• TABLE OF CONTENTS
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 Front Cover
 Letter of transmittal
 Table of Contents
 Foreword
 Summary of conclusions and...
 Overview of the situation in the...
 Agricultural and agro-industrial...
 Constraints to agricultural and...
 An agricultural development strategy...
 Back Cover






Title: Agricultural development and economic progress in the Caribbean Basin
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Permanent Link: http://ufdc.ufl.edu/UF00003650/00001
 Material Information
Title: Agricultural development and economic progress in the Caribbean Basin report of the Presidential Mission on Agricultural Development in Central America and the Caribbean
Physical Description: ix, 137 leaves : ; 29 cm.
Language: English
Creator: Presidential Mission on Agricultural Development in Central America and the Caribbean (U.S.)
Publisher: Presidential Mission on Agricultural Development in Central America and the Caribbean
Publication Date: August, 1980
Copyright Date: 1980
 Subjects
Subject: Agriculture -- Economic aspects -- Caribbean Area   ( lcsh )
Agriculture -- Economic aspects -- Central America   ( lcsh )
Economic conditions -- Caribbean Area -- 1945-   ( lcsh )
Economic conditions -- Central America -- 1979-   ( lcsh )
Genre: federal government publication   ( marcgt )
non-fiction   ( marcgt )
 Notes
General Note: Cover title.
General Note: "August 1980."
 Record Information
Bibliographic ID: UF00003650
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: ltqf - AAA5131
oclc - 10584490

Table of Contents
    Front Cover
        Page i
    Letter of transmittal
        Page ii
        Page iii
        Page iv
    Table of Contents
        Page v
    Foreword
        Page vi
        Page vii
        Page viii
        Page ix
    Summary of conclusions and recommendations
        Page 1
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        Page 3
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    Overview of the situation in the Caribbean Basin
        Page 28
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    Agricultural and agro-industrial development potentials
        Page 46
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    Constraints to agricultural and agro-industrial development and recommended responses
        Page 61
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    An agricultural development strategy for the Caribbean Basin
        Page 121
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    Back Cover
        Page 138
Full Text














AGRICULTURAL DEVELOPMENT AND ECONOMIC PROGRESS
IN THE CARIBBEAN BASIN


Report of the Presidential Mission
on Agricultural Development in Central
America and the Caribbean


August 1980

Presidential Mission on Agricultural
Development in Central America and
the Caribbean

210 Collins Building
Tallahassee, Florida 32301












PRESIDENTIAL MISSION ON AGRICULTURAL DEVELOPMENT
IN CENTRAL AMERICA AND THE CARIBBEAN

210 Collins Building
Tallahassee, Florida 32301

August 25, 1980


The Honorable Jimmy Carter
The White House
Washington, D. C. 20500

Dear Mr. President:

Our Mission on Agricultural Development in Central America and the
Caribbean has completed its work, and we are transmitting, herewith, our
Report.

This effort has constituted a very challenging and sobering experience.
Many of the countries of the Caribbean Basin are facing serious economic
problems--far worse, in fact, than we had anticipated. In some countries,
these economic difficulties are contributing to problems of political
unrest and instability.

Serious balance-of-payments problems confronting many countries result
from the failure of agricultural exports, which represent approximately
three-fourths of foreign exchange earnings, to keep pace with spiraling
costs of petroleum and other imports, including food products. In many
countries, agricultural sectors are relatively stagnant, and export crop
earnings have actually declined in recent years.

We have concluded that one of the greatest hopes for revitalizing sagging
national economies throughout the Region lies in substantially improving
agricultural and agro-industrial sectors.

Our studies indicate that there are significant potentials for expanding
and improving the agricultural sectors of all countries in the Region.
The realization of these potentials, however, will require a major
effort to address the problems or constraints limiting such development.
Our Report includes many recommendations directed towards the removal of
these constraints.

We were asked at the beginning of our study to give particular attention
to the role of the private sector in agricultural development efforts
throughout the Region. We have done this, and our Report emphasizes the
significant contributions the private sector--both U.S. and local country--
must make if agricultural development potentials are to be realized. We








-2-


have, at the same time, identified problems, some of which result from
U.S. policies, which are limiting the contributions of the private
sector to development efforts, and have recommended appropriate remedial
actions.

We have also recommended other U.S. Government actions which, we believe,
will contribute to the realization of agricultural development goals in
the Region, including some reorientation of efforts by AID and other
U.S. agencies; the removal of certain U.S. customs, tariff, and non-
tariff restrictions on access by Caribbean Basin countries to U.S.
markets; and better coordination of overall agricultural development
efforts throughout the Region. In addition, we have suggested actions
by local governments, multilateral development organizations, and others
which, we believe, would contribute to the more rapid realization of
agricultural development goals in the Region.

First and foremost among our recommendations, however, is that there be
a greater commitment by the United States to the countries of the Caribbean
Basin. We believe that this Region and its future are-of such vital
concern to our nation that it must be given priority attention by the
U.S. in many ways--some of which we have identified in this Report.

Finally, may we express our appreciation for the opportunity to participate
in this Mission and indicate our continuing interest and support as
efforts are made to achieve the development goals set forth in our
Report.

Sincerely yours,



E. T. Yor
Chairman


Enclosure

















Members of the Mission


Dr. E. T. York, Mission Chairman
Chancellor Emeritus
State University System of Florida

Dr. Richard Baldwin
Vice President for Research and Development
Cargill, Inc.

Mr. Robert E. Culbertson
Professor
Florida International University
(Former AID Mission Director in several
Latin American countries)

Mr. Jonathan Dill
Assistant to the Executive Vice President
Overseas Private Investment Corporation

Mr. David Garst
Partner
Garst & Thomas Hybrid Corn Company


Mr. Robert L. Ross
President
Latin American Agribusiness Development

Dr. Quentin West
Director
Office of International Cooperation and
U.S. Department of Agriculture


Corporation



Development














TABLE OF CONTENTS


Page


Foreword vi


I. Summary of Conclusions and Recommendations 1


II. Overview of the Situation in the Caribbean Basin 28

A. General Overview 29

B. Central America Overview 34

C. Caribbean Overview 39


III. Agricultural and Agro-Industrial Development Potentials 46


IV. Constraints to Agricultural and Agro-industrial Development 61
and Recommended Responses


V. An Agricultural Development Strategy for the Caribbean Basin 121











FOREWORD



When President Carter, in early 1980, directed that "a mission of

knowledgeable private citizens" be organized to study "ways to enhance

agricultural productivity" in Central America and the Caribbean, he

underscored the vital concern of the United States for the future economic

development of this region. He also recognized that a strong and

viable agricultural sector is vital to the Region's economic future and

related political stability.



The President further identified the Mission as a key element in the

broader effort undertaken by the United States to enhance the quality of

life of and relationships with the people of the Caribbean Basin. 1/



Between early April and late May, 1980, the Mission visited Guatemala,

Costa Rica, Honduras, Jamaica, Haiti, the Dominican Republic, Barbados,

Trinidad, and St. Vincent. In addition, meetings were held in other

countries with representatives from Nicaragua and El Salvador.




1/ In this report, the term "Caribbean Basin" is intended to mean the
Central American countries and the island countries of the Caribbean
Sea. We did not, however, visit all of the countries considered to
be a part of the Caribbean Basin. Thus, throughout the Report,
when we use the term "Caribbean Basin," or "the Region," our
observations are limited primarily to the five countries of Central
America referred to in this Report, plus Jamaica, Haiti, the Dominican
Republic, and the Eastern Caribbean, as represented by Barbados,
Trinidad, and St. Vincent. We believe, however, that these eleven
countries are representative of the Region as a whole, and that
many of our conclusions and recommendations will apply, as well, to
the other countries of the Caribbean not specifically studied by
the Mission.










In each country, we received briefings from, and conferred with, U.S.

officials and business representatives as well as representatives of all

relevant sectors of each country's private sector, society, and government.

We met with each country's Chief of State (except in the Eastern Caribbean

Islands) and with Ministers of Agriculture, Finance, and Planning and

their staffs. We consulted with commercial farmers and campesinos,

domestic and export market producers, local and foreign investors in

agriculture and agro-industry, labor leaders, government officials, and

a broad spectrum of political leaders.


We also reviewed the programs and the views of such important regional

organizations as the Inter-American Institute for Agricultural Cooperation

(IICA), the Tropical Agricultural Research and Training Center (CATIE),

the Central American Research Institute for Industry (ICAITI), the

Nutrition Institute for Central America and Panama (INCAP), the Central

American Bank for Economic Integration (CABEI), the Caribbean Development

Bank (CDB), the University of the West Indies (UWI), the Caribbean Food

Corporation (CFC), and the Caribbean Agricultural Research and Development

Institute (CARDI).


In late July, the Mission also convened, for a two-day meeting in Washington,

individuals from outside the countries visited who are knowledgeable

about the Region and who might contribute to the implementation of our

Mission's recommendations. This group included representatives from

major U.S. Foundations, multinational development organizations, such as

the Interamerican Development Bank, the World Bank, U.S. universities,

AID, and U.S. corporations active in the Region.

vii










We are deeply indebted to all who assisted us in our efforts. American

Embassies, AID Missions, government officials of host countries, repre-

sentatives of the private sector (both U.S. and host country), regional

institutions, and many other individuals and groups were most cordial,

cooperative, and helpful. The significant contribution of those who met

with us in late July capped a four month long period of study, the

fruits of which we hope will help point the way to more viable agricultural

sectors and stronger economies in the countries of the Caribbean Basin.



As the Mission undertook its task, we were generally aware of the serious

economic difficulties being experienced by most of the countries of the

Region. As in most of the developing world, the rising cost of oil and

petroleum products, together with more deep-seated economic factors have set

off a series of chain reactions that have left most Caribbean Basin

economies in a weakened and worsening state. Many of the countries are

victims of increasing import costs, declining export income, political

unrest, inflation, capital flight, balance of payments and budget deficits,

increased internal and external public and private debt and growing

difficulties in meeting increasing demands for education, health, roads,

and other public services.



We were soon to learn how much more ciritcal these problems are than is

generally understood, and to conclude that reinvigorating and developing

the agricultural sector is the most promising way back to healthy and

stable economies in countries throughout the Region.


viii










Our conclusions and recommendations are recorded in summary form in the

Section which follows, and, in more detail, in the body of this Report.



We have not attempted in this Report to deal analytically with the problem

of rapid population growth, even though its relevance to agriculture, and

especially to food production, is abundantly clear. We have, rather,

accepted the fact that rapid population growth makes the achievement of the

levels of agricultural development we seek infinitely more difficult. Thus,

while we fully recognize the seriousness of high population growth rates

and their relevance to the achievement of agricultural goals, we have

felt that further analysis of this problem would be beyond the scope of

our assigned task.



We have also not attempted in this Report to assess problems of hunger

and malnutrition within the Region. Throughout the Caribbean Basin, as

in most other developing regions, there is undoubtedly widespread mal-

nutrition. We believe, however, that much of this malnutrition results not

so much from outright hunger as from improper or imbalanced diets. To

our knowledge, there are currently neither major famines within the Region

nor even serious problems of hunger--except, perhaps, in localized sit-

uations. Where hunger does exist, the problem is more likely to be the

result of a shortage of financial resources to buy food rather than a

general shortage of available food supply. In view of these circumstances,

our Mission has concentrated on the economic implications of agricultural

development efforts--in terms of the impact upon individual producers as

well as upon overall national economies.











I. SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS


Conclusions



Following are major observations and conclusions which provide the

primary basis for our recommendations:



Most of the countries of the Caribbean Basin are experiencing very

serious economic difficulties.

Many of these difficulties are related to unfavorable balances of

trade, resulting from the failure of exports to keep pace with

rapidly escalating costs of imports.

The solution to these economic difficulties is, in a large measure,

dependent upon the revitalization of the Region's agriculture,

which accounts for a high percentage of export earnings and can

contribute to a sharp reduction in import expenditures in most

countries of the Region.

The countries of the Caribbean Basin have great potentials to

expand their agricultural sectors and to make them more productive

and economically viable. In fact, they must make a major effort to

realize these potentials if they hope to solve the serious economic

difficulties which are contributing to significant social problems

and political instability throughout the Region.

There are currently many constraints which are preventing the

realization of the Region's agricultural development potentials.

Many, if not most, of these constraints can be removed by the

concerted action we have recommended herein.

1 -








- 2 -


Major U.S. Commitment Needed



Before addressing specific problems or constraints limiting agricultural

development, our principal and overriding conclusion is that a greater

U.S. commitment to the countries of the Caribbean Basin is needed.



We believe that our vital relationships with the countries of the Caribbean

Basin can be preserved only by a greater commitment on the part of the

U.S. than we have yet made to share vigorously in the future of the

Region. Such a commitment must, in our view, be complete, consistent,

long-term and sustained. It should be clear as to purpose and intent,

and readily understandable both in principle and in specific application

from month to month and country to country.



The U.S. commitment should reflect our need for the relationships, as

well as theirs, and it should be viewed as a joint private and public

sector commitment to long-term economic and technical cooperation and as

a moral commitment by the U.S. to strengthening social and cultural

ties with our neighbors--neighbors no longer in the simple sense of

geographic contiguity, but as integral members of a single community.



Such a commitment must obviously have a major agricultural dimension.

But it must go beyond a commitment to strengthen and enhance weakened

agricultural economies because overall political, economic, and social

factors greatly impact what can be done in the agricultural sector

alone.










When we refer to a "major commitment" to the Region, we are not speaking

in monetary terms alone. More importantly, we are referring to a recognition

by the U.S. that the Region and its future are of vital concern to our

nation and that the Caribbean Basin must be given priority attention by

the U.S. in many ways.


Strong expressions by the President and his administration of such

interest and commitment could do much to create the sort of positive

climate which we believe is needed. But words, alone, are not enough.

They must be accompanied by actions which reflect our desire to develop

and maintain the closest, most meaningful, and mutually reinforcing

relations with our neighbors throughout the Region.


We believe the recent creation of the Caribbean/Central American Action

(CCAA) program designed to generate more private sector assistance and

involvement in the Region is a significant step in the right direction.

We further believe a major effort, such as our Mission proposes, to

strengthen the agricultural economies of the Region--including significant

private sector involvement--can represent another major step towards

carrying out the type of commitment to which we refer.


We do not suggest the need for massive increases in financial support to

the Region. Although we recommend an increase in AID funding for agricultural

development efforts, the proposed increase is very modest in terms of

the total AID budget. Such an increase could easily be met by a relatively








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small expansion in AID's overall budget or by shifting resources within

the current budget to reflect the high priority consideration we believe

the Region should receive. We should emphasize, therefore, that our

recommendation of a "major commitment" by the U.S. to the Region in-

volves many actions, spelled out in this Report, which are not related

to increased funding. Specifically, they include:



1. Major efforts to mobilize and involve in more meaningful ways

the significant private sector resources from both the U.S. and

the countries of the Region.

2. Actions by the U.S. Government to encourage private investment

in agriculture and agro-business in the Region.

3. A removal of policy restraints on AID operations that hamper

agricultural development efforts.

4. Action by the U.S. Government to remove U.S. customs, tariff,

and non-tariff restraints on Caribbean Basin access to U.S.

markets.

5. A reorientation of some U.S. efforts by AID and other organizations

in the Region to enable them to make more meaningful contributions

to agricultural development efforts.

6. Better coordination of current agricultural development efforts

supported by the U.S. Government. This would include AID, OPIC,

the World Bank, IDB, CDB, and others. Such coordination should

also include, where possible, many private sector organizations

including foundations, universities, and businesses operating

within the Region.








- 5 -


We agree with President Carazo of Costa Rica, who told us that the U.S.

Commitment to the Region should encompass all the countries of the

Region, that the "element of cohesiveness" we should support is the

fundamental democratic character of Inter-American Society, that foreign

transplants may appear for a while but will ultimately be rejected by

Americans--North, Central, or South-and that we should therefore work

with every country, tailoring our cooperation to the needs of each and

encouraging cohesiveness around democratic principles as each country

situation requires.



Throughout the Region, many expressed to us the view that the apparent

lack of a clear commitment by the U.S. to the Region was having a

serious destabilizing influence--contributing to difficulties in achieving

both short- and long-term agricultural development goals.



The Economic and Political Crisis



We found the Caribbean Island countries so deeply shaken by their

faltering economies that vigorous economic recovery programs are urgently

needed to avoid economic collapse and consequent political turmoil.



In Central America we found that continuing political turmoil has had

the effect of turning relatively strong economies sharply downward.

Nicaragua and El Salvador are in economic disarray, and Honduras,

Guatemala, and Costa Rica are suffering from the destabilizing effects








-6-


of the revolutions and related events in their two neighboring countries.

New investment has all but stopped. Costa Rica, struggling to maintain

its high level of public services in the face of budget and balance of

payments deficits, faces an economic crisis similar to those of some of

the Caribbean Island countries.



Both in the Island countries, where economic crises are inviting political

trouble, and in Central America where political trouble is causing

economic crises, the presence of the Soviet bloc (including Cuba) and

its efforts to influence events is being clearly and strongly felt. We

are convinced, however, that the peoples of Central America and the

Caribbean want to achieve peace, stability, and prosperity through

democratic processes and will do everything in their power to reject

foreign transplants.



We have had to conclude, however, that the peoples and the countries of

the Region cannot achieve this goal unless they take vigorous and urgent

steps to revitalize and strengthen their economies, most of which are so

overwhelmingly agricultural in both fact and potential that the solution

is as clear as the problem. Such programs require three principal

elements:

1. A maximum national effort;

2. A major new cooperation and assistance commitment from the U.S.;

3. The focusing of these economic recovery efforts on neglected

agricultural and agro-industrial sectors, including rural develop-

ment in the broader, people-oriented sense.











Agricultural Development: The Key to Solving the Economic Crisis



As expenditures, imports, and debt burdens have continued to outstrip

income, most of the countries are finding it increasingly difficult to

extricate themselves from an accelerating downward economic spiral that,

if not reversed, could end in disaster. Increasing exports and reducing

imports clearly must be major elements of any solution.


Agricultural products, on the average, account for over 70% of all

export earnings while also accounting for a substantial part of import

costs. It is, thus, very clear that the nations of the Region must

revolutionize their agricultural sectors so as to achieve two parallel

goals: to export more while simultaneously achieving a higher degree of

domestic self-sufficiency in the production of many agricultural commodities.



We believe that these two parallel goals are achievable.


It will not be easy, but it is our opinion that, with the countries

working together, and with the U.S. actively involved as an integral

member of the Caribbean Basin community, the needed agricultural revolu-

tion is possible.


The costs of oil and petroleum-based products cannot be controlled. But

fuel, fertilizer, and other petroleum products can be used more effi-

ciently, and alternative energy sources can be put into use. Import








-8-


costs can be cut by increasing domestic agricultural production.

Agricultural and agro-industrial exports can be substantially increased,

with more domestic and foreign capital attracted to this endeavor.

Capital flight can be reversed. The results of increased income from

exports and decreased import costs can relieve balance of payments and

budget deficits and provide funds for essential social services. In

short, the downward spiral can, with determination, skill, and coopera-

tion, be reversed.



The Potentials for Agricultural and Agro-Industrial Development



There are huge, unrealized agricultural potentials in Central America

and the Caribbean. Yields of most crops can be greatly increased by

introducing modern techniques. Present crop acreage can be shifted from

low-profit traditional crops to higher value export crops. New lands

can be brought into production in almost all countries, and a more

complete use can be made of the commodities that are produced.



There are sufficient potentials in agriculture and related industries to

give most of the countries of the Region significantly more export

earnings, near self-sufficiency in food, and a favorable balance of

payments--along with an expanding economy, making possible more jobs

and higher standards of living.








-9-


Constraints to the Realization of Potentials



There are, however, a number of severe constraints to agricultural

development in the Region that will have to be overcome if these potentials

are to be realized. They include:



1. A serious deficiency of trained personnel.

2. Inadequate levels and use of improved technology.

3. The absence of a "systems" or well integrated approach to the

production, processing, distribution, and marketing of agricultural

commodities.

4. Deficiencies of key production inputs (such as water).

5. Inadequate capital and credit.

6. Inadequate marketing and distribution systems.

7. The general climate of political and economic instability.

8. U.S. Government policies, including various trade barriers.

9. Government policies (other than U.S.) such as export taxes and

price ceilings on agricultural commodities.

10. Negative attitudes towards farming and lack of interest among youth

in agriculture as a career.

11. Degradation of the natural resources base, especially soil and

water.

12. Serious underutilization of land and human resources.








- 10 -


Recommendations



A number of actions are recommended to address and, to the extent possible,

remove the individual contraints discussed above. These include the

following:



1. Expand educational opportunities in agriculture through the follow-

ing actions:

a. Strengthen and expand national and regional institutions with

potentials for offering strong education and training programs.

b. Through Title XII of the Foreign Assistance Act, make more

extensive use of U.S. Land-Grant Universities in "institutional

building" efforts aimed at strengthening agricultural education

programs throughout the region.

c. Through AID, substantially expand participant training programs

in agriculture in U.S. institutions. Also develop programs

for mobilizing business and other private sector support for

training agricultural students both in the U.S. and in the

Region.

d. Develop major, continuing, in-service training programs for

agriculturalists throughout the Region.



2. Strengthen efforts aimed at developing and applying improved agri-

cultural technology. Specifically,

a. Initiate major programs to strengthen agricultural research

programs throughout the region. We recommend that in most








- 11 -


countries, government research programs concentrate primarily

on adaptive research, while research concerned with new crop

varieties emerging disease or insect problems, etc. be dealt

with by regional organizations such as CATIE, CARDI, and the

international food research centers.

b. Because of the enormous gap between the level of available

technology and its use, we recommend urgent efforts to strengthen

and improve programs concerned with the transfer and use of

improved technology. Government extension programs need to be

greatly strengthened. Knowledge delivery programs, however,

must not be limited to extension efforts of ministries of

agriculture. Such efforts should also be built into other

programs, including those of cooperatives, credit institutions,

and land reform or resettlement efforts. Furthermore, a major

effort should be undertaken to involve private sector human

and financial resources in extension efforts.

c. We recommend a more extensive use of BIFAD and Title XII

mechanisms to involve U.S. universities in developing linkages

to strengthen agricultural research and extension as well as

training programs throughout the Region.



3. Develop well integrated production and marketing programs, including

the use of a "package" of essential production and post-harvest

practices. Specifically:

a. Well planned extension programs should be developed and

carried out involving a complete technological "package" of

the best known production practices available.








- 12 -


b. Agricultural production programs must be integrated with

marketing efforts if the potentials of each are to be realized.



4. Take necessary steps to assure the availability of key production

inputs by developing appropriate programs to insure that such

inputs--fertilizers, seed, pesticides, water, etc.--are available

when needed. This may require that national governments give

priority to the importation of such inputs as fertilizers and to

the development of irrigation projects aimed at supplying critically

needed water to agricultural operations.



5. Take appropriate steps to provide adequate capital and credit to

accommodate agricultural needs, including the following:

a. Measures to improve lender and investor confidence in the

future of the Region are greatly needed. We believe the

strong commitment of interest and support by the U.S. Govern-

ment could do much to restore this confidence.

b. Many governments throughout the Region need to give higher

priority to supplying the credit needs of farmers and agri-

industries. There is a need to strengthen programs to provide

production credit or working capital to farmers.

c. AID, OPIC, the Export-Impor, Bank, and other lending institutions

should increase the levels of loan and guarantee assistance

for agricultural projects.








- 13 -


6. National and regional agricultural marketing programs must be

expanded and modernized. This will involve substantially improving

marketing systems from the farm gate to the ultimate domestic or

foreign consumer, including the development of better storage,

transport and processing facilities at all levels.



7. The U.S. government should take appropriate steps to contribute to

economic growth and stability throughout the region. Such growth

and stability are essential to long-term agricultural development

efforts. To this end, a major long-term commitment by the U.S. to

provide economic and technical cooperation and assistance is needed.

The implementation by the U.S. Government of the recommendations in

this Report, summarized in "8" below, should contribute much to

improving the climate of economic and political stability throughout

the region.



8. The U.S. Government should act to modify its policies and practices

which tend to inhibit or constrain agricultural development through-

out the Region. We recommend the following specific actions:

a. The constraint imposed by the lack of a clear U.S. government

policy towards the promotion of private U.S. investment in

agriculture and agro-industry in the Region should be removed.

Relevant U.S. government agencies not already doing so should

initiate specific programs to provide active encouragement and

assistance to specific investors. The cooperation of

Caribbean/Central American Action (CCAA) should especially be

enlisted in this effort.








- 14 -


b. The U.S. Government should consider in its concessional foreign

assistance program an element of working directly with the

private sector in providing assistance to farmers and agro-

industries. This should include helping finance private

sector technical assistance and credit programs for small

farmer contractors. AID should also design and carry out a

program for co-financing projects with private firms or consortia

of firms.

c. Increased funding should be provided by AID to private inter-

mediate credit institutions. AID should in this connection

consider projects providing for the creation of national

agricultural cooperative development banks to supply ample

credit to rural cooperatives, associations of cooperatives and

cooperatives engaged in agro-industry. AID should also be

enabled by new legislation to extend the existing experimental

Productive Credit Guarantee Program to all countries of the

Caribbean Basin.

d. AID should remove its policy constraints to supporting the

development of non-food crops.

e. AID should initiate bilateral programs with the nations of the

Eastern Caribbean which are currently being assisted by AID

primarily through regional institutions.

f. Emergency foreign exchange assistance from the U.S. through

E.S.F. funds may be needed to assist some countries in the

region currently facing extremely serious economic difficulties.








- 15 -


g. In order to effectively implement (a) through (f) above, we

believe that AID resources for agriculture in the Caribbean

Basin should be increased from, we understand, the $110 million

level at present to at least $200 million annually. This

increase should come from a combination of regular development

funds, E.S.F., and the blanket extension of P.L. 480 Title III

authority to all the Caribbean Basin countries in which AID

works.



In terms of the total AID budget, this proposed increase is

relatively modest and, in our judgement, completely justified

in light of the high priority consideration which we believe

the U.S. should give this Region.



We do not believe it appropriate at this time to terminate AID

support to so-called "middle income" countries of the Region,

such as Costa Rica, which still have great need for technical

assistance program help from the U.S.

h. The Peace Corps should step up its activities in support of

agricultural research and extension, including work with

private agro-business firms which provide technical assistance

and credit to small farmers.

i. The U.S. should give preferential trade treatment to agricul-

tural products from the countries of the Caribbean Basin.

This should involve the elimination of tariffs and quotas on

such products.








- 16 -


j. USDA sanitary regulations should be carefully reviewed to make

certain they provide needed protection to U.S. interests

without being unneccesarily restrictive to the importation of

agricultural products from the Region.

k. We recommend the establishment of a trade promotion office in

the U.S. government to promote trade between the Caribbean

Basin countries and the U.S.



9. National governments should be encouraged to consider incentives to

agricultural development and modify or abolish policies which serve

as disincentives to such development. Such actions might include:

a. The elimination or substantial reduction in export taxes

imposed on agricultural commodities.

b. The elimination or use of more realistic ceiling prices on

agricultural commodities.

c. The establishment of minimum or guaranteed price levels for

key agricultural commodities.

d. The development of incentives to encourage long-term investments

in agriculture.

e. The establishment of salary levels for government employees in

such critical areas as agricultural research and extension

adequate to attract and maintain well trained and highly

competent personnel.

f. The assignment of high priority in the use of foreign exchange

to the purchase of critical agricultural production inputs.








- 17 -


g. The development of programs aimed at making more productive

use of government lands for agricultural purposes and the

clarification of laws concerning the ownership and use of

private lands.



We recommend that assistance be provided the countries of the

Region to enable them to strengthen their agricultural policy

analysis capabilities so that such issues as the above might be

thoroughly considered.



10. Efforts should be made throughout the region to give greater

prominence to agriculture as a profession, to provide opportunities

and inducements to young people to study agriculture in schools and

colleges, and to take many steps, highlighted in this Report,

needed to make farming and related business and industry more

satisfying and economically rewarding professions.



11. Measures must be taken to avoid further degradation of the natural

resources of the Region--particularly through deforestation and

accelerated soil erosion. Specifically:

a. Major programs should be developed to deal with serious problems

of soil erosion, especially in steep mountainous areas. Such

programs may include substantial reforestation efforts and

major soil conservation programs, including the use of terraces

and other measures aimed at reducing erosion.








- 18 -


b. In countries experiencing serious erosion problems, we recommend

that consideration be given to the creation of a national

agency comparable, perhaps, to the U.S. Soil Conservation

Service, to deal with the problem.

c. We recommend the initiation of programs similar to those in

Jamaica which involve a combination of terracing and other

conservation measures to facilitate the cultivation of hillsides.



12. Efforts should be made in all countries to make more effective use

of land and human resources which, in most cases, are significantly

underutilized. Specifically:

a. National governments should consider major programs to open up

and use for agricultural purposes large areas of undeveloped

land.

b. Governments throughout the Region should also consider the use

of taxes or other incentives to move unused and underused

privately owned lands into more productive use, either by the

owners or by leasing or sale of these lands.

c. International financial agencies should work with the countries

of the Region to fund programs aimed at compensating large

land owners who sell their land to small and medium sized

farmers. This assistance might be in the form of loan guarantees

to commercial banks or through other appropriate measures.

d. Countries of the Region, with international agency cooperation,

should consider a series of massive two-pronged national








- 19 -


attacks on rural illiteracy and ignorance. This would include

programs to educate adult farmers and farm families to use

modern techniques in agricultural production. It should also

involve programs of universal primary education which would be

extended to all rural areas.

e. The countries of the Region and external agencies working with

them should recognize more fully and act to correct the gross

neglect of women as human resources for development. Waste of

this resource, at least half a county's person power, begins

with denial of educational opportunity, especially in rural

areas, for girls to obtain even a primary education. It

extends to denials of education and training at all higher

levels of education. Recognition should also be given to the

fact that, despite lack of educational opportunity, women are

already emerging as pre-eminently gifted in certain areas such

as marketing and livestock management. Finally, an important

percentage of all heads of households are women. Many "small

farmers" are women but little recognition is given to this

fact.

f. Recognizing that there is marked underutilization of vast

expanses of land, while at the same time a high percentage of

the rural people are either huddled on tiny farms or represent

day laborers with no land at all, appropriate programs should

be considered to bring these two underutilized resources--land

and people--together so that the productivity of both might








- 20 -


be increased. It should be recognized, however, that land

ownership, per se, by the rural poor is the solution neither to

the nation's agricultural development problems nor to those of

the rural poor. Striking evidence of this is found in Haiti,

where the poor rural majority have owned almost all of the

land for two centuries, yet the country remains the poorest

and most undeveloped agriculturally of any in the Region.

g. Land colonization or redistribution programs must be accompanied

by strong agricultural research, extension, and marketing

efforts to support and sustain the activities of the farmers

occupying the new lands. Failure to do this will likely

result in failure of the overall program.



Private Sector Involvement



Throughout these recommendations we have identified many opportunities

for private sector involvement in agricultural development throughout

the Region. This need is so vital to the achievement of development

goals, it merits further emphasis here.



Some of the most successful agricultural development efforts observed by

our Mission in the Region involved U.S. private sector organizations.

These private groups were able to bring together the needed experience,

capital, technology and marketing expertise, and managerial capabilities

essential for success.








- 21 -


There are tremendous opportunities, however, for greater involvement by

U.S. business and industry in agricultural development activities--often

in joint ventures with local entreprenuers. Such activities could be

encouraged and stimulated by modification of U.S. laws, regulations, and

government policies. We have suggested herein a number of governmental

actions to make investment in agriculture in the Region more attractive

to U.S. business.



In addition to these specific actions, the strong, overall commitment by

the U.S. Government to the Region, such as we have recommended, should,

in itself, help provide a more stable and favorable environment for U.S.

business involvement in agriculture in the Caribbean Basin.



There are also excellent opportunities for other U.S. private sector

organizations to contribute substantially to agricultural development

efforts in the Region. Deficiencies in agricultural research, training

and extension programs represent some of the most serious constraints to

agricultural development in the Region. U.S. universities, particularly

Land Grant Colleges of Agriculture, have, perhaps, the best resources

and capabilities of any in the world to help strengthen the Regions

agricultural research and education institutions. The Board for Inter-

national Food and Agricultural Development (BIFAD) can serve as an

appropriate vehicle for forging linkages between U.S. universities and

those institutions in the Region needing assistance.








- 22 -


Although many private sector organizations, including foundations,

religious, and voluntary groups, are already active in agricultural

development in the Region; there are enormous opportunities and need for

more involvement. The newly created Caribbean/Central American Action

program provides a logical vehicle for helping to mobilize the U.S.

private sector resources to contribute to development efforts in the

Region.



The Chairman of C/CAA, Governor Bob Graham of Florida, has asked the

Chairman of this Mission, Dr. York, to lead a newly created task force

on agriculture within C/CAA. This task force will be concerned with

mobilizing resources within the U.S. private sector to address the

constraints and thus contribute to the realization of the agricultural

development goals identified in this Report.



Priority Recommendations



We have made a number of recommendations herein aimed at removing the

constraints to agricultural development in the Region. We recongize

that all cannot be addressed at once and that some should have higher

priority attention than others. Among all the recommendations summarized

above and discussed more fully in Section IV of this Report we believe

that the five highest priorities should be:


1. The proposal that the U.S. make a new and much stronger commitment

to strengthening the economic, social, and cultural ties with our








- 23 -


Caribbean Basin neighbors through a wide range of public and private

sector cooperative efforts.



2. The family of recommendations aimed at mitigating, and eliminating

where possible, U.S. Government policies and practices that are

impeding agricultural development in the Region. Corollary to this

is the identification and implementation of U.S. Government policies

and practices which can advance such development efforts.



3. The family of recommendations that call for a greater involvement

of the U.S. and local country private sector in agricultural and

agro-industrial development, including the greater commercialization

of small farm agriculture.



4. The family of recommendations dealing with the strengthening of

national and regional agricultural research, education, and extension

programs. Strong institutions are vital to future development

efforts.



5. The recommendation calling for a well integrated "systems" approach

to address the myriad of interdependent problems and constraints

limiting agricultural development in the Region.



In addressing priorities, we should recognize that most of the individual

constraints addressed herein are symptoms of "institutional" weaknesses








- 24 -


or deficiencies. Specifically, they symbolize weak institutions con-

cerned with education, research, extension, credit, marketing, etc.

Accordingly, it is not sufficient merely to address the symptoms. The

primary goal and objectives should be to strengthen the institutions

whose weaknesses are responsible for the constraints.



A Comprehensive Agricultural Development Strategy for the Caribbean Basin



Addressing the individual constraints to agricultural development through

the recommendations discussed above could do much to enhance the national

and regional agricultural and agro-industrial sectors throughout the

Region and thereby help achieve the basic goals of our Mission. We

believe, however, that there are still other dimensions to the problems

which must be addressed before our task is complete. We are, therefore,

proposing a comprehensive agricultural development strategy and program

for the Caribbean Basin which goes beyond the removal of individual develop-

ment constraints.



In section IV we discuss the "principal of limiting factors" in agricultural

production, emphasizing the need to employ a total technological "package"

of practices affecting yields in order to achieve desired results. We

point out that the absence of a single essential element in the "package"

could contribute to the "weak link in the chain" and ulitmately result

in failure of the effort. We believe the same principle applies to

broad-based national and regional agricultural development efforts. The








- 25 -


failure to address adequately any one of the major constraints limiting

the realization of agricultural development potentials could prevent the

achievement of desired goals. These circumstances emphasize the inter-

dependence of the many factors required for successful agricultural

development, and thus the need for a "systems" approach to the whole

effort.


Another dimension to the overall problem is the question of size and

limited resources of most countries of the Region. Because of these,

many countries, individually, would have difficulty in dealing effectively

with the constraints limiting the development of their agricultural

sectors.


These considerations suggest the essentiality of a region-wide mechanism

or vehicles for program cooperation and coordination.


At the beginning of this Summary section, we indicated that our principal

and overriding conclusion is that a greater U.S. commitment to the

Caribbean is needed. As one major step in implementing this commitment

we propose the creation by the U.S. Government through the International

Development Cooperation Agency (IDCA) of a Region-wide agricultural

development and trade program with the resources to assist in accelerating

the development of agriculture and agro-industries. This proposal is

developed fully as Chapter V of this Report.


IDCA should design the structure and scope of work of a Program that

would have the objective of developing the agricultural and related industries







- 26 -


within the Region--concerned especially with addressing and removing the

constraints that are limiting this development.



The Program would accomplish its goals primarily by working with and

through existing organizations--especially AID, OPIC, and the U.S.

Private Sector--with IDCA serving as a catalyst to stimulate, motivate,

expedite, and encourage the funding of worthy development efforts. IDCA

would collaborate closely with C/CAA in efforts to mobilize and involve

the U.S. private sector in such efforts.



While the U.S., through IDCA, would be the principal initiator of the

Program, other nations and organizations would hopefully cooperate

increasingly as associated donors. Such early donors might include

Venezuela, Mexico, and Trinidad. The cooperation of the World Bank, the

Interamerican Development Bank, the Caribbean Development Bank, the

European Economic Community, major U.S. foundations, agribusiness firms

and other appropriate organizations throughout the Region would also be

sought. A concerted effort would be made to develop a well integrated

and coordinated approach to agricultural development efforts involving

all organizations and agencies with abilities and resources to contribute.

This concept is discussed in greater detail in Section V of this Report.



One principle guiding the operation of the Program would be the encourage-

ment of production of commodities by countries having the greatest

competitive advantage--those which can produce and market the product







- 27 -


most efficiently and at the lowest unit cost. This, along with the

lowering or removal of trade restrictions now limiting the marketing of

agricultural commodities within the Region, could work to the economic

advantage of all countries involved, including the U.S.



We believe the proposed Program, as outlined in more detail in Chapter

V, would have the capability to carry out successfully the agricultural

development programs we have proposed, while also serving as the corner-

stone of the major new commitment that We believe strongly the United

States must make to economic growth and improved quality of life for the

peoples of the Caribbean Basin.



We urge that serious consideration be given to the implementation of

this proposal.











II. OVERVIEW OF THE SITUATION IN THE CARIBBEAN BASIN


The economies of most countries of the Region are in severe shock from a

combination of factors, including rapidly increasing import costs due in

part to rising oil and petroleum product prices, declining export income,

budget deficits, increased internal and external private and public

debt, and political instability.



As imports and other expenditures have continued to outstrip income and

ability to borrow, many countries are finding it increasingly difficult

to extricate themselves from an accelerating downward economic spiral

that, if not turned around, could end in chaos. Increasing exports and

reducing imports must clearly be major elements of any solution.



Agricultural products, on the average, account for over 70% of all

export earnings and also contribute to a substantial part of import

expenditures. It is, thus, very clear that the nations of the Region

must revolutionize their agricultural sectors so as to achieve the two

parallel goals of substantially expanding agricultural exports and

achieving a greater degree of self-sufficiency in the production of many

agricultural commodities.



We believe that these two parallel goals are achievable. In the pages

that follow, we have undertaken to suggest how this might be done.

First however, we will present some regional and country background data

that will help to explain the nature of the problem and the basis for a

solution.


- 28 -







- 29 -


General Overview



Relationship with the United States



The Mission was impressed with the level of good will towards the

United States and its people. Decades of close people-to-people contacts

have forged lasting personal bonds. Generations of students have studied

in American schools and universities. Many from throughout the Region

spend their holidays in the U.S. or seek medical attention here. Many

have family here. Local managers, technicians and businessmen are--or

have been--employed by local subsidiaries of U.S. companies. Such positive

ties are close and continuing.



Local attitudes towards U.S. foreign and economic policies were much

less positive and were, at times, outright critical. Principal complaints

centered around a lack of commitment by the U.S. to the Region and

unclear U.S. priorities.



We frequently encountered criticism of U.S. trade policy relating to

high, selective tariffs and import restrictions--especially on agricultural

products. Many repeated the commonly expressed phrase that they would

"prefer trade to aid." We found Central Americans, in particular,

confused over U.S. policy and rueful over its negative effect on both

local and foreign agricultural investment.








- 30 -


Cuban-Soviet Ties Within the Region


The Soviet Bloc, with a strong Cuban presence, is working diligently to

strengthen its ties throughout the Region. This subject would be

beyond the bounds of this Report except for its negative effect on

investment in agriculture and the fact that thousands of Central American

and Caribbean students are studying in Russia and other Soviet-bloc

countries, many of them studying agriculture. Few from the Region are

now studying agriculture in the U.S. We were told that generous full

scholarships for study in Russia are available for the asking and that

this opportunity is being increasingly taken by young people from all

over the Region who cannot afford the high costs of U.S. training,

cannot get scholarships for study in the U.S., and cannot understand our

indifference.



Everywhere in the Region, the Cuba-Soviet-bloc presence is felt. We

talked with few who did not bring it up. Many are afraid that Russia's

will to become established in Central America may prove stronger than

our will to preserve democratic societies. This fear is contributing to

great concern throughout the Region and is having a significant destabilizing

influence upon new investment and economic planning.



National Diversity



Despite many similarities among the various countries of the Region, the

fact is that each nation faces a unique set of opportunities and constraints.








- 31 -


Although the Mission has undertaken to generalize in order to focus on

broader issues, we recognize distinct national differences.



There is no regional economic or agricultural policy even though most

nations belong to either the Central American or Caribbean Common Markets.

Much of the Central American integration movement has been based on

industrial trade, and agricultural sectors have proven to be most difficult

to integrate into a regional framework. Much trade in basic grains and

cattle among contiguous countries in Central America is unofficial.



There is a tendency on the part of the international financial community

to look at Central America in regional terms when considering country

investment risk, while the Central Americans vigorously emphasize the

diversity.



Climate



An interesting but little-recognized fact is that many of the countries

of the Region have both tropical and temperate climates. In agriculture,

a wide range of tropical crops may thrive. In addition, however, many

sub-tropical and even temperate zone crops can be grown at higher altitudes

in the mountains. No one knows what the real agricultural potentials

offered by these unique climatic conditions really are. The Caribbean

Basin provides a great "laboratory" to explore these potentials more

fully.








- 32 -


The Role of Agriculture



Agriculture and related industries form the backbone of virtually all

the countries in the Region. They account for over 70% of total exports.

Agriculture is the major source of employment and, typically, the most

important source of government revenue.



Despite progress in certain sectors of agriculture in many countries,

there are high levels of agricultural underemployment throughout the

Region and a high percentage of the Region's poor people live in rural

areas.



These facts have been known for years. Unfortunately, however, this

knowledge has not resulted in the establishment of priorities or the

allocation of public investments needed to deal with the problems of the

agricultural sector and to take advantage of its great potential. Too

much attention has, at times, been devoted to planning in many countries

without commensurate programs of action to address the problems of

agriculture and the rural poor.



Some progress has been made in many countries of the Region to expand

agriculture and related industries. This progress, neither uniform nor

sustained, has been spearheaded by the commercial sector. In most

instances where such progress has been made, the efforts were largely

planned, organized, and financed by the private sector. In some cases,

governmental agricultural policies supported these efforts; in others,








- 33 -


they did not. Individual entrepreneurship was the major motivating

force behind the growth in commercial agriculture. Private entrepreneurs

were able to obtain the financing, find technical assistance where

necessary, hire management, clear land, plant crops, build processing

plants, and organize marketing programs. Some efforts failed, but

enough succeeded to have a major impact on agriculture during the past

20 years.



Despite such demonstrated progress in commercial agriculture, not all

segments of the rural population have benefited from these developments

in terms of employment or income. Many people in rural areas are essentially

untouched by the money economy because they live in such isolated areas

or the volume of private investment in farming and related industry has

not been sufficient to absorb the available rural labor force.



Government priorities have sometimes contributed to this situation.

Until recently many governments in the Region were giving priority to

industrialization and urbanization. Consequently, major investments

were made in low cost urban housing, sewage plants, urban electrification

and water systems, urban schools, etc.--rather than in rural or agriculturally

related programs.



The Dichotomy Between Commercial Agriculture and Subsistence Farming



When attempting to generalize about past agricultural performance and

future potential, we found it necessary to distinguish between the







- 34 -


dynamism and efficiency of commercial agriculture and the stagnation and

low productivity of subsistence farmers. It is obvious that each sector

is faced with somewhat different and unique problems which must be

addressed if the potentials of each are to be realized. It is equally

obvious that one of the major goals of an agricultural development

program in this Region should be the encouragement of more extensive and

viable commercial farming operations by small scale, subsistence farmers.



While an essential long-range concern is that the productivity of the

small farmer be raised to the point that he is a viable commercial

producer, other concerns, such as meeting domestic food and export

commodity goals, should be the focus of vigorous national public sector

efforts. This will require a viable commercial sector including the

active participation of many small farmers in the Region.


Central America Overview


Present Situation



In Central America, political turmoil is engulfing two countries and is

spilling over into three others. The economies of Nicaragua and El

Salvador have been shattered by war, and the fear that the conflict may

spread has so seriously throttled new investment in Guatemala, Honduras,

and Costa Rica, that these economies also are seriously threatened.

Costa Rica has long maintained high standards of public service which it

now finds increasingly difficult to maintain in the face of decreasing







- 35 -


growth and income. Honduras' economic health, in some respects, seems

to be the most stable in the Region. It appears not to be in a downward

spiral; yet it remains the poorest country in Latin America and substantially

poorer than any other country in the Caribbean Basin, except Haiti.

Guatemala is beset by political strife, and its economy is beginning to

suffer from loss of investor confidence. Yet, Guatemala's economy

remains strong relative to the others.



Except for Costa Rica, Central America's economies had, until last year,

been strong, with their basic strengths in the export of traditional

agricultural crops. The wars in Nicaragua and El Salvador, however,

have brought both agriculture, and the economies of these countries in

general, to the brink of disaster. Costa Rica, Guatemala and Honduras

have been adversely affected by the disruption of trade with Nicaragua

and El Salvador, capital flight, increasing difficulties in borrowing

abroad, a slow-down in new investment, and increasing import costs.



New investments are limited by external credit restraints resulting from

high foreign interest rates and a reluctance of U.S. and European lenders

to differentiate commercial and political risks in Central America on a

country by country basis. Guatemala's and Honduras' traditional foreign

capital sources are holding back despite the excellent investment opportunities

available. Even Costa Rica, whose internal social and political stability

are exemplary, finds itself victim of the same "guilt by association"

blight. At the same time that private financing sources for cotton,

sugar, coffee, and beef, as well as non-traditional crops and agro-

industry are drying up, levels of U.S. bilateral assistance have also

been cut.








- 36 -


In Nicaragua and El Salvador, many crops are not being planted as a

result of actual and/or threatened violence, expropriation, or both.

Nicaragua's 1980 cotton crop is expected to reach only 40% of normal.

El Salvador's growers are similarly constrained by the fear of violence

and of confiscation under the new land reform program. New investment

in agriculture throughout the Region is being seriously hurt by the fear

that the Nicaraguan experience may be repeated in the other countries--a

fear that is underscored by uncertainty as to whether or not outside

forces either intend to help bring about or prevent new "Nicaraguas".



In Costa Rica we found a warm reception to the evidence our Mission pro-

vided of renewed U.S. interest in increasing its participation in develop-

ment in Central America. We also found strong hopes that this would

mean a higher foreign assistance budget for Costa Rica. President

Carazo appealed eloquently to us in two veins: First, Costa Rica wants

U.S. public and private external investors to view Costa Rica on its

merits--not simply as an undifferentiated part of Central America in

turmoil. Agricultural and agro-industrial investment possibilities in

Costa Rica are substantial. Second, President Carazo urged that we

provide equally strong support to all of the countries of the Region--to

the Nicaraguans as well as the Guatemalans. Costa Ricans believe that

democracy and growth with equity, as concepts, are Central American

philosophical norms, and that, given help and understanding, all Central

American societies, including Nicaragua's, will reject foreign ideologies

and maintain free and open economies.








- 37 -


The Recent Past in Central America



Economically, Central America has been one of the success stories of the

post-war period. Having formed a Common Market in the late 1950's, the

Region achieved economic growth rates in excess of 7% a year for almost

two decades. This performance was one-third better than Latin America's

as a whole. With its Common Market, and its own regional development

bank, the Central American countries together built regional transportation

and communication networks, and integrated industrial economies. Intra-

regional trade rose from practically nothing to almost $1 billion a year

between 1958 and 1970, and, even after the war between El Salvador and

Honduras in whose aftermath the Common Market was able to function only

partially, regional trade continued to increase.



Unfortunately agriculture, by and large, did not share in the integration

and prosperity of the Region's economy. Each country expanded its

traditional agricultural exports to markets outside the Region, grew

some of its own food supply, and imported most of the rest directly from

outside the Region. Whereas hundreds of small industries prospered as a

result of the regional markets and the creation of urban jobs, those

engaged in agriculture did not benefit from a similar increase in intra-

regional trade.



Industries had been assigned, by agreement, to one or more countries, to

serve the needs of all five, taking into account factors of competitive







- 38 -


advantage. In agriculture, however, no effort was made to identify

competitive advantage situations in order to designate specific countries

as primary regional suppliers. The result was that while five urban-

industrial societies, built around the five capital cities, grew rapidly

and prospered, most of each country's population engaged in food production

did not benefit. In fact, the real income and standard of living of

many declined throughout the 1960's and 1970's.



The Future



Basic to the future of Central America is the fact that the population

and the labor force will more than double in the next 20 years. Agri-

culture and agro-industry will have to bear the brunt of providing

employment for the fast growing labor force. Although rural population,

as a percentage of total population, will decline--to 50%--the absolute

numbers of people on farms will substantially increase, and their economic

plight will worsen if agriculture does not grow and become more productive

on a labor-intensive basis. Without such growth, the World Bank estimates

that rural unemployment will likely increase from 14% today to 30% by

the year 2000. Likewise, the real income levels of the rural majority

will likely decline further. At present, the poorest 40% receive only

10% of the total net income. They are malnourished and receive few

public services. This situation can only worsen if a dramatic improvement

in agricultural production and employment does not take place.








- 39 -


Caribbean Island Overview



The British Caribbean



The Caribbean island countries are characterized by alarmingly deteriorating

economic situations--economies living beyond their means and income--

with resultant social stresses that are taking on increasingly sharp

political hues. These countries have been independent for only a few

years. They have a heritage of concern for economic, as well as political

democracy, without, however, having avoided income disparities almost as

wide as those in Central America. As their populations have grown

without commensurate economic growth they have become progressively

poorer. Despite their democratic bases, the Caribbean countries now

face major economic problems that could cause serious political turmoil.

A revitalization of sagging agricultural sectors would appear to offer

these countries their best opportunity for overall economic regeneration

and the avoidance of political chaos.



The British Caribbean countries, without exception, have lost ground in

agricultural exports for the past 15 years. This is in sharp contrast

to the Central American countries where export agriculture remained the

greatest strength of the nations' economies, and productivity increased

until the Nicaragua and El Salvador Civil Wars.








- 40 -


The reasons for the decline in agricultural exports in the Caribbean include:



1. The breaking up of the large, usually foreign owned, plantations

after independence, and the parceling out of the land to new small

holders who could not, without assistance that did not materialize,

maintain the productivity levels of the large estates;



2. Control of commodity exports by government-run Commodity Marketing

Boards, some of which have created bureaucratic disincentives and

inefficiencies in the marketing and export processes.



3. In recent years, a growing shortage of foreign exchange, born of

both lower exports and increased imports, has made it difficult or

impossible to import the inputs needed to keep production up or

start new businesses.



4. Increasing costs cf petroleum based inputs and sea and air transport

have seriously affected these nations' ability to compete in world

markets.



5. A de-emphasis of agriculture as a priority subject, both by government

policy and individual choice of profession. The latter is partly a

reflection of the drudgery inherent in the profession and the low

and uncertain prospects for profits.







- 41 -


As in Central America, the governments accorded industrial development

or tourism highest priority. Neither in investment policy nor in foreign

exchange allocations did agriculture receive due consideration. An

example of the results of this is Jamaica where, by 1977, agriculture,

as a percentage of GDP, had dropped to 9%.



Despite some governments' programs to parcel out land to small farmers,

farming has come to be looked upon by many as a last resort profession--

only for the poor and unskilled who can't find anything else to do. The

average age of those engaged in farming as their principal work is today

approximately 50, and going up. Concern about this, however, is building,

and programs are being considered to make farming as a profession more

attractive to youth. Small gains in this direction have been made by

slowly improving extension services, increasing credit availability,

education, introducing terracing programs, multiple cropping and new

higher-value crops; and providing more roads, rural schools and health

services. But inadequate progress in this regard has been made thus

far.



Haiti



The poorest country in the hemisphere is a land of paradoxes. Poverty

and malnutrition surpass those of any other nation in the hemisphere,

yet almost all rural families own their own land. In fact we were told

that ninety percent of all the land is owned by ninety percent of the

people--a situation very atypical of the Region.







- 42 -


Unlike most campesinos of Central America, the poor Haitian farmer, who

constitutes 80% of the population and operates 617,000 farm units on

907,000 hectares of land, is often a commercial farmer. He grows most

of his output to sell while buying much of his food. He grows so little,

however, and sells at so low a price, that he lives in poverty. While

GNP per capital is $230, rural per capital income is under $135.



Haiti, like all the countries of the Caribbean Basin is both tropical

and mountainous. Coffee is Haiti's principal foreign exchange earner.

Haiti's mountain slopes, however, are being seriously eroded by bad

cultivation practices and deforestation. This process could, however,

be halted and, in some cases, reversed by the type of terracing and

multiple cropping methods being developed in Jamaica.



Haiti has little unused arable land and, thus, has to make the most of

what it has. With population density at 1,000 per square mile and the

average family farm holding less than two acres, intensive farming on

the Taiwan model would seem to offer great promise.



Another Haitian paradox is the fact that, as untrained Haitians flee

their present poverty by migrating to the U.S., trained Haitians are

returning home as new investment creates jobs and the industrial economy

in general inches forward.



Despite the fact that imports are currently twice the level of exports

and the balance of payments deficit is over $60 million, the Gourde







- 43 -


remains steady at 5 to the dollar, where it has been since 1919. And,

there are no foreign exchange controls.



Haiti also suffers the common problem of the Caribbean Sea countries:

traditional export crop production, and exports, have for some time been

steadily falling. Once a major sugar exporter, Haiti is now a net

importer of sugar as well as of food in general.



Dominican Republic



Occupying 2/3 of the same island, the Dominican Republic obviously has

fundamental interests in common with Haiti. These have, however, only

recently begun to be exploited constructively. The use of Haitian labor

in the Dominican Republic has recently begun both to relieve unemployment

in Haiti and meet farm labor shortages in the Dominican Republic. The

two countries also share a common long-term tie with the U.S.



The Dominican Republic also suffers from faltering agricultural exports,

rising imports, and balance of payments problems. These problems were

greatly aggravated by 1979's twin hurricanes, David and Frederick, which

caused some $860 million in damages.



The Dominican Republic's present government recognizes the central

importance of agriculture to the economy and is giving it top priority.

The previous Balaguer government had concentrated on the development of

Santo Domingo and industry and had done an excellent job. Rural areas,








- 44 -


however, in this period, stagnated in relative terms. The new government

is trying to rectify this situation both in terms of commercial and

export agriculture and in terms of rural living standards. To help all

farmers, large and small, vigorous programs are underway to improve

research, extension, and credit and to carry out an agrarian development

program based on the needs of small producers. The land distribution

program is controversial but the controversy seems to revolve principally

around how it is being administered. However, basic issues remain

unresolved, one of the principal ones being whether families resettled

on new lands will each hold title to their own individual plots or have

only a communal interest in the whole settlement.



Also involved in the government's major agriculture sector development

program are measures to remove old constraints, such as export and

import taxes, to increase credit for agriculture, including large scale

commercial agriculture, and to provide preferential exchange rates for

the importers of agricultural inputs and the exporters of agricultural

products. At the same time, the present administration is said to be

uncomfortable about appearing to be too friendly to "big business" and

feels constrained politically from taking measures to aid "commercial

agriculture" or "big investors." This, in turn, has had a dampening

effect on the country's ability to attract new foreign investment in

agriculture and agro-industry.








- 45 -


Agricultural Trade



Even though more should be done to increase intra-regional agricultural

trade among the Caribbean island countries, the maximum achievable would

not likely be significant on a regional basis, although some smaller

countries might benefit greatly. These countries basically grow the

same crops at the same time, and there are severe limits to the absorptive

capacity of both the internal national markets and the intra-regional

market. To survive, each country has to have direct ties to the outside--

especially to the U.S. and European markets. The "British Caribbean"

countries already have an advantage in that they have established access

to the EEC, and some have special, protected U.K. markets as well. The

Dominican Republic and Haiti, however, have no such established ties.

While all the island countries want and need increased access to U.S.

markets, Haiti and the Dominican Republic have no other practical external

market than the U.S., to which to seek access.











III AGRICULTURAL AND AGRO-INDUSTRIAL
POTENTIALS IN THE CARIBBEAN BASIN


Introduction



The countries of the Caribbean Basin have some unique potentials for

substantially expanding agricultural production and developing thriving

agro-industries. Such a prosperous agricultural and agro-industrial

economy must intelligently reflect the nature and the natural advantages

of the Region.



The Caribbean Basin is tropical at sea level and temperate at the altitudes

many of these countries enjoy because they are also mountainous, filled

with upland valleys, plateaus, terraceable slopes, and forests, rising

from sea-level to as high as 10,000 feet. Such variations in climatic

conditions offer potentials for a diversified agricultural development

unique in this hemisphere and, indeed, in much of the world.



This potential for further agricultural development is also related to

the relatively large areas of unutilized land. For example, in Central

America, there are, at present, some 18.5 million hectares in farms. A

total of 42 million hectares of land are available, although substantial

amounts are in wet tropic forests and in broken topographic situations,

lacking the productive potential of much land already in farms. There

remains, however, the opportunity to substantially increase the land in

farms--especially if Central America recognizes its own unique qualities

and exploits them by developing silvaculture and agro-forestry, introduces


- 46 -








- 47


terracing and other soil conservation measures, and takes advantage of

the opportunity to grow adapted crops in its mountain valleys, plateaus,

and terraced highland slopes. There are also significant opportunities

to put into more productive use, large areas of crop land, currently

unused or grossly underutilized. Except in the case of a few export

crops, levels of productivity are quite low by modern standards, providing

great opportunities for improvement.



These circumstances offer the potential for producing vastly more food,

fibre, wood, and other agricultural products, including many crops

relatively new to the peoples of the Caribbean Basin as well as the

traditional commodities--coffee, sugar, bananas, beef, and cotton for

export and basic grains for domestic food consumption.



Efforts to more nearly realize these potentials should be oriented

toward three principal economic objectives:



a. Major increases in foreign exchange earnings through a substantial

increase in exports;



b. Significant foreign exchange savings through a reduction in imported

food requirements; and



c. Maximization of profit and employment opportunities from objectives

(a) and (b) above, by endeavoring to process agricultural products

as close as possible to the producer, and as fully as possible

prior to the products being offered for export or retail sale.







- 48 -


We can speak with some specificity about the potentials for some of the

traditional export commodities. Our Mission, however, has not had the

time nor opportunity to make a detailed study of the opportunities for

expanding the production of a wide range of additional commodities which

should offer potential for expanded production. Some of the more important

groups of commodities warranting further study include a wide range of

tropical fruits and vegetables, aquaculture, agro-forestry, poultry,

swine, dairy, small ruminants, marine fisheries, tobacco, "ethnic" foods

for export, citrus and deciduous fruits, pineapples, coconuts, cacao,

avocados, macadamia nuts, a wide variety of spices, flowers, and ornamental

plants and tropical exotica.



We would be seriously remiss in any review of the agricultural and agro-

industrial potential of the Caribbean Basin if we did not focus at least

briefly on the excellent past accomplishments and future potentials of

the larger-scale private commercial farmers and processors. While major

efforts must be made to increase small farmer production and productivity,

these efforts alone will not permit the countries of the Region to

realize their full potential.



Larger commercial farms are a major source of employment. These farms

also produce significant quantities of export crops which generate both

foreign exchange as well as local tax revenues. Agricultural processors,

both domestically and foreign owned, create additional direct employment

as well as new opportunities for farmers to market their crops.








- 49 -


Frequently, these processing companies will contract with the more

sophisticated medium-sized local farmers rather than with the very small

traditional farmers since it is easier to introduce new crops, quality

control measures, etc. with the medium-sized farmers. Such orientation,

however, should not deter efforts to include the small traditional

farmers in such commercial operations as they can be trained and provided

the credit and production inputs needed for viable operations.



Following are specific comments concerning some of the traditional

export commodities and basic food crops for domestic consumption, as

well as other commodities which appear to have potentials for expanded

production for both domestic use and export.



Principal Commodities



Throughout Central America and the Caribbean, the key commercial activity

is generated by the major traditional export crops--coffee, sugar,

cotton, and bananas. These crops form the economic backbone of all of

the Central American and the larger Caribbean countries. In Central

America, these traditional crops generally did well over the past 20

years, providing major employment opportunities, both permanent and

seasonal, generating most of the region's foreign exchange, and contributing

much of the governments' tax revenues. Productivity of these crops in

some Central American countries is already quite high. Increased production

will often have to come from expanded acreage, although opportunities to

increase productivity among small farmers are still substantial.








- 50 -


The Caribbean presents a contrasting situation with declining production

of export crops, lower yields and less land devoted to their cultivation.

The short term priority should seek to restore prior levels of productivity

and acreage cultivated.



One of the greatest potentials is to take fuller advantage of existing

processing companies, exporters, producer associations, and cooperatives

to increase the output of export commodities. The overseas markets for

these commodities are well organized and the long term growth potential

for most is favorable.



Coffee is the leading export crop of Central America and a major one in

the Caribbean. The prospects for increasing coffee production are

favorable in several Central American and Caribbean countries through

higher productivity per acre, particularly among small farmers. For

example, it is estimated that coffee farmers in Guatemala are averaging

only 500 Ibs/acre compared to 1400 Ibs. in Costa Rica, where most coffee

producers are also small.



A significant potential exists for increasing productivity two- to

three-fold among small coffee farmers of Guatemala, Honduras, the Dominican

Republic, and Jamaica by applying existing technology already proven in

Costa Rica and El Salvador. This technology calls for more coffee trees

per acre, more frequent and careful pruning, and more fertilization.

Such production is more labor intensive and thus would create additional

rural jobs. However, it is also more expensive, because of the larger








- 51


number of trees per acre and the high cost of fertilization, and also is

more technologically demanding of the small farmer. Guatemala has the

most land available to increase acreage devoted to coffee, but other

countries, such as the Dominican Republic, could also devote additional

acreage to coffee.



One limiting factor in Central America is coffee rust which has broken

out in El Salvador, Nicaragua and, most recently, in Honduras. While

disease resistant strains have been developed by CATIE, they are lower

yielding. If it became necessary to replant with rust resistant varieties

on a massive scale, this could lead to a decline in coffee productivity

per acre.



Cotton. The growth potential for cotton is modest. Guatemala, Honduras,

Nicaragua, and perhaps Costa Rica and Haiti have suitable land available

for more production. In some Central American countries, cotton is

generally grown on large, well managed commercial farms obtaining very

high yields by international standards. Opportunities for further

increasing productivity on these farms are limited. Yields, in fact,

may well fall in several countries with political instability.



The cotton industry is generally well organized and capable of solving

its own problems with little outside help. One problem noted in Guatemala

was the high use of chemical pesticides and the presence of traces of

the chemicals in beef carcasses from cattle fed cotton by-products or

grazed on land near cotton fields. (Concern was also expressed about

the potential for pesticide contamination of shrimp beds).







- 52 -


Bananas are a major export crop in most Central American and Caribbean

countries. Although doing well in Central America, production has

fallen in the Caribbean (by nearly 80% in Jamaica). In most countries,

American or British fruit companies are still responsible for marketing

although banana production continues to be shifted to local growers.

Productivity remains high in countries where the fruit companies provide

technical assistance or growers are organized into effective associations.

There is more suitable land for bananas in most of the region's countries.

The major constraint to expanded production is the demand in international

markets, which, we were told, is essentially being met with current

levels of production world-wide.



Sugar production is currently expanding in Central America, but declining

in the Caribbean. Increased cane production for the manufacture of

alcohol for gasohol is being increasingly considered in both areas. In

Central America, the Dominican Republic, and Jamaica, sugar is grown

mainly by large producers, many of them linked by ownership to sugar

mills. Productivity is generally acceptable although government owned

sugar lands in the Dominican Republic and Jamaica have significantly

lower yields than privately owned farms. In Haiti, growers include both

large and small producers and productivity is low. The industry is well

organized throughout the region and can generally solve its own technical

problems. Low price ceilings fixed by the government are a major obstacle

to increased production in some countries. The availability of suitable

land and financing also constitute significant obstacles.








- 53 -


Beef. The production of beef has been increasing steadily and has the

potential for continued growth in most Central American countries, as

well as in the larger Caribbean island nations.



Central America, except for El Salvador, still has an agricultural

frontier for pasture land. The typical pattern of land clearing in

Central America is to clear land initially for cattle grazing. This

pattern will probably continue into the far seeable future. Acting

against this will be a tendency to convert the best pasture land into

farming. This trend will continue as the rising price of farm land

induces landowners to increase the productivity per acre of their land.



The industry is steadily improving its productivity through a combination

of better cattle breeding and management practices, pasture improvement,

and more utilization of agricultural by-products as a feed to fatten

cattle. One important opportunity for this industry is to industrialize

the by-products of the slaughterhouses, particularly leather products in

the manufacture of such products as hand bags, suitcases, and shoes.



Fruits and Vegetables (excluding bananas). The potential for increasing

the production of tropical and temperate zone fruits and vegetables is

very high. Although specific opportunities will vary according to local

growing conditions, they are significant in most countries of the Region.

The nucleus of the processing industry, including canning and freezing,

has been developed over the past two decades and is oriented to domestic,

regional and international markets.







- 54 -


Most fruits and vegetables have the advantage of being sold to both the

fresh and processed markets locally as well as overseas. The variety of

market opportunities offers more options to the farmer as well as the

potential to link primary production with processing industries. The

potential for increasing production will depend importantly on integrating

production and processing facilities and expanding local, regional, and

international markets.



Tropical fruits and vegetables are already being exported fresh, canned,

and frozen. The primary market for many of these products has been the

Hispanic ethnic market in the United States. Some crops, however, like

mangoes and other tropical fruit, already have broader market appeal and

the immediate potential is considerably larger.



The potential for sub-tropical and temperate zone fruits and vegetables

is considerable. Much progress has been made in recent years in producing

canned fruits and vegetables for local and regional markets. Opportunities

exist to expand production for local fresh markets, especially in countries

with a growing tourist industry, using intensive growing techniques such

as hydroponics, as well as more conventional methods. Another potential

is to increase the production of deciduous fruits in highland areas for

sale in local, regional, and distant export markets--in either fresh or

processed form. A wide range of vegetable crops is already being

exported frozen. The potential for expanding these exports based on

year-round availability and low wage rates appears significant.







- 55 -


Two of the most important weaknesses at present are the inability to

grow a quality product consistently and within industry specifications

and the inadequacy of marketing infrastructure.



With a few exceptions, such as tomatoes, Central America and the Caribbean

have had little experience as yet in growing temperate zone fruits and

vegetables. There is only a handful of trained horticulturists, and few

new ones are being prepared. Most of the successful cases of horticul-

tural development have been sponsored by U.S. companies or individuals

with little outside assistance.



Since fruit and vegetable farms tend to be medium to small, and local

technical and financial institutions to work with small farmers are so

limited, to organize a major expansion of production would require

substantial external technical, capital, and marketing assistance.



Numerous efforts have been made in recent years to develop export markets

in the U.S. and Europe for fresh fruits and vegetables other than such

traditional crops as bananas and citrus. Except for limited success

with crops such as pineapples, mangoes and avocadoes, such efforts have

met with considerable difficulty and often failure. Logistic and marketing

problems have frequently proven to be major obstacles. Despite these

difficulties, we believe there are excellent potentials for producing

and exporting such fresh commodities, but success will depend largely

upon well planned and carefully integrated production and marketing

efforts. Engaging the assistance of foreign marketing firms in these

efforts will likely be desirable.








- 56 -


Fruits and vegetables are typically high value crops and they offer a

potential to increase net income significantly. One region with a

favorable potential for fruits and vegetables is the Guatemalan highlands,

where the predominant crop, wheat, yields a low income to the farmer and

limits his ability to earn an adequate living from his small plot of

land. From all indications, many labor intensive fruits and vegetable

crops are well adapted to this region.



Spices. The availability of mini-climates gives Central America and the

Caribbean the opportunity to produce spices for world markets. These

have been traditional crops in the Caribbean. They are generally labor

intensive and yield high incomes per acre. The potential for expanding

these crops is, at present, limited by lack of market development efforts.

One spice with a favorable growth potential is cardamon seeds, grown

primarily in Guatemala, which exports about $40 to $50 million worth

annually. Other constraints to expansion of these crops are the lack of

long term financing and the need to improve productivity continuously in

order to meet competition from other producing countries.



Cut Flowers and Ornamental Plants. This industry has been growing

rapidly in recent years based on regional sales and exports to the

United States and Europe. The industry is highly labor intensive and

requires high levels of technical and managerial skills, and well developed

international marketing capabilities. It is dominated by medium-sized,

family-run businesses, with a few large corporate growers. The industry








- 57


is relatively well run and can be expected to grow for the foreseeable

future, primarily in Costa Rica, Guatemala, Honduras, Jamaica, and the

Dominican Republic.



Sesame Seed. Exports of dried and decorticated sesame seed have been

growing in recent years in response to strong international market

conditions and a favorable climate, particularly in Central America.

Most sesame seed is grown by small and medium-sized farms on marginal

lands during the dry season, often in lieu of corn. This crop is grown

mainly in El Salvador, Guatemala, and Nicaragua, and more recently in

Honduras. It is an attractive, low risk, high income crop to small

farmers and efforts to expand the production of this crop should be well

rewarded.



Tree Crops. Central America and the Caribbean offer opportunities to

grow for domestic and export markets a wide range of tree crops--including

African palm, rubber, cinchona (quinine), cacao, macadamia nuts, cashews

and trees for lumber, paper and charcoal. In addition to being an

attractive income opportunity, for hilly and marginal lands, trees also

serve the purpose of controlling soil erosion, which is a growing problem

in much of the region. Some tree crops also lend themselves to multiple

cropping programs designed to increase income per acre on small farms.



A major factor limiting the expansion of tree crops is long-term financing.

None of them produces a profitable crop in less than five years, which

means that tree crops need financing up to 8-10 years or longer. The







- 58 -


problem of long-term financing has been made more acute by the political

uncertainty prevailing in the Region.



In addition to their value as exportable raw materials, both rubber and

wood offer domestic industrial opportunities to generate off-farm employment.

The major obstacles to this development are local legislation limiting

private sector involvement in the wood industry in some countries, and

the U.S. tariff structure which imposes higher duties on molded wood

products than on unprocessed timber.



Animal Products (including poultry, eggs, pork, and dairy products).

The market potential for animal products lies primarily in the local

markets, which have been growing well throughout the region.



The production of broilers and eggs has been expanding rapidly at rates

of up to 40% per year over the past decade. A major contribution to

this growth has been dramatic improvements in productivity which have

been passed along to consumers in the form of lower prices and more

convenient foods. This productivity gain has occurred at a time of

growing urban affluence and rising prices of competing animal protein

foods, such as beef. The near term prospects for the poultry industry

remain strong. Growth rates in domestic demand of 15-25% per annum can

be expected in the near future.



The swine industry has also grown in recent years, although at a slower

rate than poultry. The potential for the industry remains favorable,








- 59 -


based on domestic and regional markets, for processed foods such as

sausages, canned pork, and hams.



The market for dairy products has grown rapidly, but much of this new

demand has been met with lower priced imports, particularly powdered and

condensed milk. A major reason why local milk production has often not

kept pace with demand is that government price ceilings on milk and

dairy products seriously discourage production.



Basic Grains for human consumption include white corn, beans, rice, and

wheat. Most of this production is accounted for by small farmers,

except for rice, which is sometimes grown by large-scale commercial

producers. Crops for animal feed include yellow corn, sorghum, and

soybeans.



Wheat is grown at a high cost in the Guatemalan highlands where conditions

may be more favorable for the production of other commodities. There is

little soybean production anywhere in the Region. The area is essentially

self-sufficient in white corn, but deficient in feed corn. The Region

as a whole is theoretically self-sufficient in rice; however, some

countries import part of their needs while the others export surpluses.

There is some potential for expanding rice production in the Region.



The potential for increasing small farmer grain productivity is limited

by several endemic problems. The most immediate and difficult one to

overcome is governments' inability to plan, manage, and carry out programs








- 60 -


to reach most small farmers with credit, technical assistance and an

assured market. Another problem is the cost of making the land more

productive (levelling, terracing, contouring, irrigation, drainage,

etc.). Other problems include inadequate national systems for storing,

distributing, and marketing grains and the fact that many governments

have opted to control prices of basic grains. Even though these programs

may start out as minimum support prices designed to encourage farm

production, too often they have become maximum prices designed to hold

down urban food prices and inflation. The resulting low prices to the

farmer have the effect of discouraging production and limiting rural

income.



Root Crops, such as yams, yautia, and cassava are relatively more important

to the Caribbean diet, although cassava is grown on a modest scale in

parts of Central America. The potential for root crops is moderate.

Local production approximately satisfies local demand. As a traditional

food, per capital consumption could actually fall as urbanization progresses

and other foods are substituted.











IV. MAJOR CONSTRAINTS TO AGRICULTURAL AND AGRO-INDUSTRIAL
DEVELOPMENT AND RECOMMENDED RESPONSES



This section describes a number of problems or constraints which are

limiting the achievement of the agricultural development potentials dis-

cussed earlier. Some of these constraints apply more to some countries

than to others, but all apply in one degree or another, and each country's

constraints profile reflects a pattern of serious obstacles to the realiza-

tion of its agricultural development potential.



In addition to identifying the constraints, we have also indicated, in each

case, the specific response or action we recommend to deal with the con-

straint. In the final section of this report, we are also proposing a

comprehensive program or plan of action for helping to overcome the broad

spectrum of problems or constraints which are limiting the realization of

agricultural development potentials throughout the Region.



Following is a discussion of some of the more specific constraints to

agricultural development, and our proposed responses. No attempt has been

made to order these constraints in terms of their relative importance.



CONSTRAINT: Serious Deficiency of Trained Personnel



One of the greatest constraints to agricultural development throughout the

Region is the serious shortage of well-trained personnel, both men and

women, in agriculture and related industries. This problem was highlighted


- 61 -








- 62 -


in every country visited.



For example, in one Central American country with tremendous potential for

expanding the production of tropical and subtropical fruit, vegetables, and

other horticultural crops, such as ornamentals, we were told by AID per-

sonnel that, to their knowledge, there was not one well-trained horticul-

tural specialist in the country.



The need for trained personnel, including women, is not limited to technical

areas, however. There is also a great need for personnel trained in eco-

nomics, development planning, and management. Many identified the shortage

of well-trained managers as one of the major limitations to agricultural

development efforts since their deficiencies limit both government and

private efforts to effectively implement agricultural development programs.



At one time, AID provided significant opportunities and financial assistance

for many foreign nationals to be trained in U.S. institutions. Such AID

programs have been greatly curtailed--in fact, virtually eliminated in many

countries.



In one country some $600,000 in AID funds were available to the local

government for training but were not being used. Government officials

explained that many personnel trained through such programs would, upon

their return, leave government positions and enter the better paying

private sector. (Observation: in terms of achieving overall national








- 63 -


development goals, having such trained personnel in the private sector may

be just as important as having them employed within government.)



Although there are institutions in several countries offering programs at

the baccalaureate-equivalent level, most agricultural programs in these

institutions need to be greatly strengthened and improved. Opportunities

for graduate level training are extremely limited throughout the Region.



At the present time, the Soviet Union has an aggressive program throughout

the Region in offering full, expense-paid scholarships to young people to

study in universities within Russia or Eastern-bloc countries. We were

told, for example, that over seven hundred students from Costa Rica and an

equal number from the Dominican Republic are currently involved in such

programs within the Soviet Union.



A minister of agriculture in one of the countries visited informed us that

he wanted to send several students to a U.S. University but was told that

his government would have to pay full expenses of the student plus forty

percent overhead. With offers of full scholarships to Soviet-bloc countries

and with very limited resources to finance educational programs in the

U.S., many young people have little choice if they want to pursue a program

of study outside their country.







- 64 -


RESPONSE



Educational opportunities and overall human resource development efforts in

agriculture must be expanded greatly throughout the Region. Nothing is

more basic to long-term agricultural development than this, and development

goals cannot be realized without such efforts.



The Mission recommends the following steps be taken to address this need:



1. Efforts should be made, through the Board for International Food and

Agricultural Development or other appropriate mechanisms, to involve

U.S. universities in cooperative arrangements with institutions in

the various countries throughout the Region to strengthen and improve

local university programs in agriculture at both the undergraduate and

nondegree levels.



2. Special efforts should be directed towards expanding and improving

certain institutions of considerable potential having regional scope

and dimensions. In addition to AID-related mechanisms, assistance to

these regional institutions might be provided by major U.S. foundations

or other private sector organizations and such multilateral development

organizations as the World Bank and the Interamerican Development

Bank. These institutions include:



a. The Panamerican School of Agriculture in Honduras. This institu-

tion, with students from many countries, has a unique program







- 65 -


involving a combination of practical experience and strong

academic training at the post-high-school--sub-baccalaureate

level. The institution has the potential to at least double its

present enrollment and has initiated a program to include women

students in its program. The School should be supported in both

of these objectives.



b. The University of the West Indies, with its agricultural programs

located on its campus in Trinidad, is already offering work in a

wide range of agricultural disciplines at the B.S., M.S., and

Ph.D. levels and has the potential to substantially expand its

programs.



c. The cooperative program between the University of Costa Rica and

CATIE's regional research program at Turrialba offers some

excellent opportunities for graduate level training and asso-

ciated research on problems of importance to the Region.


3. AID should devote more of its resources to human resource development

in agriculture through participant training programs in the U.S. Such

efforts should not be limited to project related programs and might be

oriented more to broad-based agricultural developmental opportunities

within the country.



4. Aggressive efforts should also be directed towards mobilizing business

and other private sector financial support for training agricultural








- 66 -


students in the U.S. Such opportunities should be particularly good

with U.S.-based businesses or industries operating in these countries.

This assistance might include summer intern programs with the sponsor-

ing company to allow the student to earn a portion of his expenses as

well as gain valuable experience. Such a program might well be

carried out through the Caribbean/Central American Action Program.



5. Opportunities should be explored for untilizing other universities in

the Region such as the University of Puerto Rico and the National

Agricultural University at Chapingo in Mexico. Such institutions

provide the obvious advantage of offering programs in Spanish for

those students who cannot speak English.



6. Greater effort should be directed to offering special, in-service

programs for agriculturalists throughout the Region to help them keep

abreast of new developments. The new AID-sponsored in-service training

program for extension workers to be offered by the University of West

Indies should serve a very useful purpose. Regional institutions,

such as IICA, can give effective, continuing leadership to a wide

spectrum of in-service training programs in agriculture. Private

businesses should be encouraged to participate in these training

programs, both as trainers and trainees. The training of managers for

cooperatives should also be stressed.








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CONSTRAINT: Inadequate Levels and Use of Improved Technology



In all countries visited and with most commodities produced in these

countries, the lack of--or failure to apply--improved technology is a major

constraint to enhancing agricultural productivity and efficiency.



The principal exception to this general observation is in the area of

certain high-value export crops where the private sector or autonomous

government-related organizations have carried out aggressive programs to

develop and apply improved technology. Examples of such efforts are most

notable with cotton in Guatemala, coffee in Costa Rica, and bananas in

Honduras where the yields of these commodities are among the highest in

the world. Other exceptions may be found where private-sector food-process-

ing organizations are working directly with growers to supply the commodi-

ties needed for processing operations.



One of the most surprising and disturbing observations by the Mission was

the lack of technological improvements in most sectors of agriculture

during the last ten to fifteen years. In fact, with the exception of some

export commodities, there appeared to be an actual retrogression in recent

years in terms of the use of modern technology. This is particularly true

with traditional food crops--but it is also true with many export crops--

especially in the Caribbean island countries.



In Haiti and the Dominican Republic, comments were made that coffee wasn't

"produced," it was "harvested"--reflecting very little attention to the








- 68 -


application of improved methods. In Costa Rica, we were told that less

than one-third of all the corn acreage receives any fertilizer at all

and less than five percent of corn is planted to improved seed. These

statistics are particularly striking--and disturbing--in light of the

well-known responsiveness of corn to fertilization and improved germ

plasm. Yet the circumstances in Costa Rica are not atypical of the

Region as a whole.



Throughout the region, therefore, with the few exceptions noted above,

there is an enormous gap between the level of know-how available and the

adoption of that know-how. Tremendous progress could be made through

improved knowledge delivery programs.



There is also need for expanded and enhanced adaptive research programs,

aimed at determining how technology developed elsewhere can best be used to

meet local needs. Furthermore, research is needed to meet newly emerging

problems, such as new plant or animal diseases or new insect pests in

situations where appropriate control measures are not known.



RESPONSE:


Throughout the region, yields of many crops could easily be doubled or

tripled merely by using well-established improved technology in situations

where positive results can be predicted with a high degree of certainty.


There is a great need to strengthen programs aimed at the development and

effective use of improved technology in all countries of the Region. This








- 69 -


must be done if needed improvements in agriculture are to be realized.



The Mission recommends that the following steps be taken to achieve such

objectives:



1. Major efforts are needed to strengthen programs concerned with the

development of improved technology. Expanded Title XII and other AID

mechanisms will likely be needed to achieve such institutional build-

ing objectives. As such programs are carried out, we recommend that

in most countries, government research efforts concentrate primarily

on adaptive research, while research concerned with developing new

varieties or addressing newly emerging disease or insect problems, for

example, be dealt with by regional organizations such as CATIE and the

International Food Research Centers.



2. Because of the enormous gap between the level of available technology

and its use, we recommend major efforts to strengthen and improve

programs concerned with the transfer and use of improved technology.



Government extension programs obviously need to be strengthened. Such

programs should be very closely tied to the adaptive research programs

of the country, so that, demonstrations, and other joint efforts can

be conducted most effectively.



Knowledge delivery programs should obviously not be limited to the

extension efforts of ministries of agriculture. Such efforts should








- 70 -


also be built into other programs including those of cooperatives,

credit institutions, land reform or resettlement programs and private

companies. Wherever possible commodity organizations should be assisted

to organize and supply their own technicians to advise growers concerning

the use of improved practices. In a number of instances, such efforts

have already proven highly successful. Other successful private initiatives

have involved food processing operations which work directly with producers

in helping to modernize their operations for most efficient and effective

production.



Such private sector initiatives have been most successful when one or

more of the following conditions are met:



1. The program is crop specific. This makes it easier to train the

technician working with farmers, and he can become more specialized in

dealing with a single crop.



2. The service is provided in conjunction with credit, with funds advanced

for the purchase of seed, fertilizers, and pesticides. This makes it

easier to assure the use of appropriate production inputs.



3. The service is provided by the organization purchasing the crop--in

many cases under a guaranteed price arrangement. Under this arrange-

ment the provider of the technical assistance is motivated by self-

interest to make certain that the farmer does the best job possible--

and the farmer is assured of a market and an acceptable price.








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CONSTRAINT: Failure to Utilize a Total "Package" of Essential Production
Practices and to Follow an Integrated Production and
Marketing Program



One of the major reasons why agricultural development potentials are not

being realized throughout the Region is the failure to utilize a well

integrated approach to agricultural production and marketing operations,

including the use of a total "package" of essential production practices.



Such problems are, of course, not unique to the Caribbean Basin, but they

are important constraints which must be addressed if the agriculture of the

Region is to realize its potential.



There are many factors which can limit the production of a given crop:

various plant nutrients, variety or genetic makeup of the plant, water and

other climatic factors, diseases, insects, weeds, and other pests, etc.



Applying either the biological principle of "limiting factors" or the old

adage about a chain being no stronger than its weakest link, crop produc-

tion may be limited by a single essential factor--even though other

conditions are optimum. No matter how favorable all other factors may

be, a single "weak link" or deficient element may curtail the production

of the crop. Accordingly, it may do little to apply optimum levels of

fertilizer to a crop which is suffering from a lack of water, or is

ravaged by insects or disease. The level of water or the extent of pest

damage will determine the yield--not the amount of fertilizer applied.








- 72 -


Accordingly, successful production programs must, to the extent possible,

involve the application of a "package" of practices which, in effect,

strengthens each "link of the chain"--or keeps each essential element

needed in production from becoming the limiting factor.



The same principle applies to the need to have well integrated agricultural

production and marketing efforts. We observed many examples of opportunities

to greatly expand production of certain commodities when appropriate market

outlets were not available--or when inadequate transportation facilities

prevented access to good markets. Similarly, we saw examples of marketing

efforts--especially food processing plants--which failed because of inadequate

production of the commodities needed to supply the processing plant. This,

again, illustrates the need to have a well coordinated or integrated produc-

tion and marketing program if the overall effort is to be successful.



RESPONSE:


There must be a broad recognition of the principle of limiting factors and

its implications--together with the development of appropriate, well

integrated production and marketing programs in an effort to try to eliminate

the limiting factors which could spell failure.



Specifically, extension programs for a given commodity should involve a

complete technological package of the best known productions practices

available (seed, fertilizer, pest control, etc.). Furthermore, the farmer








- 73 -


must be impressed with the importance of using the total package, not just

one or two elements thereof.



Similarly, production of a given commodity must be directed towards meeting

a given market demand--just as market organizations must be developed to

utilize predicted and needed levels of production of the commodity to be

marketed.



Obviously, the most successful operations are those in which production and

marketing are well coordinated, either through cooperatives or through

private sector initiatives where one organization is concerned with both

production and marketing or where a marketing concern contracts with the

producer for given levels of a commodity.



CONSTRAINT: Deficiencies of Key Production Inputs



Deficiencies of important production inputs, such as improved seeds,

fertilizers, pesticides, water, and energy represent major constraints to

agricultural production throughout the Region.



One of the most serious constraints of this nature, is the deficiency of

water. Many areas have lengthy dry seasons or, in some cases, shorter

periods of inadequate rainfall when a deficiency of water seriously limits

crop production. In many areas, the availability of irrigation could

permit farmers to grow an additional crop each year.








- 74 -


The potential for irrigation from either surface or ground water sources

exists in many places. Very limited irrigation is carried out, however--

being restricted primarily to high-value commercial crops.



Inadequate usage of improved seeds and desired levels of fertilizer and

pesticides constitute great constraints to agricultural production in the

Region. Indeed, appropriate combinations of these inputs, along with other

favorable conditions, could result in increasing production of many commodi-

ties by 100 to 200 percent.



In most countries, there seem to be reasonably adequate supplies of fertil-

izer, seed, and pesticides to meet current demands. Accordingly, inadequate

levels of use, rather than unavailable supplies, constitute the principal

deterrent to improved production. however, in some countries serious

shortages of foreign exchange have resulted in difficulties in importing

sufficient quantities of badly needed fertilizers and pesticides. Fre-

quently, a lack of local credit prevents farmers from securing the fertil-

izers and pesticides needed for efficient and productive operations. In

some cases marketing and distribution problems cause localized deficiencies.



Supplies of petroleum, per se, do not constitute major constraints to

agricultural production in most countries within the Region. Mechanized

operations are limited primarily to large scale commercial operations--

although limited mechanization is occurring through cooperatives where

small farmers may have access to tractors and related machinery. The

rapidly escalating cost of petroleum products, however, may constrain some








- 75 -


agricultural operations unless major efforts are made to reduce the cost of

energy per unit of production by marked improvements in productivity.



RESPONSE:



There are great opportunities to improve the productivity and efficiency of

agricultural operations by eliminating deficiencies of badly needed inputs.



There should be little difficulty in supplying needed levels of such

inputs as improved seed, fertilizer, and pesticides in most countries,

except, perhaps, where shortage of foreign exchange may pose difficulties.

The critical need is to encourage greater usage of a balanced package of

these vital inputs through effective extension and related educational

programs. Such needs are considered in greater detail elsewhere in this

report.



There are substantial opportunities to greatly expand agricultural produc-

tion through the development of irrigation facilities. In some cases, this

may involve major expenditures for large irrigation projects. In other

cases, as demonstrated in the Guatemalan Highlands, relatively inexpensive

irrigation systems for small farmers may be quite feasible. Where a shortage

of water constitutes a major constraint to agricultural development, careful

consideration needs to be given to developing appropriate irrigation systems.



There should also be a full and complete exploration in all countries

throughout the Region of opportunities to develop alternative energy








- 76 -


sources and reduce dependency upon foreign oil used in agricultural opera-

tions. It may be possible in many instances to produce alcohol or methane

gas from agricultural products or residues. The feasibility of such opera-

tions needs to be thoroughly explored. The production of trees for fuel

has interesting potentials not only as an alternative energy source, but

also as an environmentally and commercially attractive crop.



"Appropriate technology" programs in a number of countries are involved in

developing and demonstrating the use of small solar dryers for agricultural

products. It would appear that programs of this type could be very benefi-

cial to small farmers at little cost.



CONSTRAINT: Inadequate Capital and Credit



A serious constraint to agricultural development is financing in all

forms, but particularly equity capital, long-term project funding, crop

financing and working capital. This shortage is particularly acute at the

present time. The development needs of the Region are so great that the

indigeneous financial institutions and systems cannot accommodate them.



Equity capital, which has been scarce even in good economic times, is less

available because of the present political uncertainties. The availability

of normal commercial bank credit has become increasingly scarce because of

local developments, including nationalization of the banking systems in El

Salvador and Nicaragua, and credit-tightening domestic monetary policies in







- 77 -


the other three Central American countries and several Caribbean countries.



In some Caribbean countries, local credit is available, but there is a

major problem of securing hard currency financing to pay for imported

capital goods. In the Eastern Caribbean, credit is generally available,

although not for long-term investment.



Abroad, international banks have become more reluctant to extend credit to

the Region because of concern about Central America's political situation

and because of high balance of payments deficits in many Caribbean and some

Central American countries. Some international bankers generalize about

Central America without taking into account national differences.

Specifically Honduras, Costa Rica and Guatemala appear to offer substan-

tially better credit risks today than the international commercial banks

are recognizing.



Central America now finds it more difficult to tap the medium and long-term

Eurodollar markets. External financing resources available in the Region

are increasingly limited to the international aid agencies and export

credit from industrial nations.



These financial constraints affect the entire agricultural sector. Tradi-

tional export commodities--cotton, sugar, coffee, and beef--are the most

immediately affected because they rely most heavily on bank credit and are

most integrated into the money economy. Among these, cotton is likely to

be the hardest hit in the short run because it must be replanted annually.








- 78 -


The shortage of long-term capital constrains the introduction of tree

crops, the settlement of new lands, the development of irrigation projects

and new agro-industries and other long-term programs.



RESPONSE



1. Restoration of lender and investor confidence in the U.S. policy in

the Region is the first requisite. This requires a long-term U.S.

commitment to the future well-being of Central America and the Caribbean

as an integral part of an interdependent Caribbean Basin which includes

the U.S.



2. While not the sole reflection of a strong U.S. commitment, U.S. Govern-

ment decisions as to AID levels in Central America and the Caribbean

will be crucial indicators of the depth of commitment. In one Central

American country, a representative of a major U.S. business firm asked

the Mission, "Why should my company be making greater investments here

when the U.S. Government itself doesn't have enough confidence in the

country to support it?"



3. In most countries there is need for more effective programs to provide

production credit or working capital. Steps should be taken to

strengthen institutions or agencies charged with supplying such

credit--especially to the small producers. In many cases, this may be

effectively done through cooperatives.








- 79 -


4. The governments of the Region, generally, must place a higher priority

upon supplying the credit needs of farmers and agro-industries if

development potentials are to be realized.



CONSTRAINT: Inadequate Marketing and Distribution Systems



In the case both of the inadequate internal distribution and marketing

systems for small farmers and the more complex export system, post-harvest

loss is one of the most serious economic problems in the agricultural

sector. It is conservatively estimated that 40% of all agricultural

production in the Caribbean Basin is lost, after harvest, in the distribu-

tion and marketing processes, domestic and international.



Inadequate marketing and distribution systems for both basic foodstuffs and

cash crops often act as constraints to developing the small and commercial

farmer sectors. The system is typically based on a complicated network

of intermediaries, often women entrepreneurs, who buy small quantities

from individual farmers and by stages bring the crops to urban markets

and agro-industries. Although functioning as a marketing system, it, in

fact, provides farmers relatively low prices for their products, and

frequently results in high rates of spoilage and uncertain quantities

and qualities of produce.



The intermediaries, however, lack the capital and know-how to build and

operate a system of storage warehouses and distribution centers which could

stabilize price fluctuations and cut losses incurred in the distribution







- 80 -


process. Nor do they help the small farmer to gain access to credit and

technology. The intermediary's primary function of value to the small farmer

is that he provides an access to markets, paying the small farmer in cash.

Although the intermediary provides a market for traditional crops, he is

unable to help the small farmer increase his productivity either through more

efficient growing of traditional crops or through the introduction of non-

traditional, high-value crops. This "system," in other words, is not able to

provide the small farmer an integrated package of inputs, credit, technical

assistance, storage, transport and markets.



Efforts to produce new crops, such as fresh and frozen vegetables and fruits,

have, all too often, been started by well-meaning developers prior to there

being assured markets for the products, or interim cold storage, reliable

international transportation, or assured handling and marketing facilities

overseas. The results have frequently been disastrous, costing millions of

dollars in spoiled, wasted produce.



To take advantage of production potentials, therefore, there must be well

integrated marketing programs involving the development of storage and trans-

portation facilities along with good domestic and foreign market outlets.

Such improvements in marketing systems are essential if development potentials

are to be realized.








- 81 -


RESPONSE:



1. AID and other International Development Banks should be encouraged

to provide technical and capital assistance on a priority basis to both

the public and private sectors in support of modernizing national and

regional storage, transport, and marketing facilities.



2. Joint ventures among private investors should be encouraged where

an experienced firm with an established international market and trans-

port system joins with local entrepreneurs and producers to grow and

process foods and fibres in-country for both the domestic and the export

markets.



CONSTRAINT: Climate of Political and Economic Instability



A serious overriding constraint on agricultural development in the Region is

the uncertain investment and business climate as perceived both locally and

internationally. Private enterprise traditionally has provided the initia-

tive for development in the Region. In some countries, however, the rules of

the game are currently being rewritten and it is not yet clear what economic

model will replace them. In every country where the role of the private

sector is being deemphasized, capital formation has come to a virtual stand-

still, replaced by capital flight--and agriculture suffers the consequences.



The specific causes of instability differ from country to country but the

outcome in terms of investment in agriculture has been the same. The changing








- 82 -


political environment typically impacts initially and primarily on commercial

agriculture. However, all sectors of the economy are eventually impacted

through a reduction in farm and agro-industry employment, lower tax collec-

tions which depend heavily on commercial agriculture, and the growing short-

age of foreign exchange which affects all sectors of society.



Although major changes in economic systems within the Region have been

limited to Nicaragua and El Salvador, the concern of many businessmen in

other Central American countries that political instability may spread to

their country is seriously retarding the rate of private capital formation.

Such political uncertainties also undermine the effectiveness of orthodox

investment incentives, such as tax rebates, in promoting new business

development.



Unfortunately, many believe this instability is at least partially the

product of U.S. attitudes or policies toward the Region. Many--both U.S. and

foreign nationals--expressed the belief that a reaffirmation of U.S. commit-

ment to the Region would do much to overcome the atmosphere of uncertainty

and contribute to greater stability.



RESPONSE:



It is not within the province of the Mission to recommend to the countries of

the Region how to improve their political climates. There are already far

too many opinions inside and outside the area as to what political and

economic forms will bring the most lasting tranquility.








- 83 -


We have but one major recommendation in this regard. It is the basic rec-

ommendation with which we began this Report and shall end it: that the U.S.

Government must make a new and greater commitment to the development of the

nations of Central America and the Caribbean--a commitment based on a long-

term preferential consideration and evidenced by new and meaningful actions.

The commitment should flow from a recognition that due to the economic

interdependence of the United States and the other countries of the Caribbean

Basin, the future of the entire Region will be determined to an important

degree by how effective the U.S. commitment is in helping the people of the

Region achieve their development goals and aspirations.



CONSTRAINT: U.S. Government Policies



The Mission observed a number of U.S. Government policies which are acting as

deterents or constraints to agricultural development in the Region.



Policies Dealing With the Promotion of Private Investment



Our Mission was charged with exploring ways to encourage more U.S. private

sector involvement in agricultural Development. Yet, United States private

investment in the Region is seriously constrained by certain policies of the

U.S. Government. A general policy applicable to State, Commerce, Agriculture,

and others, issued in 1977, states that it is U.S. Government policy "neither

to promote nor discourage" U.S. foreign private investment. This policy

states that "there is no basis for concluding that a general policy of








- 84 -


actively promoting... international investment would further the U.S.

national interest."



This policy is interpreted by U.S. officials as requiring a posture of

"neutrality" toward U.S. foreign investment, even in developing nations. In

practice, this means that U.S. officials in embassies abroad and in the

Commerce Department do not seek to provide assistance to prospective U.S.

private investors or provide encouragement to them to undertake investments

that would further agricultural development in the nations of the Region.


This policy is, of course, in conflict with the legislative mandate of

the Overseas Private Investment Corporation to "mobilize and facilitate"

increased private U.S. investment in these countries and with the AID policy

of lending funds to such organizations as the Latin American Agribusiness

Development Corporation, whose purpose is to promote joint ventures in the

Region and with U.S. Government support for the International Finance

Corporation.



Despite its mandate, OPIC, too, is constrained by the general Government

policy of "neutrality" toward foreign investment. OPIC finds it difficult to

gain the necessary cooperation from embassy and AID staff in the field, upon

whom OPIC must rely for much of its effectiveness. In addition, OPIC is

prevented by policy from assisting larger U.S. companies to invest in "middle

income" developing nations, such as Costa Rica, Barbados, and Trinidad.








- 85 -


Another constraint upon the ability of the United States to encourage in-

creased private investment in the nations of the Caribbean Basin grows out

of the reorientation of AID policies during the past decade. In response to

legitimate developmental and budgetary considerations, AID has focused its

efforts on providing direct assistance to the poorer rural families. AID's

guidelines, however, do not permit AID adequate flexibility to utilize

private investors in achieving the maximum possible developmental impact on

this target group. AID's activities are restricted primarily to working

directly with host government organizations, cooperatives or non-profit

voluntary organizations that, in turn, are working directly with the poorest

families.



The Mission witnessed numerous cases in which AID could have made an impor-

tant contribution to furthering agricultural development and directly benefit

its target groups if it had been able to work with or through private,

profit-making corporations as well.


One of the most serious constraints to AID's being able to operate effec-

tively is a lack of managerial organization and technical skills in the

cooperating government agencies through which it seeks to operate. There are

many cases in which private, profit-making corporations with excellent

managerial and technical skills, operating in the agricultural sector, could

do much more to help the small farmer if more working capital and technical

personnel were available to them through AID. Such expanded programs would

involve small farmer credit, marketing assistance, and production/processing/

storage technologies, all among the most important types of assistance which








- 86 -


AID itself attempts to provide to small farmers but primarily through

Ministries of Agriculture, often with discouraging results.



Policy Restrictions on AID Operations that Hamper Agricultural Development



a. Non-food Crop Restrictions



AID's ability to assist small farmers is also restricted by its apparent

policy limitations on promoting or improving the production of non-food

crops. One of the best means for AID to help small farmers to increase

their income per acre is to assist them to grow non-food crops such as

cacao, coffee, cardomon and rubber. These high-value crops are labor-

intensive, relatively easy to market, and can be grown in hilly terrain

not suitable for row cropping. Tens of thousands of small coffee

farmers in most of the nations of the Caribbean Basin suffer from a lack

of knowledge of modern production techniques. A program to develop

small farmer production of these crops could result in significant

increases in small farmer income and provide the basis for utilizing

presently unutilized mountainous lands for agriculture. (AID recently

made a policy exception in Haiti to undertake a program to assist small

coffee farmers in improving their production and marketing techniques,

and in the Dominican Republic, small-farmer coffee rehabilitation

efforts are a major part of AID's emergency response to 1979's hurricane

damage. We believe that more exceptions of this nature would be

desirable.)








- 87 -


b. Lack of Long-term Commitment Capability



Another constraint upon AID's effectiveness is the lack of a long-range

planning capability due to the short-term nature of its budget processes

and its predilection to short-term projects. This constraint prevents

consideration of projects requiring a long-term commitment. The ability

to make long-term commitments is essential if AID is to undertake such

projects as the development of small farmer production of rubber, mango,

citrus, and other crops which require from six to ten years before the

trees begin to produce economic returns.



c. Lack of Bilateral Funding in Eastern Caribbean



AID is also constrained in its ability to accelerate agricultural

development in the Eastern Caribbean nations by its policy of funneling

most of its assistance through the Caribbean Development Bank and other

regional institutions. While these institutions need and deserve

support, there are many pressing agricultural development problems

within each of the Eastern Caribbean nations which cannot be addressed

effectively through a purely regional approach. For example, there are

numerous projects which are too small or too "one-of-a-kind" for funding

by the Caribbean Development Bank, yet highly important to each of the

countries concerned.







- 88 -


d. Inability To Assist Civic Action Programs



Another constraint to agricultural development imposed by United States

policies stems from the fact that in some countries the national mili-

tary establishment conducts important agricultural development projects.

The United States does not have an effective means for providing appro-

priate development-oriented assistance to these civic action programs

many of which are no more political than those of the U.S. Corps of

Engineers.



For example, in the Dominican Republic, forest areas and reforestation

and watershed management programs are the responsibility of the military.

Deforestation, erosion, and rapid silting of reservoirs behind multi-use

irrigation and hydroelectric dams are serious problems; yet the

Dominican armed forces lack the necessary human and financial resources

to deal with these problems, and AID cannot help.


Similarly, in Guatemala, the military is performing a major civic-action

role in the opening of the vast Northern Transversal Region now being

made available for small-farmer settlements. The Guatemalan military

builds roads and schools and operates a transport system to provide

supplies to and market the crops of the new small farmer settlers.



In both of these cases, the failure of the United States to provide

appropriate assistance to the government agency responsible for these








- 89 -


development tasks constrains the rate of agricultural development in

these countries.



e. AID's Concentration of its Resources on the "Poorest of the Poor"



AID's mandate during the past several years to focus its efforts on the

"poorest of the poor" has, we believe, been counterproductive, at times,

to overall agricultural development objectives. While there seems to

have been some relaxation of this policy, we believe that it would be

desirable for AID to have the freedom and flexibility to work with all

sectors of the agricultural community which can contribute meaningfully

to economic development goals and to sustained growth.



Although the poorest small farmers should continue to receive assistance,

the potentials for more rapid agricultural development which may be

greater at times with other sectors should also be exploited.



U.S. Customs, Tariff, and Non-tariff Restrictions on Caribbean Basin
Access to U.S. Markets



A theme commonly expressed by our country hosts in our visits was their need

for better access to the U.S. market, both in terms of the current export

commodities--sugar, coffee, beef--and other crops which may have export

potential, such as fruits, vegetables, wood products, and ornamentals.








- 90 -


These concerns include quota restrictions, tariffs, grading and standards

requirements, and sanitary regulations and inspection, plus pressures from

U.S. producers to prohibit the entry of products competitive with theirs.



The Mission recognizes the major initiatives that the United States has taken

in recent years to facilitate trade from developing countries through the

General System of Preferences and Most Favored Nations concessions. Many of

these concessions have been favorable for exports from the Caribbean Basin.



We also recognize that the Region has not made the best use of these con-

cessions because they have frequently not been able to compete with other

developing countries such as Brazil and Israel. One of the dilemmas is that

many concessions which could have been of potential benefit to the Region

failed because lower cost producers in other developing countries took the

lion's share of the benefits.



There are many agricultural products for which no concessions were granted

because of potential injury to domestic U.S. producers. However, the export

of many products from the Region to the U.S. could be substantially expanded

without threatening U.S. producers.



In the area of trade policies, there are a number of tariffs, quotas, or

restrictions which affect the area. These include the fear of reinstatement

of beef quotas and the lack of officially recognized fumigation programs for

fresh fruit and vegetables within the producing countries.








- 91 -


Some in Congress continue to express concern about foreign competition from

products such as citrus, sugar, palm oil, cotton and tobacco. If the U.S. is

seriously interested in helping to revive the economies of the Caribbean

Basin, however, something significant must be done to increase the Region's

export of a variety of agricultural commodities. We agree with the comments

made to the Mission in a number of countries that trade was more important

than aid in reaching their agricultural development goals.



All these countries are small. Even if they produced and exported to

capacity, the impact on the U.S. market would be relatively insignificant.



For example, the Caribbean Basin countries produce an annual total of 600,000

metric tons of beef compared with a U.S. total of 11,000,000 tons. The data

for vegetables are 1.7 million metric tons in the Region vs. 25 million

metric tons in the U.S. Obviously, only a portion of the Region's production

is available for export to the U.S. The Caribbean exports $1.6 billion in

coffee as compared with world exports of $11 billion. The comparable data

for sugar are $0.5 billion vs. $5.5 billion.



RESPONSE:



1. The United States Government, in its concessional foreign assistance

programs, should work directly with the private sector to provide

assistance and opportunities to small and medium size farmers as well as

to agro-industries. Such a program of using the private sector to

accelerate small farmer development can be more effective than trying to




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