With the boom, less productive lands were brought into use and land rents rose rapidly. This was particularly the case in El Salvador wfhere 60 percent of output is grown on rented land. Although detailed data on the trend of costs are not available, it is generally agreed that the major item of cost increases has been due to an increased use of fertilizers and especially insecticide used without any corresponding increase in output. At present, fertilizer and insecticide commonly account for one-third of production costs in Central America. An increase in contiguous plantations and the consequent spread of disease, poor conservation practices, and lack of precise knowledge on the part of some planters about the amount and kinds of insecticide needed, are some of the interrelated factors which explain the increase in the use of in- secticides. In addition, the price of imported fertilizer and insecticide has probably risen in the last three years. All insecticide is imported. 17. The cotton policy in effect in the United States from August 1966 to reduce U.S. cotton stocks, has already led to a slight weakening of world prices. The future outlook for cotton in Central America depends on the extent of the fall in world prices and the degree to which producers will be able to reduce costs. The El Salvador Cotton Cooperative has al- ready engaged a team of foreign technical experts to look into better varieties, possibilities for more economical use of fertilizer and insec- ticide and other technical problems in cotton production. The application 1/ Appendix B,para. 14, gives an estimated breakdown of costs in cotton production - 9 - of the results of such research,, once they are available, may take some years to take full effect. Lower profit margins have recently caused a decline in the demand for cottoni lands and this is resulting in lower land rents, at least in El Salvador. It is likely that the marginal producers will drop out with the disappearance of boom conditions. Central American production in :L969/70 is likely to be only slightly higher than in 1964/65, and with rising consumption by local textile mills producing for the Central American Common Market, the exportable output of cotton is unlikely to exceed 286,000 tons of lint compared to 273,000 tons in 1964/65. WJith a probable fall in prices, the value of exports in 1970 is unlikely to exceed $130 million or so, cormpared to $347 million in 1965. In the longer run, Central America could by 1975, with a reduction in costs following the elirnination of less efficient producers and the utilization of better methods of production, put its eminently suitable natural conditions to further use and expand production by 35 or 40 percent beyond recent levels. The land area available in Guatemala and Nicaragua would be sufficient to accommodate such an increase, bu-t such an expansion will depend on whether the farmer has access to the technical knowledge necessary to reduce production costs. C. Bananas 18. The prospects aftera long period of stagnation in banana exports, for the banana-producing countries - mainly Honduras and Costa Rica - are encouraging; however, bananas are unlikely to provide a major stimulus to the exports of the major cotton-producing countries. Climatic conditions on the Pacific coast of Nicaragua are not favorable for bananas. El Sal- vador has the same problem and has little land available for bananas. Production prospects in Guatemala are uncertain: as a result of wind damage, transportation costs ard dry seasons, the United Fruit Company transferred its Guatemalan plantations from the Pacific coast to the Atlantic area in 196a, but production has been limited because of water- logging, and possibly also because of political unrest in the production area. Exports of bananas from Central America as a whole remained stag- nant at about 800,000 tons for fifteen years until 1964; the share of Central America in World banana exports fell from 35 percent in 1948-52 to 18 percent in 1964. The rapid rise of production in Ecuador, whose share in the world exports rose from 9 percent to 25 percent over the same period, is directly related to the stagnation of output in Central America. The majo;^ exporters, particularly the United Fruit Company, faced with the cost of managing large plarttations in Central America, plus blowdowns, plant disease and political unrest, and the need for large investments to increase output there, preferred to buy in Ecuador, where the responsi- bility for producing and delivering the banana to the boat was in the hands of a large number of relatively small producers. Both Central America and Ecuador have relative advantages for banana production: Ecuador is below the hurricane belt and could potentially have lower production costs than Central America. On the other hand, internal transportation costs may be lower in Central America, and three of the four major Central American plantations are closer to the larger markets, without the delay and cost of Panama canal crossings. With imperfect competition in the world banana market, the two major exporting and producing companies, with their large investrients in Central America, are likely to consider other areas as residual suppliers. - 10 - 19C. As a result of the spread of Panama disease in Ecuador in recant years and the increasing emphasis on quality as a result of excess supplies, the two banana companies, with their continuing stake in Central America, are beginning to turn increasingly toward Central America for new sources of supply. Honduran exports in 1965 reached almost 590.000 tons, compared to an average of about 350,000 tons in the pre- vious four years, and Costa Rican exports reached 320,000 tons, compared to 273,000 tons five years earlier. The rise in production has been made possible by the change-over begun five years ago, except in the United Fruit Pacific coast plantation in Costa Rica, to disease-resistant varieties. These newer varieties produce a smaller more fragile fruit, than that previously growm and needs boxing for shipment, However the introduction of boxing has greatly speeded shipping, reduced its cost, and diminished losses. Virtually all Central American banana exports are now boxed. For the future, both companies are now actively engaged in expanding their acreage on the Atlantic coast areas, where there is still a large accessible acreage available for bananas. In Costa Rica the comipanies are entering into long-term fixed-price contracts with in- dependent producers, so that Iy 1970 up to a third of production in Costa Rica may be from independent producers. The reliance on independent prodlucers is much less in Honduras. A number of other U.S. and European firms have firm plans for contracts with independent producers in Costa Rica. If plans already well advanced are carried out, Central America should be able to reach exports of about 1.4 million tons in 1970 or aamost 25 percent of projected world imports at that time. The slow projected growth of world imports (about 2 percent to 2.5 percent per year) together with a probably much faster growth in supplies from Central America and from other well-placed suppliers, such as the north coast of Colombia, means that the sale of such a volume will require some reduc- tion in price. In any case, the achievement of the projected growth in Costa Rica will require an expansion of port facilities now under study and implementation of credit programs for independent producers, which will depend in large part on the availability of external credit to the banking system. In the case of Honduras, expansion of port facil- ities has begun, but the avaiLability of long-term credit to the inde- pendent producers will depend largely on preparation and implementation by the Central Bank of an agriLcultural credit project, part of which is f'or bananas. The Central Bank has begun to prepare a project with a view to obtaining foreign financing for it. 20. Even with the expansion of banana production, its prospects are that Central Americats three major export products will not be able to contribute materially in the rnext five years to the growth of export earnings. Total Central American exports of coffee, cotton and bananas rose f'rom US $331 million in 1960 to US $515 million in 1965: for the next five years, they can be expected to stay at about the same level as in 1965. Only in the case of Costa Rica is a major gain in export earnings of'about 30 percent over the period likely, due to the expansion of banana exports aind the recovery of coffee output. For El Salvador, the situation is likely to be particularly difficult in the next four or five years since earnings from its major exports-coffee and cotton-are likely to fall and total export earnings are likely to increase only marginally to 1970. In the longer run, looking to 1975, the area as a whole faces probably better prospects for the major exports, since there is a chance that - 11 - measures will have been by then applied to reduce cotton production costs and coffee prices are likEly to remain stable after 1970. Never- theless, there is a pressing need in all the countries to begin investi- gating the existing choice of pc,ssibilities for diversification and to develop new export products., In El Salvador, with its limited land area capable of further development, the choice is largely restricted to high value products with a fairly intensive use of land: aware of this limita- tion, the Salvadorean authorities are advancing rapidly in the study of possible irrigation projects. "he choice is wider for the other countries, as indicated below, although such choices will be possible in some cases only if the necessary roads are built, particularly into the Atlantic areas of Guatemala, Honduras and Costa Rica. D. Minor Export Products 21. The main possibilities for more diversified agricultural develop- ment for export over the next ten years center on lumber and wood products (see Volume V - Forestry and Wood-Using Industries), cattle, and certain fruits and vegetables. Sugar, whose production has increased rapidly in recent years, in response to the sharing of the Cuban quota in the pre- ferential U.S. market and to the unusually high world prices in 1963, is an unlikely prospect. Total output of the five countries has risen from about 275,000 short tons in 1960) to 500,000 short tons in 1965: 105,000 short tons of the increase have gone into exports (which rose from $6.7 million in 1960 to about $20 miLLion annually and 170,000 short tons annually in 1963-65) and the remainder into the domestic markets, where consumption has grown rapidly and which remain, with protected internal wholesale prices of about US$0.08 per pound, far more attractive to pro- ducers than the export market. Even at world prices of US$0.04 per pound, over double the present depressed levels, Central American producers would probably be unable to sell at a profit in the world market: the growth of exports will thus be largely dependent upon the quotas in the IJ.S. market, under the existing U.S. legislation in force until 1971. The combined quota for the five countries, which can exchange surpluses within the Central American qucta, varies from 143,000 to 187,000 short tons, depending on U.S. requirements from abroad. With a multiplicity of small mills and fairly high costs of crop production due to the terrain and climate, Central America is thus unlikely to substantially increase its export earnings from sugar, short of unexpectedly large increases in international prices. 22. Possibly the greatest long-term potential for agricultural diver- sification lies in beef producltion. Central America, which is free from foot-and-mouth disease, has large areas of land on the Atlantic seaboard, which has a fairly even rainfa:Ll throughout the year and is in general well suited for pasture. Unti:L now, commercial livestock production has been concentrated on the Pacif:Lc coast, but in the long run the marked dry seasons of the Pacific coast should encourage development of parts of the Atlantic seaboard, especiaLly in Costa Rica and Honduras, where some sizeable cattle operations are already established. Much of this future - 12 - development will require the expansion of the road network. The Atlantic seaboard is also closer to the main U.S. market, which has provided the main stimulus for the expansion of Central American product-on. 23. The development of production for export on a significant scale began in 1958-59, stimulated by rising demand and prices in the U.S. market. Previously exports consisted of live cattle shipped to Peru and Caribbean countries. The expansion of exports has not been paralleled by any marked improvements in production techniques or by any large-scale build-up of herds, except by some of the la:-ger operations. Although the extraction rate has been increased, total beef availabilities for domestic consump- tion have fallen in Guatemala and Honduras. El Salvador is a net importer of beef, mostly from Honduras. The reduction in beef supplies in some countries has to some extent been made up by higher output and consumption of pork and chicken in recent years. Aware of the need to build-up herds if Central America is to become a major meat exporter, and in order to keep dowVn domestic meat prices, the Governments of the four exporting coiuntries regulate slaughtering and the volume of exports. WiTith export prices of US cents 30-32 f.o.b. per lb. for boned beef to the U.S.A., comipared to possibly US 20 cents Der lb. in the dom'estic market for eouivalent meat, the incentive to export i,B evidently high, and the only way in which exports can be increased in the long-run Will be through a higher rate of herd growth than the annual rates of 2 percent of recent years, and through r.uch higher productivity in reproduction and fattening. Central America: Indicators of Livestock Production, 1960 and 1964 1960 1964 Estimated cattle population (millions) 5.43 5.99 (1965) Apparent extraction rate 12.1 % 13.2 % Slaughter for home market ('000 heads) 532 534 Slaughter for export ('000 heads) 231 383 Total exports to outside l/(million lbs.) 4o.4 84.4 of which to U.S.A. (million lbs.) 28.9 61.6 To-tal value of exports to outside 1/ 11.0 21.7 (19.7 in 1965) ($ millionT 1/ Honduras cattle exports are excluded, since they move almost entire'ly to Guatemala and El Salvador. Source: U.S. Department of Agriculture, and Tables 5-5e. 24. Credit facilities for livestock have increased substantially in rec ent vears: total credit outstanding for livestock in the five countries including credit from public sector development banks, increased from about CA$41 million at the end of 1960 to about CA$71 million in 1965. - 13 - Over half of the lending in Cos-;a Rica and Nicaragua has been for invest- ment at terms over one year: the proportion is somewhat lower in the other cotuntries. The increase in credlit, particularly medium- and long-term credit has been made possible by foreign loans, mostly from foreign public agencies to the commercial bankLng systems and to a few development insti- tutions, but also in the case of Guatemala from U.S. commercial banks. Disbursements on foreign loans for livestock, after averaging about $h million annually for the five countries between 1962 and 1964, rose to $10 million in 1965. The effects of these credit programs have not been appraised in detail by the authorities of the various countries, and results probably vary substantially according to the size of farms financed and to the terms of the individual loans, which all too often have been too short to let the farmer build up his herd. In general, loans to small operators (with less than 50 animals) have probably been much less effective, as evidenced by a generally poor repayment record; about one-third of disburse- ments from foreign loans have gone to these farmers. The larger operators will probably continue being the main recipients of investament credit for livestock: while improved extension services could eventually benefit smaller producers, the larger producers have already in some cases shown they can do well without calling on the very limited public extension services. Substantial livestock development, credit projects, suitable for foreign financing, and generally aimed at the larger farmers, are in an advanced state of consideration, or are already available for Costa Rica, iNticaragua and Guatemala; the Centra'l Banks of El Salvador and Honduras have such projects under preparation. The purposes towards which such credits should be used differ, since Costa Rica has available a reasonable supply of better quality breeding stock, and should therefore emphasize fencing, water facilities, and disease control. The other countries in addition could use substantial imports of breeding stock, Thich may be difficult to obtain, and semen. 25. Cormpared to other agricultural activities for export, the live- -tock industry is still relatively primitive and low-yielding: there is thus a clear need for a large-scale expansion of improvement of technical Services to the industry. With the exception of Costa Rica, technical extension services for livestock are almost non-evident in Central America. I'uch of the work in disease-prevention is done by OIRSA.l/ While Central America has been spared the devastating animal plagues of other countries, quarantine periods for imported animals should be lengthened and a stricter control of ships trading inl live cattle with Peru and Italy should be put :in effect. As regards the common endemic parasites and diseases, which greatly reduce the rate of rep:^oduction and the weight of animals, a determined attack on the problem could be made through an organization such as OIRSA. Government contributions to OIRSA should be increased, and the success of health programs wouLd then be possible with the increased fencing and separat;ion of animals financed through the credit programs. 1/ Organizac ion Internacilonal R.egional de Sanidad Agropecuaria, covering Central America Panama and Mexico, with headquarters located in San Salvador, EY Salvador. - 14 - 26. The future of Central America's meat exports depends on the build-up of herds, access to the U.S. market and the keeping the cattle population free from hoof-and-mouth disease. If the disease appeared, the U.S. market would immediately be closed. It is probable that in the next few years, the volume and value of exports will grow only slowly as govern- ments attempt to increase the meat supply for the local markets; the value of exports from Central America might reach about $30 million in 1970 com- pared to $21.7 million in 1965. If the foreign credits now becoming avail- able are adequately supervised and used to increase herds, the rate of growth of herds could probably accelerate from the present rate of 1.5 - 2.0 percent to 3 percent annualj.y. This increase, together with a feasible inicrease in productivity per animal, would probably permit a level of pro- duction in 1975 from 60 to 100 percent above the approximately 250 million lbs. produced in 1965 by the fouLr exporting countries. With about 25 to 30 percent of output going into exports, exports could thus reach up to 165 million lbs. in 1975, or about $40 million at prices slightly lower than at present. 27. While some proportion of exports can be placed in Peru and the Caribbean as in the past, and possibly also in the Mediterranean countries to which some shipments have al:.-eady been made, the main export market and the one whicih offers the hilghest prices will continue to be the United States. Under the meat import :Legislation in effect in the Unilted States since January 1, 1965, the President can establish import quotas if total imports are 110 percent, of an adljusted base quantity. While U.S. imports have run wvell below this level,L/the strict application of the above legis- lation could within the next five years pose a limitation to meat exports to the U.S., although such a development is probably unlikely in view of the permissive character of the present legislation and U.S. consumer pressure for lower beef prices. 28. The five Central American countries produce a variety of other products which might in time become significant foreign exchange earners. Guateaala, El Salvador, Nicaragua, and Costa Rica have in the last six years developed a prosperous commercial industry which exports shrimp to the United States. The shrimp industry has given rise to the beginnings of a modern trucking industry with refrigerated trailer trucks operating direct from Costa Rica to the Atlantic ports of Guatemala. Exports ini- tially increased rapidly, but have stagnated at a value of about $7 to 9 rrillion in the last three years because of limited supplies. The largest producer, El Salvador, controls the size of its fishing fleet, but poachers, who catch the young shrimp maturing in coastal creeks, do substantial damage to the catch. If new processes are more widely used to freeze tiny shrimp in blocks, and if the Atlantic coast fisheries of Nicaragua and Honduras ara developed, shrimp exports could grow moderately in the next few years. Aeaniwihile, an UNDP-assisted survey of fisheries resources of Central America and the means of their rational exploitation began in 1966: it will probably in time identify other export possibilities, such as tuna, or development of fishing to supply increasing local consumption needs. It 1/ In 1965, the level which would have allowed the President, if he wished, to impose quotas under the legislation would have been 423,000 tons (or 931 million lbs.), but actual U.S. imports were about 335,000 tons (or 737 million lbs.). It is doubtful if the tropical waters of the area contain the kind of fish necessary for large-scale production of fish meal and other fish products. 29. A number of other minor agricultural exports could be developed in the next few years, but each will require special efforts. A good beginning has been made in Honduras in producing Cuban-type tobacco for the U.S. cigar market and exports have been increasing rapidly. They reached US$1.5 million in 1964 and US$1.4 million in 1965. The National Bank of Nicaragua is beginning a. special credit program for cigar tobacco, and other countries could also become producers, although development of tobacco production of sufficient. quality for export for cigar manufacture will take time. Although U.S. cigar tobacco imports are virtunlly stag- nant, Central America and other nearby countries, such as the Dominican Republic, are well-placed to increase their share of the market. The same could also be true for fruits and vegetables for the U.S. winter season: until now, some fairly successful attemps have been made to export melons, particularly from El Salvador. However, in order to establish such a market-gardening and fruit-growing industry on a commercially significant scale, an assured channel of distribution will be necessary in the U.S. market. No major U.S. food dis1;ributors or carriers have up to now ex- pressed active interest in Central America as a source of supply for fruits and vegetables, except for pineapples, largely due to existing closer sources of supply, in particular Mexico. Central America still imports some canned fruits and vegetables: as a beginning, the growing food processing industry can tackle the local markets and gain marketing experience before facing the possibility of exports. 30. The production of other exports might be expanded if costs can be reduced sufficiently. This iLs the case of cacao in Costa Rica, and of essential oils produced from grasses in Guatemala. Cacao was Costa Rica's third major export in the fifties, but the rapid fall of prices in recent years has led to a reduction in output, particularly in 1965. Since Costa Rica is a very small producer in the world market, and local epq)erimental work to reduce production costs is already advanced, the authorities should seriously consider the possibility of credit to re- habilitate at least part of the existing plantations on the Atlantic coast. Guatemala has traditionally been a producer of oils made from lemon grass and citronella: exports have stagnated in recent years at an annual level of about $4-3 million, due to competition from synthetics in the U.S.A. and Europe. The strong local producers' association began in 1965 a well-financed prograr of research to cut costs; initial results suggest that Guatemalan producers may again begin to expand production profitably and assure a regular supply to the major buyers, who use the oils as a base for perfume and certain vitamins. Guatemala also produces c chicle and rubber. The increaEing use of synthetics will make difficult. an increase in chicle exports. At present, not more than a third of Guatemala's raw rubber requirelents are met by domestic production; it appears that production is possible in Guatemala at costs competitive with the price of imports. With the farm plans being financed with the help of an AID loan, Guatemala will become self-sufficient in rubber in the early 1970's w-ith possibly a small surplus for export, primarily to other Central American countries. - 16 - E. Public :Policy and Export Products 31. Altogether, the minor export products, including beef, cannot be expected to provide in the next few years the same stimulus to export earnings as was provided in the last five years by cotton. Looking to 1975, however, it is probable that all the Central American countries wLll by then have substantially diversified their agricultural exports, particularly into beef and forest products. Substantial pro- gress has already been made in the last ten years, largely as the re- sult of road construction and probably to a lesser extent and more recently, as a result of special credit programs which have channeled foreign assistance together with local resources to the private sector via the banking system. The newer agricultural exports and some tradi- tional exports, such as bananas produced by independent planters will need to be increasingly encouraged and expanded; adequate development credit will be necessary in this process. Since domestic availa- bility of loanable funds wi3l probably stagnate or increase only slowly because of the slower growth of exports, the banking systems and development institutions will need to increase their recourse to foreign long-term development loane.. The Costa Rican banking system, with the help of a proposed external loan of US$5 million, plans to embark on a $10 million three-year program to expand beef, bananas, pineapple and cotton production. In addition a five-year loan of $2.5 million has been obtained from a U. S. commercial bank to finance the expansion of banana cultivation. In Guatemala, the Inter-American Bank in 1966 made a $3.3 million loan to enab:Le the Bank of Guatemala to continue lend- ing on long-term to larger Earmers, mostly for livestock. Similar pro- grams, also largely for live3stock, are being financed by the Inter- American Bank in Honduras and Nicaragua (see Volume II, Tables 19a-e). The increasing emphasis on 'lending for the development of export products by medium and large farmers, particularly for livestock, should within a few years contribute to the improvement of the export prospects of all the countries. 32. In El Salvador, the authorities are advancing in the prepara- tion of an agricultural credit project for diversification, also for larger-scale farmers. WIhile the choice of products to which these credits should be channeled in El Ealvador will be limited by the restricted availability of land in that country and by the need for accompanying investments, especially in irrigation, in Central America generally the choice of products for development is substantially similar (livestock, various fruits and vegetables, rice, bananas, tobacco). This suggests the possibility that the countries might jointly undertake the necessary research, studies and promotional work on products and on areas for the diversification and expansion of exports. A proposed study of the devel- opment of the Gulf of Fonseca area, which would be carried out under the auspices of the Common Market Secretariat could be a useful beginning in this direction. Another area which might benefit from a similar approach is that to the southeast of Lake Nicaragua towards Costa Rica, where some of the best land in Central America for cattle could become accessible with relatively modest investments in penetration roads. II:: FOODSTUFFS A. General Features of the Peasant Economy 33. The trends and prospects of a-ricultural products for the domestic marlcet are less clear in general than for export products since less is known about them a,:-nd statistics on these products are largely estirMates subject to wide variations. These products consitt largely of foodstuffs, especially corn, beans, rice and sorghum. Wheat is not produced in Central America, except for small amiounts of soft; wheat in Guatemala.. With the exception of rice, the basic food- stuffs are produced in small pea3ant units, rnostly on the highland area.s. As an exception, there have been some large-scale producers of corn on the Pacific coast of El 3alva,dor: after switching to cotton in recent years, some of them are now returning to corn production as a result of the cotton production 1ifficulties of the last two years. 3a. The peasa.nt food production sector has, with the exception of Costa. Rica., operated with little credit and assistance for marketing frorm public or private sources. Credit for basic grains is a very small proportion of tota.l agricultural credit, and ha.s not substantially risen in recent years (Tables l4a-14e) evelthough the production of basic grains accounts for a-bout 20-25 percent of the value of agricultura.l output in most countries. The general illiteracy and poverty, and in many cases the lack of title to the land they occupy, of the large number of snall farmers is a. bar to their being considered credit- wortthy by the coimnercia.l banking systems. The number of families which are tenants, squatters or have no documented legal title to the land they cccupy has undoubtedly increased in most countries (Table 8a. for El Salvador). Of the approximately 12 million hectares reportedly in fa.rms for Central America. a.s a. whole (out of a. total land area of 42 million hectares), probably about 2 million hecta.res are in grains, but most of this acreage is probably in farms under 5 hectares, which, with the exception of Costa Rica, have little or no access to credit despite the efforts ma.de in recent years to establish peasant credit or ganizations such as ABIC (Administracion del Bienesta.r Campesino) in El Salvador, or SCICAS (the rura.l credit agency) in Guatemala. 35. The poverty of the majority of these small farmers does not mean tha.t their production and labor do not enter commercial channels, either through sales of grains, or of a. small amount of coffee, or of their workc as migrants for the coffee, cotton, and sugar harvests. Whl-ile the participation of the peasant sector, which ccmprises half the population, in the money econony is small, probably accounting for no more than 10-15 percent of mcneta.2y circulation, the marginal im- portance of money income to the peasant is much higher than for the urban worker, since the small anount of money income he obtains is, short of barter, the only resource he has to purchase items such as clothing or utensils. The situation is different in some degreee in Costa iRica, where a more developed system of peasant credit has erist-ed. since the late fifties and the level of rural illiteracy is - 18 - much lower than in the other countries, although the general character- istics of the peasant economy still remain. B. Trends in Output and Imports 36. Even with its dependence on the peasant, production of basic grains has evidently risen in all the countries. In the case of corn, whic:h is the main grain crop, production for the area as a. whole has risen from an average of 1.03 million metric tons in 1955-57 to 1.35 million metric tons in 1963-65, or by an annual average of 3.6 per- cent, slightly ahead of population growth (Tables 7, 7a-e, Volume II). There ha.s probably been no increase in corn output in Costa Rica and only a. 1.5 percent average annual increase in Nicaragua over the period: in Costa. Rica, however, rice is the major food grain for the bulk of the pouplation, and rice production rose by an annual rate of 8 percent over the period. The increases in the output of basic grains have been achieved a.lmost entirely by extending acreage, mostly in areas conltiguous to those already under cultivation, and with little change in cultivation techniques. The data available on yields (Table 13) show tha.t they are approximately equal in the five coun- tries, except for higher rice yields in El Salvador, and that only relatively minor increases in yields have taken place. Yields are generally low in comparison with more developed countries; in the case of corn, yields in Centra.l .America. appear to be about the same a.s in Ilexico (about 900 kg per hectare), and in the case of rice, they a-re lower except in the case of El Salvador (Table 13). 37. The increase in production has more or less kept up with the demand, and there is no evidence either of rising grain prices or of a substantial increase in imports from outside Central America. Total imports of cereals from the outside world consist largely of flour, cereal preparations and ma.inly wheat (hard wheat cannot be grown in Central America., and Guatemala's production of soft wheat meets about one third of its total wheat needs 1/ for the flour mills which exist in all the countries except Costa. Rica.. These are the categories which have shaon increases, whereas imports of corn and other basic grains are minor. The sharp rise in wheat imports is partly a reflection of reduced flour imports, as the capacity of local mills has increa.sed, but more important, of the change in consumer preferences towards brea.d as a result of rising incomes. Changes in wiheat prices do not appear to have been important during the period 1962-1965. Imports of corn from the outside averaged about 25,000 metric tons annually, or about 1.8 pE-'ceht 6f total Central American production. Imports of rice are more important, but still only totaled 12,000 metric tons in 1961h or about 5 percent of Central American production. The major im- porter of corn from the outside is El Salvador, which also imports corn 1/: Soft wheat is suitable for ihaking flour flor certain kinds of ;read only if mixed -rith hard wheat, so that Guatemala must inevitably rely on some imports of wheat. - 19 - from Honduras. Honduran exports of corn to El Sa.lvador accou=t'for the bulk of the increase in internal Common lhiarket trade in raw foodstuffs. With a probable rise of commercial corn production in El Salvador, Honduran exports of corn may Well decline in the next few years. The major importer of rice has until now been Nicaragua but, this ma.y change if the proposed project to expand rice acreage materializes. CENTRAL ALERICA: ITNCR.TS OF CEREALS AiD PREPARATIONS,1/1962-1965 (million U.S. dollars) 1962 1963 196h 1965 0 R 0 R 0 R Wheat 7.8 - 9.8 - 10.6 - 14.9 - Wheat flour 8.5 - 8.3 - 7.5 - 6.1 0.1 Corn 2.2 2.7 0.9 2.3 1.6 4.4 1.8 6.2 Rice 0.7 0.8 0.9 0.7 1.8 0.2 1.8 1.0 Cereal prepara- tions 2/ 3.5 0.3 3.7 0o. 4.4 0.7 3.5 2.2 Other 0.5 - 0.5 0.3 o.6 0.3 0.7 0.4 Total 23.2 3.8 .24s 3.7 26.5 5.6 28.8 9.9 Legend: 0: Imports from outsicle R: Regional trade within common market 1/ Category 04 of Standard International Trade Classification 2l/ Incltdes hops, various other cereal preparations, and cookies Scurce: STIECA IV: PUBLIC POLICY LND PROSPECTS FOR FOODSTUFFS A.- Introduction 38. For the future, the availability of accessible land, the possibilities of improving yields, and improvements in marketing ar- rangemenats are some of the factors which will determine the trend of production. There is still enough reasonably accessible land, except in El Salvador, to permit a substantial increase in production without major improvements in techniques. For Central America as a whole, a.boUt cne-third of the land area is in farms, but only about half the fara area is effectively cultivated or in pastures: there is thus still substantial land available for use in some cases fairly close to areas already farmed. The development of the unused areas, however, may be more difficult than in the past: the best areas closest to popula- tion centers in the highlands are probably already in use, and some of the new acreage is in more remote areas or on not as rich as the vol- canilc soil of the Pacific seaboard. The new acreage in the lowlands, part.icularly on the Atlantic seaboard, will require the planning and construction of new roads, particularly in Costa Rica and southeastern Nicaragua. 39. For El Salvador, where 73 percent of the total land area is in farms, of which 40 percent is under cultivation, the remainder be- ing mainly permiianent pastures, unless techniques improve, the long- rumn availability of suitable la..-nd will fix the limits to the expan- siorL of agricultural output. Ir:^igation projects already under pre- paration can be expected to add some 15,000 hectares of intensive cultivation in the next eigh-t years or so, an important area in that country. In the longer run, however, El Salvador will probably have to rely increasingly on imports of basic foodstuffs from its neigh- bors, even if a moderate improvement in skills and yields in peasant agriculture is achieved through general education and through the ex- pansion of the small program already begun for fertilizer distribution. In t.he next four or five years, hlowever, El Salvador's imports of basic grains may well fall below recent levels, as lands in cotton un- til 1965/66 shift back into commercial corn production in view of the rec recent setback to cotton product:ion. B. Rural Credit to Small Farrmers 40. The improvement of yie:Lds in food production in the various courLtries depends particularly onl the success of supervised credit progra.ms (which serve to provide scme technical assistance as well as finrancing for selected groups of "campesinos"),l/and on the level of rural education. The various credit programs for small farmers verJ grately in scope: in Costa Rica, the well-established rural credit system of the National Bank (a commercial bank) has some 35,000 small farms as customers or over half the total number of farms. On the other hand, in El Salvador, the Government Peasant WIelfare Agency (ABC), which began operating in 1963, to date has only about 4,000 l/ Tables 14a. - lhe. -.20 - customers, or only about 2 percent of the nurnber of farm units. Credit for the small farmer is virtually non-existent in Honduras. The effec- tiveness of the va.rious agencies has also varied, and delinquencies are substantial in sane cases, particularly for ABC in El Salvadcr, which has so far lent almost exclusive:Ly for annual crop loans. The invest- ment plans of the govermnents envrisage an increase in rural credit pro- grams; to become more effective, these programs, especially in Guatemala, El Salvador and Hondu-as, will have to be acconpanied by substantial increases in field staff,especia.lly in middle-level ex- tension agents. This applies even more to the small land settlement programs wnich have been started in the last three or four years in some of the countries. Education Li. The prosDects for increasing the level of skills of the small fanmner depend in large part: on improvements in education. Un- fortunately, the present educational situation and programs are in- adequate in all the countries. 'The percentage of rural children in school needs to be substantially raised in all the countries, the proportion of rural children aged 7 to 12 actually in school is about 40 percent in Guatemala, 50 percent in El Salvador, and about 85 per- cent in Costa. Rica.. These estinmtes probably over-state attendance, since they include a. significant proportion of children over twelve who have not yet completed prima:cy school. While the national invest- ment programs ma.y in time result in a. substantia.l proportional increase in rural enrollment, a. beginning has yet to be made in adapting the content of education in rural primary schools to the needs of pupils who are likely to remain in fanring and whose schooling will in most cases be limited to primary school. C. Colonization a.nd Settlemenlt 42. Costa. iica. established a. Land and Colonization Institute (T1CO) in 1962: ITCO ha.s wisely decided to concentrate its limited resources into settlements outside the Central Platea.u. So far, about 1600 families have been settled, 600 of t.hem on a cooperative plantation to produce bananas. A contract with a. foreign buyer has been secured, and banana, epDorts began in 1966. ITCO's activities de- serve to be expanded, but adequate operating funds better coordination with the feeder road program and credit agencies, and better internal organization will be necessary. The activities of the Agraria.n Settlement Institute (ICR) in El Salvador, created in 1932 following a. bloody peasants' revolt, a.re to ;3crte extent hampered by the same fac- tors, and by -the limited land available for settlement, although in its first two decades the Institute purchased 100,000 acres of land. In recent years, the Institute, witlh a small amount of foreign technical and financial assistance, ha.s increased its a.ctivities and since 1963 it has distribu4ed on long-term contracts about 3000 parcels of land. The size of the basic units made available to each pioneer may have to be enlarged to provide a. sufficient income to the families. Guatenmala has had a. Land Reform Agency (INTA) since the early fifties: - 21 - in recent years, the agency has settled several hundred families in a. large project on the Pacific coast,but its plans for large settlements near the south of the Peten have notmaterialized. The roads into these areas are barely roughed in, additional soil studies are needed and the real cost of the projects is still very uncertain. Nevertheless, the colonization agencies ha.ve a useful role to play in pointing the way towairds some of the new lands in the Atlantic, as in Guatemala. and Cosla Rica: the major investments required are in penetration roads and in adequate credit facilities for the settlers. Nicaragua has no settlement program, a.nd the program in Honduras, despite the prospect of an ambitious project in the Aguan Valley on the Atlantic coast, has so far achieved little. D. Storage and Marketing 43. With the exception of Costa. Rica, present gra.in marketing arrangements(principally for cor;, but also for rice and beans,)are priaitive and lead the peasant to sell at low prices at harvest time, usually through an intermediary who pays a low price both because of the lack of buyer competition and, possibly more important, because he has to hold the crop without adequate storage until he can realize his ga.in. Storage capacity and the means to finance storage are ob- viously inadequate except in Costa. Rica. Storage capcity as a. pro- p)ortion of total output of rice, beans and corn is 2.6 percent in Guatemala, 17.5 percent in El Salvador, 2.8 percent in Honduras, 3.3 percent in Nicaragua and 23.0 percent in Costa. Rica.. Since a, part of output is consumed on the farm, these percentages understate the capa- city available to store grains in commercia.l trade. The lack of stor- age in Western Honduras usually leads to seasonal exports to El Salvador, where storage capacity is available. Inadequate storage facilities re- sult usually in a fa.irly wide seasonal variation in the prices received by the farmer, with high prices outside the harvest season being about 50 percent higher than during the madin harvest. The operation of CNP (the state grain board) in Costa, Rica, has, compared to tlhe other Central American countries, pern.itted higher prices to the producer a.nd lower retail prices: this is well demonstrated, for example, in the case of rice, for which the grain board had a. purcha.sing price of about $5.90 per 100 lbs. in 1965-1966, up to 20 percent above the support price in other countries, whereas the average retail price of $10.80 in Costa. Rica. was about 20 percent lower than in the other countries. Indeed, it is probable that price uncertainty and fluctuations at the level of most small farms is greater than indicated above since exist- irg storage capacity is concentrated a.t one or two cities in each country - which are in some cases operating well below capacity due to the lack of money to pay for grain purchases - .and there is little local or regional stora.ge capacity. The present storage capacity of the five countries is about 130,000 metric tons, including wa.rehouses (Table 12). To permit a. level of purchases by the grain boards con- sistent with the maintenance of reasonab y stable prices to the pro- ducer, the Central American grain stud,)y/ estimates that by 1969 total 1/ Programa. de Fomento de la Produccion de Granos Basicos para. Centro- ame-rica, 1966-69, Joint Planning !Yission, Guatemala, October 1965. - 22 - storage capacity should have reac:hed 225,000 tons. The cost of con- struction of the additional capacity, largely in silos, is estimated at about US $7 million, the major portion of which would be spent in Guatemala, Honduras and Nicaragua. The stora.ge programs of the various national grain boards are generally consistent with these estimates and would double capacity in the next five years or so, if financing for these investm-nts is arranged and construction carried forward without delay. Unfortunately, none of the countries, except Nicaragua, ha.s so far obtained the necessary funds to begin con- struction. , oreover, the prograris ought probably to be expanded and redesigned to include more storage facilities at the local level. In the meantime, the situation could be improved if the grain boa.rds were provided with sufficient funds for purchase of surplus grains. The Grain Protocol 44. The pattern of production of basic grains among the various countries may well be influenced by the Special Protocol on Grains, which came into effect foDr the five countries in mid-1966. As of the same date, the remaing tariff and quantitative barriers on trade in grains between the countries, except for corn betweeen El ;Salvador and Nicara.gua., were eliminated. Thus the five countries now vir,tually ha.ve a. freetrade area in grains, excluding wheat a.nd flour2/ for which the loca.l flour mills have strongly supported the maintenance of protected nationa.l markets. Before the Protocol camie into effect, regional trade wa.s largely confined to the traditional trade between El Salvador and Honduras: shortfalls in other coun- tries were met by imports from tie outside through the state grain bca.rds. The key provision of the Protocol is that each grain board must :ive first priority, in meeting shortfalls, to imports from other Central American countries. Imports from the outside can only be made after consultation with the other countries, and will in the future have to pay a duty equal to the difference between the import price arid the officia.l internal support price, thus paying duties which they formerly did not pay. The main purpose of the Protocol is thus to provde an incdntive for the Central American area as a who:Le to continue being self-sufficient in grains. A coordinating commission with limited powers has been established to enforce the Protocol: if the commission and the countries can effectively give first priority to imports from within the area., the Protocol could lead to increased competition between Honduras, Guatemala. and Nicaragua. for corn exports to Ea Salvador, and between Nicaragua., El Salvador and Guatemala for rice exports to the other two countries. It is a.t this sta.ge difficult to judge, especially for corn, which 2/ At present world prices, the common external tariff amounts to about 140 percent for corn and about 200 percent for milled rice. in fact, imports from the outside are almost exclusively by the state grain boards, which are exempt from the payment of duties. - 23 - country, if any, might in the long run become the major supplier for the region. A key question will be what levels of grain support prices will be set in the regicn by the action of the national grain boards which are to be coordinated by the regional commission estab- lished by the agreement. WhilE price policy has not clearly emerged, evidently prices will need to tie sufficiently high to induce increased output, although peasant farmers may find themselves competing with newer commercial farmers entering the field if the returns become attractive. E. Prospects 45. With accessible land still available in the highland areas, and if improved storage and marketing are introduced, the Central American area can probably continue to meet its requirements for corn, beans, rice and sorghum in the next decade. While some improvement in production techniques can be expected to take place on the basis of dissemination of knowledge already under way, especially for rice and corn, it will probably not be sufficient to make a major contribution to output in the next decade. El Salvador, however, will probably over the next decade become increasingly dependent on imports of corn from the rest of the region, a:Lthough in the next few years imports may fall if corn replaces cotton in some coastal areas. In the case of rice, production on medium and large farms on coastal areas is in particular likely to increase --apidly, as a result of special credit programs in Nicaragua and irrigation projects which could begin to function in El Salvador in the early seventies. However, it is prob- able that requirements for imported wheat and dairy products will increase noticeably faster thana population, since rising incomes in the early 1970's, according to the pattern of recent years, will probably lead at present income levels to a more than proportional in- crease in bread and dairy products' consumption. / Over the next dec-- ade, with a rise in population of about 40 percent and some increase in income per head, imports of wheat can be expected to increase substan- tially. The outlook for dairy products is less clear. Generally the c:Limatic conditions in Central America do not favor efficient milk production. Even with an adequate distribution organization, it is doubt- ful whether large-scale dairy production might be developed capable of competing with low-cost powdered milk imports. Preliminary plans have been under discussion to develop a dairy production and a 1/ The value of wheat and flour imports for the five countries rose from US$16.3 million in 1962 to US$21.0 million in 1965, and of con- densed and powdered milk imports, mostly from the Netherlands and Denmark from US$5.7 million to US$7.h million. The major importer of dairy products was El Salvador. - 2h - pcwdered milk plant in Nlicargua. A feeder roa.d project in the area has already been started which could contribute to increased live- stock production. While the mission could not intensively review the proposed project, it appears that the plant could operate pro- fitably only with a very high level of protection, which would sub- stantially raise the cost of powdered milk to the consiz'aer. In Gua,te.mala, the UTDP/FAO diversification study includes the study of a possible dairy project in exisling coffee areas. In general, it is doubtful, however, if in Centra.l America, resources which could be used for beef production shouLd be used to encourage dairy farm- ing, given the problems of organ-zing a dairy industry, the plenti- ful world supplies of cheap powdered milk, and the encouraging market prospect for beef exports. 46. For the next decade at least, the agricultural sector will continue to provide the bulk of employment and still be the ma.in determinant of growth in the five Central American countries. In the past, the agricultural sector, espec-ially the export sector, has de- veloped with little direct help :rom the Government. The major con- tribution from the public sector has been through road construction, especia.lly the opening of the Pacific coastal plain in the last deca.de in Guatemala and El Salvador, and to a. lesser extent in Nica.ragua.; in other a.reas, suc'ih as the western and northern parts of lionduras, new roads - includ:ing feeder road systems - have encouraged agricultural expansion. More recently, the public sector has taken an active role as intermediary or g aarantor in channeling foreign credits for investment, particularly for livestock. These programs are in operation and should conItinue to be expanded and extended to new pro- ducts, such as certain fruits and vegetables (e.g. pineapples, citrus, a.vacado and mango) for export (processed or unprocessed), including bananas throuigh independent growers. To make room for these invest- merlnts, the Governments are now beginning to turn their attention to road investments eastwards towards the Atlantic seaboard, particularly in area.s which are likely to be suitable for beef production or for forestry and in the next stages of the road programs, these will need to receive more emphasis than in the past. As for the domestic food sector, the help required from the public sector is more direct, in the form of extension services, storage, supervised credit, and mar- keting facilities. Most of these services are still inadequate in relation to needs, though the provision of a, general a.gricultural education to an increasing proportion of the rural school-age popu- la.tion co:ld in time help towards the success of the various forms of direct assistance to the peasant sector. AtPPENIX A COFFEE 1. At least up to the beginning of the Second World War, coffee was - apart from bananas, whichi were grown by a foreign company - the region's only major ex-port cormrodity and accounted for more than B0 per- cent of its export earnings. Although the economies of the Central Amlerican countries have since begun to diversify, thanks largely to the rapid rise in cotton production, coffee sales, which in l965 amounted to more than US$28O million, stifl represent about 37 pereent of the to- tal 'value of exports, while th,. percentage is nearer 50 in the regionts three main producing countries, Guatemala, El Salvador and Costa Rica. 2. The entry into force of the International Coffee Agreement in 1963 paved the way for a recovery in coffee prices, whose steady de- cline since 1957 had contributed to a slow-down of the economic growth off the region. However, this recovery has encouraged increased output and will tins lead to an accumulation of non-exportable surpluses. If these trends continrue they may well result in a rapid deterioration of the present favorable situation, The characteristics o' coffee production 3. The combined coffee production of the Central American coun- tries amounted for the 1965/1566 fairly normal crop year to 350,000 tons, equivalent to 7 percent of the total world output. It is made up exclusively of mild coffee, which, while priced somewhat lower than similar coffees from Colombia, nevertheless command a high premium in the market not only over the P.obusta coffees but also over the B3rasil- ian Arabica types, the mostly highly priced coffees being grown in re- gions situated in altitudes above 800 and even preferably 1,200 meters. 4. For the most part, production is controlled by large planters. Although in fact there are some 150,0oo coffee growers in the area, it is roughly estimated that 5 percent of them own two-thirds of the total area under cultivation and produce 80 to 90 percent of the crop. The situation is somewhat different on the central plateau of Costa Rica, a.lthough even there half the area under coffee belongs to only 15 per- cent of the planters. 5. The levels of production, estinated acreage and. average yields in 1965/66 are shown below. Estirmated area Crop year 1965/1966 Production under coffee Yield _1(100 Eons) (1000 hectares) (kg per-hectare) tGuatemala 120 224 535 El Salvador 108 125 864 Honduras 29 92 315 Nicaragua 33 86 383 Costa Rica 60 63 952 Total 3m0 593 APPENDIX A Page 2 Although relatively high in couantries where land is limited (El Salvador, Costa Rica) and where the planters have therefore sought to modernize their plantations, yields are still very poor in Nicaragua and Honduras, where only the traditional methiods of growing are found. The growth of production 6. The total output of Central America has grown by 75 percent over the past ten years. This expansion averaged an annual rate of 8 percent up to 1962/63, but tapered off considerably thereafter, owing to exceptional circumstances such as the eruption of the Irazu volcano in Costa Rica from March 1963 to December 1964, accompanied by an un- usually dry season and plagues in 1964, and a severe leaf miner epidemic in Guatemala in 1964/65. 7. While for El Salvador the expansion of output has largely been the result of higher yields, in the other countries the higher output has been eased through both higher yields and an extension of acreage. During the last ten years the extension of the areas under coffee was fostered to a large extent by the high level of coffee prices that pre- vailed up to 1957, as well as by the availability of long-term credit that the planters were able to secure from the local banks until that time. The pronounced drop in prices, which fell on average from 66 cents FOB in 1956 to 35 cents in 1963 had the effect of markedly reducing further acreage expansion, although in fact the planting which had taken place at the end of the perio(d of high prices began to result in a larger output in the early 1960's. 8. Despite the paucity of official technical assistance, there has been a steady spread of technical knowledge: yields have already risen substantially in Costa !Rica and El Salvador, thanks to the adop- tion of new varieties, an increase in the planting density, improve- ments in growing practices, and the more widespread use of fertilizers and insecticides, which have 'Lowered unit production costs. The latter still vary considerably, however, between 15 and 30 cents a pound of green coffee equivalent, including land rent and management costs, the average probably being of the order of 22-23 cents. As a typical ill- ustration, according to calcuLations made by the Salvadorean Ministry of Agriculture, the following table shows the main components of this cost (excluding management costs and the cost of transportation to the processing plant) on a plantation with a yield of 780 kg (or 1,720 lb) per hectare. Of course, other examples might show considerable varieties above or below this example. Production cost per hectare (in US$) Land rent 86 Labor 190 Fertilizer 48 Equipment and miscellan- eous products 6 Bank interest 30 360i (or approximately 21 US cents per pound) APPENDIX A Page 3 9. Up to a given yield threshold, which appears to be about 1000 kg per hectare, modernization of growing techniques does not appear to have led to a noticeable reduction of production costs; in the well-run plantations, on the other hand, where yields in excess of 2000 kg per hectare are found, costs can generally be reduced to well below 20 cents a pound. At present prices, therefore, traditional cultivation continues to pay i;s way, but only the most efficient planters are able to earn :Largef profits from their estates. Prices to the producer 10. In the absence of anry price stabilization organization in Central America, variations in world prices have automatic repercuss- ions on the level of the priceis received by the producers. While in Costa Rica the marketing margins are subject to strict controls, and in El Salvador and Nicaragua the production of the small growers is marketed by government or semi-public agencies, the marketing margins on the whole are significant aid represent, excluding processing and transportation expenses, close to 10 percent of the FOB prices. The "Compania Salvadorena del Cafe" and the "Instituto Nacional de Comercio Exterior e Interior" (INCEI), -which market the production of the small growers (about 15 percent of total output) in El Salvador and Nicaragua respectively, guarantee these growers a fair price but have no mandate to substantially dampen export price fluctuations. The prices for which they buy the coffee vary in the course of the crop year and are almost always comparable with those offered by the trading companies. For example, during the 1964/65 crop year the price paid by INCEI at the countryts remotest buying points was 33 cents per pound, green coffee equivalent, at the beginning of the year, but fell at the end of the year to 27 cents. For its part, Compania Salvadorena bought the coffee for an average price of 29 cents a pound and, following the example of the trading concerns, extended slightly better terms to planters who agreed to stagger their deliveries. II. In view, however, of' the relatively moderate level of taxes on exports, discussed below, the price to the producer represents be- tween three-fourths (in Nicaragua, where there is now only a specific tax, at a low rate) and two-thirds (in El Salvador) of FOB prices. As an illustration, in the latter country the difference between the f.o.b. export price and the price to the producer is made up of the following components: (in U.S. cents) FOB Price 4400 Freight and shipping costs to ship 1.1 Bagging 0.4 Sorting 1.0 Processing 3.0 Export duties 6.4 Interest costs (4 months) 0.9 Marketing costs 1.5 Difference: Pro(lucers' price 29.5 Source: Association of Exporters (A.B.E.C.A .F.T,%) APPENDIX A Page 4 At the level of the average FOB prices over the past two years, i.e. 44 US cents a pound, prices to the grower evidently were of the order of 30 Us cents a pound and the return earned by Central American planters was appreciably highEr than that of growers in the other pro- ducing countries. It is generally recognized that coffee growing is once more providing a much higher profit than other crops, even on plantations which do not have high yields. Levels of Taxation 12. Although it is true that in the three main coffee producing countries the export tax scales are progressive, with the rates of the ad valorem taxes increasing with each price level, the duties actually paid are still relatively moderate. Effective % Export taxes 2/ Export tax receipts tax at price 1/ collected 1967 as percentage of of US cents: 35 4o0 44 45 (million US$) export receipts Ad valorem Giatemala 8.5 U-5 13.1- 14.0 8.4 9.2% El Salvador 11.4 13,1 14.7 15.0 10.3 10.8 Costa Rica 0.5 5.0 7.5 10.0 3.3 7.1% Specific Tlonduras 17.0 15.0 13.0 13.0 1.3 3/ 10.0% Nlicaragua 3.25 2.85 2.5 2.5 0.7 3/ 2.5% Total Central America 2h.0 8.% :1/ Average price in 1965. 2/ Excludes minor taxes collected for coffee office etc. 3/ Estimate on basis of budgetary returns. While there are a few additional minor taxes on coffee which are not included in the computation in the attached table, it appears that the amount actually collected from the main export tax on coffee in the cases of Guatemala and El Salvador was substantially below the statu- tory tax rate at that price. While there may be some lags in payment which may account for some of the difference, the consistent disparity in recent years suggests that there may be a degree of under-invoicing or some other form of evasionl, except in the case of Costa Rica, where controls are more advanced. 13. In fact, despite the progressive nature of the applicable taxes, the recovery in coffee prices has not led to any appreciable in- crease in fiscal revenue, since the general tendency in recent years has APPENDIX A Page 5 been for the duties imposed to decrease. In Nicaragua, the rate of taxa- tion on coffee exports was substantially reduced in 1958, when a differ- ential exchange rate tax on coifee was abolished. In Guatemala, the price used for computing the tax was changed from the quoted New York MAMS price to the local contract price in October 1962: this arrange- ment probably permits underinvoicing, and may account for the fact that Guatemalan coffee tax revenues have fallen despite a higher volume and higher prices. In Costa Rica, strong pressure was brought to bear on the new Government in mid-1966 to reduce the level of export duties. 1/ 1I. The taxation of coffee exports has the double function of ob- taining revenues for the government and the anti-cyclical function of capturing some of the larger pr-ofits during periods of high prices and, by implication, reducing the rate of taxation in periods of low prices. In addition, proportionally higher taxes in periods of higher prices would reduce the main incentive to expand production, since in fact the increases in planting have taken place during such periods, with the increased production coming on the market after the downturn in prices (such was the case in the period 1958-62). While tax revenues from coffee exports have increased, especially in El Salvador, since 1963, it is doubtful if the progressivity of the rates and their actual app- lication have been sufficient to noticeably affect the incentive to expand production. For the reasons developed in the following section, the Central American countries should consider in the immediate future the possibility of increasing taxation of the coffee sector. ITith pre- sent tax rates, the incentive to expand coffee production rather than that of other products would still be high, even at world prices 10 per- cent below the present ones (about US 42 cents for Central American coffees). The most effective and rapid way to achieve this would be to increase the rates and the progressivity of coffee export taxes: it is probable, however, that such a move would meet with strong opposition. It might also be criticized as unfair to the small producers, although thaese account for a fraction of production. A less direct measure would be to enforce the income tax much more strictly in the coffee sec- tor; as a beginning, the exemptions granted to the coffee sector in El Salvador and Guatemala could be reduced or abolished. 2/ t'rends in future production 15. The recovery in coffee prices from 35 cents at the end of 1963 to 44 cents in 1965 is once again providing an incentive for stepping up production. While the acreage, devoted to coffee is unlikely to expand very much in the next few years, there is still considerable scope for raising yields, especially in Guatemala, Honduras and Nicaragua. In 1/ The Costa Rican coffee tax is not strictly an export tax since it applies to all coffee purchased by coffee processing mills. 2/ In El Salvador, income originating in the coffee sector is not sub- ject to income tax, and in Guatemala the 15,000 quetzal basic ex- emption for agricultural income tax returns in effect includes the majority of coffee growers who therefore do not pay income tax. The government of Guatemala has been considering plans to substantially reduce this exemption. APPENDIX A Page 6 view of the quotas fixed for exports, it seems virtually certain that the non-exportable surpluses will assume large proportions in the future. Until 1964/65, the stocks held at the end of the crop year in Guatemala, El Salvador and Nicaragua have not reached the volume that could not be exported during the first quarter of the following year. This was the result not only of exceptional factors that affected pro- duction but also of exports either authorized under the International Coffee Agreement (waivers) or effected in violation of its terms (some exports via Honduras, then not a signatory to the Agreement), or to supposedly "new markets". On the basis of present trends, substantial surpluses would accumulate frcm the crop year 1966/67 onward and, more important, they would progresEively build up in subsequent years. CENTRAL AMERICA: PROJECTED COFFEE SURPLUSES (thousand 60 kg. bags) Actual 1964/65 Projected 1970-71 2/ ICO 1/ Total Total Local Production Country Output Quota Exports Output Consump. Quota Surplus Goals 3/ G 1,752 1,257 1,29E8 2,490 290 1,680 520 1,863 ES 2,075 1,561 1,618 2,360 160 1,786 414 1,844 H 488 266 40L 580 120 450 10 542 N 634 455 4681 880 80 524 276 549 CR 783 888 702 1,375 175 1,187 13 1,232 Total 5,732 4,h27 4),490) 7,685 825 5,627 1,233 5,730 Total in 000 met- ric tons 345.3 266.7 270.5' 463.o 49.7 339.0 74.3 345.2 1/ G = Guatemala; ES = El Salvador; H = Honduras; N = Nicaragua; CR = Costa Rica. 2/ Mission projections. 3/ International Coffee Organization for 1971/72 Source: Table 1 16. For the future, assuming that world imports and hence also the basic quotas of the Central Anerican countries are likely to increase at the rate of 2.5 percent a yea:", and that local consumption is likely to grow at least as fast as the population, or by 3.5 percent a year, the excess of exportable production over the probable export quota levels is likely to reach about 20 percent of the quotas. The surplus in relation to the exports is likely to be particularly large in Nicaragua, although the government's diversification program may by 1970 have a small impact on production, and also for Guatemala and El Salvador. APPENDIX A Page 7 17. While the calculations of future output and potential surpluses in 1970 can only be taken to show general trends, they suggest two gen- eralizations, aside fram the magnitude of the surplus itself. The first is that the Central American countries would probably benefit from a common quota arrangement under the Coffee Agreement, which would allow a surplus country to use any unfilled quotas of other Central American countries. The surpluses of Costa Rica and Honduras are likely to be srnall and could easily disappear with bad weather or disease and thus release an unfilled quota for use by the surplus countries. The second generalization is that the Coffee Agreement, particularly if such a common quota arrangement is instituted, is the best safeguard of the Central American countries: whi:Le the likely surplus is not small, its size in relation to the quota iS probably smaller than the drop in coffee earnings which would result if there were no international agreement. In such a case, the production levels of major world exporting countries could well bring about a drop in prices proportionately larger than the 20 percent surplus. 18. The government agencies directly responsible for regulating the coffee industry 1/ in the various countries have so far taken few meas- ures to cope with the impending surpluses, although the three surplus countries (Guatemala, El Salvador and Nicaragua) have in effect systems to assign a quota to each producer. These systems have so far done little to reduce the volume of coffee that is delivered to the mills. The authorities have not so far reached decisions on whether the burden of future surpluses will be borne by the producers (in the form of unpicked coffee or through a lower internal purchase price) or by a combination of other interests (such as by the coffee regulatory agencies). A be- ginning has been made in diversification studies, although the implemen- ta-tion of the results of such studies is likely to require an accompany- ing policy of increasing the taxation of the coffee sector, to lessen its attractiveness compared to other products. Since decisions have yet to be taken by the governments on these issues, projections beyond four or five years are highly uncertain. However, the impact of a growing surplus in the next five years is likely to be to reduce somewhat the incentive to expand coffee prociuction. The mission projections of out- put and exports in 1975 (Table 1) assume in addition that the authorities w-rill also by the end of the 1960's have implemented some of the measures discussed here, or measures with an equivalent effect, to adjust coffee output to world market conditions. On this basis, the bulk of the sur- plus projected in 1970/71 wouldL have disappeared by 1975/76 and surpluses over likely quota levels would have been reduced to above 10 percent of exportable production. 1/ The Asociacion Nacional del Cafe in Guatemala; the Departamento Nacional del Cafe and the Compania del Cafe in El Salvador; the Ministry of Agriculture in Honduras; the Instituto del Cafe and the Instituto Nacional de Comercio Exterior e Interior (INCEI) in Nicaragua; and the OficLna del Cafe in Costa Rica. The Asociacion Nacional in Guatemala is a private organization. APPENDIX B COTTON 1. Cotton growing, for which the natural conditions along the Pacific coast of the region are eminently suitable, has expanded very rapidly in the sixties. Such a. rapid expansion, however, has been accom- panied in the last two or three years with a steady increase in produc- tion costs which in several countries (notably El Salvador) has already led to a certain curtailment of cultivation. Uncertainty still exists as to wnen and on what conditicns cotton growing will be able to resume its expansion. 2. During the agricultural year 1964/65 cotton production in the region reached 290,000 tons of cotton fiber, equivalent to 2.5 percent of world production. The percentage represented by exports is much higher, since local industries at present absorb only a small proportion of the output. In 1965, exports (60 percent of which went to Japan and more than 30 percent to the EEC countries) amounted to 289,000 tons (approximately 7 percent of the volume traded in world markets), and were valued at US$147 million, thus accounting for 19 percent of the total exports of the region. Cotton has thus become the region's second ex- port product, and the primary one in the case of Nicaragua. I. The areas under cultivation vary considerably from country to country, but yields are uniformly high, particularly in Nicaragua, as shown in the tabulation below. In fact, they are the highest in the world for rain-fed plantations (Mexico 662 kg; USA 579 kg, for the same year). CENTRAL AMERICAN COTTCN PRODUCTION AND YIELDS: 1964/65 1/ 1964/65 production Area cultivated Yield (kg) per Country (1000 metric tons) (1000 ha) hectare Guatemala 71.7 97.6 735 El Salvador 80.5 121.8 661 Honduras 11.3 13.9 813 Nicaragua 122.8 133.4 921 Costa Rica 3.2 5.0 639 Total 289.5 371.7 779 I/ Source: Table 3 APPENDIX B Page 2 4. The cottons produced aLre of standard quality. They are Upland Middlings, 85 to 90 percent of them of the Delta Pine variety, which yields fibers with a staple lengtth of 1-1/8"1 and of acceptable resist- ance. Quality on the whole is Satisfactory although it has tended to deteriorate in Nicaragua owing to the lack of storage facilities and the inadequacy of the labor force. Because of apparent shortage of labor skilled in cotton picking, the wJorkers there have not given all the care that cotton harvesting calls for, while mechanization, on which the growers have been forced to relr to an increasing extent, also affected its quality. This should not, however, prove to be a permanent adverse factor. 5. Cottonseed, the production of which rose to 490,000 tons for Central America in 1965, is utilized for the most part by local oil plants; Nicaragua, however, continues to export two-thirds of its cottonseed out- put to Japan. Structure of production and marketing organization 6. A recent survey 1! of a total of 13,000 cotton plantations in Central America shows that prodaction is largely controlled by medium and large planters. Planters cultivating less than 35 hectares account for 80 percent of the total number of cotton growers, but only for 20 percent of the harvest. In Guatemala, which has the largest plantations in the world, there are less than 300 planters. The boom in cotton production has in part taken place on rented land, especially in El Salvador, where 60 percent of the acreage is rented land. 7. The rapid expansion of cotton production has largely been the work of private individuals and the large planters, who have adopted the most up-to-date farming methods in use in the U.S.A. and have become highly mechanized, except in picking. Active cooperatives have been etstablished for processing and marketing of cotton. In El Salvador, as in Honduras, a single cooperative is responsible for both ginning and selling the entire crop. The cooperatives have also obtained advances from foreign firms and banks in. order to cover part of the crop financing needed by their members. Developments in cotton production 8. About ten years ago, the cotton production of the region barely exceeded 20,000 tons. Encouraged by the high level of world prices which prevailed up to 1957, that is, until the U.S. Government decided to dis- pose of its stocks of cotton on the market, production increased steadily 1/ Informe sobre la fibra del algodon, SIECA, March 1965 and March 1966. APPENDIX B Page 3 from 1955 to 1957 in Nicaragua, Honduras and El Salvador. While produc- tion dropped sharply in 1959 as a result of the drop in prices, the growth of production resumed at a rapid pace in 1960 as a result of the effects of the drop in coffee prices, and the opening of new roads on the Pacific slopes. Output from 1960 to 1964 trebled, largely from an increase in the area cultivated, although there was a particularly marked increase in yields in Nicaragua. 9. The steady increase in output kept up until 1964/65, but pro- duction in the 1965/66 crop year declined, as a result of drought con- ditions, the persistence of pests and rising costs. Yields in Guatemala, Nicaragua, Honduras and El Salvador, fell substantially (Table 3). 10. Worried by the rise in production costs, production difficul- ties and the possibility of a drop in prices due to the new cotton policy introduced by the U.S. Government, many planters, faced with a sharp re- duction in profits, are considering going out of cotton. The indications are that in the 1966/67 crop year, the area cultivated in El Salvador, which had reached 122,000 hectares in 196h/65, is unlikely to exceed 50,000 hectares in 1966/67. In Honduras, too, the area under cotton may fall from 18,000 to l4,000 hectares, and in Guatemala from 164,000 to l10O,000 hectares. In Costa Rica and Nicaragua, on the other hand, the land under cotton may increase if the plans to provide a larger volume of finance for expansion materialize. 11. Although the new cottorn policy of the United States does not justify the fears held by certair planters in Central America, there does appear to be much more cause for apprehension regarding increases in production costs, the reasons for which are both numerous and complex. 12. First, wage costs have risen, probably due to a greater demand for labor and possibly also due to the introduction by the authorities in El Salvador and Nicaragua of a minimum wage. Because of the profit- ability of cotton growing, the land rent, particularly in El Salvador, has increased sharply and this ha,s affected the profit margins of many producers who rent acreage for cultivation. Attracted by the prospect of a quick and large return, planters have in some cases indiscriminately used increased quantities of fertilizers and insecticides without giving enough attention to the economic returns from increased applications and often neglecting soil conservation or possible crop rotation which is needed over the longer view. As a result, yields have not increased pro- portionately and costs have risen. The lack of crop rotation has, to- gether with contiguous plantatiorns, encouraged the proliferation of in- sects, while the use of insecticides has in some instances probably en- hanced the resistance of certain varieties of insects to normal dosage levels. The authorities have not; taken sufficient elementary remedial measures, such as ordering the burning or ploughing-in of the plants after the harvest or ensuring that treatrnents are applied at the sane time. APPENDIX B Page 1 13. The increased virulence of pests and disease is regarded today as the main factor responsible ior the recent increases in production costs. Wlhereas the number of applications of insecticides during the last crop year was still about ten annually in Costa Rica, in Nicaragua and Guatemala it already averaged over twenty-five, and it was as high as forty in El Salvador. The cost of these applications, which in El Salvador used to represent one-f"ourth of total production costs, now accounts for one-third. With bad weather and a reduction in yields, it is probable that many planters have on balance lost money in 1965/66 in El Salvador. However, profil; margins are still attractive in Costa Rica, where the industry is more recent, and in Nicaragua, where the poor 1965/66 crop was largely the result of bad weather. 14. W,rhile data on changes in costs are not available, recent official data on the main components of production costs show the relative magnitude of land rent and insecticides in costs. These estimates are not fully comparable, but the general conclusion that costs in 1964/65 were highest in El Salvador and lowest in Nicaragua is probably correct. M4anagement costs are not included. COTTOIN PRODUCTION COSTS IN 1J.S. DOLLARS PER HECTARE, 1964/65 El Salvador Nicaragua Guatemala Honduras Land rent 60 40 32 40 Seeds 3 4 3.5 3.5 Fertilizers h40 30 30 40 Insecticides 96 60 75 64 Air spraying :32 20 25 35 Cultivation costs <30 50 90 75 Harvesting costs '56 70 80 75 Bank interest 20 20 17.5 25 Total 387 294 353 359.5 Yields (kg.) per hectare 1964/65 crop 661 921 735 813 Unit cost (Us cents) P'er kg. of seed cotton 58-5 32 48 44 F'er lb. of seed cotton 26.5 14.5 21.7 20 Source: Documentation for the Central American Cotton conference San Salvador N1arch 1966. The product of the sale of cotton seed (for every pound of lint the cotton seed has a sale value of about 3 U.S. cents) is slightly more than the cost of processing, transportation and marketing (2.5 U.S. cents per pound) so APPENDIX B Page 5 that the unit costs shown for seed cotton are more or less equivalent to what it costs the farmer to produce lint cotton, after taking into account processing, transportation and marketing. At an f.o.b. price of 24 cents, the average price for 1965, it appears that cotton cultivation remained highly remunerative in Nicaragua but not in El Salvador, at the level of yields obtained in 1964/65. 15. The recovery in production is essentially dependent on a reduc- tion in production costs, which in turn depends on the outcome of re- search and experimental work. The cotton producers of Central America met in El Salvador in March 1966 to arrive at a common diagnosis of their prc,blems, and to devise a common approach to the research necessary to reduce production costs. So far, the Cooperative of El Salvador has taken an active interest in this research aspect. It is receiving the assist- ance of France from the "Institute de Recherches du Coton et des Fibres Exotiques" (IRCT); an IRCT mission has been at work since 1964 but will not be able to present all its findings for some months yet. Production outlook 16, In the next two years or so further reductions in the area cul- tivated will probably take place. Since the areas likely to be taken out of production are marginal ones, the reduction in acreage will have a less than proportional impact on the level of production. Production fell by close to 50 ,000 tons in 1965/66 to about 240,000 tons, that is, 16 percent below the level of the preceding crop year. 17. For the seventies, the prospects of a renewed upswing in pro- duction at rates anything like those in the late 1960's are not favorable. However, important increases can still be obtained in all likelihood. The Pacific coastal lands are eminently suitable for cotton production, although a resumption of growth in output will depend in part on the effectiveness with which costs can be reduced. In a short period, Central American producers have shown that they could attain the highest yields in the world for non-irrigated cotton; with a beginning already being made in research to cut costs, there are reasonable prospects that, in time, costs could be reduced sufficiently to make production profitable even at scmewhat lower market prices. Some drop in prices is likely to result from the United States' new cotton policy; the extent of such a drop is difficult to forecast, but the mission has taken as a basis for its projections a decline to about 20-21 cents per pound in the early 1970's. ,uch a decline would particularly affect marginal producing countries with their very low yields, but it may serve to bring about a gradual de- gree of equilibrium between supply and demand in the world market in the future, particularly as the United States' long-range policy is aimed at the gradual elimination of its stocks. APPENDIX B Page 6 18. Providing Central American producers can adjust costs to pros- pective price levels, there would still be opportunities for increasing production in existing areas, except in El Salvador, where production 1has spread to marginal areas. Imiited suitable areas for cotton growing are still available in Honduras (Choluteca Valley) and Costa Rica. U3nere- as the construction of new access roads could permit the cultivation of an additional 40,000 hectares irn Nicaragua, it is above all in Guatemala - where the area under cotton on the Pacific coast could reasonably be doubled - that cotton growing is capable of expanding the most. On the basis of these assumptions and those in the above paragraph, the mission has estimated that cotton production in Central America could reach some 400,000 metric tons by 1975 (Table 3a). Some 10-15 percent would be needed for local consumption, leaving about 375,000 tons for export. These quantities, assuming stability in prices, would represent an annual average rate of increase in cot;on export earnings of some 5.5 to 6.0 percent between 1970 and 1974. APPENDIX C BANANAS Introduction 1. Banana production in Central America began on a noticeable scale in the 1880's in Costa Rica and Honduras. This was then followed at the turn of the century by the granting of large concessions of land to the United Fruit Company. A3 a result, the company opened up various areas providing them railroads, ports, housing, and various social ser- vices. The performance of some economies of the region, particularly Honduras, was until recently depoendent on the varied fortunes of the indiustry, in which the spread ot Panama disease played a key role. Until now, virtually the whole production for export has been by the United Fruit Company and the Standard Fruit Company, or marketed through them. 2. The introduction of new disease-resistant varieties and of boxing placed Honduras, Costa Rica and Panama on a new growth plan. The foreign companies' increasing interest in expanding output through pri- vate planters is also changing the nature of the industry, giving nation- als a greater direct stake in its future. Production trends 3. Many areas of Central America afford soil and climatic condi- tions that are highly favorable' for banana growing. This is particularly true of the regions along the Atlantic seaboard of Costa Rica and Honduras, which are usually not affected by hurricanes and have the additional ad- vantage of being better situated than the Pacific coast areas in relation to the major consumption centers of the eastern United States and Western Europe. 4. Despite these eminently suitable conditions, banana exports from the region have remained stagnant ever since the end of the Second World Wfar. World banana importis almost doubled between the period 1948-52 and 1963, rising from 2.3 to 4.4 million tons, but it was only through the development of banana growing in other countries, notably Ecuador, that Western Europe's greatly increased demand could be met. Central America's share in the world's banana trade has shown a steady decline: the average of 800,00() tons exported during the period 19h8-52 represented 35 percent of tota:L world exports; the 1963 export tonnage, which has always remained more or less identical, represented however no more than 18 percent. During the same period, Ecuador's share of the world marlet rose from 9 to 25 percent. 54 This stagnation followed the spread of the Panama disease, which rendered the areas affected unusable for the production of the Gros Michel variety and forced plantations to undertake expensive relocation. APPENDIX C Page 2 The United Fruit Company in 19)42 gave up its Linon plantation on the Atlantic Coast of Costa Rica; in 1956, it phased out the Quepos planta- tion on the Pacific coast in favor of the Bolfit plantation, also on the Pacific. In Guatemala, the company shifted its plantation from the Paci- fic coast to the Atlantic side; a contributing factor to this decision was the high cost of transportation from the former site. Changes in production patterns 6. The industry, originally based on the Gros Michel variety has switched in favor of the Giant Cavendish variety because of higher yields, less vulnerability to damage by hurricanes and, above all, its resistance to Panama disease. However, because this variety is more fragile than the Grcs Michel, in order to transport the Cabanas (brand name of Standard Fruit's Giant Cavendish bananasl it was necessary to develop an entirely new system of packaging in cardboard boxes instead of the old system of shipping on the stem. The new ,ystem simplified the shipping of bananas, greatly reduced losses and resu:Lted in better financial returns. Conse- quently it has already gained virtually complete acceptance in the West- ern Hemisphere, creating a great local demand for cardboard for boxes. 7. The United Fruit Company has been switching to the Valery variety (brand name: Chiquita), which is closely akin to the Giant Caven- dish. Accomplished very quicklyr in Honduras, this switchover is taking place slowly in Costa Rica; the chanlgeover has been even slower in Guate- mala, owing to unexpected difticulties with the terrain and climate and to continuing political instabi'Lity in the region where the plantations are situated. These changes have helped to increase banana exports from 340,000 to 590,000 tons in Hondliras and from 260,000 to 320,000 tons in Costa Rica, between 1963 and 1965. Guatemala's production, on the other hand, has slackened off whiLe NhLcaragua's Gros Michel plantations, estab- lished a few years ago under government sponsorship on the Pacific coast, have suffered from hurricanes. Dnergence of independent growers 8. The banana companies are increasingly looking to the independ- ent planters as a source of supply for their rising shipments from Cen- tral America. The independent planters in turn are obtaining the benefit of technical assistance from the banana companies in their production problems, and they are also able to take advantage of the fruit companies' transportation and marketing networks. This development has increased the interest of the governments in expanding banana cultivation. 9. The Government of Nicaragua has sponsored a crop diversifica- t:ion program on the Pacific coa-st and secured an undertaking from United Fruit in 1961 to purchase for five years and at relatively high prices the bananas grown on the new plantations of independent planters. Pro- duction has so far been hindere(d by various setbacks, especially blow- downs, and it remains to be seen whether the agreement can be renewed on APPENDIX C Page 3 the same basis. The GoverrNnent also hopes to extend banana plantings to the land that had been scheduled for irrigation in the Rivas region (bordering Lake Nicaragua). Howiever, this decision will depend largely on the outcome of further studies and field tryouts now in process. 10. The Costa Rican Government, anxious to restore the sagging economy of the Atlantic region which has been hit by the drop in cocoa prices and output, has been developing plans for financing independent banana growers. The conditions for bananas in that area are favorable - the even rainfall eliminates irr-igation costs, railroad infrastructure is adequate and hurricanes are relatively infrequent. The plans of the Government mesh with those of the Standard Fruit Company which, having earlier met difficulties in securing land concessions, is now seeking to expand its activities by signing agreements with independent planters to purchase their entire output. lJnder the arrangements between Standard Fruit and the independent producers, the planters are provided with young plants of the Giant Cavendish variety and receive considerable technical assistance at low cost, both in preparing the land and in the maintenance and operation of the plantation3. The company assumes responsibility for establishing and operating packaging stations. Given this assistance to the planters, the dollar price paid of US$1.25 per 42-lbe cardboard box FOB, which is guaranteed for a 'LO-year period, is sufficient to yield an ample return to plantations that are adequately managed and laid out. On an independent producer's plantation with a yield of 36 tons per hectare, not an unusual yield in Central America, the total value of sales per hectare would average about $2,:350, and leave a return, before income taxes and debt service, of possibly about $400 per hectare. The return left after servicing the cost of' land purchase, is ovidently still attrac- tive. These favorable results are made possible by the high yields gen- erally obtainable due to rich soils and the generally high level of the skills of workers in the banana industry, A major factor in future pros- pects to maintain this competitLve edge will be the cost of boxing mat- erials, which now account for about one-third of the cost of the product delivered in containers at the port. 11. The interest being shown by the Costa Rican Government in the expansion of banana growing has led other companies to follow the lead given by Standard Fruit. The West Indies Company and its subsidiary Bandeco, as well as two European firms, are at present establishing them- selves in Costa Rica. The prices offered, especially in the case of the contract signed between the Wes-t Indies Company and the Government Insti- tute of Land and Settlement, are higher than those of Standard Ft'uit, but the services provided are genertally less extensive and the terms of the contract less specific regarding the grounds on which fruit can be re- jected by the purchaser. 12. The efforts of the Costa Rican authorities seem likely at all events to result in a consideralDle expansion of banana growing in that country, provided that adequate financing is made available to the inde- pendent growers. The Government has included financing for such activity APPENDIX C Page 4 in a project submitted for consideration by an external financing agency. However, the present port facilities at Puerto Limon do not appear capable of coping with a rapid growth of exports. The plans for temporarily improving present facilities and constructing adequate new port facilities at Puerto Limon should be given, top priority; the IBRD is therefore giving assistance to Costa Rica for technical and engineering studies of new port facilities in the region. 13. The efforts of the Ccsta Rican authorities to promote the de- velopment of an industry of incLependent banana producers in Costa Rica are in sharp contrast with the case of Honduras whereas credit facilities generally have not so far been available for associate producers. Until now, the Honduran authorities hlave not been inclined to encourage an in- crease in the country's dependence upon bananas, which, in 1965, consti- tuted almost 45 percent of total exports. Marketing Characteristics 14. fWhereas in banana-producing countries in other parts of the world, such as Ecuador, the indlependent growers have been responsible for expanding the crop, banana production in Central America has continued to be controlled by the two major fruit companies. 15. The entire system is fully integratod: the bananas are carried in company ships and the companies have extensive networks at their dis- posal in the USA. In fact, they enjoy close to 90 percent of the U.S. market. However, in view of the limited scope for further expansion of the U.S. market, they are endeavoring to extend their distribution net- works throughout IJestern Europie, particularly in West Germany and the Benelux countries, and generalLy to those countries that are still open tc) international competition. 16. Under these circumstances it is evident that these companies are in a good position to market the produce of independent growers, by providing nearby producers wita the necossary technical knowledge and at the same time entering long-term purchase contracts at stable price levels, Temporary fluctuations in worli prices would thus in all probability be absorbed by marketing margins. Production prospects 17. Now that the technical problems that had halted the expansion of banana growing in Central America have largely been solv3d, countries of the region will be in a much better position to regain their former position in the world market. This applies equally to Panama, which in 1965, reached total exports of about 360,000 tons, valued at US$31 million. The market to absorb the increased production is severely limited, however, and increased sales by Central America will in part be possible only be- cause of stagnation in the output of Ecuador. In the United States, per capita consumption seems to have reached saturation levels. Despite a short-lived recovery brought on by the adoption of new packaging methods APPENDIX C Page 5 and the increased emphasis on marketing (e.g. more advertising), 1965 imports, at 1.82 million tons, were slightly below those in 1961. In Western Europe, too, consumption levels are now becoming stabilized, except perhaps in Italy, where Lmports are still subject to quota and prices to consumers are stiLL high. However, Great Britain, France and Italy will probably continue to import preferentially from countries with which they have political and t;-ade ties. Consumption in Japan has in- creased considerably in recent years, but future demand is likely to be met by imports from such neighboring countries as Formosa and the Philipp- ines . 18. In such a highly compartmentalized market, supply seems far" more likely to increase than demand. However, the major banana companies already have substantial investzrents in Central America and have agreed to ten-year contracts at fixed prices for a growing share of their output. It is thus likely that they wilL give first priority to disposing of their Central American output. Nevertheless, the uncertainty of market pros- pects over coming years seems to generate different responses among the larger firms. Thus it appears that United Fruit at present plans to limit its plantations in Honduras to about 12,000 hectares, as compared to 8,000- 10,000 hectares in recent years, and is proceeding only slowly with the conversion of its Costa Rican plantations to the high-yield Valery variety. (This may reflect management's ,lecision to capitalize on its present in- vestments on the Pacific coast)., Moreover, it is signing association agreements only with planters whlom it formerly employed, and their opera- tions continue to be closely inuegrated with its own. Other competing firms are, however, pursuing a mnore expansionist policy which may reflect a more favorable assessment of the region's capacity to compete favorably against banana producers in other regions of the world. 19. On the basis of plans for expansion, total Central American ex- ports, excluding Panama, could wiell reach between 1.3 and 1.4 million tons in 1970, including 750,000 tons from Honduras and 500,000 tons from Costa Rica (see Table 6). In Honduras, the anticipated increase would come from completion of United Fruit's current expansion plans and from the culti- vation of an additional 2,000 ha. belonging to two large planters who have signed agreements with Standard Fruit. In Costa Rica, the areas being cultivated by independent growers, which at present do not exceed 1,000 ha., would probably reach 4,000 ha. in the next two or three years and might expand still further 'Ln subsequent years. 20. In the other countrie3 of the region there is only limited scope for development. In Nicaragua, the soil conditions in the Atlantic region do not appear particularly conducive to banana growing; experimental work is being carried out to determine what conditions are required to expand banana growing on the Pacific coasts. In Guatemala, the plantations on the Pacific coast have been abandoned. Plantations on the Atlantic side have been maintained at low level, and plans for expansion are still very ullcertain. APPENDIX C Page 6 21. These projections are consistent with the world market outlook, but they assume that within the total market, which cannot be expected to grow much over 2 percent per yee.r on average over the next decade or so, the Central American countries will be able to obtain a larger share because of relative stagnation in Ecuador and their ability to compete, both in production costs and in geographical location for quick shipping to major markets. STATISTICAL APPENDIX Ta.b:le 1 Central America: Coffee Production and Exports, 1965-1975 la Central America: Volume of Coffee Exports, 1962/63-1965/66 2 Central America: Cotton Production 3 Centra.l America: Cotton Area, Production and Yields 3a Central America: Cotton Production and Exports, 1965-1975 4 Central America: U.S. Sugar Import Quotas and Exports, 1963-1971 5 Central America: Beef Cattle Herds aind Production, 1960-1975 5a Guatemala.: Beef Cattle Herds and Production, 1960-1975 5b El SaLvador: Beef Cattle Herds and Production, 1960-1975 5c Honduras: Beef Cattle Herds and Production, 1960-1975 5d Nicaragua: Beef Cattle Herds and Production, 1960-1975 5e Costa Rica: Beef Ca.ttle Herds and Production, 1960-1975 6 Central America: Banana Exports, 1960-1975 7 Central America: Land Use 8 Central America: Estima.tas of Farm Size 8a El Salvador: Farm Size a:.d Land Tenure, 1950 and 1961 9 Centra1 America: Estimates of Land Tenure 10 Central America: Percentage of Fa.rms Occupied Under Different Systems of Tenuxre 11 Central America: Support Prices for Grains, 1965 - 1966 12 Central America: Storage Capacity for Food Gra.ins, 1962 13 Central America: iiajor Food Crop Yields l4a Guatemala: Agricultural Credit, 1960 - 1965 Table ' L4b El Salvador: Agricultural Credit, 1960-65 Ih c Ilonduras: Agricultural Credit, 1961-65 14 d NTTicaragua: Agricultural Credit, 1961-65 14he Costa Rica: Agricultural Credit, 1960-65 15 Central America: Na.in Agricultural Dctension Services, 1965 Table 1: CEMTRAL AMERICA: COFFEE PRODUCTION AND EXPORTS, 1965-1975 (Volumes in thousand 60 kg. bags, Values in million U.S. dollars) Actual 1965 Projection 1970 or 1971 Projection 1975 or 1976 Produc- Local Export- Produc- Local Export- Produc- Local Export- tion Cons. able tion Cons. able 1/ tion Cons. able 1/ 1964/65 Produc- Exports 1970/71 Produc- Exports 1974/75 Produc- Exports tion Q V tion Q V tion Q V rhint.P.ma Ia 1.752 250 1,502 1,588 91.3 2,490 290 2,200 1,680 92 2,600 350 2,250 1,880 103 El Salvador 2,075 125 1,950 1,644 95.6 2,360 160 2,200 1,786 98 2,400 185 2,215 2,000 109 Honduras 488 90 398 422 23.2 580 120 460 450 25 650 140 510 505 28 Nicaragua 634 60 574 470 26.4 880 80 800 524 29 850 95 755 590 32 Costa Rica 783 140 643 805 46.6 1,375 175 1,200 1,187 -65 1,550 215 10335 1,330 73 Total 5,732 665 5,067 4,929 283.1 7,685 825 6,860 5,627 308 8,050 985 7,065 6,305 345 Surplus over likely quota levels 1,233 760 Average Price (US cents per lb.) 4140 1.0 410 Q=Quantity; V=Value 1/ Equivalent to likely export quotas. Mission pjojection. Source: Mission projection. Table Ta: CEI 1TRAL A>1]RICA: VOL'uM-E OF C OFrLL. EXPORTS, 1962/63-1965/66 (thousand 60 kg. bags) Crop Years 1962/63 1963/64 196h/65 Estimate 1965/66 effective actual effective actual effective actual effective exportable quota exports quota exports quota exports quota production Guatemala 1,331 1,762 1,511 1,51h 1,257 1,298 1,403 1,700 El Salvador 1,h15 1,530 1,685 1,719 1,561 1,618 1,573 1,680 Honduras 282 334 334 318 266 hoh 269 300 Nicaragua 415 479 435 437 455 468 h6h 470 Costa Rica 940 901 970 921 888 702 896 860 Total 4h383 5,oo6 4,935 4,909 4,427 b,490 4,605 5,010 Source: International Coffee Organization and mission estimates. Agriculture Report Table 2: CENTRAL A1ERICA: COTTON PRODUCTION (Thosnds Tons) Crop Year Total Guatemala El Salvador Honduras Nicaragua Costa Rica 1952/53 27.0 3.1 10.5 .5 12.7 .2 1953/54 42.1 5.6 12.8 .5 22.9 .3 1954/'55 75.5 8.1 20.1 .8 46.2 .4 1955/16 76.6 9.1 30.2 .7 36.3 .4 1956/57 87.2 9.4 31.7 1.3 43.9 .9 1957/58 103.7 13.4 35.3 4.1 49.6 1.3 1958/59 108.1 15.3 38.9 4.3 48.4 1.2 1959/60 78.5 13.7 33.1 1.6 29.1 1.0 1960/61 96.1 19.1 41.1 1.3 33.4 1.2 1961/62 144.2 24.1 59.7 3.5 55.6 1.2 1962/63 204.7 52.0 71.5 7.2 72.4 1.5 1963/64 241.5 65.9 74.2 6.8 92.9 1.7 1964/65 291.0 71.7 80.5 11.3 124.3 3.2 1965/66 236.8 71.4 45.0 10.2 105.1 5.1 (Prelim.) Source: Secretaria Permanente del T'ratado General de Integracion Economica Centroamericana (SIECA), and staff estimates 1965/66. Agriculture Report Table 3: CENTRAL AMERICA: COTTON AREAL PRODUCTION AND YIELDS Area Production Yields Crop Year 1000 Hectares 1000 Metric Tons Kg per Hectare Guatemala 1960j61- 25.8 19.1 741 1961/62 44.7 24.1 538 1962/63 71.6 52.0 727 1963/64 90.0 65.9 732 1964/65 97.6 71.7 735 1965/66 (Prelim.) 163.9 71.4 688 El Salvador 1960161 56.5 41.1 728 1961/62 81.6 59.7 732 1962/63 93.3 71.5 767 1963/64 118.6 74.2 625 1964/65 121.8 80.5 661 1965/66 (Prelim.) 8127 45. c0 551 UIonduras 196016T 2.0 1.3 665 1961/62 4.2 3.5 844 1962/6-3 9.2 7.2 786 1963/64 9.1 6.8 750 1964/65 13.9 11.3 813 1965/66 (Prelim.) 18.1 10.2 564 Nicaragua 960/61 60.8 33.4 550 i961/62 74.9 55.6 742 1962/63 93.7 72.4 773 1963/64 115.0 93.0 808 1964/65 133.4 122.8 921 1.965/66 (Prelima.) 159.5 105.1 659 Costa Rica 3960/bl 3.4 1.2 346 1961/62 2.8 1.2 430 1962/63 2.7 1.5 548 1963/64 2.9 1.7 589 1.964/65 5.0 3.2 639 1965/66 (Prelim.) 6.4 5.0 791 Source: Secretaria Permanente del Tratado General de Integracion Economica Centroamericana (SIECA), znd mission estimates for 1965/66. Agriculture Report Table 3a: CENTRAL AMERICA: COTTON PRODUCTION AND EXPORTS, 1965-1975 (Volumes in thousand metric tons, Values in million U.S. dollars) Actual 1964/65- Export- Projection 1969/70 Proiection 197L/75 Local able Exports 1965 Local Exports 1970 Local Exports 1975 Produc- consump- Produc- U TV Produc- consump- O V Produc- consumnp- u V tion tion tion tion tion 1/ tion tion 1/ Guatemala 71.7 4.8 66.9 70.6 36.6 75 8 67 30.2 120 11 lo 49.1 El Salvador 80.5 7.7 73.3 73.1 37.8 70 12 58 26.2 95 20 75 33.8 Honduras 11.3 1.0 10.3 11.4 6.5 15 3 12 5.h 22 5 17 7.7 Nicaragua 124.3 2.5 121.8 125.1 66.1 150 5 145 65.3 180 8 172 77.5 Costa Rica 4.6 2.5 2.1 2.1 1.Q 11 7 4 1.8 15 11 h 1.8 TOTAL 292.3 18.0 273.0 281.0 147.4 311 35 286 128.9 432 55 377 169.9 Average f.o.b. (US cents 23.8 20.5 20.5 per lb.) Q=Quantity; V=Value 1/ Includes consumption for manufacture of textiles for export to other Central American countries and the outside. Source: NIission projections. Agriculture Rep2ort Table 4: CENTRAL AMERICA: U.S. SUGAR IMPORT QUOTAS AND EXPORTS, 1963 - 1971 (thousand metric tons) Actual Exports U.S. Quotas 1966-71 '/ 1963 1964 1965 (1) (2) Guatemala 46.3 62.0 38.7 30.9 40.2 of which to U.S. market (46.3) (37.7) (38.2) 31 Salvador 20.,4 19.4 23.0 22.5 29.5 of w3hich to U.S. market (16.9) (19.4) (19.5) Honduras 1.7 5.5 1.5 3.7 4.8 of' which to U.S. market ( - ) (na) (na) Nicaragua 44.1 48.9 53.5 36.5 47.6 of which to IJ.S. market (44-1) (48.9) (44.6) Costa Rica 34.0D 36.8 45.9 36.5 47.6 of' which to U.S. market (34.'D) (36.8) (38.4) TOTAL 147.) 172.6 162.6 of which to U.S. market (141.3) (142.8) (140.7) 142.9 186.7 1/ Based on the 1965 U.S. Sugar Act in effect until 1971, about half of the quota allocations shown her'e would revert to Cuba if Cuba were to regain its preferred access to the U.S. market. The quota projections shown here were based on (1) a level of total U.S. consumption of 8.8 million metric tons '(or 9.7 million short tons) and (2) of 9.5 million metric tons (or 10.4 mil- lion short tons). Total U.S. requirements in 1966 are expected to be about 9.3 million metric tons. Source: IBRD Economic Department Agriculture Report Table 5: CENTRAL AiERICA: BEEF CATTLE HERDS ANDL- PRODUCTION, 1960 - 1975 (thousand head of cattle) Prelim. Projection 1960 1961 1962 1963 1964 1965 1970 1975 Cattle population 5,430 5,538 5,653 5,745 5,895 6,023 7,121 8,590 Extraction 656 678 689 825 793 1,007 1,235 - as % of herds 12.1 12.2 12.2 14.4 13.5 14.1 14.t - of which sold domestically 532 519 465 563 534 664 798 - sold for export 124 159 22L 262 259 3h3 b37 Approximate beef volume sold for export (million lbs.) -/ 40.4 44.3 67.1 93.5 84.4 130.0 185.0 - of which sold to U.S.A. 28.9 30.7 45.5 63.8 61.6 89.0 115.0 Total value of meat exports to outside wog;d (million U.S. dollars)S/ 11.0 12.7 17.4 21.3 21.7 19.3 27.7 39.1 Average annual rates of herd 1960-1964 Projected 1964-1970 Projected 1970-1975 'increase 2.1% 3.0% 3.6% 1/ Beef only; excludes exports of live cattle, which are minor, except within Central America, which is excluded. 2/ Includes live cattle, but excludes Central American regional trade in live cattle, mostly from Honduras to El Salvador and Guatemala. Source: See following Tables 5a - 5e. Agriculture Report Table 5a: GUATFI4ALA: BEEF CATTLE HERDS AND PRODUCTION, 1960-1975 (Thousand Head of Cattle) Prelim. Projection 1960 1961 1962 1963 1964 1965 1970 1975 Cattle population: 1,170 1,202 1,232 1,263 1,296 1,3h5 1,603 1,951 Average annual increase 1960-64: 2.6% Projected annual increase 1964-70: 3.6% Projected annual increase 1970-75: 4.0% Extraction 140 14h 148 207 206 240 293 - as % of population 12.0 12.0 12.0 16.4 15.9 15.0 15.0 - of which for domestic market 131 134 104 153 161 175 213 - for export 9 10 44 54 45 65 80 Volume of beef exports (million lbs.) - 2.8 17.8 21.4 17.2 27.0 35.0 - of which to U.S.A. - 1.9 12.3 14.8 11.8 20.0 25.0 Value of exports (US$ million) 0.2 0.8 3.8 4.4 3.7 4.4 6.0 7.3 Source: Ministry of Agriculture, Planning Council, and U.S. Department of Agriculture: The Beef Export Trade of Central America (1965). Yiission projections. Agriculturle Report Table 5b: EL SALVADOR: BEEF CATTLE HERDS AND PRODUCTION, 1960-1975 (T-housand Head of Cattle)~ Prelim. Projection 1960 1961 1962 1963 196h 1965 1970 1975 Cattle population: 906 916 926 938 949 960 1,030 1,137 Average annual increase 1960-6h: 1.2% Projected annual increase 1964-70: 1.h4% Projected annual increase 1970-75: 2.0% Extraction 117 123 122 121 126 139 159 - as % of population 12.9 13.h 13.2 12.9 13.3 13.5 1L.0 - of which for domestic market 100 97 lo4 121 126 139 159 Value of imports of live animals (US$ million) 2.2 1.9 2.5 2.6 2.4 1.7 3.5 6.0 Meat products (US$ million) 0.4 0.4 0.h 0.h 0.4 0.4 - - Total c.i.j. 2e5 2.3 2.9 3,0 2.8 2.1 3e5 6.0 Source: MisEion estimates, and Direccion General de Estadistica y Censos. Agriculture Report Table 5c: HONDURAS: BEEF CATTLE HERDS AND PRODUCTION, 1960-1975 (thousand head of cattle) Prelim. Projection 1960 1961 19,52 1963 1964 1965 1970 1975 Cattle population 1,233 1,237 1,238 1,242 1,266 1,266 1,453 1,684 Average annual increase 1960-64 0.7% Projected annual increase 1964-70 2.3 Projected annual increase 19?O-75 3.0% Extraction 106 121 132 133 126 174 211 - as % of population 8.6 9.8 10.7 10.7 10.0 12.0 12.5 - of which for domestic market 62 73 63 62 54 99 120 - for export 44 47 69 71 72 75 91 Volume of beef exports (million lbs.) 5.2 7.6 14.h 14.5 13.3 20.0 35.o - of which to U.S.A. 3.*4 55 9.3 9.3 8.6 14.0 20.0 Value of exports (million US $) 3.5 4.6 5.8 5.8 5.? 4.6 5.8 8.3 Beef 1.1 1.5 2.6 2.9 2.5 2.8 4.2 7.3 Live cattle 1/ ?.) 3.1 3.2 2.9 2.7 1.8 1.6 1.0 1/ Largely exports to Guatemala and Fl Salvador. Source: Planning Council, Plan Nacional de Desarrollo, 1965-69; misdion projections. Agriculture± Rleport' Table 5d: NICARAGUA: BEEF CATTLE HERDS AND PRODUCTION, 1960-1975 (Thousand Head of Cattle) Prelim. ~ Projection 1960 1961 1962 1963 1964 1965 1970 1975 Cattle population: 1,21h 1,226 1,239 1,251 1,264 1,277 1,525 1,856 Average annual increase 1960-6h: 1.0% P-ojet+ed . rnnninl inerinn.p IQ6J)-.70! 3- n Projected annual increase 1970-75: h.0% Extraction 153 15h 153 192 195 229 278 - as % of population 12.6 12.6 12.3 15.3 15.4 15.0 15.0 - of which for domestic market 118 101 103 108 113 134 160 - for export 35 53 50 84 82 95 118 Volume of beef exports (million lbs.) 1h.5 21.3 23.1 36.6 35.0 41.0 50.0 - of which to U.S.A. 10.1 14.6 15.6 2h.5 23.6 30.0 350o Value of exports (US$ million) 4.8 5.7 6.9 8.9 7.8 7.0 8.5 10.5 - Beef 3.1 h.l 6.0 80h 7.5 6.7 8.5 10.5 - Live cattle 1.7 1.6 0.9 0.5 0.3 0.3 - - Source: Ministry of Agriculture, 1963 Agricultural Census, and nr13sion. projections. A ricultUr2qeort Table 5 e^. COSTA R0IA: BEEF CATTLE HERDS ANTD PRODUCTION, 1960 - 1975 (thousand head of cattle) Prelim. Projection 1960 1961 1962 1963 1964 1965 1970 1975 Cattle Population 908 957 1018 1051 1120 1175 1,501 1,962 Average annual increase 1960 - 1964 5.44% Projected annual increase 1964 - 1970 5.o% Projected annual increase 1970 - 1975 5.5p Extraction 140 136 134 157 140 225 294 - as % of population 15JF 14.2 13.2 14.9 12.5 15.0 15.0 - of which for domestic market 112 104 91 108 93 117 146 - for export 28 32 43 49 48 108 148 Volume of beef exports (million lbs.) 22.2 12.6 11.8 22.0 25.6 42.0 65.0 - of which to U.S.A. 15.3 8.7 8.1 15.2 17.7 25.0 35.0 Value of exports (million U.S. dollars) 4.9 4.7 4.1 5.6 7.7 5.1 9.0 14.0 - beef ) 4.3 2.8 2.7 5.0 6.0 3.2 9.0 14.0 - live cattle 0 o.6 1.9 1.4 o.6 1.7 1.9 - - 1/ Traditionally to Peru, Curacao and Aruba. In 1964 shipments were begun to Italy. Source: Planning Office: Plan Nacional para F-mento Ganadero, and imission projections. Agriculture Report Table 6: CENTRAI AMERICA: BANANA EXPORTS 1960-1975 (Volume in thousand metric tons-L/, Values in million U.S. dollars) Actual Exports Projected Exports 1960 1965 1970 1975 Q V Q V Q V Q V Honduras 363 28.1 590 54.1 750 63.8 850 72.3 Costa Rica 273 20.3 320 29.3 500 42.5 675 57.4 Gua-temala 198 17.3 28 2.5 75 6.4 150 12.8 Nicaragua 2 0.1 15 0.7 50 4.3 75 6.4 Total 836 65.8 953 86.6 1,375 117.0 1,650 148.9 Total f.o.b price per kilo (U.S. cents) 7.9 9.0 8.5 8.5 -of which bananas 7.6 6.T.o 6.0 -cellophane bag 0.3 - - - -cardboard bow/ - 2.5 2.5 2.5 Q=Quantity; V=Value 1/ Metric ton=approximately 52 42-lb. boxes=approximately 34 stems of 65 lbs. each, an average. 2/' Based on a price for boxes cf US$28 per ton. Source: V'lr e LII, Tables 25al, c, ci, e, and mds{sfifon irojections Agriculture Report Table 7: CENTRAL AMERICA: LAND USE (Thousand Hectares) Central Americal/ Guatemala El Salvador Honduras Nicaragua Costa Rica 19502/ 19623/ 1950C2/ 19612/ 1952./ 1952J/ 19572/Y/ 19503/ 19632X/ Total land area 43,207 10,889 2,139 11,209 13,900 5,070 Area in farms 1h,997 3 721 5,315 1,140 1,561 2,507 2,372 2,944 1 500* 2,670 a, of tot lOan rea ')-7 , , -, I ),T T -. 73.0 22.L 17.1 21.2 29.6 52.7 Used for annual crops ( 656 1,175 ( ( 296 287 303 100* 169 - fallow or crops lost (34737 [29 241 ( 2304 488 h25 1h9 361 121 2h1 - perennial crops 1,130 159 h16 120- 160 175 128 178 150* 201 - improved pastures ( 232 h06 ( 101 823 ( ( (936 - natural pastures (4,930 582 777 ( 790* 50h ( 637 (1,383 (i,)30 ( - forest and waste 5,200 1,663 2,300 ( 309 789 1,170 679 ( -- 1,123 General note: The data shown here a-,e meant to indicate general trends only, and changes in individual items from one period to another may reflect changes in definition as much as real changes. v _. Estimated. g/ Total of the most recent years shown for the five countries. 2/ Census data. ~/ Estimates based on data supplied by country. v/ Data from 1963 Agricultural Census not yet fully available. Source: Direccion General de Estadisticav Censos of the five countries (as summarized in Inventory of Information Basic to the Planning of Agricu]tural Development in Central America, Pan American Union, 1965). Agriculture Report T'able 8: CENTRAI AMSERICA: ESTDvIATES OF FARM SIZE o a"Sub- M'ulti-family" Type of Farm 2 Familyr" "Family" Medium Large Total Central America - No. of farms (thousands) 620.7 99.5 55.5 2.2 777.9 - Average size (hectares) 2.4 15.3 90.6 1,781.5 153.6 - Total area covered (1000 hectares) 1,482.4 1,521.4 5,034.8 3,919.4 11,956.0 Guatemala (1950) - No. of farms (thousands) 308.1 33.0 7.1 0.5 348.7 - Average size (hectares) 1.7 12.2 165.4 2,921.9 106.7 - Total area covered (1,000 hectares) 533.1 500.8 1,167.6 1,519.4 3,720.9 El Salvador (1950) 2/ - No. of farms (tnousands) 160.7 6.3 7.0 0.1 174.2 - Average size (hectares) 2.3 21.2 103.7 2,104.1 87.8 - Total area covered (1000 hectares) 366.0 134.7 724.5 305.1 1,530.3 Honduras (1952) - No. of farms (thousands) 120.3 22.2 13.3 0.4 156.1 - Average size (hectares) 4.2 18.6 83.1 1,107.3 160.6 - Total area covered (1000 hectares) 505.9 413.3 1,101.0 487.2 2,507.4 Nicaragua (1952) - No. of farms (thousands) :L7.9 19.3 13.5 0.8 51.6 - Average size (hectares) 3.0 15.7 75.7 1,182.5 459.9 - Total area covered (1000 hectares) 54.4 302.9 1,021.5 993.3 2,372.1 Costa Rica (1955) - No. of farmis thousands) 13.6 18.6 14.8 0.3 47.3 - Average size (hectares) 1.7 9.1 69.1 2,457.6 386.4 - Total area covered (1000 hectares) 23.0 169.7 1,020.2 614.4 1,827.3 T The classification is intende(d to relate the size of the farm with the productive capacity of its land. For example, sub-family farms are consid- ered to be too small to support a family of five: the gross income from such farm would vary from an average of about US$140 per year in Guatemala to about US$750 in Costa Rica. v/ Table 8a shows the changes whi.ch took place from 1950 to 1961. Source: Study on "Las relaciones entre la tenencia de la tierra y la eficiencia del uso de los recursos agricolas en Centro America", joint ECLA-FAO-ILO project, prepared by Ing. S. Maturana (FAO). Agriculture Report Table 8a: EL SALVADOR: FARM SIZE ANiD LAND TENURE, 1950 AND 1961 1950 1961 No. ol' % % of No. of %O % of Famrs of Farm Farms of Farm Farm Size (Hectares) ('000) Total Area ('000) Total Area 0-3 125.5 72.0 8.6 175.6 78.2 11.0 3-10 29.1 16.6 10.4 29.1 12.9 10.4 10-100 17.6 10.2 31.1 17.5 7.9 32.4 100 and Over 2.0 1.2 49.9 2.1 1.0 46.2 Total 174.2 100.0 100.0 224.3 100.0 100.0 1L950 1961 Land Tenure No. ('000) % of Number No. ('000) % of Number Ow-ers 107.9 61.9 88.1 39.3 Colonos 1/ 33.4 19.2 54.8 24.4 Others 2/ 32.9 18.9 81.4 36.3 Total 174.2 100.0 224.3 100.0 1,/ Depending on the individual arrangement, a "colono" can be a share- cropper or virtually a squatter. 2/ IMlostly renters and squatters. Source: E:L Salvador, 1965-69 Development Plan, Chapter XV. Agriculture Report Table 9: CENTRAL ANERICA: ESTIMATES OF LAND TENUIRE/ (Thousid-s of Farmers) 2/ "Multi-family" Type of Farm "Sub-family" "Familyl" Medium Large Total Central America 620.7 99.5 5565 2.2 777.9 Omners 79377 T.U U2h7 1-7. 407.0 Renters 110.0 204 o.6 - 113.0 Others3/ 216.9 28.3 12.3 0.3 257.9 Guatemala (1950) 308.1 33.0 7.1 0.5 348.7 Owners 159.0 9 73 193.9 Renters 58.0 11 0.1 - 59.2 Othersl! 91.1 3.8 0.7 0.1 95.6 El Salvador (1950) 160.7 6.3 7.0 0.1 174.2 O3fers T9T7 -61 g77 0.1 107.9 Renters 32.6 0.2 0.2 - 32.9 Others./ 33.4 - - - 33.4 Honcduras (1952) 120.3 22.2 13.3 0.4 156.1 Owners 21.3 61 57 0.3 33.3 Renters 18.6 0.7 0.3 - 19.7 Others 80.4 15.4 7.3 0o2 103.2 Nicaragua (1952) 17.9 19.3 13.5 0.8 51.6 Owners -~77i 14.911.3 0.7 367-3 All Othersl/ 8.6 4.4 2.2 0.1 15.3 Costa Rica (1955) 13.6 18.6 14.8 0.3 47.3 Owmers --37. 1375 12.6 07.2 357 Renters o.8 0.3 - - 1.2 Othersl-/ 3.5 4.8 2.1 - 10.4 l/ See also Table 10. 2/ See Table 8 for explanation of classification. 3/ Including "All others" from Nicaragua. Source and Classification: See Table 8. Agriculture Report Table 10: CENTRAL AMERICA: PERCENTAiGE OF FARMS OCCUPIED UNDER DIFFERENT SYSTEMS OF TENURE Guatemala El Salvador Honduras Nicaragua Costa Rica (1950) (1950) (1961) (1952) (1955) Percentage of Number of Farms 6 Owners 55.0 61.9 21.3 44.8 75.5 Renters 17.0 18.9 8.6 9.3 2.5 "Ejidatarios" V - - 3309 14.6 - "Colonos" 2/ 12.4 19.2 3/ 4.1 - 0.3 Squatters 10.0 - 11.0 18.2 1.7 Others 5.6 _ 21.1 / 13.1 20.0 Percentage of Area in Farms 6 Owners 80.0 92.2 46.2 66.8 88.9 Renters 2.8 5.7 3.1 2.6 0.4 "Ejidatarios" - - 24.6 8.1 - "Colonos" 1.6 2.1 / 0.5 - 0.1 Squatters 2.6 - 5.3 21.6 o.6 Others 13.0 - 20.2 v 0.9 10.0 1/ 4 form of co-operative village ownership. 2/ Range from share croppers to squatters, depending on individual. 3/ Probably includes squatters. th/ Includes sharecroppers. 5/ Probably chiefly squatters. 6/ Total numbers and areas are s3ame as in Table 9, except for Honduras. Source: Direccion General de Estadistica y Censos of each country. Agriculture Report Table 11: CENTRAL JAMERICA: SUPPORT PRICES FOR GRAINS, 1965 - 1966 2/ (C.A. pesos per 100 lbs.) Actual 1965/66 Proposed 1966/67 Corn (yellow) Guatemala 3.25 3.25 21 Salvador 3.60 3.60 Honduras 3.25 3.25 Nicaragua 3.00 3.00 Costa Rica 3.46 Actual Retail Price milled rice in 1965 Rice (unmilled, large grain) Guatemala 4.25 4.40 12.30 El Salvador 4.80 12.60 Honduras 4.50 4.70 13.60 Nicaragua 5.05 5.05 10.89 Costa Rica 5.92 5.77 10.81 Beans (red) Hionaduras 5.25 5.25 Nicaragua 5.10 5.10 Costa Rica 8.25 1/ Stated prices at wihich grain boards will purchase at given sites. Source: SIECA Agriculture Report Table 12: CENTRAL VMERICA: SIORAGE CAPACITY FOR FOOD GRAINS1 1962 (Thousand Metric Tons) Silos Ware- Other-/ (1) (2) (1) as houses Total Output of % of Corn, Rice (2) and Beans, 1965 Guatemala 14.7 3.1 - 17.8 685 2.6 El Salvador 21.4 8.9 13.4 h3.7 251 17.4 Honduras 7.6 1.9 3.7 13.2 456 2.8 Nicaragua 5.5 1.4 - 6.92/ 213 3.2 Costa Rica 19.8 17.0 - 36.8 15& 23.3 Total 69.o 32..3 17.1 118.4 1,763 6.7 1/ Includes private enterprise storage, and some smaller warehouses. 2 In addition, Nicaragua has storage for about 14,750 metric tons under construction in Hanagua. Source: Joint Planning Mission for Central America, Program for the Development of Basic Grain Production in Central America (Guatemala, October 1965). Text in Spanish. Agriculture Rpo-rt Table 13: CENTRAL AMERICA: MAJjR FOOD CROP YIELDS (in kg. per hectare) Three-Year Mexico Panama Peru Averages Guatemala El Salvador Honduras Nicaragua Costa Rica 1964/65 Corn 1957-59 890 720 725 695 1,110 1963-65 830 905 835 865 960 1954-65 1,090 840 1,390 Beans (dry) 1957-59 730 410n l15 450 4f 1963-65 490 525 485 785 400 1964-65 430 280 1,000 Rice (rough) 1957-59 1,250 2,640 1,820 1,390 1,215 1963-65 1,950 2,665 1,545 1,470 1,190 1964-65 2,070 1,o6o 4,310 1 Sorghum 1957-59 n.a. (1,035) 805 (805) n.a. 1963-65 n.a, 1,185 (810) (850) n.a. 1964-65 2,100 n.a. n.a. Wheat 195_7-59 620 _ 1963-65 670 1964-65 2,550 - 990 1/ 1963/64 data; largely irrigated. Source and Note: The above yield data are calculated from the total national food crop productions shown in Tables 7a-e, Volme IT and estimates of the areis under each crop, as shown by the Direccion General de Estadistica y Censo of each country. Comparisons with Mexico, Panama and Peru taken from FAO Production Yearbook, 1965. Agriculture Report Table 14a: GUATEMALA: AGRICULTURAL CREDIT, 1960 - 1965 196C) 1961 1962 1963 1964 1965 3redit by the Banking System l/ Outstanding at end of period 38.9> 52.4 50.5 57.9 66.2 60.8 for coffee 11.9 22.1 15.2 14.0 lio8 13 for cotton 6.3 9.5 14.0 18.4 19.5 12.8 for other crops 7.9 10.3 9.7 10.5 12.1 14.2 for livestock 12.8 10.5 11.6 15.0 16.8 20.2 of which poultry (na) (0-7) (o.7) (0.8) (1.2) (2.9) 3ross lending during period 27.4 36.6 41.4 45.1 50.0 47.4 for coffee 7 1$.7 14.6 13.4 5.T 14. for cotton (na) 10.1 16.5 19.6 20.5 18,0 other crops (na) 4.6 4.5 6.5 5.5 7.3 for livestock 5.h 3.2 5.8 5.6 8.5 7.6 .Iaturity of gross lending Up to 1 year's original maturity 40.3 42.4 40.8 1 - 3 years 3.3 3.1 2.7 over 3 years 1.4 4.5 4.1 Supervised Credit (SCICAS) Outstanding at end of period - 1.4 1.2 1.5 1.9 3.0 Number of loan recipients (approximately) 3,700 l/ Inc:ludes State Banks, but excludes INFOP (the Government grain stabilization board and development agenci. Source: Banco de Guatemala, poletin IEstadistico, and SCICAS (Servicio Cooperativo Interamericano de Credito 3upervisado). Agriculture Report Table 14b: EL SALVAD0it: AGRICULTUi{AL CREDIT, 1960-65 (l1illion C.A. Pesos) 1960 1961 1962 1963 1964 1965 Comme rcial Banks/ Agricultural Credit 4o.6 32.4 31.6 33.0 41.2 X7.0 For Agriculture 3T9 716 30.9 32.0 79.5 L. - of which cotton 12.5 7.9 12.3 10.7 14.5 12.6 - of wh11ich coffee 2.1 17.4 13.2 16.1 16.8 19.5 - of which sugar 0.5 0.8 1.0 0.8 2.3 4.1 - of which cereals 1.0 0.5 0.5 0.5 0.7 1.0 For Livestock 1.0 4.8 0.7 1.0 1.7 2.2 ABC (Peasant1 Welfare Agency) - - n.a. 0.5 2.3 3.0 No. of loan roci.i nts 880 2,511 3,543 FCI, (Co-operative Credit) Total gross credit crop year ending n.a. n.a. 0.7 0.9 1.3 1.5 Credit by Producer and ELport Organizationq / Coffee Company (gross credit granted crop year ending) 5.8 9.3 8.4 5.4 n.a. n.a. Cotton Co-operative (net out- standing as of Oct. 31) n.a. n.a. 31.4 36.6 38.4 39.8 1/ Including government-owned Mortgage Bank. 2/ Almost entirely crop credit to producers and comnercial credit to mills or excporters. Financed almost entirely by lines from U.S. commercial banks. Source: Central Bank, El Salvador. Agriculture Report Table l1c: HONDURAS: AGRICULTURAL CREDIT, 1961-65 (million C.A. pesos; amounts outstanding at end of period) 1961 1962 1963 1964 1965 National Development Bank 3.3 5.3 5.6 7.5 8.8 Other Banks 3.6 3.5 4.5 5.0 8.8 Total Credit 6.9 8.8 10.1 12.5 17.6 National Development Bank Loaans under 1 year 2.2 3.2 3.4 4.6 6.2 Loans over L year 1.0 2.1 2.3 2.9 2.6 Loans for livestock 0.7 1.8 1.9 1.8 2.0 Loans for agriculture 2.6 3.5 3.7 5.8 6.8 of which for - cotton 1.7 T 2.0 2.9 - coffee 0.6 o.6 0.7 1.7 - corn 0.2 0.2 0.3 0.5 - tobacco 0.1 0.2 0.1 0.4 Source: Central Bank of Honduras Agriculture Report Table 14d: NICARAGUA: AGRICULTURAL CREDIT, 1961-65 (million C.A. pesos; amounts outstanding at end of period, excluding frozen portfolii ______ ________________________ 1961 1962 1963 1964 1965 Coimercial Banks 33.5 35.3 31.0 32.7 47.2 INFONAC 2.3 1.6 3.0 2.8 2.8 Total Credit 35.8 36.9 34.0 35.5 50.0 Commercial Banks Loans under one year 13.9 15.8 21.8 20.7 28.5 Loans over one year 19.6 19.5 9.2 12.0 18.7 Loans for Livestock 9.4 7.7 7.5 12.0 17.5 Loans for Agriculture 24.1 27.6 23.5 20.7 29.7 of which for - Cotton 7.7 8.1 19. 11.3 12.9 - Coffee 4.7 4.4 4.6 5.6 5.1 Source: Central Bank of 'Nicaragua. Agriculture Report Table l4e: COSTA RICA: AGRICULTURAL CREDIT 1960-65 (million C.A. pesos; amounts outstanding at end of period) 1960 1961 1962 1963 1964 196e5 Commercial Banks - Total 61.8 62.8 65.0 66.5 74.7 84.9 Loans under one year 39.2 37.5 36.9 42.1 39.4 39.6 Loans over one year 22.6 25.3 28.1 24.4 35.3 45.3 Loans for Livestock 17.0 18.1 20.0 20.7 24.4 30.0 Loans for Agriculture 44.8 44.7 45.0 45.8 50.3 54.9 of which for - Coffee -297 87W 27.0 =28 29.6 30.0 - Other crops 15.0 16.1 18.0 17.0 20.7 24.9 Loans by Juntas Rurales j 9.9 11.5 14.8 15.4 16.2 20.0 Loans under one year 1.8 2.0 2.0 1.7 1.7 1.7 Loans over one year 8.1 9.5 12.8 13.7 14.5 18.3 j Credit to small farmers by Banco Nacional de Costa Rica. Source: Banco Central and Banco Nacional de Costa Rica. Agriculture Report Table 15: CENTRAL A11EAICA: MAIN AGRICULTUiRAL EXTENSION SERVICES, 1965 El Costa Guatemala Salvador Honduras Nicaragua Rica Number of farm units 348,687 224,289 156,135 61,901 64,625 Year of Census or Estimate 1,950 1961 1952 1965 1963 Agency I4AOt/ SFEII/ MAAJ/ MAG./ YIG17 No. extension offices 30 15 31 19 18 33 Extension Personnel: SuperTvisors 6 -- 9 7 3 8 Specialists 5 -- -- 9 -- -- &ftension agents 31 15 70 26 18 33 Assistant agents 0 48 -- 5 14 8 Juvenile club agents -- -- -- -- 44 40 Xome economists 8 -- 30 -- -- 20 Total Personnel2/ 50 63 109 47 79 109 Budget for extension (C 7e ,te Os __ , Apprcximate 1965 total 267,000 214,000 354,000 500,0004/ 362,000 364,000 Estimated percent of faihms served 5 n.a. 4 n.a. n.a. 15 1/ Mir.Listry of Agriculture or specialized agencies within it. 2/ Servicio de Fomento de la Econoinia Indigena. 3/ Excluding secretaries and service workers. I/ For entire DESA1RURAL programs, including research and other activities. Source: Inventory of Information Basic to the Planning of Agricultural Devglopment in Central Ame:^ica, Pan American Union, 1965.