The year 2000 was one of gradual but uneven economic recovery for the Latin America and Caribbean region after the recession that had affected many countries in 1998 and 1999. While regional GDP growth was close to zero in 1999, forecasts for 2000 point to a resumption of growth to about 4 percent.84 Inflation rates are forecast to remain at historical lows, with a regional average of about 10 percent. Current accounts are expected to remain in deficit - representing approximately 17 percent of exports of goods and services. However, deficits should be less than they were in 1998 and, for most countries, capital inflows should be sufficient to compensate.
To a large extent, this general improvement reflected external factors. For example, the region benefited from the recovery of Asian economies as well as from the continued buoyancy of United States markets and the acceleration of economic activity in Europe. The export prices of several commodities of importance to the region tended to strengthen from their deeply depressed levels of 1999.
Nevertheless, the depth of both the crisis and the recovery was uneven among countries. Indeed, 1998 and 1999 were years of recession for most of South America, but a period of still positive, if slower, growth for countries in the Caribbean, Central America and for Mexico, thanks in particular to the sustained pace of the latter countries' exports to the United States. This dichotomy was less marked in 2000, as most countries in the region shared in the recovery.
Table 27
ANNUAL REAL GDP GROWTH RATES IN LATIN AMERICA AND THE CARIBBEAN
Country/region |
1996 |
1997 |
1998 |
1999 |
20001 |
20011 |
(Percentage) | ||||||
Argentina |
5.5 |
8.1 |
3.9 |
-3.1 |
1.7 |
3.7 |
Brazil |
2.7 |
3.6 |
-0.1 |
1.0 |
4.0 |
4.5 |
Colombia |
2.1 |
3.4 |
0.5 |
-4.5 |
3.0 |
3.8 |
Mexico |
5.2 |
6.8 |
4.9 |
3.5 |
6.5 |
4.8 |
Latin America and the Caribbean |
3.6 |
5.4 |
2.2 |
0.3 |
4.3 |
4.5 |
1Projections. | ||||||
The policy response to the crisis was varied. Among the larger countries, Brazil was applying severe fiscal adjustment measures to maintain currency stability and control inflation, while the export sector was benefiting from the country's currency devaluation in 1999. Other countries, including Chile, Colombia and Ecuador, also devaluated their currencies although, in the case of Ecuador, this move was followed by strong inflationary pressure. Argentina, on the other hand, was struggling to maintain competitiveness under its fixed nominal exchange rate, and it was facing the need to introduce unpopular fiscal reforms. Several Andean countries were suffering political instability, which impaired the policy environment for stabilization and recovery. For many countries, the crisis and measures to cope with it left a sequel of difficult economic and social problems as well as uncertainties for the future. The slowdown of economic activity in 1998-99 depressed the level of job creation and caused a rise in unemployment, which reached the highest levels of the decade. Stabilization measures inevitably involved financial austerity and short-term recessionary impacts, which penalized the poor disproportionately. Poverty levels and income concentration, which had undergone little reduction even during the high-growth periods, were aggravated by the crisis.
The region's agricultural performances in recent years were mixed. Extremely poor climatic conditions and natural disasters resulted in a marked slowdown in agricultural production growth, which reached 1.8 percent in 1998. Two unusually severe natural disasters had an impact on the region that year: the El Niño phenomenon, which affected the Andean region in particular, and Hurricane Mitch, which provoked the worst natural disaster in Central America in more than 50 years.
Agricultural output increased substantially in 1999, as the region's average agricultural growth rate rose to an estimated 4.6 percent. Crop and livestock production expanded at rates exceeding 4 percent, and cereal harvests increased by 4.6 percent after a contraction of nearly 3 percent in the previous year. However, non-food production rose by a mere 0.4 percent.
The strong regional performance was driven by South American output growth of 5.1 percent, which came after the more modest growth rate of 2.1 percent in 1998. In 1999, food and livestock production rose by 5.4 and 5.7 percent, respectively, after growth rates of 1.8 and 0.7 percent in 1998. Cereal output, which fell by 4.4 percent in 1998, increased by nearly 7 percent in 1999. For 2000, overall agricultural production is estimated to increase by close to 2 percent, with crops and cereal output anticipated to rise by less than 1 percent. However livestock and non-food production are estimated to increase by about 3 and 4 percent, respectively.
Table 28
NET PRODUCTION GROWTH RATES IN LATIN AMERICA AND THE CARIBBEAN
Year |
Agriculture |
Cereals |
Crops |
Food |
Livestock |
Non-food |
(Percentage) | ||||||
1991-95 |
3.1 |
4.8 |
2.6 |
3.5 |
3.7 |
-3.5 |
1996 |
1.8 |
2.9 |
0.8 |
1.6 |
3.1 |
5.9 |
1997 |
3.7 |
3.5 |
3.9 |
4.3 |
2.5 |
-6.3 |
1998 |
1.8 |
-2.7 |
2.2 |
1.5 |
1.5 |
6.9 |
1999 |
4.6 |
4.6 |
4.0 |
4.9 |
5.8 |
0.4 |
20001 |
2.0 |
1.7 |
1.4 |
2.0 |
2.7 |
2.0 |
1 Estimates. | ||||||
In Argentina, agricultural production rose by only 1.4 percent in 1999, after rising by 7.1 percent in 1998. Large production increases in 1998 were recorded for sorghum, maize and soybean. In 1999, cereal production fell by nearly 10 percent owing to much-reduced maize, sorghum and barley harvests. On the other hand, the 1999 wheat crop, estimated to be 14.2 million tonnes, was a marked improvement on the 1998 below-average crop. Preliminary estimates indicate that, while agricultural production has increased by less than 1 percent, cereal output could rise by nearly 7 percent in 2000. Crop production is estimated to fall by 0.4 percent.
Brazil saw its agricultural production expand at a rate of 7.3 percent in 1999 after recording only 1.7 percent growth in 1998. Ten states in the country's northeastern region suffered prolonged drought in 1998, which severely affected crop production in this area. Overall cereal production fell by about 9.2 percent in 1998 but recovered in 1999, rising by 16.6 percent. Maize, rice and barley output was up by between 5 and 53 percent. In 2000, overall agricultural output is estimated to rise by between 3 and 4 percent while cereal output is estimated to drop by 2 percent. Livestock production is anticipated to increase by about 4 percent.
In Chile, overall agricultural production fell by 1.7 percent in 1999, after recording 1.5 percent growth the previous year. The 1999 wheat, barley, maize and rice crops were adversely affected by drought conditions, and overall cereal production fell by nearly 30 percent. In 2000, agricultural output is expected to drop again, although by less than 1 percent. Crop production is estimated to fall by between 2 and 4 percent, while cereal output is anticipated to rise by 20 percent.
Agricultural production in Colombia remained unchanged in 1999 after growing by 2.5 percent in 1998. A more or less average cereal output brought a recovery from the poor harvest of 1998. Heavy rains and flooding at the end of 1999 caused many human deaths as well as damage to crops, especially coffee. In 2000, growth in agricultural output is expected to be between 1 and 2 percent.
In Venezuela, agricultural production increased by 2 percent in 1999, after contracting by 2.2 percent in 1998. Cereal production fell by 1.7 percent in 1999, following a drop of about 11 percent the previous year. December 1999 brought torrential rains and heavy flooding, leading to the deaths of about 30 thousand people and damage to agriculture. Nevertheless, agricultural output in 2000 is only estimated to contract by less than 1 percent, with crop and cereal production expected to record a decline for the third consecutive year.
In the Andean countries of Peru and Ecuador, agricultural production in 1999 grew strongly, at rates of between 13.5 and 19.4 percent, respectively. In Ecuador, this increase came after the steep fall in output experienced in 1998. In 2000, agricultural production is estimated to fall by about 5 percent in Ecuador, where crop and non-food outputs are set to decline while the cereal harvest is expected to increase slightly from the level of 1999. Agricultural output is expected to increase by about 2 percent in Peru, where an above-average wheat harvest and a bumper maize crop are estimated for 2000.
In Central America, output grew at a rate of 3.4 percent in 1999 after recording only a modest growth of 1.1 percent in 1998. The poor performance in 1998 was due to Mexico's weak growth of 1.1 percent and output contractions in Costa Rica and El Salvador. For 2000, agricultural output growth of 3 percent is estimated. Food and cereal production are expected to increase by about 3.5 and 5 percent, respectively, while non-food items are estimated to fall by about 6 percent.
In Mexico, adverse weather conditions caused wheat production to drop by 5 percent in 1999, after a fall of nearly 12 percent in 1998. At 1.8 million tonnes, maize output remained at an average level while sorghum production fell by about 6.7 percent in 1999. Increased agricultural production of nearly 3 percent is estimated for 2000, with maize and sorghum production expected to increase by about 2 and 6 percent, respectively.
In 1999, despite heavy rains that delayed planting, average to above-average crop outputs were recorded in Costa Rica, El Salvador and Guatemala. Particularly for the latter two countries, this represents a significant recovery from the crop harvests that had been affected by Hurricane Mitch the previous year. Honduras, by contrast, experienced below-average output, with cereal output down by 2.4 percent in 1999. Nicaraguan output was up by 22 percent in 1999, a marked improvement on the previous year. Tropical storms and Hurricane Keith disrupted agricultural activity in some Central American countries in 2000. Belize was the worst affected, and substantial losses of maize were reported in El Salvador, Honduras and Nicaragua. Aggregate coarse grain production is anticipated to drop to below-average levels.
In the Caribbean subregion, agricultural output declined for most of the 1990s and fell by 1.1 percent in 1999. For 2000, agricultural production is estimated to rise by less than 1 percent in the subregion. Cuban production fell by 0.6 percent in 1999, continuing the mostly negative trend of the 1990s. The Dominican Republic saw its output fall by 5.8 percent in 1999, after an increase of only 1 percent the previous year. Cereal production, however, increased by 13 percent in 1999 after a 6 percent contraction in 1998. For 2000, below-average cereal and bean outputs are anticipated in Haiti owing to a prolonged period of very dry weather. The Dominican Republic and Cuba are expected to record average cereal harvests.
Beyond the exceptionally unfavourable climatic conditions experienced, the relatively poor performances of Latin American and Caribbean agriculture in recent years must be seen in the light of long-term agricultural and general development problems as well as new challenges linked to the current process of market liberalization and globalization.
Foremost among the long-term obstacles to agricultural and broader development in the region are the imbalances and inequities that characterize its societies. In particular, a high concentration of landownership accompanied by inequitable access to land represents perhaps the main single impediment to a rapid reduction of poverty and food insecurity in the region. After 80 years of redistributive "traditional" agrarian reforms, conducted throughout the region since the Mexican revolution, progress has been uneven and slow. The reforms of agrarian structure accomplished so far have left three tasks uncompleted: providing secure access to the land for the smallest landholders and the landless, ensuring land tenure patterns that are compatible with natural resources conservation and sustainable use, and securing the competitiveness of the land reform beneficiaries and smallholders in general. This section revisits these issues, focusing on a new policy direction that has emerged in recent years, that of market-based land reforms.
In the 1960s, latifundistas owned roughly 5 percent of farm units and 80 percent of the land, while minifundistas owned 80 percent of farm units but had only 5 percent of the land.85
By the end of the 1990s, the concentration of landownership appeared to be less extreme, but still very high: 26 percent of the total number of farms still controlled 90 percent of the total arable land, while at the other extreme, 50 percent of the farm units controlled only 2 percent of the land.86 The Lorenz Indices of land property concentration available for the 1990s are still in the range of 0.85 to 0.95 for most countries in the region.87
In most countries, property rights remain poorly defined, and land markets - either in property, rental or leasing - are insufficiently developed and generally not accessible by the landless or poor smallholders. Land tenure remains highly insecure; it is estimated that about half of the rural households in Latin America and the Caribbean lack land titles.88 These factors all hamper investment in productive activities as well as the adoption of natural resource conservation practices. They constitute a major obstacle to any significant progress in rural poverty alleviation and have also been at the basis of grassroots demands and upsurges - those of Mexico's Chiapas region and of the Rural Landless Workers' Movement in Brazil are but recent examples.
In recent years, the widely adopted development paradigm based on market reliance has been extended to encompass land regimes. Market-based land reform, a policy orientation now followed by several governments and supported by development banks, is being introduced as a faster, less costly and less conflictual alternative to traditional land reform.
The objective of this new policy approach is to intervene in the land sales markets to help the rural poor gain access to land. Its basic principles require transfers to be voluntary and based on the identification of desirable lands by the beneficiaries, while negotiations between buyer and seller are to be mediated by the government.89
Such policies therefore exclude expropriation and promote progressive land taxes to encourage the owners of idle large estates to sell their properties. They do not involve land redistribution, but rather combine land transfer and financing mechanisms. The approach depends on decentralized decision-making and resource allocation mechanisms and requires significant participation by beneficiaries in financing their land purchases.
This change in orientation has occurred in a context of macroeconomic reform in which certain economic distortions affecting the land market have been reduced; agricultural credit subsidies have been cut drastically, and inflation has been contained and is now at historical lows. The consequent reduction in the financial attractiveness of landholdings for non-productive purposes has had the effect of increasing the supply of land and reducing its price. In Brazil, for example, the price of land has dropped drastically over the past years and large tracts are now available for sale.90 In addition to Brazil, two other Latin American countries - Colombia and Guatemala - have now embarked decisively on market-based land policies and reforms.
In Colombia, a new land reform law was promulgated in 1994 to promote negotiated land reform. It stipulates a 70 percent direct subsidy on the total value of the land to facilitate land acquisitions. Technical assistance is provided for the negotiation of land purchases, for the financial and economic appraisal of the property to be bought, and for the further cultivation of the land in a productive and efficient manner. The important innovation is that an identified beneficiary group negotiates the land price with a willing seller, a principle that now tends to be adopted by most market-based reform initiatives.91
The land reform agency, Instituto Nacional Colombiano de la Reforma Agraria (INCORA), can also buy or expropriate lands and transfer them to the beneficiaries with the same 70 percent subsidy. By 1996, most transactions were occurring by way of this mechanism. The total number of transfers for 1995 (4 172) was only slightly higher than the annual average in previous years (3 673).92 An additional law, promulgated in 1996, has provided vast means for the expropriation and redistribution of huge tracts of land that have been acquired illegally. The new reform has so far had a limited impact, but it has paved the way for its future extension.
In Guatemala, two separate institutions have been implementing negotiated land reform programmes: the private foundation Fundación Centavo (FUNDACEN) and the governmental Instituto Nacional de Transformación Agraria (INTA). Both aim at opening land markets to low-income farmers and implementing the principle of negotiated land reform.93 To date they have reached a limited but growing number of families (about 1 300 and 1 800, respectively). The FUNDACEN programme provides beneficiaries with financial assistance for purchasing land as well as a package including credit, technical assistance and marketing and social services to enable them to become self-sustaining.
The governmental INTA programme has settled its beneficiaries in a total area of 5 000 ha extending over 11 large properties, providing a flat subsidy of $1 600 per beneficiary. Its credit component is implemented by the national development bank, Banco Nacional de Desarrollo Agrícola (BANDESA). After a 10 percent down payment is made for the land, a provisional land title is issued to each group of peasant families as a whole, and farms are then informally divided into family production units. Overall, INTA's beneficiaries receive less financial support than those of FUNDACEN, yet they seem to achieve a higher degree of independence and sustainability more rapidly.94
Land use and land tenure are critically important issues in Brazil. A recent FAO study has estimated that about 2.5 million families are potential land reform beneficiaries. In 1985,
44 percent of the country's arable land was insufficiently productive.95 Current estimates indicate that more than 50 percent of the farms are smaller than 10 ha and occupy less than 3 percent of the total agricultural land, while 1 percent of the farms account for almost 50 percent of the total agricultural land area. Since the mid-1980s, movements organized by the landless have mobilized approximately 150 000 families to occupy unproductive land and press the government to negotiate for property titles. These issues have been addressed, first with a "traditional" policy based chiefly on the compulsory purchase and redistribution of land, and since 1997 with a complementary market-based approach.
The first national Plan for Agrarian Reform (1985-1989) was adopted with the target of settling 1.4 million landless families in five years. In reality, this process of traditional and redistributive reform was much slower than had been expected. By 1989, the federal government had settled 84 000 families on about 4.7 million ha.96 A federal minister for agrarian reform was appointed in 1996 and the land reform budget tripled from $0.4 billion in 1994 to approximately $1.5 billion in 1997. The reform process has been accelerating accordingly. In 1997 alone, some 82 000 families benefited from this redistributive reform and 1.8 million ha were expropriated or acquired by the settlement and agrarian reform agency, Instituto Nacional de Colonização e Reforme Agrária (INCRA), for redistribution. These efforts were accompanied by other policy instruments. Among these were: a revised rural land tax, which heavily penalizes owners who leave land idle or allow the unsound use of resources; revised legislation on land dispossession; a programme to support family farms, Programa Nacional de Fortalecimento da Agricultura Familiar (PRONAF); and an extension service project (LUMIAR).
Land preparation
Redistributive land reform in Brazil has been accompanied by policies such as support to family farms and penalties for land left idle
FAO/14799/A. CONTI
By 1999, INCRA had redistributed more than 8 million ha to 290 000 families.97 In addition, it had supported the colonization of about 14 million ha by 75 000 families.98 In the meantime, PRONAF had assisted about 600 000 farm units. The total cost of this "traditional" approach is estimated to have averaged approximately $30 000 per settled family.99 The redistribution process is lengthy, as legal procedures normally take between 12 and 24 months and, in the case of highly disputed occupations, even up to 36 months.
Since 1997, with World Bank support, the Brazilian Government has been developing an alternative market-based approach in the country's northeastern states in order to establish cheaper and simpler reform mechanisms wherever feasible. The pilot programme was called Cédula da Terra and initially aimed at benefiting 5 000 families in three years. In the first year, it reached 6 000 beneficiaries, which was considered an encouraging accomplishment, and by 1999 the programme had been enlarged to encompass more northeastern states.100 Preliminary evaluations have revealed some advantages of the new decentralized market-based approach over the traditional programme, for example lower costs per family (with savings of up to 30 percent in installation costs alone) and faster implementation (six months).101 In 1998, the federal government decided to expand the objectives and coverage of the programme to include 13 states under the extensive Banco da Terra project, with a value of $2 billion102 over four years.
Box 2 MAJOR CHARACTERISTICS OF BRAZIL'S CÉDULA DA TERRA AND BANCO DA TERRA PROJECTS1
1Adapted from: K. Deininger. 1998. Making market-assisted land reform work: initial experiences from Colombia, Brazil and South Africa. World Bank; and A. Buainain. 1999. Structural adjustment and financial crisis in Brazil: impacts on agriculture and food security. FAO Working Paper (in preparation). 2 Deininger, ibid. 3 Namely the Confederação Nacional dos Trabalhadores na Agricultura (CONTAG). Another body, the Movimento dos Trabalhadores Rurais Sem Terra (MST) is more supportive of the traditional settlement and land occupation approach in areas where there is a high social pressure of land, and has criticized the government for promoting a "fake agrarian reform" by focusing on areas where there are no real land conflicts (El Norte, 16 December 1997). |
Compared with Colombia's experience, the Brazilian experience is perceived to have the advantage of stimulating beneficiaries to negotiate lower prices for the land and of self-selection of the beneficiaries, which makes the process more participatory and less bureaucratic. However, there is a drawback in that the working capital credit provided to the beneficiaries is subsidized up to 70 percent.103 The long-term economic viability of the beneficiaries is thus a potential problem because the farm units face difficulties in reaching real efficiency and competitiveness.
This market-based approach is being implemented in the northeastern states, which is where two-thirds of the Brazilian rural poor live, but land tenure problems differ from one state to another. The intensity of land conflicts is much lower in the north, central-western and Amazon parts of the country than in the south, where most MST-led land occupations take place, and in the northeast, where the market-based approach is being promoted.
Despite the expected benefits of the market-based approach in Brazil, its planned extension is so far relatively modest: the programme target in the first phase is to reach 15 000 families over a limited number of years (compared with the traditional settlement targets aimed at reaching about 100 000 families every year). However, the Banco da Terra project is expected to provide the government with additional means to replicate the current experiments. The present context of low land prices and coercive taxes for idle land will probably produce a favourable climate for disseminating the approach in the short term. Whatever the merits and potential of the negotiated market-based approach, however, it cannot be realistically seen as a substitute for the traditional redistributive land reform, as implemented by INCRA. The latter will continue to play a major role in providing the landless with access to land even if the 1998/99 financial crisis and related adjustment had the immediate effect of halving its resources.
In conclusion, a market-based approach has many advantages, including lower costs and speedier implementation. The approach has shown considerable initial success in Guatemala and Brazil. However, it still seems to require substantial support from public sectors. To ensure the sustainability of the resulting farm units, the market-based approach requires a series of subsidized supporting services, implying a strong and long-term institutional and financial commitment by the government.
In addition, a major prerequisite for enhanced land markets is the establishment of secure property rights. Much emphasis has to be placed on the development of cadastres and land registries as well as leases and other land use contracts. The establishment of a good legal framework and an effective land information system is undoubtedly important for achieving significant reductions in transaction costs.
As a whole, the potential development of the approach is limited by the boundaries of the land markets themselves. The potential offered by land rental (fixed rental, share cropping or leases) has not yet been seriously explored, in large part owing to insecure property rights. For the time being, market-based approaches must be seen as just one land policy tool among others; traditional compulsory land purchases may continue to play a major role in most of the highly conflictive areas.
Haiti has faced considerable political and institutional instability in its past. From 1991 to 1994, the country was subject to an economic embargo imposed by the Organization of American States following a coup that exiled its democratically elected president. Trade and financial sanctions were also imposed by the United Nations Security Council in mid-1993. In 1994, constitutional rule was restored.
The economic and political isolation suffered during the embargo accelerated the economic deterioration that was already under way. Production and employment fell sharply, foreign capital and aid flows slowed considerably, and institutional capacity was diminished. More recently, unresolved political difficulties left the top seats of government vacant from 1997 and impeded development progress until elections were held in 2000.
The country covers a total area of 28 000 km2 and has a population of 8.1 million, translating into a population density of 289 per km2 - among the highest in the Caribbean region. Two-thirds of Haitians live in rural areas and are peasant farmers.
Haiti's climate is tropical and subtropical, its biological diversity is rich and it has some mineral deposits. It is vulnerable to the tropical storms and hurricanes that plague the Caribbean region and has experienced significant destruction from severe weather conditions for the past several years.
Agricultural land represents about 50 percent of total land area; 20 percent is arable land and 12 percent is under permanent crops. The remainder consists of plains and hillsides that have been largely denuded of trees to the extent that the forest cover is now only 5 percent of the total land area. Between mountain ranges, there are several fertile valleys where agricultural production is carried out.
The country has a very low level of development (see Table 29) and an estimated poverty rate of 60 to 80 percent of the population; Haitians have a life expectancy of 54 years. The UNDP Human Development Index (HDI) ranks it 150th out of 174 countries. Per capita GDP was about $410 in 1998 and incomes are very unevenly distributed, with about 44 percent of wealth being held by 1 percent of the population.
Table 29
COMPARISON OF KEY INDICATORS FOR HAITI AND LOW-INCOME COUNTRIES, 1998
Key indicators |
Haiti |
Average of |
GNP per capita ($) |
410 |
520 |
Life expectancy (years) |
54 |
63 |
Infant mortality (per 1 000 live births) |
71 |
68 |
Adult illiteracy rate (%): |
||
Men |
50 |
22 |
Women |
54 |
49 |
Access to safe water (percentage of population) |
28 |
... |
Source: World Bank. 2000. World Development Indicators, 2000. Washington, DC. | ||
Food security in Haiti is a dire issue. FAO's most recent estimates show that 62 percent of the population were undernourished in the 1996-98 period. This figure constitutes a small decline from the early 1990s, but a positive jump from the 48 percent estimated for 1979-81. The primary reason for worsening food insecurity is a decline in food production since 1981, with imports and food aid unable to fill the gap. A food insecurity action plan to assess current conditions is being drawn up by the Ministry of Agriculture, Natural Resources and Rural Development. Under the Food Insecurity and Vulnerability Information and Mapping Systems (FIVIMS), FAO has targeted Haiti as one of eight pilot countries requiring accelerated development and evaluation of its food insecurity action plan.
Foreign aid has been a major contributor to Haiti's economy during the post-coup period (Table 30), providing up to 90 percent of government investments in social services in some years.
Table 30
NET OFFICIAL DEVELOPMENT ASSISTANCE TO HAITI
Year |
ODA |
(Million $) | |
1994 |
601 |
1995 |
726 |
1996 |
369 |
1997 |
325 |
1998 |
407 |
Source: OECD. | |
Some donors have supported social programmes by channelling funds directly to NGOs as a mechanism for delivering services. The extensive system of private services provides a lifeline for poor rural residents, for whom government resources have most often been insufficient or
non-existent. It has also created opportunities for partnerships between established NGOs and government ministries. The recent move to decentralize government services and increase the resources available in rural areas provides new impetus for such partnerships to be developed.
Coordination between the Central Bank and the Finance and Planning Ministries allowed advancements on several fronts even during the period that Haiti was without top leadership. A medium-term recovery plan was assembled in 1994 with the support of IMF, the World Bank, the United States Agency for International Development (USAID) and other donors. With piecemeal implementation, the plan has been partially successful in managing the reduction in government spending, privatizing industry, stabilizing inflation and directing external aid towards emergency relief, infrastructure rehabilitation and social needs.
Box 3 INCREASED SOCIAL SPENDING AS A KEY TO HIGHER GROWTH RATES The long-term effects of low social investment are clearly seen by comparing Haiti's conditions to those of neighbouring countries as well as those of the Latin America and Caribbean region. The World Bank has attempted to estimate economic growth in Haiti given relatively small changes in key social, legal and political variables, and also how it would fare under the initial conditions and policies existing in selected countries for the same period.1 According to its estimation, a one-year improvement in male education attainment would have had the highest impact on economic growth in Haiti, increasing it by 1.3 percent per capita. A fertility rate of 1 percent less than the country's actual rate would produce almost the same economic growth benefit. Other factors that would have augmented growth to a lesser extent were more efficient government spending, improved functioning of the legal system and greater democracy. One startling result of the study is that, had those variables been at the level they were in the Dominican Republic, Haiti's per capita economic growth rate for 1985-90 would have been 3.5 percent per year, rather than -1.7 percent per year. 1 World Bank. 1998. Haiti: the challenges of poverty reduction. Washington, DC. |
The positive outcomes are a lower external account deficit, a lower than expected public sector deficit and improved overall growth. Per capita income fell by more than 2 percent per year on average between 1980 and 1991, then plummeted by nearly 6 percent annually during the 1991-94 embargo period, and has improved only slightly since then. Real GDP growth has, however, recovered to some extent since the embargo and was growing at 2 percent in 1999.
Owing to growth in its output and exports, Haiti's external debt is declining and was 27 percent of GDP in 1999, with a debt-service ratio of 11 percent of exports in fiscal year 1998/99. Most of the country's debt is on concessional terms.
The Central Bank of Haiti made substantial headway in reducing an inflation rate of 37 percent in 1994 to 10 percent in 1999. Likewise, the exchange rate has stabilized. Exports stood at $352 million in 1998/99, an increase of 23 percent over the previous year.
Haiti's main export is assembled clothing and footwear for the United States market. This activity accounts for 80 to 90 percent of Haiti's total exports. About 25 000 people in the Port-au-Prince area are employed in assembly plants for export production. This subsector has been growing strongly and has significant potential to increase if services can be reliably maintained. The share of agricultural exports fell from 50 percent of the total in 1980 to 11 percent in 1999, in part owing to growth in the assembled manufacturing sector but primarily as a result of the decline in agricultural production for export.
Table 31
REAL GDP GROWTH RATES IN HAITI
Year |
Average annual |
Average annual |
(Percentage) | ||
1980-91 |
0.3 |
-2.3 |
1991-94 |
-4.8 |
-5.9 |
1995 |
4.4 |
2.4 |
1996 |
2.7 |
0.5 |
1997 |
1.2 |
-0.9 |
1998 |
3.0 |
0.9 |
1999 |
2.0 |
0.3 |
Source: IMF. | ||
Imports represent nearly 30 percent of GDP and have tripled since the early 1990s. The share of food in the import bill declined in recent years from about 50 percent during most of the 1990s to 27 percent in 1999, mostly owing to increases in other imports. Imports are largely financed by donors (both in the form of financial aid and equipment) and by remittances from Haitians living and working abroad. An estimated $300 million per year is received from overseas.
Haiti's critical macroeconomic problem has been and remains a lack of investment. Between 1988 and 1998, gross domestic investment fell by an average of 1.5 percent per year to reach 11 percent of GDP in 1998. This is little more than half of the share of investment in GDP of all low-income countries. Foreign assistance is a major but volatile source of investment.
Agriculture accounts for about 30 percent of GDP and almost two-thirds of the labour force. Agricultural production has declined steeply, falling by 20 percent in per capita terms between 1989-91 and 1999 (see Figure 23). The decline is due to deteriorating infrastructure, soil degradation and poor weather, including a severe drought in the northwest and Hurricane George in 1998.
Haiti's primary agricultural products are maize, sorghum, rice, beans, bananas, tubers and some animal products. Most farm production takes place on small plots owned by peasant farmers, with an average size of 1.2 ha. A few large plantations (1 percent of farms), mainly specializing in coffee and sisal, make up about 10 percent of the cultivated area.
Trading at a street market
Although agriculture absorbs about two-thirds of Haiti's labour force, most rural dwellers are obliged to carry out additional commercial activities
FAO/18757/G. BIZZARRI
The majority of Haitians are small farmers, and agriculture absorbs 63 percent of the economically active population. Rural-urban migration has nevertheless created dense slums around Port-au-Prince and a 34 percent urban population. Land is exchanged through inheritance, at which time it is divided among children into smaller plots. Because many land transfers are not recorded, ownership is obscure and complex. Agrarian reform to enhance productivity has been a goal of the Government of Haiti but is hampered by ownership traditions.
Agricultural productivity is low by any standards and suffers from a lack of modern inputs. Very little animal traction is used, in spite of the benefits it would bring in increased productivity, milk and manure. Most farming households are unable to buy a plough animal and imported feed is unaffordable. The exceptions are the highest-income farm households, which produce about ten times as much as low-income households with the same land area because of greater expertise and access to modern inputs.
FAO's Special Programme for Food Security is operating in two locations in Haiti. The mission of the Programme is to support productivity-enhancing developments in areas of high food production potential. It has worked with several thousand small farmers in Haiti to intensify crop production and improve small-scale irrigation and water management operations. Through seed improvement, provision of inputs and reductions in post-harvest losses, farmers involved in the Special Programme have substantially increased their yields of maize and rice.
Haiti contains 560 000 ha of arable land, about 75 000 of which are covered by some form of irrigation system. Improvements in irrigation have been a priority for the Ministry of Agriculture, Natural Resources and Rural Development, and several projects are under way to rehabilitate components of the irrigation system in the important Artibonite Valley.
Agricultural exports contribute about 10 percent of total export earnings and were valued at $23 million in 1999. Coffee is the only significant export crop, and the development of shade coffee production has recently proved a successful method of protecting local forest cover. Sugar had previously been an important crop in Haiti but imports from Guyana and other Caribbean countries have replaced processed sugar production and refineries in Haiti have been closed since the early 1990s. Sugar-cane production, the major contributor to erosion problems, has declined by 44 percent since 1987. The other significant crop is rice, which contributes significantly to the national diet. Rice production takes place in the irrigated and fertile Artibonite Valley. However, cheaper imports have discouraged local production, which has dropped by 17 percent since 1987. The values of total agricultural and coffee exports are shown in Figure 24.
As part of the economic restructuring programme in the post-1994 period, Haiti substantially lowered its import tariffs on many products and food imports flooded into the country. Cereal aid has been about 110 million tonnes per year during the 1990s. The values of total agricultural and rice imports are shown in Figure 25. Commercial imports have risen faster (in volume and calorie terms) than domestic supply since 1980. Food imports currently account for about half the value of Haiti's total merchandise imports and nearly twice the value of total exports.
Degradation of natural resources threatens farm productivity and rural livelihoods. Haiti has a partially hilly terrain with a coastal plain and some fertile valleys. The most severe problem it faces is deforestation, which has reached irreversible proportions. Poor people cut trees to provide both fuel and a source of income. The water basins are heavily silted as a result of erosion. Roughly 80 percent of water in Port-au-Prince is contaminated with human waste and only 16 percent of rural dwellers have a basic pit latrine.
Environmental awareness among the rural population is rising as deforestation reduces the resources available to the poor, yet there is no local system in place to provide them with alternative source of income or energy. An option proposed by the Ministry of Agriculture, Natural Resources and Rural Development is to coordinate its own efforts and those of the Environment Ministry in identifying alternative farming practices and to implement appropriate practices with the assistance of microcredit.
The creation of alternative income-generating activities for the rural poor is critical for protecting the remaining tree cover. The Government of Haiti is anticipating the recovery of its tourism industry, which has been practically non-existent since the early 1990s. An inadequate transportation infrastructure, a paucity of tourist facilities outside Port-au-Prince and the increased security risk in rural areas are barriers to the development of tourism.
Not all rural residents rely solely on farming for their livelihoods. Most earn only about 50 percent of income from agriculture and are involved in small commercial activities in addition to, or instead of, farming as well as relying on foreign remittances. Nonetheless, the importance of landownership in Haiti, its predominantly rural society and the need for food production to achieve food security all imply that agriculture is destined to be an important sector in Haiti in the future.
Agriculture is a top priority in the government's development strategy. Among the principal reasons for this are the country's heavily rural population, its food security needs and the desire to increase agricultural exports. The four main objectives of the Ministry of Agriculture, Natural Resources and Rural Development are:
However, agriculture in Haiti must overcome some major hurdles before it can meet these four objectives and satisfy a greater share of the population's food needs. Some relief from food shortages has been provided through increases in commercial imports, but this does not solve the longer-term problem of food supply.
The increasingly heavy dependence on food imports is not seen as a sustainable path for Haiti. The potential to expand export earnings to finance these imports may be further developed, in particular through niche markets for agricultural commodities. Because of the constraints to enhancing agricultural productivity, however, developing competitiveness in traditional or new production lines is a costly undertaking which, even if successful, can only bear fruit in the medium to long term. This, along with the pressing demands and dismal nutritional status of the growing population, argues for additional solutions. Given the crucial role of agriculture for the survival of large segments of the population, an obvious policy option is to place emphasis on staple food production, especially at the small farm level, as a means for reducing poverty and improving the nutritional status of the rural poor. This would also reduce the need for food imports.
A major study of Haiti's position in light of changing trade conditions104 pointed to a number of critical factors impeding agricultural productivity in the country. These were:
In a world with an increasingly open trading system, Haiti is extremely uncompetitive in agriculture. Low productivity resulting from the combination of factors listed above contributes to higher costs and/or lower output in the agriculture sector, thereby reducing Haiti's opportunities to enter international markets. These constraints will need to be addressed through a long-term, coordinated approach to public investment in rural areas. Needs range from sector-specific requirements, such as seed quality and extension advice, to broader issues related to the environment and public infrastructure.
Policy-makers are hoping to develop niche export markets for Haitian products. These would include the recently introduced Haitian Blue coffee, as well as specialty fruits and vegetables for export to Haitian consumers in the United States. The success of these efforts depends on carrying out a careful marketing strategy, as well as reaching trade agreements at different levels - including within the Caribbean Community and Common Market (CARICOM) and WTO.
Haiti has recently become a member of CARICOM, the Caribbean regional trading bloc. Adoption of CARICOM's common external tariff presents the possibility of stemming the flow of food imports from the United States and Europe and favouring imports from Caribbean neighbours. Haiti has negotiated the terms of its entry with a five-year suspension of CARICOM's tariff, hoping the grace period will allow it to find market opportunities within the regional bloc, and prevent huge increases in consumer prices of important staple commodities. Within CARICOM, Haiti faces competition from other member countries that have invested in agricultural modernization in commodities such as sugar, coffee, fruits and vegetables and rice.
Whatever the direction of government policies, their success in creating the basis for sustained recovery will hinge on the availability of adequate financial and technical resources. A large part of these must be generated through external assistance. Considerable donor support is being provided to revitalize the agriculture sector into a dynamic growth engine for the economy, including through projects aimed at integrated rural development, rehabilitation of roads and irrigation systems, and natural resource conservation and food security efforts. Increasing emphasis is being placed on sustainable employment-based projects, rather than direct aid delivery.
Prospects for the maintenance of adequate flows of external assistance will depend on donors' perception of how efficiently aid is likely to be used. The political environment will be a deciding factor in this context.
