• TABLE OF CONTENTS
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 Front Cover
 Title Page
 Preface
 Acknowledgement
 Table of Contents
 Agriculture in the Salvadoran economy,...
 The role of the agricultural sector:...
 The demand for agricultural...






Group Title: Volume 4
Title: Agricultural sectoral analysis for El Salvador
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 Material Information
Title: Agricultural sectoral analysis for El Salvador prepared for the Government of El Salvador and the United States of America A.I.D. Mission to El Salvador by Robert R. Nathan Associates, Inc
Physical Description: 5 v. : ill. ; 27 cm.
Language: English
Creator: Robert R. Nathan Associates
Publisher: The Associates
Place of Publication: Washington D.C.?
Publication Date: 1969
 Subjects
Subject: Agriculture -- Economic aspects -- El Salvador   ( lcsh )
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Includes bibliographical references.
General Note: "December 1969."
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Bibliographic ID: UF00053854
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: oclc - 11220215

Table of Contents
    Front Cover
        Front Cover
    Title Page
        Page i
        Page ii
    Preface
        Page iii
        Page iv
        Page v
        Page vi
    Acknowledgement
        Page vii
        Page viii
        Page ix
    Table of Contents
        Page x
        Page xi
        Page xii
        Page xiii
    Agriculture in the Salvadoran economy, 1970-90: An overview
        Page 1
        The model
            Page 2
            Page 3
            Page 4
            Page 5
            Page 6
            Page 7
        The possibilities of economic growth
            Page 8
            Page 9
            Page 10
            Page 11
            Page 12
            Page 13
            Page 14
            Page 15
            Page 16
            Page 17
            Page 18
            Page 19
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            Page 27
            Page 28
            Page 29
            Page 30
            Page 31
            Page 32
            Page 32a
            Page 32b
            Page 32c
            Page 32d
    The role of the agricultural sector: A capsule view of past trends and problems
        The place of agriculture in the national economy
            Page 33
            Page 34
            Page 35
            Page 36
            Page 37
            Page 38
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            Page 75
            Page 76
            Page 77
            Page 78
            Page 79
        Factors in the stagnation of agriculture
            Page 80
            Page 81
            Page 82
            Page 83
            Page 84
    The demand for agricultural products
        Page 85
        Page 86
        Foreign demand
            Page 87
            Page 88
            Page 89
            Page 90
            Page 91
            Page 92
            Page 93
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            Page 138
        Domestic food demand
            Page 139
            Page 140
            Page 141
            Page 142
            Page 143
            Page 144
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Full Text
















AGRICULTURAL SECTORAL ANALYSIS
FOR EL SALVADOR

VOLUME I


Prepared for
THE GOVERNMENT
and the
UNITED STATES OF
TO EL SALVADOR


OF EL SALVADOR


AMERICA A.I.D. MISSION


ROBERT R. NATHAN ASSOCIATES, INC.


December 1969


















AGRICULTURAL SECTORAL ANALYSIS


FOR EL SALVADOR



VOLUME I














Prepared for
THE GOVERNMENT OF EL SALVADOR

and the
UNITED STATES OF AMERICA A.I.D. MISSION
TO EL SALVADOR

by

ROBERT R. NATHAN ASSOCIATES, INC.


December 1969



















A sectoral analysis evaluating the supply
and demand factors influencing agricultural
production and establishing production
targets and a development strategy for the
period 1970 1990.



















PREFACE


This sector study arises from a grant by AID to
the Government of El Salvador under an agreement which
contains this key phrase:

The Plan will present a strategy
for the development of the agricul-
tural sector and will provide the
basis for sectoral programs and pro-
ject loans from AID, international
institutions, and private enter-
prise.


Sector studies are receiving increasing atten-
tion from development planners because they provide a
framework for planning that is less abstract than glo-
bal economic plans and because they facilitate project
formulation. We were particularly concerned that this
study not be a mere review of the past and description
of prospects for the future as many such studies are.
Our objective was to offer government officials and in-
ternational lending agencies tangible measures and pro-
jects for consideration and preliminary approval, and
to provide a basis for commissioning detailed feasibil-
ity studies and initiating loan negotiations.


There is no inventory in El Salvador of final
project studies on which we could draw. Moreover, the
time and resources available to us were limited. None-
theless, this study does identify projects and policies
upon which the Government and international lending en-
tities can act. For each recommended measure we have
sought to muster sufficient information to make a prima
' facie demonstration that a project or program is impor-
tant.


iii












We have discussed costs and benefits, priori-
ties, and scheduling for the principal projects recom-
mended in the report with as much precision as the
limited data available allowed. These projects should
now be candidates for feasibility studies. A number
of other projects that appear to have merit are listed
and described. There is insufficient information avail-
able on these projects to permit detailed analysis.
Our recommendation is that an immediate effort be made
to develop additional data and analyses so that deci-
sions can be made on whether to proceed to detailed
feasibility studies.


For this study we have chosen a relatively long
time period, 1970-90, for agriculture requires a long
planning period. Policies, programs, and projects in
this sector require many years to mature -- particular-
ly such programs as livestock and irrigation. Long
gestation periods are sometimes richly rewarding, as is
the case of agricultural research. The reach of these
programs is well beyond the conventional five-year per-
iod for an economic plan. Hence, priorities need to
be established and resources allocated that are based
not only on likely results in the next five years, but
on their cumulative effects over the much longer term.


The methodology of the report contains no start-
ling innovations. But it does have an uncommon ap-
proach in its use of both macroeconomic and microeco-
nomic analyses. By combining both approaches, we
sought to avoid the common failings of each. Macroeco-
nomic studies are often faulted for being too general
and for failing to consider the requirements for speci-
fic factors of production and the likelihood of their
being well-used. Microeconomic studies may fail to
test for feasibility, for interrelations among sectors,
and for their fit within national economic parameters,
such as savings and foreign exchange availability.


At the macroeconomic level we developed an econo-
metric model of the economy to test the feasibility of
the growth targets selected as a result of our analysis.
This is described in detail in Chapter II and in the
Technical Appendix.










At the microeconomic level (in Chapter V and in
the related appendixes) we analyzed the factors affect-
ing supply -- human, land, water, and forestry resources.
Of special note is a survey of farm operators conducted
with the cooperation of the Ministry of Agriculture to
develop information concerning the possible responses
of El Salvadoran farm operators to specific programs.
The survey determined the present use of capital and
other inputs by various classes of farm operators and
the changes necessary to bring about the required in-
crease in production. The findings of the survey help-
ed in the selection of production goals. Sector stud-
ies seldom give sufficient attention to this kind of
farm management analysis.


The evaluation of the role of the agricultural
sector in Chapter III and the analysis of demand in
Chapter IV are straight-forward. The demand estimates,
both foreign and domestic, are our own, based on past
trends, FAO evaluations of coefficients of income elas-
ticities of demand and demand functions, and analyses
of world markets.


A substantial part of the report deals with pro-
grams.to reach the production goals: needed marketing
facilities, services, and roads; prices and price pol-
icy; research, education, and extension; the financial
requirements of investment programs; and economic poli-
cies, programs, and institutions (Chapters V and VI).


Finally, in Chapter VII specific programs and
projects are detailed, many of them clear candidates
for implementation.


Thus, our analyses included the top-down, macro-
economic evaluation, establishing the broad limits with-
in which the sector plan could be tested for overall
feasibility; and the bottom-up, microeconomic evalua-
tion to determine the resource availabilities and spe-
cific investment and other requirements to reach produc-
tion targets. Both analyses demonstrate that an ambi-
tious investment program to bring about a major
increase in agricultural output is both necessary and
feasible.










It was action by Mr. Paul Oechsli, Director of
the AID, El Salvador, that made the study possible. He
and the Government agreed on the terms of reference of
the study, and the funding of costs for technical as-
sistance was then provided by the AID Mission. Director
Oechsli followed this study throughout its life and
gave it unqualified support.


Prime responsibility for this report was vested
in Robert R. Nathan Associates, Inc., by the Government
of El Salvador and AID. Principal staff work was done
by.RRNA personnel. However, through a very effective
arrangement between the AID Mission in El Salvador and
the U.S. Department of Agriculture, we were fortunate
to have the assistance of USDA experts in marketing,
water, forestry, and pricing policies. Thus, this re-
port may well represent a unique case of cooperation
among a private consulting firm, the host government,
AID, and USDA. A listing of participants in the study
appears in the Acknowledgment.


Despite the wide participation in the study by
El Salvadorans and members of PASA with the staff of
RRNA, the ultimate responsibility for what is said here-
in rests exclusively with Robert R. Nathan Associates,
Inc.



















ACKNOWLEDGMENTS


The RRNA team consisted of a field team serving
approximately 15 months, as follows:

Mr. Marvin R. Brant, Project Director
Dr. George Westcott, Economist


The team was aided by short-term experts from
the firm whose services ranged from one to eight months:

Dr. Richard Wheeler
Dr. Clark Joel
Mr. Gifford Rogers
Mr. Jeremy C. Ulin
Dr. Peter Newman
Mr. Leo Paschal
Mr. Nathan Koffsky


Mr. Koffsky, former Director of Agricultural Eco-
nomics in the U.S. Department of Agriculture, provided
overall guidance to the team in the field and actively
participated in the drafting of the report. The offi-
cer in charge of the project was Mr. Jerome Jacobson,
Vice President of RRNA.


The USDA experts previously referred to were
Dr. Gordon Fox, Assistant to the Chief of the Forest
Service, author of the forestry section; Dr. Francis
Kutish, Staff Economist in the Office of the Secretary
of Agriculture, author of the marketing section; Dr.
Louis Herrmann, Staff Assistant to the Administrator,
Economic Research Service, author of the section on
Prices; and Mr. Murray Weinberger, Assistant to the


vii










Director of Natural Resources Division, ERS, who con-
tributed to the section on water.


The GOES provided a wide range of help. Ing.
Edgardo Suarez Contreras, Executive Secretary of the
National Planning Council (CONAPLAN), made available to
the project the assistance of several technicians; Ing.
Hernan Tenorio, Chief of the Agricultural Department,
and his two assistants, Ricardo Mata and Ciro Matta,
participated. Stanley Avalos assisted with the Spanish
translations. CONAPLAN also provided office space and
logistical support.


The Minister of Agriculture, Ing. Enrique Alvarez
C6rdova gave invaluable support to the project. Lic.
Rafael Alfaro Castillo, Director of the General Directorate
of Agricultural Economics and Planning of the Ministry of
Agriculture, provided advice and assistance throughout
the life of the project and freely made personnel in his
Department available for consultation. Among these are
Sub-Director Ren6 Aguilar Gir6n, Dr. Ren6 Augusto Urbina,
Salvador Alberto Zelaya, Carlos Alfredo Alegria, Hector
Alfredo Linares, Rub6n Rail Cantor M6ndez, and Jos6
Honorato Cisneros. The survey section of MAG provided
the enumerators for the field survey who successfully
performed their difficult task. Ing. Andr6s Sol6rzano
Burgos, Director General of the DGORD, and the UN advisor
to the DGORD, Ing. Terence Scharenguivel, assisted
generously in the preparation of the sections on irrigation
and drainage.


Assistance was also given by Ing. Angel Roberto
Vaquero and German Le6n Escobar of IRA; Ing. Napole6n
Lazo of the Department of Forestry and Dr. March Leon
Rocher, advisor on forestry to the GOES; Salvador Navas
Martinez of the Livestock Department and Mr. Gerald Day,
UN advisor to the GOES on livestock development; and
Jan Van As, Director of the UN GAFICA group headquar-
tered in Guatemala.


Special mention should be made of Miss Lydia
Alvarado who performed the many demanding secretarial
tasks associated with the project with efficiency and


viii









graciousness, as did Mrs. Consuelo de Reason and Miss
Vilma Adriana GonzAlez.


We also wish to express appreciation to the many
others who made some contribution to this study.


















CONTENTS


VOLUME I

Page

PREFACE................................................ iii

ACKNOWLEDGMENT..................................... vii

I. SUMMARY............................... ..... ... S

II. AGRICULTURE IN THE SALVADORAN ECONOMY
1970-90: AN OVERVIEW....................... 1

III. THE ROLE OF THE AGRICULTURAL SECTOR:
A CAPSULE VIEW OF PAST TRENDS AND
PROBLEMS.................................. 33

IV. THE DEMAND FOR AGRICULTURAL PRODUCTS........ 85


VOLUME II

V. SUPPLY
V-A RESOURCE BASE............................... 1
1. Human Resources. ......................... 3
2. Land Resources ...... .................... 27
3. Water Resources.......................... 55
4. Forest Resources......................... 87
5. The Operating Unit in Agriculture......... 133

V-B THE PRODUCTION POTENTIAL AND GOALS OF THE
AGRICULTURAL SECTOR, 1970-90................. 147


VOLUME III

V. SUPPLY (continued).......................... 1











Page

V-C MARKETING FACILITIES AND SERVICES AND
FARM-TO-MARKET ROADS........................ 1
V-D AGRICULTURAL PRICES AND PRICE POLICY ....... 67

V-E AGRICULTURAL RESEARCH, EXTENSION AND
EDUCATION................................... 99
V-F FINANCING AGRICULTURAL DEVELOPMENT.......... 115
VI. ECONOMIC POLICIES, PROGRAMS AND INSTITUTIONS
FOR PLAN IMPLEMENTATION..................... 171


VOLUME IV

VII. PROGRAMS, PROJECTS AND PRIORITIES........... 1
Appendix to Chapter II: A PLANNING MODEL FOR EL
SALVADOR'S AGRICULTURAL SECTOR,1970-90...... 97
Appendix to Chapter V: WATER RESOURCES POLICY
AND AGRICULTURE............................. 125

Project Descriptions and Details............. 145
El Salvador Organizations Concerned with
Water..................................... 149
Legal Dispensations that Directly or
Indirectly Govern the Use of Water, Its
Conservation, and Problems Occasioned by
Its Exploration.. ......................... 155
Preliminary Study of Irrigation, Drainage,
and Flood Control Projects in El Salvador. 162
Zapotitan Project.......................... 177
Zapotitan Valley............................ 183
Rio Grande De San Miguel Basin (Groundwater
Research) .................................. 186
Rio Grande De San Miguel Basin (Appraisal
Report) ....... ... ... ... ................ .. 188
Upper Rio Lempa Basin....................... 190
La Cabafa, S.A.................. ............ 192
Appendix to Chapter V: THE OPERATING UNIT
IN AGRICULTURE............................. 195


















VOLUME I


CONTENTS

Page

PREFACE.......................................... iii

ACKNOWLEDGMENT................................. vii

I. SUMMARY.................................. IS

II. AGRICULTURE IN THE SALVADORAN ECONOMY,
1970-90: AN OVERVIEW................... 1
The Model................................. 2
The Possibilities of Economic Growth..... 8

III. THE ROLE OF THE AGRICULTURAL SECTOR:
A CAPSULE VIEW OF PAST TRENDS AND
PROBLEMS...... ........................... 33
The Place of Agriculture in the National
Economy..................... ............ 33
Factors in the Stagnation of Agriculture. 80

IV. THE DEMAND FOR AGRICULTURAL PRODUCTS..... 85
Foreign Demand............................. 87
Domestic Food Demand.................... 139


Xll




















II. AGRICULTURE IN THE SALVADORAN ECONOMY,
1970-90: AN OVERVIEW


In this chapter we focus on two important prob-
lems. The first concerns the prospects of growth for
the whole El Salvador economy over the period 1970 to
1990, and the demands on the country's limited resources
which such growth will impose. The second problem con-
cerns the composition of output of the agricultural and
nonagricultural sectors, and the effect which emphasis
on agricultural growth will have on the demand for re-
sources.


Later chapters are concerned with particular in-
vestment programs to bring about agricultural growth;
here we have attempted to project an overview of what
the economy is capable of in coming years.


We asked ourselves this question: Is it realis-
tic to believe that the resources available to the
country -- domestic and foreign -- can be harnessed and
directed to create the jobs and income that El Salvador
requires now and in the years ahead? El Salvador's
needs are well-known:


(1) To provide employment for the growing popu-
lation and labor force, and to reduce the unemployment
rate significantly below t-e current level.

(2) To improve per capital income levels.

(3) To cover foreign payments necessary for im-
ports and to service foreign debt.















The most critical factors in satisfying these
needs are the rates of growth in the PTB, in agricultur-
al PTB, in nontraditional exports -- particularly in
nonagricultural exports -- and in foreign borrowing and
the debt service it implies. Each acts as a check on
the other. A high growth rate in the PTB not accompan-
ied by high growth of exports would quickly create an
intolerable balance-of-payments deficit. Similarly,
failure to achieve a major breakthrough in agricultural
production would make a high growth rate in the PTB im-
possible. If foreign lenders fail to make substantial
aid available to El Salvador, the country would not
have the resources vital for growth. High interest
rates and other unfavorable terms would exacerbate the
debt repayment problem.


It is a difficult task to estimate what an econ-
omy is capable of doing. Every economic fact influences
another, one failure causes another, and the chain may
be long. All the economist can do is to use his best
judgment. Reasonableness must be his guide. He must
invoke all tests -- past performance, performance in
other developing countries, what the theory and practice
of economic development have taught us.


The Model


Our principal aid in this analysis was the com-
puter. It told us that under certain highly optimistic
assumptions El Salvador can have the growth in income
and jobs that it requires. It is doubtful -- but not
entirely out of the question -- that all these optimis-
tic assumptions will be realized. The computer also
told us what the less optimistic -- probably more real-
istic -- assumptions would mean for the years ahead.
Finally, it confirmed what is all too well-known -- a
dismal future if the economy does not improve on its
past performance.


The 93 simulations of 67 economic variables pro-
cessed by computer culminated in 131,000 numbers,
26,000 of which were printed out. By careful screening
and by restricting the analyses to five-year periods
beginning in 1970, we were able to assess broadly the














shape of the economy in the next 20 years. The particu-
lar assumptions made and the choice of certain growth
rates for key economic variables are dealt with later.
The following are our principal conclusions:


Overall Growth: The PTB

(1) A growth rate of the PTB on the order of
6.9 percent per year over the next 21 years -- hard but
not impossible to achieve -- would place exceptionally
heavy demands on the balance of payments. It would be
achievable only with an exceptional effort to increase
nonagricultural exports and with a high proportion of
foreign financing on concessionary terms. Moreover,
this growth rate in PTB would have to be accompanied
by a high growth rate in agriculture and in nontradi-
tional agricultural exports. It would offer the pros-
pect of a sharp reduction in unemployment and a sub-
stantial increase in per capital income, but foreign
borrowing would be of considerable size.


(2) Growth rates averaging about 5.7 percent
over the period would result in much more manageable
balance-of-payments problems, a slower growth of in-
come, and a much more modest inroad on the rate of un-
employment. But here, too, nontraditional exports
would have to increase substantially, and agricultural
output would have to grow at a 4.8 to 5.5 percent rate.


(3) An overall growth rate as low as 4.5 per-
cent will create intolerable unemployment problems.
The economy is capable of better performance than this.


Agricultural Growth

(4) With an overall PTB growth rate of 5.7 per-
cent, a growth rate in agricultural PTB of 3.5 percent
is insufficient to prevent serious balance-of-payments
and unemployment problems. Agricultural growth at 4.8
percent would result in a better but still uneasy
balance-of-payments position, whereas growth at 5.5
percent in agricultural output would lead to a comfor-
table foreign deficit.













Nonagricultural Exports

(5) The role of exports of nonagricultural goods
is just as important as that of agricultural growth.
By 1990, such exports should constitute at least 65 per-
cent of total exports, and economic policy should be
carefully framed so as to secure insofar as possible
smooth and rapid expansion, especially to markets be-
yond Central America.


This investigation demonstrated the importance
of selecting a high but realistic target for growth in
total output. Growth at 6.9 percent may well be too
high a target. The analysis also shows that a growth
target of even 5.7 percent is more likely to be achieved
if agriculture is emphasized. The explanation for this
is simple. Faulty performance in agriculture would
create a grave foreign payments problem which would
limit borrowing capacity, and that, in turn, would make
overall growth at 5.7 percent unachievable.


The Government's aim, therefore, should be to
achieve a growth rate in agriculture of 4.8 to 5.5 per-
cent between 1970 and 1990, while focusing on companion
policies in other parts of the economy to realize the
economy's growth potential of 5.7 to 6.9 percent over-
all in the next 21 years.


The model demonstrated that current revenue pro-
grams would not produce sufficient public savings to
finance investment for any of the moderate to high
growth assumptions. In fact, the ratio of revenues to
PTB actually fell over the period 1970-90. Therefore,
the last computer run of the model included an assump-
tion of a moderate increase in revenues after 1980 suf-
ficient to maintain the present ratio to PTB. (This
is discussed in the Technical Appendix.) This result-
ed in an adequate level of public savings.


To illustrate the main points above, we have
chosen four simulations, which we shall call scenarios,
and ten variables, and have summarized their findings
in table II-1. The four simulations are presented in
their entirety at the end of this chapter.








Table II-1. The Economy in 1980 and 1990: Four Alternative Scenarios


Scenario I Scenario II Scenario III Scenario IV
Item Unit 1965 1980 1990 1980 1990 1980 1990 1980 1990
1,95 5,08 9,64 4506 ,8564,50


PTB / ................
Agricultural PTBb/...
Labor force..........

Nonagricultural em-
ploymentc/..........
Change in unemployment

Traditional agricul-
tural exportsl/.....
Nonagricultural ex-
portse/.............
Required foreign
resources...........
Required foreign re-
sources as percent
of PTB...............
Current tax and non-
tax income of
government..........
Additional foreign
debt service incur-
red 1970-90........
Consumption per
capital ............


mil.col.
mil.col.
thous.
workers
thous.
persons
thous.
persons

mil.col.

mil.col.

mil.col.





mil.col.


mil.col.

colones


1,958 5,008 9,864 4,506 7,856 4,508
556 1,030 1,631 1,091 1,863 1,030

929 1,513 2,168 1,513 2,168 1,513


380 769 1,253

0 -35 -96


710 1,076


7,857 4,506 7,834
1,631 883 1,222

2,168 1,513 2,168


710 1,076


6 7 24 81


278 420 571 420 571 420


161 881 2,692

113 642 1,036


6.1 13.9 11.4


237 596 1,140


-- 402.7


838 2,172


571


838 2,172


305 111 372


7.3 1.5 8.9


543 944 540


1,032.5 283.2 394.2 291.3


513 704 936 636 747 637


350


710 1,076

79 212

410 532

796 1,748

554 1,062


4.8 13.3 14.6


929


528 874


534.7 370.0 925.0


749


638 751


continued--










Table II-1. The Economy in 1980 and 1990: Four Alternative Scenarios
continued--


a/ PTB
b/ Agricultural PTB
c/ Nonagricultural employment
d/ Traditional agricultural
exports
e/ Nonagricultural exports


Scenario I Scenario II Scenario III Scenario IV
H M M M
M H M L
H M M M















Each scenario contains a separate set of assump-
tions of growth rates of five key variables. Each
variable is assigned a high, medium, and low growth
rate. The specific values of the growth rates are dis-
cussed in more detail in a later section of this chap-
ter.


Scenarios I and II represent the "optimistic,"
or high-growth models; Scenario III is the "partially
satisfactory," or medium-growth model; and Scenario IV
is the "pessimistic," or low-growth model. What do the
results of the simulations that appear in table II-1
mean for selected key economic indexes?


By 1990, unemployment would decrease sharply
from 1965 (by 96,000) in Scenario I, increase only
slightly (by 7,000) in Scenario II, increase by 81,000
in Scenario III, and by 212,000 in Scenario IV.


Agricultural output would increase 2.9 times
above 1965 levels in Scenarios I and III, 3.4 times in
Scenario II, and would about double in Scenario IV.


Government tax and nontax income would be almost
five times 1965 levels in Scenario I, and about four
times 1965 levels in Scenarios II, III, and IV. The PTB
ratio varies but slightly, from 12 to 13 percent.

Foreign resources required would increase about
nine times over 1965 levels in Scenario I, and are
11.4 percent of PTB in 1990. In Scenario II, the need
for foreign resources actually declines and the ratio
of PTB in 1990 is only 1.5 percent. The need for
foreign resources in 1990 increases again in Scenario
III about three times over 1965 levels, and reaches
4.8 percent of PTB. In Scenario IV, required foreign
resources rise to nine times 1965 levels and to 14.6
percent of PTB.


Per capital private consumption would increase to
about 1.8 times the 1965 levels in Scenario I, and
1.5 times in Scenarios II, III, and IV.












Later in the chapter we strive to keep these
figures in sharper perspective by judging them in rela-
tive terms, particularly in relation to the PTB.


Many more figures could be presented since
131,000 were computed. They all say the same thing to
us: Maintaining the present ratio of revenues to PTB,
the economy will possess the resources necessary for
expansion at a rate to allow absorption of most of the
increasing labor force and to permit reduction of the
unemployment rate.l/ No grave stress will be placed on
domestic resources, but continued borrowing from abroad
will be vital. The debt burden is sustainable and, in
most of the optimistic and satisfactory models, the
debt will ease by 1990 to where it will be less than
today in relation to exports and to PTB. However, at
least medium growth in agriculture is vital both to
absorb the unemployment and to keep foreign borrowing
within supportable bounds.


The Possibilities of Economic Growth


It is easy to specify a target for economic
growth. The problem is to know whether this target
growth rate is both feasible and optimal. For growth
targets to be feasible, they must be consistent with
the resources at hand. If a planned growth program
places too great a call on any one of many critical
resources, such as a need for foreign exchange in ex-
cess of what is available, then the program is not sus-
tainable and should be excluded from further discussion.


On the other hand, a planned growth rate may
fail to utilize fully the resources available and high-
er outputs could be achieved. In this case, planners
should search for programs which are optimal in that
they make full use of at least some of the available
resources.


The task for the planner is complex. He must
have some estimate of the limits of availability of


1/ After 1980 a change in revenue policies will be neces-
sary so that revenues remain at the current percentage of
the PTB.













each type of resource and have some way of systemati-
cally examining the demands placed on those resources
by alternative growth programs. He must then discard
programs which are not achievable and programs which are
too modest, and concentrate on programs which push the
economy up to, but not beyond, the limits of which it
is capable.


The task is not easy, and the main point still
remains: Any selected growth program represents an
implicit judgment of its feasibility and opportunity.
It is better to articulate how that judgment was derived
than to leave it unexamined in the realm of pure "hunch."
Otherwise, it is not possible to make sensible compari-
sons between alternative growth programs that might be
proposed.


Using this kind of economic analysis, political
leaders can select growth programs in terms of their
economic implications.


A Macroeconomic Growth Model

One of the ways modern economic analysis now tackles
the problem of examining interrelationships between several
variables in the whole economy is by setting up a macro-
economic model consisting of as many equations as there are
unknown economic variables. The equations are consis-
tent with economic theory and represent a reasonably
close approximation of the actual data. Once the equa-
tions are estimated, high speed computers can calculate
the consequences throughout the economy of alternative
growth targets and assumptions about some of the key
"outside" variables which affect the economy, e.g., the
level and rate of growth of traditional exports. The
model permits us to ask such questions as these:


If PTB is assumed to grow at an annual rate of
x percent, agricultural output at y percent, and non-
agricultural exports at z percent, what will the rest
of the economy look like in, say, 1980? What will
taxes be? Consumption per capital? Savings? Will the
balance-of-payments deficit be so large that it is
simply unrealistic to expect foreign lenders to sup-
port it? Moreover, can we expect a reasonable evolu-
tion over the years from 1970 to 1990, so that large







10.


but temporary foreign deficits incurred in the early
years of the period justify themselves in the form of
rapid growth and reduced deficits in later years?


The relevance of these questions to policy is
obvious. It is therefore of considerable advantage to
seek answers which are realistic and consistent with
each other (and with the conventions of national income
accounting), even though those answers must necessarily
be in the nature of probability estimates rather than
exact assertions.


Projections of Key Policy Variables

Policy-makers need to specify certain economic
targets for coming years, and that is what we did for
each year, 1970 through 1990. Because of the difficulty
in anticipating price changes, we assumed all these tar-
gets at constant prices for the latest year available,
namely 1967.


Specifically, targets were set for PTB (at fac-
tor cost, not market prices), for PTB originating in
agriculture, and for employment in the nonagriculture
sector. For each of these variables high, medium, and
low target rates of growth were set,i/ as follows:


Annual rate of growth (pct.)
Policy variable High Medium Low
I. PTB at factor cost 6.9 5.7 4.5
II. PTB generated in
agriculture 5.5 4.8 3.3
III. Nonagricultural
employment 5.0 4.25 3.5



1/ Actually, the rates set were not necessarily cons-
tant from year to year, but the variation was suffi-
ciently small that no significant loss of accuracy is
entailed in describing them as constants.







11.


Since any growth rate in one variable can in
principle be matched with any growth rate for another
variable, there are 3x3x3 = 27 possible sets of targets.
However, it was unrealistic to combine high projections
with low, which cut the possible targets down to 15.


Projections of Outside Variables

In addition to variables set by the policymaker,
planning also has to take into account variables which
depend mainly on forces outside the Salvadoran economy
(the technical term is "exogenous" variables). In the
present scheme, the main outside variables are two ex-
port variables, whose high, medium, and low projections
are as follows:

Annual rate of growth (Pct.)
Outside variable High Medium Low

IV. Exports of nonagri- 10.0 10.0
cultural goods and rising 10.0 declining
services/ to 12.5 to 7.5
V. Exports of tradi-
tional agricultural 3.5 3.0 2.5
products (coffee,
cotton, sugar)a/

a/ It may be misleading to call these "outside" vari-
ables since suitable policy can often influence their
levels. The first variable, especially, can be influ-
enced by suitable subsidies, exchange rate policy, and
several other devices. However, their dependence on
outside forces should not be minimized.


Framework of the Projections

It was assumed that no high projection of tradi-
tional agricultural exports could be combined with the
low projection of any policy variable, and that no low
projection of such exports could be combined with any
high projection of a policy variable. On the other
hand, so much uncertainty surrounds what will happen to
nonagricultural exports, that it was thought worthwhile
to leave each target level compatible with any of the








12.


other permissible target projections. These considera-
tions resulted in a total of 93 permissible combinations
of policy and outside variables.


In addition to the five preset variables already
mentioned, a number of others of lesser importance were
included in the projections. Thus, impacts of noncom-
peting foods (principally wheat) and net imports of
factor services (repatriated profits, interest, etc.)
were preset, but their target levels were assumed to
move with those of PTB -- high when PTB was at its high
projection, medium when PTB was medium, and low when
PTB was low. A similar pattern of dependence held with
respect to PTB in agriculture for an index of real
wages in the agricultural sector and for depreciation
on the recorded capital stock in agriculture. There
was just one projection each, preset, of the economical-
ly active population and of the total population.1/


Results from the Model: Choice of Variables

The model enabled us to make projections of all
those variables which are functionally dependent on the
preset variables. We call such variables "dependent"
(the technical term is endogenouss"). Since there are
55 equations in the model, there are 55 dependent vari-
ables, too large a number to examine here. Instead,
we selected for discussion only ten of the most impor-
tant variables, as follows:

(1) Foreign resources required
(2) Current tax and nontax revenues of govern-
ment
(3) Current government expenditure
(4) Domestic savings, including depreciation
allowances
(5) Gross fixed investment
(6) Consumption per capital



1/ Details of how the projections of the preset vari-
ables were derived are given in the Appendix.









13.


(7) Food consumption per capital
(8) Nontraditional exports of agricultural
products (net)
(9) Employment, unemployment, and productivity
in agriculture
(10) Service on foreign debt (for selected simulations).


In essence, what the model tells us will happen
to each of the dependent factors is a consequence of
what we tell the computer is happening to the 12 preset
variables. These variables are bound to have much
larger values than in the past because we are planning
for growth. Are these values reasonably larger? To
test this, we often judge them against the growth in
the whole economy -- against the PTB and other macro-
economic measures.


Foreign Resources Required

The availability of foreign resources is probab-
ly the most important restriction on the ability of the
Salvadoran economy to grow quickly. The need for
foreign resources arises from two separate aspects of
the economy: First, "internal" balancing between in-
vestment and savings; and second, the "external" balanc-
ing between imports and exports. If not enough is
saved domestically to match the total physical invest
ment being planned, then assets held abroad must be
secured or foreign resources borrowed. If the total
bill for imports!/ 'is not matched by exports, then the
deficit in the current balance of payments must be met
the same way. The foreign resources required measur-
ed here refer to the larger of the two gaps in the
internal savings-investment account and in the external
export-import account. As it turned out, the external
gap was almost always (98 percent of the time) the
larger of the two.


As might be expected, the foreign resources re-
quired are extremely sensitive to the alternative


1/ Including imports of factor and nonfactor services.








14.


projections of the preset variables. Table II-2 pre-
sents data for 21 out of 93 projections, and two years
(1980 and 1990) out of a possible 21 years. We preset
PTB, nonagricultural employment, and traditional agri-
cultural exports all at high growth rates (A), or all
at medium (B), or all at low (C). Then, for each of
these A, B, C projections, we varied nonagricultural ex-
ports over high, medium, and low; and agricultural out-
put over high and medium (for A), over high, medium,
and low (for B), and over medium and low (for C).


The most striking result is the rapid increase
in foreign resources required as the PTB budget is
raised from low through medium to high.l/ For example,
assuming

1. High growth in PTB,
2. High growth in nonagricultural employment,
3. High growth in exports of traditional agri-
cultural products,
4. Medium growth in exports of nonagricultural
products, and
5. Medium growth in agriculture,

the foreign resources that would be required in 1980
and 1990 (based on 1967 prices for the variables enter-
ing into the calculation) would be:

Foreign resources required as percent of PTB
1965 1980 1990
6.1 14.5 15.4




1/ If one reads up the middle column of the 1980 half
of table 11-2, there are big jumps from the lower three
entries to the middle three, and then to the top three;
and similarly in the 1990 half of the table, where the
jumps are even more pronounced. Compared with these
gross differences, the effect of raising nonagricul-
tural exports and of raising agricultural output as a
proportion of total output are much less striking,
though still significantly positive.








15.


Table 11-2. Resources Required as a Percentage of PTB at Fac-
tor Cost, 1980 and 1990
(1965 value = 6.1 percent)
(A) = I, III, V at high; (B) = I, III, V at medium; (C) = I, III,
V at low


Nonagri-
cultural
exports


High....
Medium..

Low.....

High....
Medium..
Low.....

High....
Medium..
Low.....


12.4
13.1
13.7


6.6
7.3
8.0


n.c.
n.c.
n.c.


13.9
14.5
15.1

8.2
8.9
9.6


1.7
2.5
3.3


n.c. 8.7 11.4 n.c.
n.c. 12.7 15.4 n.c.
n.c. 16.0 18.6 n.c.


11.8
12.6
13.3


5.8
6.6
7.4


-1.2
1.6
5.6

n.c.
n.c.
n.c.


-0.2
4.8
8.9

-4.8
-4.3
-2.8


5.5
10.5
14.6

-3.3
-0.8
4.3


Note: n.c. means not computed, because a low PTB in agriculture


is not consistent with a high PTB overall;


and similarly


with high agricultural growth and low overall growth.







16.


Obviously this is a major change. Foreign re-
sources required as a percentage of PTB would increase
about 150 percent over the 1965 ratio if the high growth
rates assumed above were achieved. The table also makes
clear that it is growth in the PTB which explains most
of this. For example, when we drop to medium PTB growth
assumptions as in Scenario III, the ratio is only 8.9 per-
cent in 1980 and 4.8 percent in 1990.


The question is to define the point at which the
ratio must be rejected as unrealistic. Such ratios can
be quite high (Israel is an example), but only in ex-
ceptional and transitory cases. Are the ratios for the
A projections too high? Conversely, are the ratios for
the C projection too low, bearing in mind that several
of them are below the 1965 figure and that the general
economic performance they reflect (PTB growth at 4.5
percent) is not satisfactory?


A large and continued borrowing from foreigners
means the buildup of a large foreign debt, which must
be serviced with foreign currencies available only from
borrowing or from export earnings. In arriving at a
judgment about the feasibility of foreign deficits, it
is therefore relevant to measure them not only against
PTB but also against total export earnings. This is
done in table 11-3, for the same projections of preset
variables as were examined in table 11-2. In 1965,
foreign borrowings equalled 24 percent of exports in
that year.


Table II-3 presents the same pattern of increas-
ing ratios as table 11-2, only in more accentuated
fashion. Foreign borrowing as a percentage of export
earnings rises rapidly as we move from low to medium
and high growth rates. But the effects from increased
nonagricultural exports and an increased proportion of
agricultural output in total output are even more pro-
nounced in lowering the foreign resource/export ratio.


Bearing in mind that in 1965 the ratio of foreign
borrowing represented 24.0 percent of exports, the
ratios associated with the A projections in which PTB
and agricultural growth are high and nonagr cultural









17.


Table 11-3. Foreign Resources Required as a Percentage of Ex-
ports of Goods and Nonfactor Services, 1980-90

(1965 value = 24.0 percent)


(A) High ...

(A) Medium..

(A) Low.....


High....
Medium..

Low.....

High ...

Medium..
Low.....


PTB in agriculture


41.8

45.5

49.3

19.3

22.1

25.0

n.c.

n.c.

n.c.


48.9

53.0

57.2

25.1
28.3

31.6


4.5

7.0

9.4


n.c.

n.c.

n.c.

40.9

44.9

49.2

17.1
21.9

23.5


23.4

40.1

59.1

-2.5

3.6

15.3

n.c.

n.c.

n.c.


(A) = I, III,


V at high;


(B) = I, III, V at medium; (C) = I, III,
V at low.


Note: See note to table 11-2.


32.6

52.7

76.0

-0.4
12.3

26.5

-7.7

-8.1

-6.3


n.c.

n.c.

n.c.

13.5
31.1

52.1

-6.0

-1.8

11.3







18.


exports grow at 10 percent increasing to 12.5 percent
per year are so great as to invite serious reservations
as to their feasibility. The ratio is 41.8 percent, in
1980 although it falls back to the 1965 level by 1990.
Even if the extraordinary growth of exports could be
achieved, El Salvador would face the problem of getting
over the hump of the 1980's.1/


At the other end of the spectrum of foreign re-
source ratios, we set aside the C projections because
their economic performance is inadequate. If the work-
ing of the model had shown that it was only the C pro-
jections that gave sufficiently low deficit ratios to
be feasible, then one might have had to live with that
result (or build a different model), and so confine
attention only to the poor C rate of growth. But since
one outcome of the model is that at least some of the
B projections appear to imply reasonable demands on
foreign resources (i.e., demands which, proportionately
to PTB and export earnings, are not too far removed
from present levels) while projecting more easily
achievable growth of nonagricultural exports, the C
projections are dominated by the feasible B targets.


Therefore, the other nine dependent variables on
the list were examined within the context of the B pro-
jections. But neither are all the B projections satis-
factory in the demands which they place on foreign re-
sources. From tables II-2 and II-3 one can see that
almost every one of the B projections which also has a
low projection for agricultural output calls for a
foreign saving/PTB ratio in 1980 more than twice that
for 1965; and broadly speaking, this is true for the
foreign saving/export ratio as well. Hence, although



1/ It is possible that the Salvadoran economy might
undergo a very drastic reduction in its propensities
to import goods and services of all kinds -- consumer
goods, capital goods, and raw and semifinished mater-
ials -- in which case the import coefficients used in
the model, and estimated from recently past data, would
be inapplicable. But given Salvador's small economic
size such a major change is unlikely.







19.


in what follows we shall occasionally examine B projec-
tions with low agricultural output, most attention will
be paid to B projections with high and medium growth in
agricultural PTB.


Current Tax and Nontax Revenues of Government

As explained previously, tax and nontax revenues
of present programs were found to be inadequate in pro-
viding resources to support the projected levels of
government consumption and the public savings needed
to finance public investments. Continuation of these
programs resulted in a decline of the ratio of public
revenues to PTB. The model indicated that sufficient
public savings could be generated by keeping this ratio
at the same level as at present. Moderate increases in
taxes were therefore assumed after 1980 (as explain-
ed in the Technical Appendix) and these are reflected
in table 11-4.


Focusing only on B projections, table II-4 gives
information on the ratio of current tax and nontax
revenues of the Central Government as a proportion of
PTB at factor cost. The constancy of the tax ratio is
remarkable -- ranging only from 12.0 to 13.3 percent.
That such constant ratios should persist in the face
of very different composites of total output, as shown
in the alternative projections of the preset variables,
is explained by compensating movements in the various
categories of taxes (direct taxes and license fees,
import and excise duties, and export duties).


Current Government Expenditures

Table II-4 also provides information on noncapi-
tal expenditures of the Central Government, and again
the main feature of the results is the remarkable cons-
tancy of the ratio of current Government expenditures
to PTB at factor cost. The range of the nine projec-
tions as shown in table II-4 is 10.8 to 11.8 percent.1/


1/ It is a consequence of the structure of the equa-
tions in the model itself that current Government








20.


Table 11-4. Tax Ratios, Expenditure Ratios and Domestic Saving
Ratios,a/ 1980-90

(in percent)



Nonagri- PTB in agriculture
cultural
cultural 1980 1990
exports
High Medium Low High Medium Low


High........
Medium......
Low .........





High........
Medium......
Low .........






High........
Medium.......
Low .........


(2) Current tax and nontax revenues of
Government/PTB at factor cost
(1965 = 12.7)


13.0
13.0
12.9


13.0
12.9
12.8


12.7
12.7
12.6


13.3
12.9
12.6


13.1
12.7
12.4


Central



12.7
12.3
12.0


(3) Current government expenditures/PTB at
factor cost (1965 = 9.1)


11.0
11.0
11.0


11.0
11.0
11.0


10.8
10.8
10.8


(4) Domestic savings,
allowances/PTB at
(1965 = 13.4)


21.2
21.2
21.1


21.2
21.2
21.1


21.2
21.2
21.1


11.8
11.8
11.8


11.7
11.7
11.7


11.6
11.6
11.6


including depreciation
factor cost


22.3
21.9
21.5


22.2
21.8
21.5


22.1
21.7
21.4


a/ For B projections only (medium PTB growth, medium growth in
nonagricultural employment, medium growth in traditional agricul-
tural exports).







21.


This constancy is explained by the fact that in the
model the main preset variable governing the various
categories of current Government expenditures such as
agricultural administration, research, extension and
education, and nonagricultural expenditures, and sub-
sidies to the private sector is the level of PTB it-
self.I/


Domestic Savings, Including Depreciation
Allowances

The last dependent variable covered by table
II-4 is the level of domestic savings (including allow-
ances for depreciation of fixed capital equipment) as
a percentage of PTB at factor cost. The constancy of
this ratio is just as striking as in the previous two
cases. The nine projected ratios o- domesticc savings
range from only 21.1 to 22.3 percen.. Since these
total savings are made up of several components, name-
ly personal disposable income minus consumption, Govern-
ment savings in the current budget, and agricultural
and nonagricultural depreciation, this constancy is
remarkable. Again, it is explained by compensating
movements in the various categories.



expenditures are not affected by exports of nonagricul-
tural products, such that each intercolumn of the sec-
ond part of table II-4 consists of one number repeated
three times.
1/ It is true, of course, that this sector study
recommends increased physical investments, credits, re-
search, extension, and educational outlays, all of
which will require larger current outlays than hither-
to known. The Government's current expenditures will
also have to grow to support investment programs in
other sectors of the economy. It may be argued that
the model should base its growth in Government outlays
for current expenses on the growth in such investment,
rather than on the growth in the PTB. However, in ad-
dition to investments, population growth, the general
level of economic activity, and many other factors not
specifically tied to investments will determine cur-
rent Government costs. It was for this reason that we
chose the growth of the PTB as the preset variable that
would determine current Government outlays.







22.


But unlike the two previous cases, there is a
marked difference between these very constant ratios
for 1980/90 of about 22 percent, and the 1965 level of
13.4 percent. There has been no assumption here that
marginal propensities to save will increase. In fact,
the main force in increasing savings would appear to
be the piling up of depreciation allowances that fol-
lows the rapid increase of the nonagricultural capital
stock in the last decade and in the next two decades,
as envisaged by the model. Even apart from this, how-
ever, the marginal propensity to save out of disposable
income over the last decade was estimated at over 17
percent, which is reasonably high, though still a little
under 20 percent.


In the model, the next two dependent variables --
gross fixed investment and consumption per capital -- de-
pend only on PTB and agricultural output, and no other
preset variables. This is an admitted simplification
and a defect in the model, but one of the prices which
was paid for operating with a general equilibrium
model. Table II-5 gives complete information for 1980
and 1990 of the pattern of variation of three variables
for the B projections -- gross fixed investment, con-
sumption per capital, and food consumption per capital.


Gross Fixed Investment

Table II-5 shows that gross fixed investment
would increase fivefold by 1990 from its 1965 level,
over a period when PTB would only triple; as a result,
the gross investment/output ratio would rise from 16.7
percent to about 21.0 to 22.0 percent. The reasons for
this increase are (1) that a rapid increase in the capi-
tal stock causes a large rise in gross investment simp-
ly to keep capital stock intact; (2) very little of the
1965 gross investment was in agriculture since much in-
vestment in that sector goes unrecorded and it is as-
sumed that much of the agriculture investment from
1970 on will be recorded; and (3) it is assumed that
the capital/output ratio nonagriculture will rise
slightly from 1970 on.


Note that a switch from a relatively low per-
centage of agricultural output to a high percentage of












Table 11-5. Gross Fixed Investment, Consumption Per Capita, and
Food Consumption Per Capita, 1980-90


Agricultural output

Dependent variablea/ Unit 1980 1990

High Medium Low High Medium Low


(4) Gross fixed invest-
ment................

(5) Consumption per
capita..............

(6) Food consumption
per capita..........


Mil.
colones


colones


colones


865


636


212


889 925


637 638


212 213


1,510 1,563 1,644


748


236


749


236


751


236


(4) = 0315 million;


a/ 1965 values:


(5) = 0513;


(6) = 0197.







24.


output would cause total fixed investment requirements
to fall by about 6.0 to 8.0 percent. Thus, an agricul-
tural investment program would tend to ease the burden
on savings (for a given PTB) rather than increase it.


Consumption Per Capita

Table II-5 shows that consumption per capital
would increase by about 1.5 percent a year from 1965 to
1980, and by about 1.65 percent a year from 1980 to
1990, both of which are quite respectable rates of
growth. (The model does not indicate how this average
increase in consumption will be distributed -- as between
rich and poor, or between urban and rural.) The differ-
ing compositions of output between agriculture and non-
agriculture do not significantly affect this variable.


Food Consumption Per Capita

In almost all the projections, food consumption
per capital grows quite slowly in the first decade,
1970-80, and then accelerates in 1980-90, although in
some adverse cases it scarcely grows at all. In the
present three cases, food consumption grows at just
over 0.5 percent a year from 1965 to 1970, and there-
after at close to 2 percent a year. It is perhaps sur-
prising that the sectoral composition of output makes
little difference to this variable, since one might
have thought that the higher the agricultural output,
the higher would be food consumption per capital. In
this model, however, consumption is determined by de-
mand and supply considerations, so that if local out-
put is below demand food is imported, and conversely.


Nontraditional Exports of Agricultural
Products (Net)

We come now to a dependent variable whose pro-
jected values are given with rather less confidence
tian can be granted in the above cases, because of
theoretical difficulties in formulating a satisfactory
model of the relevant behavior, or because of lack of
adequate data, or both. This variable is essentially
a residual item, after exports of traditic al products







25.


and production for domestic food consumption are sub-
tracted from total agricultural output. This explains
why it is a net figure. Domestic food demand may out-
run domestic supply, in which case these net exports
would be negative. Hence, the estimates must be treated
with all the caution that such residual estimation normal-
ly implies, since they absorb all the errors present in
all the other variables. Table II-6 should be interpret-
ed with these reservations in mind.


The pattern of dependence of this variable on PTB
in agriculture is clearly marked. In 1990, at a high PTB
in agriculture, El Salvador would be a net exporter of
364 million of nontraditional export products. At a low
PTB in agriculture, El Salvador would have to import 243
million of goods. It is plain that high agricultural out-
put would have a substantial positive balance of payments
effect (e.g., 607 million in 1990) compared with low agri-
cultural output, even for the same level of PTB overall,
and the same level of individual agricultural exports.


Employment, Unemployment and Productivity in Agriculture.

Employment data for the nonagricultural sector are
very fragmentary, and for agriculture, hardly exist. This
makes it difficult to arrive at good statistical expla-
nations for.employment and unemployment, and the estimates
presented in table II-7 should be interpreted with extreme
care. Nevertheless, they should not be dismissed as irrel-
evant for policy formulation (the precise nature of this
sector of the model is discussed in the Appendix). The
results given in table II-7 confirm that employment pro-
jections with low agricultural output, even in the B
projections, are far from satisfactory. There would be
880,000 employed in agriculture in 1990 compared with
549,000 in 1965 1/, but unemployment in the country-
side would rise by 212,000. At high agricultural out-
put, unemployment would rise by only 7,000. At low
agricultural output, productivity in agriculture would
be 1,119 per worker -- barely 10 percent better than

1/ Differs from 1965 employment estimate in Chapter II
because of difference in concept. Agricultural employ-
ment here is the residual after deducting nonagricultural
employment from the labor force.








26.


Table 11-6. Nontraditional Exports of Agricul-
tural Products,^/ 1980-90

(In million colones)



Projection of tradi- Agricultural output
tional agricultural
exports High Medium Low


1980:
High...............
Medium.............
Low ................


1990:
High...............
Medium..............
Low ................


120
130
n.c.




364
402
n.c.


59
69
78




130
168
206


n.c.
-79
-69




n.c.
-243
-205


a/ For projections involving
n.c. = not calculated.


medium PTB growth only.









Table 11-7. Employment, Unemployment and Productivity in Agriculture,a/ 1980-90


Dependent variable-/


(9a) Employment in
agriculture .....

(9b) Change in unem-
ployment in ag-
riculture compar-
ed with 1965.....

(9c) Agricultural pro-
ductivity per
man available....

(9d) Nonagricultural
productivity per
man employed.....

(9e) Ratio of agri-
cultural pro-
ductivity to
nonagricultural
productivity.....


thous.


thous.



colones



colones





percent


Agricultural output


1980


1990


Low


797


779


724 1,085 1,011


24 79


880


7 81 212


1,358 1,282 1,100 1,706 1,493 1,119



4,353 4,438 4,645 5,030 5,246 5,626


31.2


28.9 23.5 33.9 28.5


19.9


a/ For B projections only, involving medium growth in PTB, medium growth in nonagri-
cultural employment, and medium growth in traditional agricultural exports.
b/ 1965 values: (9a) = 549 thousand; (9b) = 0; (9c) = 01,013; (9d) = 03,443;
(9e) = 29.4 percent.







28.


today -- compared with V5,626 per worker in nonagricul-
ture. Moreover, there would be grave deterioration in
the relationship between output per man in the agricul-
tural and nonagricultural sectors. The medium agricul-
tural output projection is barely satisfactory, for
unemployment would increase by 81,000 and the gap be-
tween productivity in the two sectors would not be di-
minished.


Service on Foreign Debt

In the last dependent variable analyzed here, we
examine the volume of repayment of foreign debt implied
by some of the projections. The procedure was, for any
constellation of preset variables, to find the stream
of requirements for foreign resources implied for each
of the years 1970 through 1990. Then it was assumed
that such resources could be borrowed on the average
terms of a 15-year loan period, including a 3-year
grace period and a rate of interest over the whole loan
period of 5 percent per year. It was assumed that capi-
tal repayments were made in 12 equal quotas.l/


We then examined how the debt payments, includ-
ing interest and amortization payments, would build up
over time. The debt repayments so calculated refer to
all foreign debt, whether incurred by the private or
the public sector, and do not cover debt service on
debt incurred prior to 1970, which must therefore be
added to the present payments to obtain an estimate of
total debt service. The results for post-1969 debt
are shown in table 11-8.


The simulations shown in table II-8 refer to the
Scenarios presented in table II-1 at the beginning of
this chapter. Scenarios II and III demonstrate the effect
of varying the agricultural growth rate while holding con-
stant the rate of growth of exports of nonagricultural
goods. Scenario II with the high agricultural growth


1/ Since the model printed out foreign savings only
at 5-year intervals, annual estimates were obtained by
linear interpolation within each 5-year interval.








29.


Table 11-8. Debt Service Incurred in Foreign Resources
Borrowed During 1970-90
(Millions of colones)



Scenario I Scenario II Scenario III Scenario IV
Year Simulation Simulation Simulation Simulation
#13 #11 #23 #60

Interest payments
1975 ............ 82.3 66.0 69.3 78.2
1980............. 179.5 115.1 112.2 161.8
1985 ............ 270.7 126.0 156.1 238.0
1990 ............ 355.9 102.0 161.0 327.9

Capital repayments
1975 ............ 47.0 42.6 43.7 46.7
1980 ............ 223.1 168.0 179.0 208.2
1985 ............ 476.6 295.7 331.9 429.1
1990 ............ 676.6 292.0 373.7 597.1

Total debt service
1975............. 129.3 108.6 113.0 124.9
1980 ............ 402.7 283.2 291.3 370.0
1985............ 747.3 421.7 488.0 667.1
1990 ............ 1,032.5 394.2 534.7 925.0

-------------- Percent ------------------
Debt service as a
ratio to exports
1975 ............ 14.5 11.8 12.6 15.1
1980 ............ 30.7 20.6 22.1 32.9
1985 ............ 37.6 20.5 25.3 43.9
1990 ............ 32.5 12.7 18.6 45.4

Debt service as a
ratio to PTB at
factor cost
1975 ............ 3.91 3.43 3.57 3.94
1980 ............ 8.69 6.78 6.97 8.85
1985 ............ 11.50 7.65 8.85 12.10
1990 ............ 11.32 5.42 7.35 12.71







30.


rate shows a debt service to exports ratio in 1990 of
12.7 percent, whereas it is 18.6 percent in Scenario III,
with the medium agricultural growth rate.


Scenario I and III both have the medium agricul-
tural growth rate but Scenario I has the high growth
rate in both nonagricultural exports and in overall PTB.
The debt service resulting from the increased foreign
resources required to support high PTB growth, more
than offsets the increased export earnings so that the
debt service ratio to exports of Scenario I rises to
almost twice the level of Scenario III.


Scenario IV, with low rates in both agricultural
growth and growth of nonagricultural exports, shows a
steadily worsening ratio, to 45.4 percent in 1990. In
each of the first three Scenarios the ratio is worse
in the 1980-85 period, declining in 1990. Whether this
debt service problem is so serious as to render infea-
sible some of the projections that have provisionally
been accepted as feasible is a decision which cannot
be made on a priori grounds. Much will depend on the
willingness of foreign lenders to supply funds to fuel
rapid economic expansion which could not take place
without a temporary large inflow of this type, and will
also depend on the terms on which such loans are avail-
able. The loan terms assumed here represent a guessed-
at average of terms for short-run and long-run debt,
and of terms for public and private debt. A lengthen-
ing of loan period and of grace period, and a reduction
of interest payments, would do much to ease the savings
and the transfer burden of such debt.


Conclusions

In interpreting the results that have been re-
ported here, one must be careful not to think of them
as predictions of what will happen. The future is quite
uncertain, especially over a period as long as 20 years
and for a small underdeveloped country embarking on
rapid growth in the world economy. All that the exer-
cise of making projections can do is to combine all the
information that is available with all the tools of
economic and statistical analysis to delir-ate certain








31.






possible alternative paths for the future, to alert
policy-makers to certain difficulties and opportunities
that may otherwise remain hidden in a less explicitly
quantitative exercise.










EL SALVADOR MODEL


SIMULATION NO. 13
(SCENARIO I)


PREDETERMINED VARIABLES


YEAR


EL POP


1965 929.
1970 1081.
1975 1271.
1980 1513.
1985 1815.
1990 2168.


2928.
3441.
4092.
4904.
5907.
7132.


ENAG

380.
472.
603.
769.
982.
1253.


XNAG


161.
323.
526.
881.
1519.
2692.


PAG FLOPAG


1864.
2401.
3335.
4535.
6531.
9119.


556.
638.
811.
1030.
1296.
1631.


1013.
1085.
1198.
1323.
1460.
1612.


FNDOGENOUS VARIABLES


YEAR


P PNAG


1965 1958. 1402.
1970 2565. 1926.
1975 3560. 2749.
1980 5008. 3978.
1985 7023. 5727.
1990 9864. 8234.


YEAR FEINSE


D SAVDOM


1965 45. 142. 108.
1970 51. 172. 261.
1975 89. 251. 417.
1980 137. 373. 621.
1985 196, 529. 883.
1990 271. 749. 1262.


YEAR ELRES SUREAG

1965 549. 0.
1970 609. 20.
1975 668. -9.
1980 744. -35.
1985 833. -54.
1990 915. -96.


CONSP CONSG

1501. 170.
1880. 231.
2527. 334.
3452. 515.
4793. 752.
6676. 1083.


TAX TAXEX TD[R TIND


237.
297.
403.
596.
818.
1140.


36. 51. 150.
46. 67. 184.
53. 95. 255.
60. 163. 372.
69. 227. 521.
79. 315. 746.


EM EMCAP EMCOND EMIAG EMINAG

567. 131. 168. 34. 98.
861. 226. 226. 41. 200.
1323. 398. 324. 70. 312.
1909. 548. 463. 106. 496.
2795. 783. 665. 150. 800.
4119. 1116. 949. 205. 1311.


CONCAP CONFER 4GPR3D PRODNS CAPRAT

513. 197. 1013. 3443. 8237.
546. 198. 1049. 3732. 8956.
617. 212. 1214. 4137. 10550.
704. 232. 1385. 4686. 12652.
811. 258. 1556. 5301. 14313.
936. 290. 1782. 5975. 16132.


G GAG GNAG CONGAG YEAR


315. 41. 274.
501. 34. 467.
854. 75. 780.
1162. 95. 1068.
1646. 116. 1530.
2332. 146. 2186.


X XAG XAGNTR

471. 310. 27.
620. 297. -8.
891. 365. 5.
1313. 432. 12.
1990. 471. -18.
3177. 485. -86.


CONGRA TAXRAT GGRAT

9.1 12.7 3.6
9.6 12.4 2.8
10.1 12.2 2.1
11.1 12.9 1.7
11.6 12.6 1.0
11.9 12.5 0.6


7. 1965
12. 1970
22. 1975
37. 1980
40. 1985
44. 1990


FEXT FINT YEAR

113. 76. 1965
262. 74. 1970
464. 197. 1975
642. 184. 1980
871. 255. 1985
1036. 350. 1990


DOSARA F3SARA YEAR

13.4 6.1 1965
18.0 10.9 1970
20.2 14.0 1975
21.4 13.9 1980
21.7 13.4 1985
22.1 11.4 1990


11211


Note: The explanation of the code names is given in the Technical Appendix, Chapter VII.


XAGTR

278.
305.
360.
420.
490.
571.


YEAR

1965
1970
1975
1980
1985
1990










EL SALVADOR PODEL


SIMULATION NO. 11
(SCENARIO II)


PREDETERMINED VARIABLES


EL POP


929.
1081.
1271.
1513.
1815.
2168.


2928.
3441.
4092.
4904.
5907.
7132.


ENAG

380.
468.
576.
710.
874.
1076.


XNAG

161.
323.
520.
838.
1349.
2172.


Y

1864.
2431.
3158.
4183.
5515.
7276.


PAG FLOPAG XAGTR


556.
638.
834.
1391.
1425.
1863.


1013.
1089.
1221.
1368.
1532.
1717.


278.
305.
360.
420.
490.
571.


ENDOGENOUS VARIABLES


YEAR


P PNAG


1965 1958. 1402.
1910 2562. 1923.
1975 3405. 2570.
1980 4506. 3416.
1985 5947. 4522.
1990 7856. 5993.


YEAR FEINSE


D SAVDOM


1965 45. 142. 108.
1970 51. 173. 258.
1975 94. 240. 394.
1980 151. 332. 553.
1985 225. 438. 751.
1990 322. 579. 1016.


YEAR ELRES SUREAG

1965 549. 0.
1970 613. 27.
1975 695. 11.
1980 833. 6.
1985 941. 11.
1990 1092. 7.


CONSP CONSG

1501. 170.
1879. 231.
2424. 318.
3120. 461.
4072. 630.
5330. 855.


TAX TAXEX TDIR TIND


237.
294.
384.
543.
713.
944.


36. 51. 150.
46. 67. 181.
53. 94. 237.
60. 156. 326.
69. 212. 432.
79. 285. 579.


EM EMCAP EMCONO EMIAG EMINAG

567. 131. 168. 34. 98.
845. 214. 226. 41. 200.
1209. 321. 308. 74. 299.
1641. 403. 413. 116. 447.
2270. 538. 556. 171. 573.
3142. 717. 746. 244. 1010.


CONCAP CONFDR AGPROD PRODNG CAPRAT

513. 197. 1013. 3443. 8237.
546. 198. 1042. 3765. 9037.
592. 205. 1201. 4049. 10324.
636. 212. 1358. 4353. 11752.
689. 223. 1515. 4679. 12634.
747. 235. 1706. 5030. 13582.


G GAG GNAG CDNGAG YEAR


315. 41. 274.
475. 35. 440.
697. 82. 614.
865. 107. 757.
1143. 140. 1003.
1510. 183. 1327.


X XAG XAGNTR


471.
617.
923.
1378.
2062.
3137.


310. 27.
294. -11.
400. 41.
540. 120.
713. 224.
935. 364.


CONGRA TAXRAT GGRAT


9.1 12.7
9.b 12.3
10.0 12.1
11.3 13.0
11.4 12.9
11.8 13.0


7. 1965
12. 1970
23. 1975
39. 1980
42. 1985
47. 1990


FEXT FIT YEAR

113. 76. 1965
249. 50. 1970
318. 72. 1975
305. -9. 1980
264. -32. 1985
111. -65. 1999


D3SARA F3SARA YEAR

13.4 6.1 1965
17.9 10.4 1970
20.0 10.1 1975
21.2 7.3 1980
21.6 4.8 1985
21.9 1.5 1990


22112


Note: The explanation of the code names is given in the Technical Appendix, Chapter VII.


YEAR

1965
1970
1975
1980
1985
1990


YEAR

1965
1970
1975
1980
1985
1990









EL SALVADOR MODEL


SIMULATION NO. 23
(SCENARIO III)


PREDETERMINED VARIABLES


EL POP

929. 2928.
1081. 3441.
1271. 4092.
1513. 4904.
1815. 5907.
2168. 7132.


ENAG

380.
468.
576.
710.
874.
1076.


XNAG

161.
323.
520.
838.
1349.
2172.


PAG FLOPAG


1854.
2431.
3158.
4180.
5515.
7275.


556.
638.
811.
1030.
1296.
1631.


1013.
1085.
1198.
1323.
1460.
1612.


ENDOGENOUS VARIABLES


YEAR


P PNAG


1965 1958. 1402.
1970 2563. 1924.
1975 3405. 2594.
1980 4508. 3477.
1985 5948. 4652.
1990 7857. 6226.


CONSP CONSG

1501. 170.
1880. 231.
2426. 317.
3122. 458.
4078. 628.
5339. 852.


TAX TAXEX TDIR TIND


237.
295.
383.
540.
705.
929.


36. 51. 153.
46. 57. 182.
53. 93. 237.
60. 152. 328.
69. 203. 433.
79. 259. 580.


G GAG GIAG CONGAG YEA4


315. 41. 274.
484. 34. 449.
708. 75. 633.
889. 95. 794.
1177. 116. 1061.
1563. 146. 1417.


YEAR FEINSE


D SAVDOM


1965 45. 142. 108.
1970 51. 172. 259.
1975 89. 229. 394.
1980 137. 333. 553.
1985 196. 440. 746.
1990 271. 584. 1006.


YEAR ELRES SUREAG


1965 549.
1970 613.
1975 695.
1980 803.
1985 941.
1990 1092.


EM EMCAP EMCONO EMIAG EMINAG


567. 131. 168. 34. 98.
849. 218. 226. 41. 203.
1212. 327. 308. 70. 300.
1648. 415. 413. 106. 451.
2276. 555. 557. 150. 579.
3147. 743. 747. 205. 1326.


CONCAP CONFDR AGPROD PRODNS CAPRAT

513. 197. 1013. 3443. 8237.
546. 198. 1042. 3765. 9037.
593. 205. 1168. 4089. 10428.
637. 212. 1282. 4438. 11982.
690. 223. 1377. 4827. 13034.
749. 236. 1493. 5246. 14165.


471.
617.
897.
1317.
1932.
2873.


XAG XAGNTR

310. 27.
294. -11.
377. 17.
479. 59.
583. 93.
731. 130.


CONGRA TAXRAT GGRAT

9.1 12.7 3.6
9.6 12.3 2.7
10.0 12.1 2.1
11.0 12.9 2.0
11.4 12.8 1.4
11.7 12.8 1.1


FEXT FINT YEAR


113.
253.
346.
372.
399.
350.


76. 1965
58. 1970
83. 1975
14. 1980
6. 1985
-7. 1990


D3SARA FOSARA YEAR

13.4 6.1 1965
17.9 10.5 1970
20.0 10.9 1975
21.2 8.9 1980
21.5 7.2 1985
21.9 4.8 1990


22212


Note: The explanation of the code names is given in the Technical Appendix, Chapter VII.


YEAR

1965
1970
1975
1980
1985
1990


XAGTR

278.
305.
360.
420.
490.
571.


YEAR

1965
1970
1975
1980
1985
1990


7. 1965
12. 1970
22. 1975
37. 1980
40. 1985
44. 1990










EL SALVADOR MODEL


SIMULATION NO. 60
(SCENARIO IV)


PREDETERMINED VARIABLES


EL POP

929. 2928.
1081. 3441.
1271. 4092.
1513. 4904.
1815. 5907.
2168. 7132.


ENAG

380.
468.
576.
710.
874.
1076.


XNAG


161.
323.
514.
796.
1197.
1748.


PAG FLOPAG


1864.
2401.
3158.
4180.
5515.
7276.


556.
638.
751.
883.
1039.
1222.


1013.
1072.
1143.
1220.
1301.
1388.


ENDOGENOUS VARIABLES


YEAR


P PNAG


1965 1958. 1402.
1970 2565. 1926.
1975 3406. 2o55.
1980 4506. 3623.
1985 5940. 4901.
1990 7834. 6612.


CONSP CONSG

1501. 170.
1882. 231.
2430. 315.
3129. 453.
4088. 625.
5354. 948.


TAX TAXEX TDIR TIND


237.
297.
360.
528.
678.
874.


36. 51. 150.
46. 67. 184.
53. 89. 238.
59. 142. 326.
67. 1H8. 426.
75. 242. 557.


G GAG GNAG CDNGAG YEAR


315.
506.
735.
925.
1234.
1644.


41. 274.
32. 474.
56. 678.
66. 859.
78. 1156.
92. 1552.


7. 1965
12. 1970
20. 1975
32. 1980
37. 1985
39. 1990


YEAR FEINSE


0 SAVODIM


1965 45. 142. 108.
1970 51. 169. 261.
1975 76. 239. 393.
1980 135. 335. 548.
1985 139. 448. 723.
1990 180. 597. 958.


YEAR ELRES SUREAG

1965 549. 0.
1970 613. 17.
1975 695. 38.
1980 803. 79.
1985 941. 142.
1990 1092. 212.


EM EMCAP EMCONO EMIAG EMINAS

567. 131. 168. 34. 98.
860. 229. 226. 41. 200.
1219. 340. 309. 60. 303.
1640. 432. 414. 82. 449.
2234. 583. 559. 107. 552.
3023. 782. 750. 138. 928.


CONCAP CONFDR AGPDO0 PRODNS CAPRAT

513. 197. 1013. 3443. 8237.
547. 198. 1042. 3765. 9037.
594. 205. 1081. 4193. 10693.
638. 213. 1100. 4645. 12540.
692. 223. 1104. 5121. 13828.
751. 236. 1119. 5626. 15191.


X XAG XAGNTR


471.
516.
830.
1126.
15203.
2037.


310. 27.
293. -11.
316. -44.
331. -79.
324. -143.
289. -243.


CONGRA TAXRAT GGRAT

9.1 12.7 3.6
9.6 12.4 2.7
10.3 12.D 2.0
10.8 12.6 1.8
11.3 12.3 1.0
11.5 12.0 0.4


FEXI FINT YEAR

113. 76. 1965
265. 81. 1970
419. 112. 1975
554. 54. 1980
770. 78. 1985
1062. 107. 1990


DOSARA F3SARA YEAR

13.4 6.1 1965
17.9 11.0 1970
19.9 13.2 1975
21.1 13.3 1980
21.2 14.0 1985
21.4 14.6 1990


22323


Note: The explanation of the code names is given in the Technical Appendix, Chapter VII.


YEAR

1965
1970
1975
1980
1985
1990


XAGTR

278.
305.
360.
410.
467.
532.


YEAR

1965
1970
1975
1980
1985
1990




















III. THE ROLE OF THE AGRICULTURAL SECTOR:
A CAPSULE VIEW OF PAST
TRENDS AND PROBLEMS



The Place of Agriculture in the National Economy


Agriculture occupies a strategic position in El
Salvador's economy. At this stage of economic develop-
ment the agricultural sector is a dominant factor and
plays a primary role in determining overall economic
growth. It provides food for the population, exports
to pay for necessary imports, and raw materials for
industry. Agriculture provides manpower and capital,
and it provides a broadening domestic market for in-
dustrial products, all of which are essential for
overall development.


El Salvador's agricultural output is increasing.
For instance, value added by agriculture increased
over 60 percent from 0345 million in 1950 to 0558 mil-
lion in 1967 (in 1962 prices). In the future agricul-
ture can and must increase even faster if it is to
stimulate rather than retard growth.


While agricultural output is increasing, its
production will and should grow less rapidly than
nonagricultural production. This is a normal phenomenon
in the development process. But this does not mean
that agriculture becomes less important, strategically,
in the overall economic development of El Salvador.


33.







34.


Value added by agriculture was estimated at
0600 million in 1967 in current prices -- 27 percent
of the Gross Domestic Product (compared with 43 percent
in 1950).

The sector, broadly defined to include fish-
eries, livestock, forestry, and agriculture, accounted
for roughly 60 percent of total employment.

The sector provided 0359 million of exports
in 1967, 69.4 percent of total commodity exports.

Agricultural export taxes amounted to 024.4
million in 1968, or 11.2 percent of total tax revenues
collected. The sector provided far more government
revenues, through taxes collected on incomes and net
worth. No measure of such accounts is available.

Domestic production accounted for 87 percent
of all foodstuffs consumed in El Salvador.1/

Consumers spent one-third of their funds for
domestically produced foodstuffs. For the lower in-
come groups, the figure is far higher since foodstuffs
account for the major portion of their total expendi-
tures.


The Setting for Agricultural Development

The setting for Salvadoran agriculture dictates
the direction which that development must take. Out-
standing characteristics are these:

Very high population density and a high and
growing population growth rate.

Predominately rural population.

Land resources that are widely -- but not
wisely -- used.


1/ Based on Central Bank data on consumer expenditures.







35.


Low agricultural productivity and income for
the great majority of the rural population
and a highly skewed income distribution.

High rural unemployment and underemployment.

Concentration of land ownership and extensive
minifundia.

Production of export crops in the larger and
more productive farms and low productivity
or subsistence production of food crops for
local consumption on the smaller farms.


Population

The population density of 166 per square kilo-
meter is one of the highest in the world and by far
the highest in Central America. Population density in
rural areas is approximately 79 percent of the national
average.


The rapidly increasing population growth rate
is currently about 3.5 percent, projected to increase
to 3.8 percent in about 10 years. About 60 percent
of the population is rural.


If all farm land were distributed equally among
rural residents in 1961, each person would have had
only 1.02 hectares, or an estimated 5.1 hectares per
rural family. The average land area available per
agricultural worker would have been 2.91 hectares./


1/ These figures represent a theoretical average con-
cept. In fact there is substantial inequality in land-
holdings, the amount of land available per capital for
the great majority of the rural population being much
less than implied by the above figures. Moreover, not
all agricultural land is being cultivated. See the
report by the Grupo de Tenencia de la Tierra, El Salva-
dor: Characteristicas Generales de la Utilizacidn y
Distribucion de la Tierra, 15 de agosto de 1968, pages
41-42 (unpublished).







36.


According to the most recent census information
(1961), 78 percent of the country's total land area is
used for agricultural purposes. Since the country is
mountainous, it is commonly believed that there are
no large amounts of unutilized lands to be brought into
agricultural use, but our study does raise some ques-
tion as to the validity of this belief. Drainage and
land reclamation can add to the stock of agricultural
land, but these possibilities are limited.


Productivity and Employment

Product per man in the agricultural sector!/ in
1961 was 0972, compared with 03,046 in the nonagricultural
sector. For 1966, we estimated product per man in the
two sectors at 01,036 and 03,853, respectively. Thus,
nonagricultural productivity is 3 to 4 times higher
than that in agriculture. On the whole, this low value
of output reflects very little use of modern produc-
tion methods and insufficient investment. Much more
will be said later in this report of the great need to
build up research, extension, and educational services
for the farm population.


The extent of unemployment in the rural sector
is not known; there have been no official surveys of
seasonal unemployment or disguised unemployment. An
unofficial estimate suggests that the total agricultural
labor force is fully employed an average of 122 to
140 days a year. This would imply an2 employment rate
of only 43 to 50 percent of capacity.


Increasing migration to urban areas points up
the inability of the rural areas to absorb the increases
in the rural population during the last two decades.

i/ Defined as the value added in agriculture per worker
"employed" in agriculture. The term "employed" con-
forms to the definition of the 1961 population census.
2/ See Grupo de Tenencia de la Tierra, op. cit., p. 43.







37.


The urban population grew by 43 percent between the
last two census periods, while the total population
grew by 35 percent and the rural population by 31 per-
cent. The population of the city of San Salvador in-
creased 64 percent between 1950 and 1961, compared
with population increases of 22 to 26 percent for the
rural departments of Cabanas, Chalatenango, Morazan
and Cuscatlan.


Farm Size and Tenure

The distribution of land holdings in El Salvador
is extremely unequal. Data on the number and area of
farm units based on the Agricultural Census of 1961 are
presented in table III-1.


There are 227,000 farm units ..ith a total area
in farms of 1.6 million hectares. This averages out
to less than 7 hectares per unit. Almost half of the
farm units have less than 1 hectare, averaging not
much more than a half hectare per farm. Farm units
of less than 10 hectares account for 91 percent of all
farms while comprising only 22 percent of the land
area.


At the opposite end of the scale, some 1,000
farm units, about 0.5 percent of the total number,
have 38 percent of the land area, averaging 580 hec-
tares per unit.


Some 40 percent of the farm units, including
78 percent of the land area, are worked directly for
the account of the owner (table III-2). A consider-
able number of the smaller units are rented wholly
or in part. These comprise about one-third of the
units with about 13 percent of the land area. In
addition, there are over 55,000 colonos, who repre-
sent some 25 percent of the farm units, but less
than 3 percent of the land area.








38.


Table III-1. El Salvador:
According


Number and Area of Farm Units


to Size,


1961


Farm units Area
Size class Percent Percent Median
Number l Total f t
of total of total size


All classes.........

Less than 1 hectare.

1-9.9 hectares ......

10-49.9 hectares....

50-199.9 hectares...

200 and more hec-
tares..............


226,896 100.0

107,054 47.2

100,245 44.2


15,235

3,335


1,027


6.7

1.5


0.5


(hectares)

1,581,428

61,365

284,804

326,054

313,202


596,002


(hectares)


100.0

3.9

18.0

20.6

19.8


37.7


6.96

0.57

2.84

21.40

93.91


580.33


Source: Data from the Censo Agropecuario, as summarized by Grupo de
Tenencia de la Tierra, CIDA/CAIS. El Salvador: Caracter-
isticas Generales de la Utilizacidn y Distribucidn de la
Tierra. Mexico, D.F. 15 de agosto de 1968.







39.


Income and Output

As might be expected, the high concentration of
control over land is accompanied by extreme inequality
of income distribution, as indicated by estimates from
a CIDA/CAIS study, presented in table III-3. The
monthly incomes from agriculture of landless families
and families on units of less than 1 hectare were
estimated at only 047 and 062, respectively. In the
same study, it was estimated that these two groups
represented 16 and 39 percent, respectively, of the
total number of families dependent on agriculture in
1961. In contrast, the study quotes an estimate of
the Instituto de Colonizacion Rural that a minimum
monthly family income of 0158 would be required to meet
basic needs.


Table III-4A shows that the i.-oss value per hec-
tare of selected crops increases wi the size of unit,
being roughly three times as high on the large units
as on the small units. To a considerable degree, this
reflects the greater relative importance of high-value
crops such as coffee, cotton, and sugar (the tradi-
tional export crops) on the larger units, and the pre-
dominance of lower value crops such as corn, beans,
and grain sorghum (crops for internal consumption) on
the smaller units.


On the other hand, the gross value per hectare
of total farmland is lower on the large units than on
the small units (table III-4B). This reflects the
larger proportions of pasture, forest, and fallow land
included in the larger units. Land suitable only for
pasture or forest is unlikely to be subdivided into
small units to the same extent as cropland. Further-
more, the larger landowners who rent out individual
fields for crop production are saddled with the fallow
land which is a normal element of the rotation. Given
the probability that landholdings of different sizes








40.


Table III-2. El Salvador: Number and Area
to Tenure of Operator, 1961


of Farm Units Accord-


Number Area
Tenure status
Total Percent Hectares Percent


All classes...........

Owner ................

Renter ...............

Part owner.............

Owned...............

Rented...............

Colonato / ............

Other forms............


226,896

89,918

43,457

29,850





55,769

7,947


100.0

39.6

19.1

13.1





24.6

3.6


1,581,428

1,125,221

70,877

123,319

79,878

43,441

44,076

109,935


100.0

77.5

5.0

7.8

5.1

2.7

2.8

7.0


a/ A colono resides on a farm property and receives a plot of land
for which he may pay cash rent, a share of the crop, or a specified
amount of labor.

Source: Grupo de Tenencia de la Tierra, CIDA/CAIS, op. cit., p. 61
Based on Censo Agropecuario, 1961.








41.


Table III-3. El Salvador: Estimated Distribution of Agri-
cultural Income by Farm Families and
Landless Workers, 1961

(in colones)


Estimated income/ per family in
Class 1961
Monthly Annual


All classes................

Landless workers............

Operators of units of less
than 1 hectare.............

Operators of units of
1-9.9 hectares ............

Operators of units of
10-49.9 hectares...........

Operators of units of
50-199.9 hectares ........

Operators of units of
200 or more hectares......


128


1,488


568


743


299


1,048


3,583


17,719


64,394


1,477


5,366


a/ Gross value of production
labor, plus wages received by
farms.


less wages paid out to non-family
family members for work on other


Source: Estimates by CIDA/CAIS, Grupo de Tenencia de la Tierra,
based on data provided by the Ministry of Agriculture
and Livestock, p. 128.







42.


Table III-4A. El Salvador: Gross Value of Output Per
Cultivated Hectare of Selected Crops, by
Size of Farm Units, 1961
(in colones)


Crops for Wei
Weighted
Size of Class Internal/ average
aons on/ Export/ of total
consumption

All classes............. 282 1,042 599

Less than 1 hectare.... 272 351 279

1 to 9.9 hectares...... 266 806 342

10 to 49.9 hectares.... 309 1,016 682

50 to 199.9 hectares... 343 1,213 1,006

200 and more hectares.. 299 1,018 819



a/ Corn, beans, sorghum, sesame, peanuts, tobacco and rice.
b/ Coffee, sugar cane, cotton.

Source: Grupo de Tenencia de la Tierra, op. cit., p. 103.








43.


Table III-4B. El Salvador: Gross Value of Selected Products
Per Hectare of Total Farm Land, by Size of
Farm Units, 1961


Agricultural Value of Selected Value
Size of class area productsa/(thous. per hectare
(hectares) of colones) coloness)


All classes..........

Less than 1 hectare.

1-9.9 hectares......

10-49.9 hectares....

50-199.9 hectares...

200 and more hec-
tares..............


1,485,186

54,171

269,833

313,660

299,164


548,358


389,765

31,120

93,360

75,951

84,495


103,429


262

574

346

242

282


189


a/ Corn, beans, sorghum, peanuts, tobacco, rice, milk, eggs, meat,
sugar cane, coffee and cotton.

Source: Grupo de Tenencia de la Tierra CIDA/CAIS, op. cit., p. 105.








44.


are not identical with respect to potential productiv-
ity, it is obvious that great caution must be used in
attempting to draw conclusions about the relative effi-
ciency of various sized units from such data as those
of the census.


In summary, agriculture in El Salvador is char-
acterized by two broad categories of operations: (1)
Relatively large owner-operated farms producing export
crops and accounting for most of the agricultural land;
and (2) uneconomical small farm units operated by
tenants or sharecroppers producing food crops for do-
mestic consumption.


This polarization is not complete. The "family"
type farm lies in between, but these account for only
6.7 percent of the farms and 20.6 percent of the area.
Also, many small units are owner-operated and food
crops are grown to some degree on large farms. But,
by and large, the polar characterization is valid.


Purchased Inputs

In recent years it has become common to classify
agriculture as "traditional" or "modern." Under the
traditional pattern, land and labor are the principal
inputs, whereas the modern pattern involves much great-
er use of fertilizer, pesticides, machinery and many
other items which originate outside the boundaries of
the individual farm.


The sources of these input materials are varied.
Some, such as improved seed, materials for livestock
feeding, and fibers used in making containers, are
produced on other farms; others such as lime and ferti-
lizing materials are derived from mining; many more
are manufactured products, including vehicles, tractors
farm machinery, pesticides, fuels, and mixed feeds for
livestock. Whatever the source of these materials,
their increasing volume reflects the growing dependence
of individual producers on the industrial and commer-
ical sectors of the economy.







45.


El Salvador has no direct source of comprehen-
sive data on the inputs purchased by farmers, but some
of the major items can be identified in the foreign
trade statistics of imports. This is a reasonably
satisfactory source of data on fertilizer use, for
example, as nearly all chemical fertilizers were im-
ported during these years and nearly all imports of
chemical fertilizers are for agriculture.


Average annual imports during the 1965/67
period for some imports used wholly or mainly in
agriculture were as follows:

Item Quantity Value
(M. T.) (000 Colones)

Manufactured fertilizers 125,45' 19,748
(561)
Pesticides & disinfectants 7,728 16,081
(599-02)
Agricultural machinery 870 2,957
(712)
Tractors (713) 775 2,803
Rural utility vehicles 378 1,515
(732-01-01)
Agricultural hand tools 217 351
(699-12-01)
Veterinary medicines 80 539
(541-09-07)
Seeds for planting 86 210
(292-05)


On a year-by-year basis, imports of several of
these inputs show variations closely related to the
evolution of the cotton enterprise, as already
sketched in above (see table III-ll). The 1964 import
tonnages of fertilizers and pesticides, for example,
were nearly double those of 1961, but in 1965 and 1966
both the quantities and values of these imports fell
substantially below the 1964 levels, concurrently with
the decline in cotton acreage. By 1967, pesticide
imports had risen to above the 1964 level, but the
value of fertilizer imports remained at less than 75
percent of the previous peak. Tractor imports in 1967
were only a fourth (by weight) to a third (by value)








46.


of those realized in 1964 when cotton acreage was close
to its peak. In fact, one may conclude that the cotton
enterprise accounts in large measure for the partial
change from "traditional" to "modern," which has char-
acterized the country's agriculture in recent years.


Further evidence on this score is provided by
calculations of the Ministry of Agriculture based on
estimates of production cost data for individual crops.l/
These calculations suggest that 53 percent of total
expenditures on fertilizer and 87 percent of total
expenditures on pesticides in 1964 were for treatment
of cotton. As coffee received 28 percent of the value
of fertilizer applied in that year, the amount dis-
tributed among all other crops was very limited. By
1967, the use of these materials was somewhat more
broadly distributed among various crops, as cotton and
coffee together received only about 65 percent of the
fertilizer and 74 percent of the pesticides.


It is noteworthy that the total value of im-
ports of tractors, rural vehicles, other mechanical
equipment, and agricultural hand tools (not including
artisan tools) in the 1965/67 period did not equal
half the value of imports of insecticides, fungicides,
and disinfectants. Both population pressure and the
rough or mountainous nature of the terrain mitigate
against rapid mechanization, and producers have exer-
cised reasonable caution in making investments in
equipment which might prove uneconomic for them indi-
vidually, and, in the aggregate, might be even more
uneconomic in terms of national interests. On the
other hand, they have not hesitated to make large
expenditures for chemicals to protect high-value crops,
insofar as the techniques were available./ In fact,
it is commonly thought that cotton growers at times
have exceeded economic levels for pesticide applica-
tions, partly because they lacked adequate knowledge
for adjusting applications to the minimum which would
afford adequate protection.

1/ Ministerio de Agricultura y Ganaderia (1969). Plan
Quinquenal de Desarrollo Agricola, 1968-1972: Anexos
Metodologicos. Cuadros 9 and 12.
2/ Ibid.








47.


Import statistics reveal the country's aggre-
gate use of petroleum products, but they give no indi-
cation of the proportion used on farms or in the
transportation of farm products and inputs. Neverthe-
less, one has only to travel the main highways of the
country to observe that a very large share of the
total consumption of petroleum is associated with
transportation of farm products, farm inputs, and farm
people between farms and urban centers. It seems
reasonable to suppose that at least half of the
national consumption of petroleum products is used on
farms or for such transportation, in which case total
annual imports for agricultural activities in 1965/67
would have exceeded 214,000 metric tons valued at more
than 021 million.


For certain other kinds of i, :ts, there is
little if any useful data available. Thus, a sum of
the imports mentioned would fall short of the total
imported inputs for agriculture and would give no
indication, of course, of inputs produced for agricul-
ture by domestic industry. Among the latter, rations
for livestock represent a class of growing importance,
whose value in 1967 was estimated at more than 10
million colones.


In total, then, production inputs for agricul-
ture obtained from imports and domestic sources prob-
ably amount to between 080 and 0100 million, or some
15 to 20 percent of the total value of agricultural
output.


Recent Trends in Agriculture


In this section, we shall review and analyze
recent trends in the agricultural sector for the period
1955-68. Trends examined will include value added and
gross output of principal crops, employment and labor
productivity, net contribution of agriculture to
exports, and the food balance.








48.


Value Added

A decline in the relative importance of agricul-
ture is to be expected as a predominantly agricultural
economy develops its manufacturing, construction, and
service industries. Indeed, value added by the agri-
cultural sector declined from 38.2 percent of PTB in
1950 to 26.2 percent in 1967 in constant 1962 prices
(see table III-5). But in this period, output rose
from 0345 million to 0558 million.


During 1950-67, value added by agriculture in-
creased at an average annual rate of 2.9 percent.
This growth took place at an uneven rate. In the
decade of the 1950's, the growth rate was only 2.1
percent; it jumped to 12.3 percent during 1960-62
owing to the sharp increase in the output of cotton;
then remained stationary through 1966. Preliminary
Central Bank estimates indicate a 5.8-percent increase
in 1967, and a 2-percent increase in 1968.


For the period 1962-68, the average annual in-
crease in value added by agriculture was only a lit-
tle more than 2 percent. At the same time, PTB rose
about 6 percent a year, primarily due to very rapid
increases in exports of industrial products which
have since slowed appreciably.


During the period of 1950-67, PTB in constant
1962 prices increased at an average annual rate of 5.2
percent, while population increased at an estimated
3.2 percent annually. On the other hand, the 2.9
percent average annual growth rate of the agricultural
sector failed to match the population growth rate, and
therefore permitted no increase in per capital consump-
tion. This performance reflects in large part the
relatively low priority given to balanced agricultural
development in the past; production difficulties in
particular sectors (particularly cotton); price and
marketing problems for coffee and sugar; and, in
general, failure to modernize the agricultural sector.







49.


Table III-5


Value Added by Agriculture (broadly defined) in Re-
lation to PTB
(in thousand colones at 1962 prices)


Value added Col. (1) as percent
ear in agriculture of Col. (2)


1950 ......

1951 ......

1952 ......

1953 ......

1954.......

1955 ......

1956 ......

1957 ......

1958.......

1959 ......

1960 ......

1961 ......

1962.......

1963 ......

1964 ......

1965.......

1966 ......

1967(prelim.)


345,355

358,298

359,986

361,966

356,324

384,369

394,251

403,590

415,879

423,616

426,163

451,067

537,038

518,456

539,967

517,164

527,258

557,680


903,302

956,751

1,017,985

1,046,766

1,077,687

1,124,070

1,191,715

1,258,765

1,271,770

1,328,858

1,382,721

1,431,473

1,602,581

1,671,627

1,827,486

1,925,623

2,063,521

2,125,427


38.2

37.4

35.4

34.6

33.1

34.2

33.1

32.1

32.7

31.9

30.8

31.5

33.5

31.0

29.5

26.9

25.5

26.2


Source: Based on Central Bank data.








50.


A breakdown of the subsectors contributing to
value added by the agricultural sector is presented
in table III-6. The relative share of the major com-
ponent parts have not changed significantly between
1950 and 1967, with the exception of fishing whose
contribution has risen from 0 in 1950 to 010.7 million
in 1967.


Investment

The public investment program by major economic
sectors for 1964-69 is presented in table III-7. The
program is broken down into Physical Investment
(Inversion Fisica) and Financial Investment (Inversion
Financiera). The former refers to direct government
investment, such as construction of public buildings,
roads, irrigation projects, etc. Financial investment
refers to the channeling of public investment funds to
the private sector through the intermediary of auton-
omous institutions, such as the ABC. A major portion
of financial investment in agriculture represents
credit for working capital (purchase of seeds, ferti-
lizers, insecticides, etc.), not for fixed capital.


The data in table III-7 show that for the period
1964 through the first half of 1969, the sum of physi-
cal plus financial investment in agriculture fluctuated
between 9 and 23 percent of total public investment in
all sectors However, this proportion substantially
exaggerates real public capital formation because most
public investment in agriculture is of the "financial"
type, which does not enter into capital formation.


In the absence of solid data on real capital
formation, it is our best estimate that only between
6 and 10 percent of total public funds spent on real
capital formation during 1964-69 was channeled to the
agricultural sector. We estimate that no more than 20
percent of the amount entered as financial investment
is actually spent on fixed capital assets, and thus
represents real investment in the sense in which

1/ The ratio is 15 percent for the period 1964-69.














Table III-6. Value Added by Major Components of the Agricultural
Sector in Selected Years, 1950-67
(In thousand colones, current prices)


Item 1950 1955 1957 1960 1963 1966 1967


Crops........

Livestock....

Silviculture.

Apiculture...

Fishing......

Poultry......

Total......


292,467

64,065

11,432

223


25,325

393,512


426,601

68,451

13,174

429


40,753

549,408


430,1

68,1

14,0

7


38,4

551,5


.26 315,467

.12 70,293

143 15,403

'40 710

-- 10,010

96 37,384

.17 449,267


387,755

69,425

16,585

1,169

12,424

35,461

522,819


422,941

78,043

17,798

725

12,219

42,166

573,892


445,137

86,613

19,091

597

10,681

38,750

599,869


Source: Central Bank.











Table III-7. Physical, Financial and Public Investment by Major Sectors,a/ 1964-69
(In thousands of colones, in current prices)


Sector


1roductive................
Agriculture (including
fisheries, poultry
and livestock)...........
Physical investment...
Financial investment..
Commerce and industry...
Physical investment...
Financial investment..
Power
Physical investment...
Transport and communi-
cations
Physical investmentb.

Social....................
Education
Physical investment...
Health
Physical investment...
Housing.................
Physical investment...
Financial investment..

Administrative............
(Public buildings)
Physical investment...

grand Total...............
Physical investment.....
Financial investment....


First semester
1969


IPct.


34,122


9,849
926
8,923
6,766
373
6,393


65.6 62,087 69.0 55,258 57.2 44,048 53.1 48,067 67.4 28,027 70.2


18.9
1.8
17.2
13.0
0.7
12.3


12,127
1,176
10,951
12,384
2,497
9,887


13.5
1.3
12.2
13.8
2.8
11.0


8,416
3,946
4,470
12,445
2,469
9,976


8.7
4.1
4.6
12.9
2.6
10.3


12,319
2,942
9,377
10,759
812
9,947


14.8
3.5
11.3
13.0
1.0
12.0


14,671
3,104
11,567
8,680
866
7,814


20.5
4.3
16.2
12.2
1.2
11.0


9,271
2,682
6,589
4,760
361
4,399


23.2
6.7
16.5
11.9
.9
11.0


4,619 8.9 15,694 17.5 8,878 9.2 4,338 5.2 9,302 13.0 3,625 9.1


12,888 24.8 21,882 24.3 25,519 26.4 16,632 20.0 15,414 21.6 10,371 25.9

17,347 33.3 26,579 29.6 35,367 36.6 34,024 41.0 20,208 28.3 9,233 23.1

1,303 2.5 5,052 5.6 9,096 9.4 4,770 5.7 4,247 6.0 1,37.1 3.4


10,684
5,360
5,360


20.5
10.3
10.3


7,645
13,882
11,603
2,279


8.5
15.4
12.9
2.5


13,393
12,878
9,173
3,705


13.9
13.3
9.5
3.8


16,213
13,041
9,221
3,820


19.5
15.7
11.1
4.6


8,727
7,234
4,987
2,247


12.0
10.1
7.0
3.1


2,958
4,904
3,497
1,425


7.4
12.3
8.7
3.6


550 1.1 1,260 1.4 6,050 6.3 4,928 5.9 3,271 4.6 2,668 6.8

550 1.1 1,260 1.4 6,050 6.3 4,928 5.9 3,271 4.6 2,668 6.8


52,019
36,703
15,316


100.0
70.6
29.4


89,926
66,808
23,118


100.0
74.3
25.7


96,675
78,523
18,152


100.0
81.2
18.8


83,000
59,856
23,144


100.0
72.1
27.9


71,348
49,721
21,627


100.0
69.7
30.3


39,927
27,514
12,413


100.0
68.9
31.1


See following page for footnotes.


continued--







53.


Table III-7. Physical, Financial and Public Investment by Major
Sectors,a/ 1964-69
continued--


a/ Physical investment refers to direct Government investment
such as road building, irrigation, erection of public buildings,
etc. Financial investment refers to the channeling of public
funds (for investment) to the private sector through autonomous
institutions such as ABC, INV, etc.
b/ Includes purchase of road equipment.


Source:


CONAPLAN, Informe Trimestral de Proyectos de Inversidn
Public for 1965, 1966, 1967, 1968 and January-June
1969; and CONAPLAN Indicadores Economicos y Sociales,
May-August 1968 and April-June 1969. The amounts allo-
cated annually for the "rural cadastral survey" were de-
ducted-for the years 1964-67 as the cadastral survey is
not an investment in the agricultural sector as such.
CONAPLAN's figures for 1968 and 196' -xclude the cadastre
from the agricultural sector investment program.







54.


economists use the term. The proportion of public
physical investment in the agricultural sector to total
public physical investment in all sectors (presented
in table III-8) averaged, only 4.6 percent in the
1964-69 period.


There are no data on private investment activity
in the agricultural sector. Private construction and
improvement of farm buildings as well as improvements
of land, planting of coffee trees, etc., are undoubt-
edly significant but are not recorded.


Government Budget

Central Government expenditures on the agricul-
tural sector for the period 1964-68 are summarized in
table III-9. Note that the operating budget for agri-
culture constitutes only about 4 percent of the total
operating budget. There can be no doubt that the
agricultural budget will have to increase significantly
if an accelerated agricultural investment program is
adopted. On thq other hand, the Central Government's
capital budget/ for agriculture constitutes a much
more significant 13 to 25 percent of its total capital
budget. This budget includes "financial" investment
undertaken with Central Government funds as well as
foreign loans channeled through the Central Government,
but excludes loans made by the autonomous institutions
(example ABC) with their own resources. The agricul-
tural capital budget is very modest in absolute terms
in both 1967 and 1968, and has declined significantly
since 1965.


Output of Principal Crops

Coffee

Output, value of production, and prices of cof-
fee are presented in table III-10. For the period

1/ The "capital budget" includes public funds trans-
Fers to autonomous institutions to help them meet both
operating and fixed capital requirements, and is thus
distinct from "real capital formation," d'-cussed
earlier.








55.


Table III-8. Public Investment Program: Physical Investment in
Agriculture as a Proportion of Total Physical Investment

(thousand colones, current prices)


Physical Total Col. (1) as
Year investment physical percent of
in agricul- investment col. (2)
ture


1964............

1965............

1966 ............

1967 ............

1968............

First semester
1969...........

Total 1964-69...


926

1,176

3,946

2,942

3,104


14,776


36,703

66,808

78,523

59,856

49,721


2.5

1.8

5.0

4.9

6.2


9.7

4.6


319,125


Source: CONAPLAN, Secci6n de Control Fisico de Ejecuci6n,
Informe Trimestral de Proyectos de Inversi6n Pblica,
for respective years.


Note;


Expenditures on the rural cadastral survey were deduct-
ed from the figures provided for 1964-67 because this
outlay should not be classified as investment in the
agricultural sector.








56.


Table III-9. Proportion of Agriculture to the Central Govern-
ment's Operating and Capital Budgetsa/ 1964-68

(in thousand colones)


Agriculture Total Agriculture as a
Year percent of total
Operating Capital Operating Capital
budget budget budget budget Operating Capital
budget budget


1964...


1965...

1966...

1967...

1968...


7,714


7,703 170,470 33,336


7,185 14,041 182,355 55,908

7,294 10,520 197,143 50,819


7,834

7,611


5,052 197,093 38,453

4,004 212,040 22,353


4.5

3.9

3.7

4.0

3.6


23.1

25.1

20.7

13.1

17.9


a/ These figures include both physical (direct) and financial
investment, undertaken with Central Government funds. Foreign
loans to autonomous institutions are included if channeled
through the Central Government. The figures exclude financial
investment financed by the autonomous institutions own resources
and through loans that bypass the Central Government. All fig-
ures represent amounts actually spent and committed.

Source: Informe Complementario Constitucional of the Ministry of
Finance for the respective years, Tables IV-4 for
1964-67 and Tables 11-9 and 10 for 1968.





Table III-10. Coffee: Output, Value and Average Price,
1950/51-1967/68


Year


1950/51....
1951/52....
1952/53....
1953/54 ....
1954/55....
1955/56....
1956/57....
1957/58....
1958/59....
1959/60....
1960/61....
1961/62....
1962/63....
1963/64....
1964/65....
1965/66...
1966/67....
1967/68....


Output/
(in 60 Kgs.)


1,254,254
1,052,521
1,342,505
1,045,201
1,310,770
1,198,780
1,484,734
1,358,304
1,536,192
1,717,595
1,453,179
2,040,896
1,638,340
2,044,686
2,051,384
1,820,089
2,050,000
2,413,000


Average prices-
(colones/46 Kgs.)

117.65
133.07
133.52
151.89
158.15
150.97
153.76
135.96
109.46
98.65
95.85
88.20
84.03
91.26
103.85
107.80
98.73
95.05


Average prices
(colones/60 Kgs.)

153.46
173.57
174.16
198.12
206.28
196.92
200.56
177.34
142.77
128.67
125.02
115.04
109.60
119.03
135.46
140.61
128.78
123.99


Value (Col. (1)
times Col. (3))


192,477,819
182,666,070
233,810,671
207,075,222
270,385,636
236,063,758
297,778,251
240,881,631
219,322,132
221,002,949
181,676,439
234,784,676
179,562,064
243,378,975
277,880,477
196,205,594
263,999,000
299,187,870


a/ Departamento Nacional de Cafe.
b/ Prices for crop years were obtained by averaging the average coffee export prices
for the corresponding calendar years. For example, the average price for 1950/51
was obtained by averaging the export prices for calendar years 1950 and 1951. Thus,
the resulting value figures are approximations.







58.


1950/51 to 1966/67, the production of coffee (in physi-
cal terms) increased at an average annual rate of 3.1
percent. However, this increase did not occur evenly
throughout the period. Coffee production over these 16
years is divided into three periods: (1) 1950/51 to
1955/56, when coffee production showed no trend; (2)
1955/56 to 1959/60, a period of rapid growth during which
average annual output increased by 9.4 percent; and (3)
1959/60 to 1966/67, during which output increased at the
moderate annual rate of 2.5 percent. A sharp increase
in coffee production was reported for 1967/68 (17.7 per-
cent), but this is considered an exceptional year and a
much lower output was reported for 1968/69.


Sharp fluctuations in coffee prices contributed
significantly to the instability in the value added by
agriculture and of export earnings. Average coffee
prices increased by 31 percent between 1950/51 and
1956/57, then declined by some 36 percent between
1956/57 and 1959/60. A further price decline took
place during 1960-63, followed by recovery through
1965/66 and another decline in 1966 to 68 (see table
III-10). In 1969, prices are up substantially, con-
tributing to the increase in value added.1/


Cotton

Cotton production increased by about 5.3 times
between 1951/52 and the peak year 1964/65. Particu-
larly sharp increases occurred in 1954/55 and 1955/56
and during the period 1959/60 to 1964/65 when output
increased at an average annual rate of 21 percent
(table III-11). However, after 1964/65 output declined
sharply, dropping by 57 percent between 1964/65 and
1967/68, as a result of insect and disease problems
and the lack of knowledge to combat these economically.


Cotton yields per hectare increased signifi-
cantly during 1951-58, but showed little progress
through 1966/67 (table III-11). Yields were between


1/ Estimates of yield trends of coffee lands were not
presented owing to the absence of reliable data on
lands planted to coffee.

















Table III-ll. Area, Output, and Yield of Selected Crops: Cotton
and Corn, 1951/52-1967/68



Cotton Corn
Year Area Output Yield Area Output Yield
(Has.) (thou.kg.) (Kgs./Ha.) (Has.) (thou.kg.) (Kgs./Ha.)


1951/52...
1952/53...
1953/54...
1954/55...
1955/56...


1956/57...
1957/58...
1958/59...
1959/60...
1960/61...


1961/62...
1962/63...
1963/64...
1964/65...
1965/66...


1966/67...
1967/68...


29,852
28,181
21,100
29,564
45,702


38,369
39,926
53,581
43,007
56,690


81,927
93,636
114,022-/
110,839-/
81,979a/


49,342/
40,909


9,822
10,749
12,908
20,483
30,762


32,382
36,003
39,688
31,050
41,946


58,672
72,365
75,064
81,692
52,278


38,808
34,982


329
381
612
693
673


844
902
741
722
740


716
773
658
737
638


787
855


157,584
181,535
182,977
190,235
172,341


166,580
155,681
178,596
178,042
177,405


155,101
197,618
172,508
165,588
192,881


207,412
191,676


178,547
173,440
159,841
170,372
144,311


158,896
148,532
141,525
150,544
178,029


144,655
212,942
207,077
191,611
203,006


265,412
208,840


1,133
955
874
897
837


954
954
792
846
1,004


933
1,078
1,200
1,157
1,052


1,282
1,090


a/ Estimated area, not authorized area


Source for Cotton:


Source for Corn:


For
Ret]


on the basis of licence


the period 1964/68, MAG table entitled
rospectiva de Superficie, Rendimiento y


issue.


Produccion, op. cit., 1964/65 to 1967/68.
Through 1963/64 statistics from Estadisticas
Seleccionadas con Relaci6n a la Agricultura,
op. cit.; for 1964 to 1968 MAG table on
Retrospectiva de Superficie, Rendimiento y
Produccion, cited above.







60.


300 and 400 kgs. per hectare in the early 1950's, in-
creased to 600 to 700 during 1953-56, and reached a
peak of 902 in 1957/58. They ranged between 638 and
855 during the following decade, the high figure occur-
ring in 1967/68.


Corn

Corn production declined between 1951/52 and
1958/59, showed no trend through 1961/62, and increased
by 47 percent in 1962/63. The gain was held in the
following years, but there was no upward trend. Corn
production yields showed no significant upward trend
over the last 16 years (table III-11).


Rice

Rice production declined between 1953/54 and
1963/64, then increased dramatically through 1967/68.
The 27-percent increase over this recent four-year
period was mostly the result of increases in the acre-
age planted to rice, but yields also rose. During
1951/52 to 1959/60, the acreage planted to rice de-
creased steadily, stabilized between 1959/60-1963/64,
but increased sharply during 1964/65-1967/68 as acreage
was taken out of cotton cultivation. Yields increased
from about 1,000 Kg. per hectare in 1951-53 to 1,800
in 1967/68 (table III-11A).


Beans

The production of beans declined significantly
and steadily between 1951/52 and 1959/60, recovering
only slowly and partially thereafter. Output for
1967/68 was still only 58 percent of the 1951/52 level.
Yields followed this same trend (table III-11A).


Sorghum

Output and yields of sorghum showed no signifi-
cant trend between early 1950's and 1967/68 (table
III-11B).














Table III-11A. Area, Output and Yield of Selected Crops: Rice and
Beans, 1951/52-1967/68


Rice Beans
Year
Area Output Yield Area Output Yield
(Has.) (thous.kg.) (Kgs./Ha.) (Has.) (thou.kg.)l(Kgs./Ha.)

1951/52... 16,322 16,892 1,035 35,288 30,142 854
1952/53... 17,302 17,616 1,018 37,323 32,921 882
1953/54... 21,273 22,416 1,054 34,276 28,741 839
1954/55... 19,868 21,982 1,106 34,828 28,794 827
1955/56... 17,467 19,137 1,096 34,449 27,890 810


1956/57... 15,549 18,065 1,162 26,924 18,667 693
1957/58... 14,778 14,686 994 25,033 13,426 536
1958/59... 12,092 12,281 1,016 5,853 10,406 617
1958/60... 9,401 12,202 1,298 21,508 10,233 476
1960/61... 10,883 13,100 1,204 20,038 10,380 518


1961/62... 8,888 11,623 1,308 21,469 10,479 488
1962/63... 10,852 16,662 1,535 32,898 18,352 558
1963/64... 9,140 13,414 1,468 27,755 14,462 521
1964/65... 14,790 21,498 1,454 21,357 12,378 580
1965/66... 13,216 22,669 1,715 23,497 16,546 704


1966/67... 19,705 32,777 1,663 26,407 15,462 586
1967/68... 27,972 50,600 1,809 28,389 17,486 616



Rice, Note: All figures are in "oro" terms. The MAG table on
Retrospectiva de Superficie, Rendimento y Producci6n
was converted from "granza" to "oro" by multiplying
by 0.65.

Source: Through 1963/64 Estadisticas Seleccionadas con Relacion a
la Agriculture, op. cit., for 1964-68 MAG table on
Retrospectiva de Superficie, Rendimiento y Produccion,
cited above.









62.


Table III-llB.


Area, Output and Yield of Selected Crops: Sorghum
and Tobacco, 1951/52-1967/68


Sorghum Tobacco
YearArea Output Yield Area Output Yield
(Has.) (thous.kg.) (Kgs./Ha.) (Has.) (thou.kg.) (Kgs./Ha.)


1951/52...
1952/53...
1953/54...
1954/55...
1955/56...


1956/57...
1957/58...
1958/59...
1959/60...
1960/61...


1961/62...
1962/63...
1963/64...
1964/65...
1965/66...


1966/67...
1967/68...


68,529
82,650
92,780
96,545
95,039


97,122
83,078
89,040
84,233
.87,115


98,231
105,027


87,032
110,979


107,496
103,776


80,260
89,327
101,367
109,906
103,553


115,648
86,285
77,700
74,904
81,734


84,433
111,745


87,743
105,611


114,680
108,100


1,171
1,080
1,093
1,138
1,090


1,191
1,039
873
889
938


860
1,064
m--

1,008
952


1,067
1,042


760 1,216
730 1,186


700 1,155
675 1,131


1,600
1,625


1,650
1,675


Source: Through 1963/64 statistics from Estadisticas Seleccionadas con
Relacion a la Agricultura, op. cit.; for 1964 to 1968 MAG
table on Retrospectiva de Superficie, Rendimiento y Produccion,
cited above.








63.


Tobacco

Output and yields of tobacco remained station-
ary during the period 1964/65-1967/68, the only period
for which data are available (table III-11B).


Sugar

Output of processed sugar increased gradually
but steadily between 1951/52 and 1963/64 at an average
annual rate of 7.3 percent (col. (1) of table III-12).
In 1964/65, output increased by 64 percent, and rose
by another 31 percent during the following three years.
This upsurge is attributed to the construction of a
new sugar mill at Izalco and to an increased U.S.
sugar quota.


There are no complete historical data on the
acreage devoted to sugar cane productibn.1/ Estimates
of yields are based on production of lands owned or
controlled by the sugar processing mills (cols. (2) to
(4), table III-12) Sugar cane produced on these lands
increased slightly over the last decade (col. 3), but
accounted for a diminishing fraction of the total cane
processed by the mills.2/ The yield data (col.4) show
no discernible trend over that period.


Conclusion of Production Trend Analysis

Average annual growth rates of production and
yields for the principal agricultural commodities are
summarized in table III-13. For the three time periods
shown, it is clear that sustained and significant in-
creases in agricultural output were registered only by
coffee, rice, and sugar. Cotton performed very well
during the 14-year period 1951/54-1965/68, but has


1/ Except that provided by the 1961 Agricultural Census
for a single year.
2/ The proportion of sugar cane from the mill-owned
lands declined from 83 percent in 1957/58 to 50 percent
in 1968/69.








64.


Table III-12. Output of Sugar and Area, Output and Yield of
Sugar Cane, 1951/52-1967/68


Sugar cane production on land con-
Year Total output trolled by sugar mills
of sugar Areab/ Outputb/ Yield
(Has.) (Short tons) (Short ton/Ha.)

1951/52..... 27,186
1952/53..... 27,508
1953/54..... 30,268
1954/55..... 34,684
1955/56..... 35,696


1956/57..... 45,770
1957/58..... 42,412 7,634 506,418 66.3
1958/59..... 46,414 7,457 525,020 70.4
1959/60..... 48,300 7,438 509,605 68.5
1960/61..... 49,358 7,766 527,585 67.9


1961/62..... 63,894 8,126 542,901 66.8
1962/63..... 58,604 8,682 576,983 66.5
1963/64..... 63,066 10,601 546,509 51.6
1964/65..... 103,454 11,088 717,342 64.7
1965/66..... 110,354 8,815 648,040 73.5


1966/67..... 125,194 10,546 706,437 67.0
1967/68..... 135,115 10,106 643,785 63.7



a/ For 1951/52 to 1957/58, Ministry of Agriculture as reported
In the Revista Mensual of the Central Bank. For 1958/59 to
1967/68, MAG Anuario de Estadisticas Agropecuarias Continuas,
1967-68, "Zafra" Table 2.
b/ MAG, Zafra 1966-67 and 1967-68, Table 1 (mimeographed report
issued by Seccion de Tabulacion). Area cultivated was converted
to Hectares by multiplying manzanas by .6988 (1 Mz. = .6988 Ha)








65.


Table III-13. Average Annual Growth Rates in Physical Output
of Selected Agricultural Products
(in percent)


Average 1951/52- Average 1960/61-
Produ1953/54 to 1962/63 to 1965/66 to
1965/66-1967/68 1965/66-1967/68 1967/68

Output Yield Output Yield Output Yield


Coffee..

Cotton..

Corn....

Beans...

Rice....

Sorghum.

Sugar...


4.8

9..9

2.0

-4.3

4.5

1.4

11.1


-- 3.8

4.0 -6.1

1.0 4.8

-2.1 4.8

3.7 21.0

-0.6 3.4

-- 16.6


3.6

0.5

2.6

4.0

5.1

1.3

0.3


15.1

-18.2

1.4

2.8

49.0

1.2

10.6


15.1

15.8

1.8

-6.5

2.7

4.6

-6.9







66.


declined very significantly since 1965. Corn shows
only a slight long-run upward trend, with a 14-year
average annual rate of growth of only 2 percent. Sor-
ghum followed the same general pattern with an even
slower growth rate of only 1.4 percent over the longer
period. The annual production of beans has declined
appreciably since 1951/52.

Yield trends have been satisfactory for the
same three crops -- coffee, cotton and rice.


Output of Minor Crops

There is, of course, considerable interest in
El Salvador in diversifying production, particularly
enlarging output of the so-called minor crops. Not
much progress appears to have been made. Output, area,
and yield estimates by the Ministry of Agriculture for
a number of these products for 1964/65 to 1967/68 are
presented in table III-14 and III-15. Figures for
melons and cantaloups are based on a comprehensive
survey undertaken by the Ministry of Agriculture in
1968. No survey data are available at this time for
other years or for other products.1/ Ministry of
Agriculture estimates for these other products were
based on export data and on assumptions regarding
domestic consumption. In a number of cases, rough
assumptions regarding yield and acreage were postulated.
Thus, the data on most of the products listed in tables
III-14 and III-15 are of substantially lesser reli-
ability than the data for the products presented in
tables III-11 and III-12.


Given the limitations noted above and the short
period for which estimates are available, no meaning-
ful analysis of output and yield trends for the prod-
ucts described in tables III-14 and III-15 can be
made. Only changes of magnitude will be noted. The
sharpest increases in output and/or yields occurred
for sesame, kenaf, and melons, while significant de-
clines occurred in the production of cottonseed and
bananas.

1/ A survey of fruits and vegetables was undertaken in
1968-69, but the results were not available at the
time of this writing.









67.



Table III-14. Area, Output, and Yield of Selected Agricultural
Products, 1964/65-1967/68


Product 1964/65 1965/66 1966/67 1967/68

Sesame
Area (hectares).......... 775 1,260 2,110 4,500
Output (thous. kg.)...... 767 1,285 2,216 4,859
Yield (kgs. per hectare). 920 1,020 1,050 1,080
Cotton seed
Area (planted to cotton). 110,839 81,979 49,342 40,909
Output................... 132,333 86,477 64,893 58,074
Yield.................... 1,194 1,055 1,315 1,420
Copra
Area..................... 4,600 4,651 4,702 4,754
Output................... 8,625 8,837 9,051 9,270
Yield............ ......... 1,875 900 1,925 1,950
Kenaf
Area..................... 757 1,576 2,897 2,300
Output................... 1,366 2,911 5,393 4,300
Yield................... 1,804 1,847 1,862 1,870
Cacao
Area .................. .. 360 360 360 360
Output................... 270 270 270 270
Yield................... 750 750 750 750
Olives
Area ................... 2,267 2,292 2,318 2,344
Output................... 1,496 1,513 1,530 1,547
Yield.................... 660 660 660 660
Henequen
Area..................... 4,980 4,980 4,980 4,980
Output................... 3,262 3,262 3,262 3,262
Yield.................... 655 655 655 655
Banana
Area..................... 14,200 11,306 9,118 7,553
Output................... 9,230 4,522 3,191 3,399
Yield................... 650 400 350 450
Oranges
Area..................... 4,300 4,400 4,500 4,600
Output................... 29,240 29,920 30,600 31,280
Yield..... ............... 6,800 6,800 6,800 6,800


continued--








68.


Table III-14. Area, Output and Yield of Selected Agricultural
Products, 1964/65-1967/68 continued--


Product 1964/65 1965/66 .1966/67 1967/68

Pineapple
Area (hectares).......... 1,220 1,270 1,320 1,370
Output (thous. kg.)...... 22,448 23,622 24,816 26,030
Yield (kgs. per hectare). 18,400 18,600 18,800 19,000
Mango
Area ..................... 450 480 510 550
Output................... 3,420 3,648 3,876 4,180
Yield.................... 7,600 7,600 7,600 7,600
Avocado
Area................. ... 1,895 1,995 2,100 2,218
Output................... 18,761 19,751 20,790 21,879
Yield.................... 9,900 9,900 9,900 9,900
Canteloupes
Area..................... 800 700 900 750
Output..................... 8,000 7,000 9,000 7,500
Yield.. ................. 10,000 10,000 10,000 10,000
Melons
Area................. ... 1,200 1,300 1,420 1,500
Output.................. 19,200 22,880 27,264 31,500
Yield.................... 16,000 17,600 19,200 21,000
Yucca
Area..................... 720 800 850 880
Output.. .................. 8,640 9,600 10,200 10,560
Yield..................... 12,000 12,000 12,000 12,000
Tomatoes
Area..................... 720 730 740 750
Output................... 8,525 9,125 9,735 10,361
Yield. ................... 11,840 12,500 13,155 13,815
Cabbage
Area..................... 260 270 280 290
Output................... 1,950 2,025 2,240 2,320
Yield.................... 7,500 7,500 8,000 8,000
Sweet Pepper
Area..................... 140 150 160 170
Output.................... 756 855 960 1,071
Yield.................... 5,400 5,700 6,000 6,300


Source: MAG table on Retrospectiva de Superificie, Rendimiento
y Produccion, op. cit.







69.


Livestock and Dairy Products

The output of livestock and dairy products
increased moderately in recent years. Between 1964/
65 and 1967/68, average annual growth rates in that
sector are as follows: Milk 5.4 percent, eggs 3.8
percent, beef meat 7.8 percent, poultry meat 6.4
percent. Pork meat remained at the same level.
(table 15).


Trends in Employment and Labor Productivity

Owing to the absence of employment data for the
post-1961 period, all estimates relating to employment
and productivity trends in the 1960's must be inter-
preted with great caution. However, we feel confident
that the following conclusions can be safely drawn:

(1) Employment in the agricultural sector has
increased at a much lower rate than in the nonagricul-
tural sector for the period 1950-67.

(2) Labor productivity or value-added per
capital in the agricultural sector is one-third to
one-fourth as high as in the nonagricultural sector.

(3) For the period 1950-67, productivity in
the agricultural sector has increased at a much lower
rate than in the "other" sectors. It is likely that
the difference in these growth rates has increased
during 1961-67.


These are in part qualitative and derived
judgments simply because of the lack of data. The
fact is, that the only reliable data on employment
in the country are provided by the 1950 and 1961 pop-
ulation censuses. Estimates for intervening years
as well as for the period 1962-67 were derived from
the Central Bank's value-added estimates and our
estimates of trends in output per man. The estimates
appear in table III-16.









70.


Table III-15. Output/ of Selected Agricultural Products,
1964/65-1967/68



Product 1964/65 1965/66 1966/67 1967/68


Milk (thous. litres)......

Beef meat (thous. kg.)....

Pork (thous. kg.) .........

Poultry meat (thous. kg.).

Eggs (thous. units).......

Honey (thous. litres).....

Wax (thous. kg.) ..........

Wood (thous. cu.m.) .......

Firewood (thous. cu.m.)...

Balsam (thous. kg.).......


179,100

18,156

4,050

5,975

363,903

465

19

49

2,077

116


187,941

18,226

5,959

6,356

377,884

855

39

50

2,130

144


197,422

21,053

3,662

6,762

392,403

701

28

51

2,134

144


209,503

22,733

4,022

7,193

407,480

800

29

52

2,240

156


a/ Yield and area data not available or not relevant.

Source: MAG table on Retrospectiva de Superficie, Rendimiento y
Produccion, op. cit.










Table III-16. Estimated Employment and Productivity in Agriculture/ and Other
Sectors, 1950-67


Employment Value added Value added Productivity Productivity
Date Employment in all in in all other of labor in of labor
in other b agriculture sectors/ agriculture in all other
agriculture sectors- coloness) coloness) sectorsY/

1950.... 410,582c/ 214,215d/ 345,355e/ 506,472k/ 841.lf/ 2,3642/
1955.... 428,409 301,400 384,369 680,679 897.2 2,258
1956.... 433,767 292,941 394,251 736,863 908.9 2,515
1957.... 438,351 328,457 403,590 792,622 920.7 2,413
1958.... 445,887 308,588 415,879 791,397 932.7 2,565
1959.... 448,365 303,278 423,616 838,971 944.8 2,766
1960.... 445,265 -- 426,163 888,334 957.1
1961.... 464,205 298,904 451,067 910,371 971.7 3,046
1962.... 545,604 309,185 537,038 993,561 984.3 3,213
1963.... 519,964 315,403 518,456 1,078,918 997.1 3,421
1964.... 534,568 336,882 539,967 1,210,942 1010.1 3,595
1965.... 505,438 378,846 517,164 1,330,075 1023.2 3,511
1966.... 508,691 381,738 527,258 1,470,760 1036.5 3,853
1967.... 531,124 386,900 p557,680 -- 1050.0

a/ Agriculture as used in this table is broadly defined to include livestock, poultry,
fisheries and apiculture.
b/ Other sectors means other than agriculture, mining, and housing services.
c/ For 1950 and 1961, census data; for all other years, employment was determined as
the quotient of value added divided by productivity in the agricultural sector.
d/ Excludes employment in agriculture (broadly defined), mining and housing. Employ-
ment in nonspecified activities is excluded from both column (1) and (2), as such
activities cannot be distributed among sectors. Figures for 1950 and 1961 are from
the population censuses.
-4
e/ Source: central Bank estimates.
f/ For 1950 and 1961, quotient of value added divided by employment in agriculture.
For all other years, productivity in agriculture was projected to increase at annual
rate of 1.3 percent, or at the rate that prevailed for the period 1950-61.
g/ Quotient of column (4) divided by (2).









72.


The 1950 and 1961 censuses indicate that employ-
ment in agriculture during the 11-year period 1950-61
increased at an average annual rate of only 1.1 percent,
compared with 3.1 percent for employment in sectors
other than agriculture, mining, and housing services
(see table III-16). For the period 1961-67, we have
estimated that employment in these last sectors accel-
erated to an average annual rate of increase of 4.4
percent, compared with 2.3 percent for employment in
agriculture.


On the basis of the 1950 and 1961 population
censuses, productivity in agriculture for the period
1950 to 1961 increased at an average annual rate of
only 1.3 percent, compared with an increase of 2.3
percent for all sectors other than agriculture, mining,
and housing services. No employment benchmarks for
agriculture are available after 1961. Our estimates
in table III-16 indicate the productivity in these
"other"- sectors increased at an average annual rate
of 4.8 percent during 1961-66, compared with an annual
growth rate of 1.3 percent for the agricultural sector.


The estimates in table III-16 also indicate that
differences in productivity between the agricultural
and "other" sectors are both substantial and increasing.
The labor productivity ratio between agricultural and
nonagricultural sectors was 2.8 in 1950, 3.1 in 1961,
and 3.7 in 1966. Thus, the average worker employed in
the "other" sectors is between three and four times as
productive as his counterpart in the agricultural
sector. /







1/ Other than agriculture, mining, and housing
services.
2/ It was assumed that productivity in agriculture
increased at the same rate during 1961-67 is during
1950-61.









73.


Trends in Exports

Dt a on exports of agricultural and agro-
business/ products are summarized in table III-17.
The total increased from 0261.8 million in 1955 to
0359.1 million in 1967, or at an average annual growth
rate of 2.7 percent over the 12-year period. During
the 10-year period 1955-65 the rate of increase was
3.8 percent, whereas these exports actually declined
between 1965 and 1967.


Looking at individual export commodities, we
find that export earnings from coffee show little
long-term trend, though they exhibited pronounced year-
to-year fluctuations. Over 1955-66 an increase in
volume was largely offset by a decline in price, so
that coffee export earnings in 1966 were only slightly
more than in 1955. Cotton contributed significantly
to the sharp boost in agricultural earnings between
1962 and 1955, and to the decline in the following
years.


For exports other than coffee and cotton, the
products that show a clear upward trend between 1955
and 1967 include live animals, rice, margarine, vege-
tables, corn, and eggs. Exports with little or no
growth in recent years include sugar, shrimp, edible
fats, animal feeds, fruits, edible gelatins, cakes and
flour of oleaginous seeds, meats, honey, balsam, cotton-
seed oil, and coco oil.


1/ In practice, it is not possible to distinguish the
export value attributable to purely agricultural activ-
ities from value added by the processing of agricul-
tural products because much of the export data do not
permit such separation. For example, coffee export
figures include the value added by the processing mills
(beneficios ); cotton export figures include the value
added by ginning and packing; rice export figures in-
clude milling, etc. The export data presented in table
III-17 include the value added by such processing and
must therefore be understood to comprise the contribu-
tion of the agro-business sector to exports.










Table III-17. Agricultural Exports of El Salvadora/
(In thousands of colones, current prices)


Exports 1955 1957 1960 1962 1963 1964 1965 1966 1967


I. Total foodstuffs...........
Coffee, all forms............
Sugar, unrefined.............
Fresh fish and shellfish
(mainly shrimp).............
Live animals.................
Rice ........................
Edible fats.................
Margarine of animal and
vegetable origin............
Sugar preparations...........
Vegetables, fresh and dried.
Beansb/.....................
Corn.........................
Animal feed and food wastes.
Sorghum......................
Eggs ........................
Fruits, fresh and dried.....
Edible gelatins..............
Cakes and flour of
oleaginous seeds...........
Meats (not hermetically
sealed.....................
Meats and preparations,
hermetically sealed........
Bread products..............
Natural honey...............

II. Tobacco...................

III. Crude inedible materials
Cotton.......................
Sesame seeds.................
Cotton seeds................
Natural balsam...............


234,523 295,510 231,051
228,523 284,471 202,415
62 486 1,960


25
1,395
538
291

5
186
132
(8)
132

96
297
60


116
3,067
491
788

59
352
490
(14)
12
10
11
172
200
1


12,099
2,381
549
1,077

807
632
735
(118)
60
196
38
999
980
13


226,091 224,663 271,585
189,952 187,615 233,441
5,362 -- 7,061


14,127
2,237
479
1,947

932
1,317
575
(7)
284
328
32
276
376
428


11,439
3,238
921
1,243

1,273
1,343
740
(221)
275
594
159
941
804
594


10,765
2,058
899
1,185

1,564
1,992
575
(265)
276
1,058
135
638
960
482


*277,735 284,402
240,196 224,913
3,658 16,410


7,760
2,001
1,368
2,149


1,603
921
(481)
35
2,330

581
735
556


12,014
4,237
3,154
2,625

1,903
1,910
1,352
(837)
610
2,006
109
514
492
527


307,035
246,975
10,829

9,155
9,863
6,280
2,624

2,037
1,938
1,893
(1,638)
1,828
1,705
1,000
1,505
963
701


1,497 3,093 3,136 5,107 4,995 5,649 7,219 6,187 3,772


10 306


5 461


25,444 41,506 41,018 82,715 99,219 95,300 98,354 64,902 47,288


22,823
1,929
23
357


39,583
1,338
32
497


39,434
790
15
610


80,663
651
853
445


94,108
506
2,498
465


92,785
490
988
483


94,494
632
484
1,876


60,881
1,124
536
1,445


continued--


42,346
2,847
43
1,152












Table III-17. Agricultural Exports of El Salvador!/
continued--
(In thousands of colones, current prices)


Exports 1955 1957 1960 1962 1963 1964 1965 1966 1967


IV. Oils and fats of animal
and vegetal origin......
Cotton seed oil.............
Coco oil....................

Total (I + II + III + IV).....
Total without coffee.........

V. Estimated value of agri-
cultural inputs incor-
porated in manufactured
good other than food-
stuffsc/................


1,738 2,720 2,536 3,014 3,253 3,590 5,128 4,178 4,276


2,558
20


2,195
261


2,288
561


2,336
417


2,571
364


3,082 2,499 2,250
525 920 503


261,828 339,794 274,641 311,838 327,154 370,494 381,218 353,487 359,060
32,957 55,323 72,226 121,886 139,539 137,053 141,022 128,574 112,085


n.a.


n.a.


n.a. 1,861 3,324 4,060 4,701 5,359 6,720


a/ Items listed under each subheading include only those amounting to more than 0400,000 in 1967 or in other
recent year. Thus, individual items do not add up to the total for each of the four commodity categories.
b/ Figures are in parenthesis, as beans are included under "vegetables, fresh and dried", listed directly above.
c/ Based on unpublished Central Bank estimates.

Source: Estadistica y Censos, Anuaric Estadistico, Comercio Exterior; and Banco Central Revista Mensual.







76.


The following facts stand out from the analysis
of agricultural exports over 1955-67:

(1) Agricultural exports increased between 1955
and 1967 both in physical and value terms.

(2) The increase in total agricultural exports
over 1955-67 is found to be much greater if coffee is
excluded. In value terms, the average annual growth
rate is 2.7 percent with coffee, 10.7 percent without.
This reflects an unmistakable trend toward a reduced
dependence on coffee within the agricultural sector.

(3) There was a clear upward trend in non-
coffee agricultural exports until 1963, stagnation
during 1963-65, and a decline thereafter, the last
being almost entirely attributable to the sharp fall
in cotton exports. While exports of some commodities
continued to increase throughout the period, the growth
trend for many others ceased some time during the
interval 1962-65.


The Food Balance

Careful analysis of the country's food balance
is essential in the formulation of any program of
agricultural development. This is particularly true
in El Salvador where a burgeoning population will almost
triple the present consumption of food in the next 20
years. As important as the need to satisfy these
demands, the major needed increase in foodstuffs repre-
sents an opportunity to provide badly needed employment
and income. The analysis of the food balance reveals
where a domestic market exists and awaits exploitation.


El Salvador should not, of course, aim at achiev-
ing self-sufficiency in all foodstuffs as a goal in
itself. However, when foodstuffs presently imported
can be produced domestically at competitive prices, or
when they can be produced in El Salvador at prices
permitting production for export, these opportunities
should be seized. Certainly, other countries, partic-
ularly in Central America, can satisfy part of El
Salvador's growing food needs. Just how much cannot







77.


be foreseen. Production in the area is at such a low
level of efficiency and the future magnitude of the
changes in technology will of necessity be so high,
that production decisions cannot now be based on theo-
retical analysis of comparative advantage in El Salva-
dor among alternative products, or between El Salvador
and other countries. The open economy called for by
the Central American Market will help to assure that
production and trade within the area respond to the
respective comparative advantages within the countries
of the region.


El Salvador has run a small food deficit (except
coffee) historically. This will increase substantially
over time unless production increases faster than in
the past. An accelerated rate of growth in agriculture
can eliminate the deficit by 1990 -- a matter more
fully brought out in Chapter IV. I is equally certain
that an accelerated rate of growth in agriculture is
the key to keeping the food deficit from becoming
excessively onerous.


Turning to the current situation, let us note
that this analysis of the food balance is helped by
the fact that export and import data are considerably
more reliable than agricultural production statistics.
Data on El Salvador's food balance with breakdown by
major commodity groups are presented in table III-18.
The table shows for each commodity group the net
export and import position for the period 1955-67.


Of particular interest is line 2, Total Food-
stuffs Without Coffee, which is simply the total food
balance with coffee omitted. The country's total food
deficit in 1967 was .small, only 08.25 million, or 12
percent of the country's total food imports in that
year. Although total food imports have been increasing,
from 033.5 million in 1955 to 068.3 million in 1967,
this rising trend in food imports has been more than
offset by the growth in non-coffee agricultural exports,
resulting in some improvement in the overall food defi-
cit situation. The total food deficit (excluding cof-
fee) has declined from 027.1 million in 1955 to 08.3
million in 1967.











Table III-18. El Salvador's Food Balancea/ (Plus = Surplus, Minus = Deficit), 1955-67
(In thousands of current colones)


Product 1955 1957 1 960 1962 1963 1964 1965 1966 1967


Total foodstuffs.................

Total foodstuffs without coffee..
Coffee, all forms..............
Meat and meat preparations not
sealed hermetically...........
Meats and meat preparations,
sealed........................
Dairy products.................
Eggs ...........................
Natural honey..................
Fresh fish and shellfish and
preparations, unsealed.........
Fish, shellfish, etc., sealed..
Wheat ..........................
Rice...........................
Corn............ ...............
Sorghum.........................
Bread products.................
Other cereal preparations......
Fruits, fresh and dried........
Canned fruits and fruit pre-
parations............. .. ...
Vegetables, fresh and dried....
B 'ns..........................
Canned vegetables and prepara-
tions .........................
Sugar, unrefined................
Sugar, refined.................
Candies and other sugar
preparations.................
Cakes and flour of oleaginous
seeds .........................
Food wastes and animal feed....
Margarines, animal and vegetal.
Edible fats.....................
Edible gel s...............
Other fo^es (residual)....


aT ts CIF.


201,032 259,519 187,961 172,609 167,124 207,993 207,907 209,657 238,719


-27,145 -24,870 -14,441
228,177 284,389 202,402


-17,338 -20,482 -25,433 -32,286
189,947 187.606 233,426 240,193


361 454 411 529 703


- 404
- 4,115
249
173

- 40
- 947
933
- 1,410
- 1,365
28
- 217
- 1,257
- 1,437

- 762
- 1,426
(-657)


- 432
- 5,546
150
378

57
- 1,073
- 944
253
- 842
- 106
- 202
- 1,494
- 1,640

- 1,004
- 2,974
(-2,001)


- 546 597
58 486
634 1,099

- 631 403


1,306
- 101
0
- 3,110
11
- 8,044


2,880
- 417
59
788
- 2,097
- 8,325


- 428
- 6,292
951
339

12,024
1,340
2,071
882
3,072
182
153
1,090
1,432

585
4,017
(-2,643)

779
1,955
1,461

455

3,134
- 1,316
806
- 539
- 79
- 7,766


- 347
- 8,018
194
555

14,127
1,167
5,901
998
6,985
122
165
- 1,223
- 2,097

- 574
- 7,576
(-5,303)

- 617
5,362
821

384

4,956
- 1,171
907
702
409
- 4,491


- 295
- 9,071
826
660

11,358
1,154
7,831
149
4,900
115
101
- 1,197
- 2,636

- 866
- 7,790
(-5,349)

- 551
5,774
309


-15,246 8,252
224,903 246,971


312 376 542 755


- 323
- 9,456
313
926

10,682
1,554
7,807
284
- 8,081
- 57
- 69
- 1,206
- 2,808

- 1,411
- 9,356
(-6,601)

- 474
7,043
- 10


- 228
- 9,922
- 44
553

7,688
- 1,261
- 8,846
657
-13,646
- 1,209
- 200
- 1,858
- 2,432

- 1,302
- 7,729
(-6,710)

- 1,091
3,658
1,025


- 30
-12,652
88
644

11,931
1,068
8,072
629
-11,479
- 292
- 359
- 1,540
- 4,175

- 1,609
- 6,743
(-4,545)

- 795
16,405
517


280 586 900 1,174 1,097


4,510
- 1,081
1,094
1
573
- 7,629


4,815
- 463
1,563
554
457
- 8,097


7,024
341
- 15
1,521
533
- 2,014


4,795
- 67
1,703
249
511
- 2,651


- 97
-11,268
986
476

9,085
- 1,114
-10,518
5,431
- 1,483
984
- 527
- 1,714
- 4,214

- 1,415
- 7,940
(-4,832)

- 891
10,821
- 12


1,$56
518
1,804
- 216
660
- 4,356








79.


This reduction in the country's food deficit
balance, however, provides no cause for complacency.
Analysis of the evolution of the individual product
balances shown in table III-18 shows that the improve-
ment in the total food balance is due to a few items
whose exports have increased substantially between 1955
and 1967. These items include fish (mostly shrimp),
the net export of which increased from -040,000 in.1955
to +011.9 million in 1966 (but which declined to 09.1
million in 1967); rice, from -01.4 million in 1955 to
+05.4 million in 1967; and unrefined sugar, from +058,000
to +010.8 million. While exports of fish and rice can
be expected to have a promising potential in the future,
the same is not true of sugar exports, which are limited
by the size of the U.S. sugar quota.


On the other hand, increasing deficits were ex-
perienced in a number of important food categories.
Significant and growing deficits during 1955-67 occurred
in dairy products (deficit up from 04.1 to 011.3 million),
wheat (from 0933,000 to 010.5 million), fresh and dried
fruits (from 01.4 to 04.2 million), and vegetables (from
01.4 to 07.9 million). Thus, it is clear that the im-
provement in the overall food deficit is not due to a
broadly based advance in the food producing sector, but
rather to the spectacular growth of three individual
products, one of which has no prospect for further
significant growth.


Conclusions

To summarize, historical trends show that:

(1) The agricultural sector has grown at a
significantly lower rate than the rest of the economyY/
and growth has not kept pace with population growth.


1/ This, however, is of little significance, per se,
as nonagricultural sectors must be expected to grow
faster as the economy develops.







80.


(2) There has been a very noticeable slowdown
if not a general stagnation of agriculture since 1962.
The immediate causes of the problem are the sharp de-
cline in cotton production, the weakening until recent-
ly of coffee prices, and the country's inability to
increase significantly its production of meat, dairy
products, cereals (other than rice), fruits, and
vegetables.

(3) The growth of the country's agriculture
over the past 12 years has been primarily dependent on
a few key products -- coffee, cotton, sugar, shrimp
and rice -- which are almost entirely responsible for
whatever gains were secured. Each of these has run
into either production or marketing problems in recent
years, accounting for the lack of growth of the agri-
cultural sector since 1962.

(4) Labor productivity in agriculture is very
low, only about 01,000 per year; this is only a third
or a fourth of the level in the nonagricultural sector.
It is estimated to be increasing by only 1.3 percent
annually.

(5) The food deficit (excluding coffee) has
shown a declining tendency during 1955-67, and is
currently quite low. However, this result must be
interpreted with great caution since (a) this improve-
ment was obtained as a result of the spectacular growth
of only three products, while the food deficit situa-
tion in several major food categories has worsened;
and (b) continuing increases in the rate of increase
of population could easily reverse the recently improv-
ing food situation unless ambitious programs are car-
ried out both to increase food production and reduce
the rate of population growth.


Factors in the Stagnation of Agriculture


The factors that impede the expansion of agri-
cultural production will be discussed in detail in
other sections of this report. Only a brief synopsis
of the major institutional factors believed responsible
for the lack of dynamism of the agricultural sector
will be presented here. Since most of thce factors








81.


are interrelated, any attempt to remove these institu-
tional obstacles to growth must involve a comprehen-
sive program designed to deal with all of them.


(1) Low levels of rural education, literacy
and health. Data from the 1961 census indicate that
64 percent of the rural population was illiterate, as
compared with 26 percent for the urban population.
The interrelation between education and productivity
is well-understood, and government planning calls for
a major effort in the educational field. Of equal
importance will be programs to substantially raise
nutritional and health levels of the rural population.
Programs in these areas now included in the Five-Year
Plan are not considered adequate.


(2) Insufficient resources are allocated for
agricultural research, extension, and higher technical
agricultural education. The importance of agricultural
research can hardly be overemphasized. Adequate re-
search is essential to develop the capability to re-
solve insect and disease problems, to develop varieties
resistant to diseases prevalent in the area, to develop
export products meeting required standards with respect
to quality and size, and, in general, to find the
answers to the whole range of problems that must be
solved for El Salvador to achieve a breakthrough in
agriculture.


Just one example emphasizes the importance of
research. The lack of suitable research left the
country's cotton crop exposed to the onslaught of
insects and diseases, neglect which is costing the
country some 020 to 030 million in foreign exchange
earnings annually. Nor can such research be simply
adopted from the developed temperate countries, because
significant differences in soil, climate conditions,
etc., do not permit transfer of varieties and agricul-
tural techniques from one region to another without
considerable local experimentation and testing for
adaptation to local conditions.







82.


(3) Inappropriate size of landholdings and
inadequate tenure arrangements. There are indications
that the majority of farms are too small for efficient
production, and some of the larger farms appear to be
larger than the size required for optimum operation.
Such a landholding pattern appears to have adverse
implications with respect to mass participation in the
process of development, as well as with respect to the
distribution of the benefits of such development.


A related problem is the limited extent of land
ownership, illustrated in table 111-2, together with
the absence of the long-term tenancy arrangements which
would guarantee stability of tenure to the farmer and
thus encourage investments in land improvement. Also,
the practice of demanding payments of rent in advance,
which reportedly occurs on 60 percent of the rented
farms,!/ reduces the farmer's working capital and,
thus, his ability to increase his productivity.


(4) Insufficient investment through irrigation
and drainage to increase the capacity of land presently
in use to produce more.


(5) Insufficiency and maldistribution of
agricultural credit. The data presented in table III-19
indicate that between 69 and 81 percent of the total
credit extended to the agricultural sector during 1964
-67 went to the three traditional crops -- coffee,
cotton, and sugar cane. The amounts made available for
vegetables and fruits were negligible. Other basic
difficulties with agricultural financing include
lending based largely on the available collateral, with-
out consideration of the productivity of the loan or
the ability of the user to repay the debt, a practice
which discriminates against small and medium-sized
farms; inadequate supervision of the actual use to which
the loans are put; undue slowness in the negotiation


1/ Ministerio de Agricultura y Ganaderia, Plan Quin-
quenal de Desarrollo Agropecuario, 1968-72, Page 11-28.




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