Citation
The economic potential for increasing vegetable production in the Zapotitan District, El Salvador

Material Information

Title:
The economic potential for increasing vegetable production in the Zapotitan District, El Salvador
Creator:
Zimet, David J. ( Dissertant )
Andrew, C. O. ( Thesis advisor )
Emerson, R. D. ( Reviewer )
Polopolus, Leo ( Reviewer )
Place of Publication:
Gainesville, Fla.
Publisher:
University of Florida
Publication Date:
Copyright Date:
1974
Language:
English
Physical Description:
ix, 104 leaves : ill. ; 28 cm.

Subjects

Subjects / Keywords:
Agricultural land ( jstor )
Agriculture ( jstor )
Corn ( jstor )
Crops ( jstor )
Employment ( jstor )
Imports ( jstor )
Irrigation drainage ( jstor )
Land use ( jstor )
Sugar cane ( jstor )
Vegetables ( jstor )
Agriculture -- Economic aspects -- El Salvador ( lcsh )
Dissertations, Academic -- Food and Resource Economics -- UF
Food and Resource Economics thesis M.S
Vegetable gardening -- El Salvador ( lcsh )
Genre:
bibliography ( marcgt )
non-fiction ( marcgt )
Spatial Coverage:
El Salvador -- Zapotitán

Notes

Abstract:
Two linear programming models with emphasis on vegetable production were used to maximize the annual net return to management and resident labor of the Zapotitan Irrigation and Drainage District. One model utilized vegetable imports implicitly and then specified an optimum enterprise combination for the District. A second model explicitly included vegetable imports to determine the ability of the District to compete with Guatemala. Demand specification in both models for crops grown in the District included: upper limits for vegetables equal to current production in the District plus imports; upper limits for fresh corn, tobacco, and citrus equal to present production; and no limits for milk and grains. All the solutions included large increases in the land used for pastures for dairy production and a more even distribution of vegetable production over the year. the results suggest that: 1) increases in vegetable production, particularly during non-traditional production periods when the District can compete favorably with Guatemala, would augment employment and income, but that limited domestic demand prevents vegetable production from having a major impact of employment, income, and the agricultural trade surplus; 2) sugar cane production in the District has adverse effects on employment and income, while contributing slightly to the agricultural balance of trade surplus; and 3) increases in pastures for dairy production by approximately 2,000 manzanas would have the greatest positive effect on land used in the District and the balance of trade by eliminating imports of dairy products.
Thesis:
Thesis (M.S.)--University of Florida, 1974.
Bibliography:
Includes bibliographical references (leaf 103).
General Note:
Typescript.
General Note:
Vita.
Funding:
Electronic resources created as part of a prototype UF Institutional Repository and Faculty Papers project by the University of Florida.
Statement of Responsibility:
by David Joseph Zimet.

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University of Florida
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The University of Florida George A. Smathers Libraries respect the intellectual property rights of others and do not claim any copyright interest in this item. This item may be protected by copyright but is made available here under a claim of fair use (17 U.S.C. §107) for non-profit research and educational purposes. Users of this work have responsibility for determining copyright status prior to reusing, publishing or reproducing this item for purposes other than what is allowed by fair use or other copyright exemptions. Any reuse of this item in excess of fair use or other copyright exemptions requires permission of the copyright holder. The Smathers Libraries would like to learn more about this item and invite individuals or organizations to contact Digital Services (UFDC@uflib.ufl.edu) with any additional information they can provide.
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37900529 ( OCLC )
ACZ2934 ( NOTIS )

Full Text
Dr. PETER HILDEBRAND UmAW PnRA omm mom n
INSTITUTO DE CIENCIA Y TECNOLOGIA AGRICOLM
THE ECONOMIC POTENTIAL
FOR INCREASING VEGETABLE
PRODUCTION IN THE ZAPOTITAN
DISTRICT, EL SALVADOR
By
DAVID JOSEPH ZIMET
Food and Resource Economics Departument
Institute of Food and Agricultural Sciences
University of Florida 1974




Dr. PETER HILDEBRAND COMONiADR PRIGRAMA. SOCIO [CONOMIA RURAL INSTITUTO DE CIENCIA Y TECNOLOGIA AGRICOLAS
THE ECONOMIC POTENTIAL
FOR INCREASING VEGETABLE
PRODUCTION IN THE ZAPOTITAN
DISTRICT, EL SALVADOR
By
DAVID JOSEPH ZIMET
A THESIS PRESENTED TO THE
GRADUATE COUNCIL OF THE
UNIVERSITY OF FLORIDA IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS
FOR THE DEGREE OF MASTER OF SCIENCE IN AGRICULTURE
UNIVERSITY OF FLORIDA 1974




ACKNOWLEDGEMENTS
The author wishes to express his appreciation to the
North Carolina State University Project, "The Potential for Vegetable Production in Central America and Mexico", its director, Dr. Richard Simmons, and the Florida Agricultural Experiment Station for making this thesis research possible. Appreciation is also extended to the members of the Supervisory Committee, Dr. C.O. Andrew and Dr. R. Emerson for their help in all phases of graduate study including this thesis.
The author is greatly indebted to Dr. P.E. Hildebrand for his supervision and assistance during the periods of research and document preparation. The support of the USAID/El Salvador, Agricultural Section, is also appreciated. The author is also grateful to the staff of the Department of Agricultural Economics at the Centro Nacional de Tecnologia Agropecuaria, most especially Rosa Maria de Florez and Maria Consuelo de Miranda for their aid in typing parts of the early drafts of this thesis. Thanks is also extended to Miss Beth Zimpfer of the University of Florida for her help in preparing the final draft and to Miss Jill Byrum for typing the manuscript.
The greatest appreciation is due to Jan, the author's wife, for typing the many pages of rough draft and for preparing the graphics. Most importantly, however, she withstood the author's dark days and nights with a smile, and presented a cheery countenance when all seemed bleak.
(ii)




TABLE OF CONTENTS
Page
AC N W ED E E T .
LIST OF TABLES . . . . . . . . . . . v
LIST OF FIGURES . . . . . . . .* . .. . vii
ABSTRACT . . . Viii*, .
CHAPTER
I. INTRODUCTION. 9 o a a so a
Agricultural Production Patterns. ,,.*,***
Vegetable mp t.., .. .. ,. Imprt
Vegetables in the Governm~ent Development
The Zapotitan Irrigation and Drainage District. .. 12
History and Land Use. ** 0 0..... 14
Credit o.* . o 0 0 *** 18
Marketing .... .. . 19
Technology... . . . ... 20
The Research Project. ........ ...... 21
Propositions .*.. .. *... .. 21
Objectives ,, ,,,, .,.,* 22
Organization of' the Thesis, 0 0 24
I I. METHODOLOGY . $, . . . 25.
The Conceptual Model. 0 a a a,,. .o... 25
The Working Model .. 31
Land Costs and Constraints, *,, 32
Credit Costs and Constraints~ .. . . 33
Labor Costs and Constraints .. ,,. 35
Demand Constraints. 37




CHAPTER Page
Imports . 39
Farm Prices. . . . 40
Net Return a 42
The Model and Analyses . 0 . . . . 42
Summary a . .... 44
III. RESULTS AND ANALYSIS . . . . . . . 46
Production and Land Use............... 47
Credit , . .. . . .. 55
Employment a 57
Income 62
Imports and Balance of Trade ....... .... 6
Policy Alternatives .. ..... .. 68
IV. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS . 73
Summary 0 73
Limitations of the Study. ... ........ 74
Conclusions and Recommendations......... 76
APPENDIX A a ., 82
APPENDIX B. . . . . . . . 85
APPENDIX C. . . . . . 92
APPENDIX D. . 97
GLOSSARY. . . . 102
LITERATURE CITED. ., 103
BIOGRAPHICAL SKETCH,, . . . .. ... 104
(iv)




LIST OF TABLES
Page
1. Salvadorean Agricultural Balance of Trade (1969,4972
Average) . . 0 5
2, Average Monthly and Annual Vegetable Imports,
1999-1972. .. . . 7
3. Months of Highest and Lowest Vegetable Retail
Prices and Highest National Production. . ... 8
4. Comparison of Production Costs of Selected Vegetables between Guatemala and Zapotitan
(Colones) 10
5. A Comparison of 1966-1969 Average Zapotitan Plantings to the 1972-1973 Crop Year in Selected
Crops .. ... . . . . 17
6. A Tableau of the Models . . ....... 26
7. Areas and Returns for Selected Enterprises in the Zapotitan District 27
8. Man-Days Available by Month for Employment within the Zapotitan District .. . . . 36
9. Summary of Credit Use (Colones) . . . .. . 56
10. Credit Use by Quarter (Colones) . . . 56
11. Labor Available and Labor Utilized Under Actual
Conditions and in the Models .. . . . . 58 12. Annual Labor Use by Product Group Under Actual
Conditions and in the Models .. .. . . 61
13. Income, Summary and Comparisons Under Actual
Conditions and in the Models ..... . . 63
14. Potential Changes in the Agricultural Trade
Surplus Indicated by the Models. . ... . 66 15. Summary of the Results from the Modelst Land
Use, Labor Use, Income and Trade Conditions. . 69 16. Vegetables in Which the Zapotitan District
can Compete . . . .. . 70
17. Vegetables Which Require Slight Yield Increases
for the District to Compete with Guatemala . 72
(v)




Page
18. Net Return from Import ........ ..... 86
19. Vegetable Import Values in Colones .. .. 93
20. Optimal Production in the Zapotitan District,
Non-Competitive Model . .. . . .. ... 99
(ti)




LIST OF FIGURES
Page
1. Map of Central America . . o . . 2
2. Map of El Salvador ........ .. ..... 13
3. Total land use in the Zapotitan District . . . 47 4. Non-competitive models well drained land use...a. 49
5. Competitive model with sugar cane: well drained
land use a a a 50
6. Competitive model without sugar canes well
drained land use ... 51
7. Non-competitive model poorly drained land use 52
8. Competitive model with sugarcane: poorly drained
land use a a a . . 53
9. Competitive model without sugar cane: poorly
drained land use. . . . .... . . 54
(viI)




Abstract of Thesis Presented to the
Graduate Council of the University of Florida in Partial
Fulfillment of the Requirements for the
Degree of Master of Science in Agriculture
THE ECONOMIC POTENTIAL FOR INCREASING VEGETABLE PRODUCTION IN THE ZAPOTITAN
DISTRICT, EL SALVADOR
By
David J. Zimet
June, 1974
Chairmanh Dr. C.O. Andrew
Major Departments Food and Resource Economics Two linear programming models with emphasis on vegetable production were used to maximize the annual net return to management and resident labor of the Zapotitan Irrigation and Drainage District. One model utilized vegetable imports implicitly and then specified an optimum enterprise combination for the District. A second model explicitly included vegetable imports to determine the ability of the District to compete with Guatamala. Demand specification in b9th models for crops grown in the District included: upper limits for vegetables equal to current production in the District plus imports upper limits for fresh corn, tobacco, and citrus equal to present production, and no limits for milk and grains.
All the solutions included large increases in the land used for pastures for dairy production and a more even distribution of vegetable production over the year. The results suggest that: 1) inareases in vegetable production, (viii)




particularly during non-,traditional production periods when the District can compete favorably with Guatamala, would augment employment and income, but that limited domestic demand prevents vegetable production from having a major impact on employment, income, and the agricultural trade surplus; 2) sugar cane production in the District has adverse effects on employment and income, while contributing slightly to the agricultural balance of trade surplus and 3) increases in pastures for dairy production by approximately 2,000 manzanas would have the greatest positive effect on land used in the District and the balance of trade by eliminating imports of dairy products.
Chairman
(ix)




CHAPTER I
INTRODUCTION
El Salvador, the smallest mainland country in Latin
America, is the only Central American republic that does not border on both the Pacific and Atlantic Oc eans, It lies in an east-west orientation with the Pacific being its southern border, Honduras forming the north and northeast border,and Guatemala forming the western border (Figure 1). The Gulf of Fonseca borders on Honduras and Nicaragua.
El Salvador differs substantially from other Central
American countries and Mexico in several important respects. With an estimated population of 3,800,000 (1~2) and a total land area of approximately 8,000 square miles (about the size of Maryland), the 1973 population per square mile was 471.7 persons, as compared t~o 101.8 for Costa Rica, 73.5 for Mexico, 133.2 for Guatemala, and 78.1 for Central America as a whole (12). El Salvador has almost no unused -land and suffers from very high seasonal unemployment and underemployment, During the coffee, cotton, and sugar cane harvest season from November through February, there is virtually no unemployment, yet unemployment during the rest of the year has been estimated to be at least twenty percent (2, p-3).
Even when compared to other Central American countries, its population growth rate is high at 3.2 percent for 1972197.3. For the same year, for example, the growth rate for Mexico was 3.3 percent, 2,7 percent for Costa Rica, 2.6




H-onuras j Atlantic Ocean
Salvador Y /
P-acific Oce-an
Nicaragua
Costa Rica
Panama Fiqure 1.Map of Central' America




3
percent- for Guatemala, 2,9 percent for Nicaragua and 3.2 percent for all Central America. (12).
Agricultural Production Patterns
Besides these important population and demographic
differences, the Salvadorean agricultural production pattern also differs from other Central American countries. Several enterprises which require some production activity on a yearround basis. Included in this group are sugar cane, cotton, coffee, citrus and other fruit, poultry and cattle. The egg production industry in El Salvador is one of the most advanced in Central America, Most of the cattle are dualpurpose, but specialty herds exist and are becoming more popular.
As is true for most of the Pacific coast of Central
America, El Salvador has a long dry season extending from November through April, The production of seasonal crops and the activities- related to their production have historically followed the rainy-dry season pattern, The bulk of the producers who follow this pattern plant corn when the rainy season begins in mid to late May. When the corn has matured, the stalks are doubled-over below -the ears and the ears are left 2,n the field to dry. Beans are then planted and the bean plants grow up the doubled-over corn stalks while the corn dries When tl -e beans have matured in early November as the dry season commences, the plants are cut and, spread out around -the field to dry, The corn is then harvested,. Following th bean and co~rn ha.rvest small farmers with no irrigated land leave their homes to wur'k in the




4
harvests of the three export crops: cotton, sugar, and coffee. Towards the end of February the harvesting slackens and it is curtailed by mid March.
Horticultural crop production also follows the rainydry season pattern. During the dry season, if irrigation water is available, vegetables are produced in large quantities with planting usually taking place in October or November. The dry season horticultural harvest also terminates in March. There is relatively little horticultural production during the rainy season. Owing to a higher incidence of disease problems on poorly drained soils, horticultural production at this time is limited to well drained soils. If no irrigation is available, planting does not take place until June because of the irregularity of the rain in May which may be insufficient to start a new crop. The rainy season harvest begins in July and is terminated in September or October.
Vegetable ImDorts
During the March-December period El Salvador imports
large quantities of vegetables primarily from Guatemala. In the 1962-1969 period, El Salvador had a fruit and vegetable trade deficit ranging from 4.3 million dollars in 1962 to 7.0 million dollars in 1968 (14, p. 75), approximately 7 percent of the total agriculturall imports (Table 1).
The figures for calendar years 1969 through 1972 reveal the wide monthly variation in imports, This wide variation can be seen for five heavily imported vegetables (onions, potatoes, cabbage, tomatoes, and carrots) in Table 2. The month of highest value of imports does not necessarily




5
Table 1. Salvadorean Agricultural Balance'of Trade (1969-1972
Average).
Product Group Value ( )
Coffee 247,150,000
Cotton 68,375,000
Sugar 25256,00ooo
Other 114,511,000
Total Export 455,292,000
Imports 76,082,250
Surplus 379,209,750
Source Banco Central De Reserva, Revista Mensual,
November, 1973.




6
correspond to the month with the highest volume of Imports due to price changes caused by gluts and the product is both purchased and consumed, even when it is to be exported to El Salvador (10, p. 3-21). A further stimulus for these attitudes and practices is that for many products Salvadorean produce sells at a higher retail price than Guatemalan produce.
Imports, retail prices, import volume and national production (Table 2 and 3) illustrate that prices vary substantially from month to month. This variation can be explained by differences in quality, cost of production, marketing margin, growing conditions, and/or transport costs between the two countries. Only when El Salvador has little or no production is the quality of Guatemalan produce better than Salvadorean produce. At other times Salvadorean produce is at least of comparable quality to the Guatemalan produce: for example, in July, El Salvador imports lower quality tomatoes primarily for cooking and processing and exports better quality salad tomatoes.
As there are no truly comparable cost of production
figures, it is difficult to compare costs of production in Guatemala and El Salvador. A comparison between weekly wholesale price differentialf in Guatemala and El Salvador reveals that wholesale prices are generally higher in El. Salvador than in Guatemala,-except when Salvadorean production is at its peak, This Is n indication that Salvadorean production costs might be lower than Guatemalan costs during parts of the year on a pe unit weight basis.




7
Table 2. Average Monthly and Annual Vegetable Imports, 1969-1972.
Onion Potato Cabbage Tomato Carrot
Annual Import:
CWT 35,388.5 162.091.5 156,136.5 43,593.0 42,696.5
Value (#) 120,044.50 418,803.00 186,613.70 68,800.40 79,083.80
Monthly Average:
CWT 2,944.04 13,507.63 13,00137 3,632.75 3,566.29
Value (V) 10,003.71 34,900.25 15,551.04 5,733.37 6,536.40
Highest Monthly
Import:
CWT 4,048.0 19,148.0 16,592,25 10,102.75 4,587.5
Month October September September December May
Value() 20,713.10 48,101,00 28,086.30 16,707.00 10,025.10
Month October January January December July
Lowest Monthly
Imports
CWT 1,733.75 5,131.75, 6,882.25 294.25 2,838.5
Month April March April Jul August
Value() 4v571.50 12,993.50 9,962.10 59 50 4,660.10
Month March March April July December
Sources: AnualL de Estadisticas and Noticias de Mercadeo Agricola.




8
Table 3. Months of Highest and Lowest Vegetable Retail Prices
and Highest National Production.
Month of highest Month of lowest Month of highest
Crop retail Drice retail price national production
Onion September April September-February
'Potato February September March-September
Cabbage April September February
Tomato February October March
Carrot June November August
Sources Noticias de Mercadeo Agricola.




9
The differences might also be influenced by marketing margins. Another indication of seasonally lower Salvadorean production costs as compared to Guatemalan costs is that although Guatemala has year-round production of most vegetables, at times it does import vegetables from El Salvador. Only cantaloupe, watermelon and tomato, however, show consistently high and regular El Salvador to Guatemala exports. Using available information on marketing losses and rudimentary cost of production figures (Table 4), it appears that El Salvador, through higher retail and wholesale prices, pays Guatemala a premium for vegetables that Salvadorean producers could, but do not, produce year-round. Much of the rest of this thesis will be devoted to this point.
Vegetables in the Government Development Strategy
Importation of vegetables seems to be an inadequate
solution to the seasonal supply and price instability pattern scarcities in Guatemala.
The problems of seasonal production and unemployment are a major concern of the Ministry of Agriculture. The May, 1972, market report shows that the price of potatoes had increased one hundred percent over the previous month. The report states "To have the products (vegetables) available during this time of year, would benefit the national producers, the consumer, and the country because of the decrease in flow of -esources abroad" (3, P. 9).
iLittle is known about marketing margins, and this author is reluctant to comment upon them.




10
Table 4. Comparison of Production Costs of Selected Vegetables between Guatemala and Zapotitan (Colones).
Product Guatemalaa Zapotitanb
Cucumber 0.53/box 0.54/box
Potatoes 4.43/cwt 3.89/cwt
Tomatoes 2.14/cwt 2.36/cwt
Cabbage 0.72/dozen 0.37/dozen
Onion 4.36/cwt 3.67/cwt
Carrot 0.10/d6zen 0.34/dozen
Sources: a1968 production budgets of Banco Agricola of Guatemala.
bThe production budgets used in this study.
4




El Salvador experienced a U.S. $56,000.00 balance of trade deficit in vegetables during that month as a result of the deficiency in national production (3, P. 17).
Because there is virtually no quality grading done in either Guatemala or El Salvador, the Guatemalan producers, wholesalers, and exporters are not pressured to deliver a quality product to El Salvador. The truckers, most of whom are Salvadoreans, face the same situation as the Guatemalans. One reason for this attitude is that the Guatemalan producers do not think it is necessary to handle vegetables carefully because in a relatively brief period they are shipped into El Salvador. Because of the problem of seasonal fluctuations in employment and vegetable prices, and the balance of payments deficits caused by vegetable imports, the Ministry of Agriculture has embarked on an agricultural diversification and import substitution program. Because vegetables are high yielding and are labor and land intensive (11, p. 5), the government has made increased vegetable production an important goal of its diversification program. The Ministry of Agriculture recently has been spending large sums of money on vegetable production research and extension. For example, the National Center of Agricultural Technology (CENTA) uses much of the land available to it for vegetable production research. This research is focusing on variety adaptation, optimum plant density, fertilizer levels, and disease and pest control methods, The National School of Agriculture has a large horticultural department which trains students in




12
vegetable production methods through the use of field work in which students have their own vegetable plots as well as through course work. Many of the foreign agricultural technicians and specialists who work directly with the Ministry or with CENTA devote much of their time to horticultural work. It is hoped that through this type of overall endeavor Salvadorean vegetable production will increase, employing more people, generating more income, as well as substituting for Guatemalan imports. An important part of the diversification effort is the Zapotitan Irrigation and Drainage District (henceforth referred to as the District) created by Legislative Decree No. 214 on January 20, 1972 (8, 0. 3).
The Zapotitan Irrigation and Drainage District
The District (Figure 2) is comprised of 4490 hectares (one hectare equals 2.47 acres) with a net of approximately 4,000 hectares being irrigated, and is favorabaly situated relative to the population centers of El Salvador. Its northwestern border is the Pan American Highway which connects the District to San Salvador, the capital and largest city, 30 kilometers to the East (one kilometer equals 0.6 miles). Santa Tecla, or Nueva San Salvador, the fourth largest city is 23 kilometers to the East of the District on the Pan American Highway. Forty-five minutes from the District to the West is Santa Ana, the third largest city. The southern border is the highway to Sonsonate, the fifth
largest city and about twenty,.five minutes from the District., The eastern border is the irod o1 Salvador,




A Santa Ana Zapotitan Valley
B San Salvador road road
C Nueva San Salvador
or Santa Tecla road r
railroad
D Sonsonate
Figure 2. Map of El Salvador




14
History and Land Use
On November 17, 1970 the Salvadorean Legislative
Assembly passed Decree No. 153, the first Irrigation and Drainage Law. The preamble to the law states: "Cons idering,
I. That the large population increase, relative to the
limited endowment of land and water, imposes upon the
Government of the Republic ..., the non-postponable
measure to increase agricultural production by using the said resources for the economic and social development.
II. That the lack of an appropriate law regarding Irrigation and Drainage is evident, for the orderly,
rational, and optimum use of water and the progressive
development of national agricultural and livestock. III. That the State must execute works that, because of
their magnitude, cannot be realized by private
initiative and that permit the development of irrigation and drainage .." (13, p. 1,2).
The law also made the Ministry of Agriculture responsible for the research a'd development, administration, and maintenance of any and all irrigation districts. Accordingly, the Ministry created the Division of Irrigation and Drainage which is ze' ponsble for the Zapotitan District as well as the development and administration of other districts
The second law peetai ilng to Irroigation created the
District. Land for' -ha Distric't ';Tas tui"edrd on August 20,




15
1934, by the Junta de Defensa Social (The National Social Defense Committee), presently called Instituto de Colonozacion Rural (The Institute of Rural Colonization). This land and that immediately adjacent were parcelled and transferred to rural families.
Land tenure circumstances in the District are separated because of Article 34 of the Irrigation and Drainage Law. This law states that the Ministry of Agriculture must be advised of any transfer of landtitle in an irrigation district within ninety days and Article 20 of the Law states that the Legislative Decree creating an irrigation district must set both amihi'iium and maximum on land holdings (13, pp. 12,14). The Law of Creation of the Zapotitan Irrigation and Drainage District set the Title limits on land at two to fifty hectares (9, pp. 15,16). It also stated that within ninety days of the creation of the District all land holdings had to reported to the Ministry of Agriculture.
From 1947 until February, 1971, eleven studies were published about the Zapotitan area. The first ten were designed to determine the agricultural potential of the region. When land use was determined in these studies, year-round horticultural production was highly recommended for at least some of the land, particularly the better drained, sandy and sandyloa soils, The other major clayloam and organic soil types were recommended for horticultural production only when drainage and water conditions permitted, including irrigationr n the dry season, The




16
most recent of these studies was "Proyecto de Desarrollo Agricola del Valle de Zapotitan" (Agricultural Development Project of the Zapotitan Valley), prepared by Tahal Consulting Firm, Ltd. (an Israeli firm) in 1970. The last study-was published in February, 1971, by the Ministry of Agriculture. Unlike the other ten studies, it deals with the economic and social problems instead of the technical aspects of an irrigation and drainage district or the agricultural potential of the region under irrigation.
Before the Zapotitan area was drained, vegetables were produced during the dry season, and corn and rice were the major crops during the wet season (Table 5). Vegetable production had always been important in the valley, and it was hoped that development would increase vegetable production significantly. Road construction was finished in late 19701 the drainage system was completed in 1971. The irrigation system is not complete as of this writing. The effects of drainage were large increases in area planted in sugar cane (from 242.0 hectares in 1968 to 693.3 hectares in 1972), vegetables, including fresh corn (from 224.0 hectares in 1968 to 456.0 hectares in 1972) and improved pasture (from none in 1968 to 450.0 hectares in 1972)s there was a sharp decline in the area used for YDatural pastures (from 1407.0 hectares in 1968 to 506 .S hectares in 1972). Although the District does not produce e as many vegetables as had been anticipated, it is the single most important vegetable producing region in 1 Saivado According to the ISIC-FAO diversification study in i9,0 the Zapotitan District relative




17
to the entire country encompassed approximately 24%, 84%, 31%, 43%, and 30% of the total area planted in tomatoes, potatoes, cabbage, cucumber and sweet pepper, respectively (11, pp. 12,25,29,30,36).
Table 5. A Comparison of 1966-1969 Average Zapotitan Plantings
to the 1972-1973 Crop Year in Selected Crops.
.1966-1969 Average 192-1973 Crop Year.
Cron Rainy Season Dry Season Rainy Season Dry Season
.....-.---- -- Hectares ----.............
Vegetables 169 224 515 456
Corn 886 3,018 1,172 100
Sugar Cane 242 242 693 687
Rice 802 --- 500 --Sourcet Department of Studies, Division of Irrigation and
Drainage.
The Irrigation and Drainage Division feels that the
high investment involved in creating the District requires that the land and water resources be used more intensively. They suggest -the production of crops that could be harvested at least three times a year and that require irrigation to maintain year-round production.
It is also generally beleived that vegetable production in the District is more profitable than other crops and livestock alternaive, :Furthermore, Ministry officials believe that if a series of restrictive conditions were removed then more vegetables would be produced and they would be produced year-round to decrease or eliminate imports. The restrictive conditions can be placed into three niabn categoriess credit, commercial or marketing problems, and extension or technical problems.




Credit
The Zapotitan Cooperative, (henceforth referred to as CODEZA), and the Agricultural Promotion Bank (Banco de Fomento Agropecaurio), a governmental agency, are the District's major sources of credit. To borrow money from CODEZA one has to be a land owner in the District and a member of the cooperative for at least three months. The interest rate is twelve percent annually and a loan is due, when used for production purposes, immediately after the product would normally go to market. Thus, storage is not encouraged and credit policy is not helping to reduce seasonal price variability. The Agricultural Bank makes eight percent interest loans to any land user in the District. The bulk of its clients are renters and small land owners. Bank And credit association loans, generally long term (a year or more)
and at twelve percent interest annually, are also available to the land owners of the District.
The credit available from the Agricultural Promotion
Bank and CODEZA, however, is not fully utilized. The Agricultural Bank for example had V385,000 (one Colon = U.S. $0.40) in loanable funds available to the District in 1972, and it loaned only V280,000. The 1973 loan goal is 0580,000 and it is expected that approximately 400,000 will be loaned. The cause of this problem is thought to be that "campesinos" are not accustomed to institutional credit, and request loans at the "last minute". any loans are not granted because a
loan cannot be authorized in the short period of time allowed




19
by the campesinos, To overcome this problem the Agricultural Bank is attempting to plan with each borrower his annual seasonal credit needs to it can in turn make the loan available upon the "campesinos" request. Marketing
Marketing of Zapotitan crops is carried out in several ways. The first is somewhat organized on a District level. There are six "centros de acopio" (gathering and selection centers) to which a producer can bring his produce. At these assembly points produce occasionally is graded and sized, and then sold to buyers who come to the centers.
Individual sales represent a second method including&
1) producer delivery of the product to the market 2) buyers going to the District to buy directly from producers; and 3) producer contracts with buyers to produce a given quantity of product which will be sold at the contract price. The last practice is least common.
A third major sales method is through cooperative
marketing. CODEZA sells produce for its members, generally acting as a sales representative and agent. A buyer, for example, will approach CODEZA representatives and say he wants a certain quantity of a particular product. The cooperative gathers the product from its members, arranges for the transfer to the buyers, and then pays the members who contributed produce, keeping a fee for itself. CODEZA also operates on open airre tail airket, but with limited sales, during the main dry season harven't period,




20
Producers', who have had their products rejected during the height of the traditional dry season production period, are reluctant to request credit for vegetable production during any part of the year. During this peak period, because of the glut on the market. buyers can afford to purchase only the highest quality produce. A product that is rejected then might readily be accepted during another time of the year. Thus marketing experience of some producers makes the job of the extension agent difficult as he attempts to promote year-round vegetable production.
The combination of good internal transport facilities and easy access to highways which connect the District to the rest 6f' the country greatly facilitate marketing of highly perishable products. The major roads, although unpaved, are all weather roads and connect to the country's major highways. Hence, for the District, roads are not presently a restriction to further development. Technology
Producers are likely to face crop failures- without
proper technical assistance, owing to the technical problems of disease, pests, and poor drainage which are common during the wet season. Because producers are aware of this they plant crops that they- know best, such as rice and corn, and which' are least subjec- to disease and marketing problems. .Improved prodution practices and better technology could presumaly change pteresent market situation of gluts and pearcities of Salvadoran proue Removal of this adverse




21
market'condition through more research'and extension activities could make the vegetable market more secure, thus enhancing the chance of further modification of the production pattern.
The Research Ero Jeet
Officials of the Ministry of Agriculture believe that increasing vegetable production in El Salvador is the most promising means for improving the present low rural income and employment situation, while improving El Salvador's agricultural balance of trade. Little is known, however, about the relative profitability and competitive situation of vegetables within the District, the District's ability to compete with Guatemala in vegetable production, and what conditions are necessary to make promotion of year-round vegetable production successful. Therefore, the remainder of this thesis studies the above three unknown situations for vegetable production in the District. Propositions
The following propositions areeiamineds
1) Is year-round vegetable production in the District
profitable relative to other crop and livestock
alternat ies?
2) Can the Distr .t compete with Guatemala in vegetable production?
3) WouWd increase Ig overall vegetable production and
reducing the cyclical tendencies
a) increase i~nome to the people of the District, and
b) increase employment in, th D.,str jVet?




22
4) Are credit supply, sugar cane production, extension
problems and marketing channels presently barriers
to increasing year-round vegetable production?
The existence and the extent of the last two
hypothetical barriers are not tested specifically in the thesis, If it is determined that vegetable
production is profitable relative to other crop and
livestock alternatives,, that the District can compete with Guatemalan sources, that there is enough credit
available for vegetable production, and that sugar
cane production does not affect vegetable production,
it can be assumed that a combination of the latter
two hypothetical barriers is in fact a barrier to
increasing year-round vegetable production.
_jbectives
The primary objective of the study is to determine the feasibility of expanding vegetable production and ascertain the effectiveness of doing so as a neans of reducing rural unemployment and increasing rural income, The Zapotitan District has been chosen as the study region since it is apparently the area, W.th most potential for vegetable production. The general procedures are the following%
1) Develop seasoial Production budgets for specified
crop and livestock enterprises in the Districtl
k) Dote riin the amount of credit available t the
Distit a.nd the credit of the specified crop and live tc I-k ;dtk to aid in deter-




23
mining if credit is a limiting factor of production;
3). Determine the present production patterns in the District and compare them with other possible
patterns
4) Determine present employment and income in the District for comparison with employment and income
effects of different production patterns,
5) Determine if year-round vegetable production is profitable and if so, how the present vegetable
production pattern could be changed;
6) Determine present vegetable import values to have a basis for comparison between the District and
Guatemalan sources;
7) Determine present vegetable import levels to aid in determining present vegetable consumption
8) Determine under what conditions and in what crops the District can compete with Guatemala in vegetable production.
9) Determine the effects of sugar cane production on other crop and livestock alternatives, income and employment, and the balance of trade because sugar
cane IS tie most rapidly expanding crop in the
District,,
10) Determine if a co bination of marketing and
extension problems limitvegetable production.




24
Qrganization of'-the Thesis
The methodology is described in the second chapter
which begins with a presentation of the concepts and assumptions that were used in constructing the economic model employed in the study. The workings of the model are then reviewed by explaining the constraints used, as well as the activities and the net return figures employed in the objective function. The final section of the second chapter explains how the propositions were evaluated.
After the model is reviewed, the outcome of the various situations are discussed in the third chapter. The results are presented to show the effects of different situations on
land use, employment, income, and the balance of trade. The policy alternatives are presented at the end of the third chapter. The fourth chapter begins with a summary of the analyses. After the summary, the limitations of the study
are discussed. Finally the conclusions and corresponding recommendations are given.




CHAPTER II~
METHODOLOGY
The Conceptual Framework
In accordance with the Salvadorean government's goals to decrease unemployment and increase rural income, an objective of the present study is to determine the potential for increasing employment and real incomes in the Zapotitan Irrigation and Drainage District. Special emphasis is given to increasing year-round vegetable production as a means of reducing imports, and increasing employment and income. Hence the study includes an analysis of the ability of the District to compete with Guatemalan sources of vegetable supply and its ability to maximize annual net returns to the people of the District.
Two basic linear programming models termed competitive and noncompetitive, are used in the research. The competitive model contains two separate situations based upon the inclusion and exclusion of sugar cane production. Linear programming Is used to maximize or minimize a given linear function (the objective function) subject to a given set of linear constraints (1, p. 592). The objective function of both models is the maximization of net returns to manage ment and resident labor in the Zapotitan District. This objective fnction i s the sum of the monthly volume demanded multiplied by farm price less production and/or import
25




26
costs, adding back the local (not migratory) labor charges used in production. The constraints are demand, labor, credit and land (Table 6).
Table 6, A Tableau of the ModelsaCompetitive Model Non-Competitive
Production Import Production
ConstraLnt/Objective Function + + +
Land + 0 +
Labor + 0 +
Credit + 0 +
Demand + + +
a/A + indicates a positive value or resource use and a 0 indicates that the resource is not used.
The activities in the competitive model which generate
income are production and import (Table 7 and Appendix A). In the non-competitive model only production activities generate income (Table 7),
When vegetable imports are explicitly included in the analysis, the Salvadorean demand must be met by either production or import. In the two situations of the competitive model producers of the District are considered to be purveyors who are responsible for supplying El Salvador with specific amounts of all vegetables. As such, to meet this demand the district can produce or import vegetables supplying the
required amount of a vegetable product at the greatAst income relative to the production or import of other vegetable and non-vegetable products. Thus, if it is more profitable




27
Table 7; Prices and Returns for Selected Bnterprises in the
Zapotitan District.
Code Farm Price Yield Gross
Product Month per cwt (cwt) Return
Colones Colones
Ayote (a squash) 10 10.00 80 800.00
Beets 10 3.00 560 1680,00
Broccoli 10 37 00 48 1800.00
Cabbage 10 2.66 650 1729.00
Cantaloupes 11 3.60 300 1080.00
Carrots 11 15,00 280 4200,00
Cauliflower 10 22.22 180 4000.00
Celery 10 20.00 210 4200.00
-Cucumber 10 4.50 4130 2002.00
Eggplant 10 5.00 720 3600.oo00
Guisquil (a squash) 12 6.60 880 5808,00
Lettuce 10 10.83 470 5808.00
Onion 10 10.00 380 3800.00
Sweet Pepper 10 15.00 200 3000.00
Pipian (a squash) 10 10.00 72 720.00
Potatoes 11 10.00 320 3200.00
Radish 10 4.00 280 1120.00
String Beans 10 30,00 64 1920.00
Processing Tomatoes 10 6.00 350 2100.00
Salad Tomatoes 10 7.50 300 2250.00
Watemmelon 11 2.10 715 1501.50
Baby Corn 11 10,00 84 840.00
Fresh Corn 11 1.40 336 470.00
Beans 8 30.00 22 660.00
Corn 5 8.00 75 600.00
Rice 5 10.00 85 850,00
Sugar Cane N.A. 1.06 2053.33 2176.53
Pastures N.A. N.A. N.A. 1920.96




28
Table 7. Extended.
Costs Less Net Return to Management (Labor) and Labor
(Colones)
274.89 525.11
383.06 1296.94
530.78 1438.92
459.78 1269.22
257.38 822.62
2757.49 1442-51
514.49 3485.51
469.56 3730.44
851.96 1150.04
308.48 3291.52
2162.11 3645,89
2767.86 2322.24
810.21 2989.79
1388,28 1611.72
177.72 542.28
884.84 2315.16
294.13 825.87
683.64 1236,36
419.68 1680.32
419.68 1830.32
392.72 1108,78
203.40 636.60
186.60 7283'.40
233.88 426.12
321.49 278,51
426.36 423.64
1402,53 774.00
850,90 1070o06




29
relative to the El Salvadorean market to produce cucumbers in July than it is to import theme but their production uses resources required for cauliflower production which is relatively more profitable within the District than cucumber production, then the competitive model dictates that the District will import cucumbers and produce cauliflower.
In the non-competitive model the people of the District
are not purveyors responsible for producing a specific amount of produce at the least cost relative to production and import. Even if the District is in a poor co mpetitive position relative to Guatemalan sources for a particular crop, the farmers might still earn more from producing that crop than from producing another. Thus, a model which includes imports only implicitly is also studied. In this non-competitive model it is assumed that the supply of any commodity not produced in sufficient quantity in the-District is imported but earnings from imports do not accrue to the District, This model determines the optimum product mix for the District, given the constraints and prices used. The solution of thenon-competitive model is more relevant from the point of view of the farmers while allowing for optimal enterprise combinations within the D1,7
In both the competitive :rid non-competitive models, it is assumed that production in the remainder of the country is static so that changes in supply from the District directly affect foreign exchange. The effect of an increase in vegetable production in the District, however, miight beat the




)0
expense of grain production, for example, causing an increase in foreign exchange expenditures for grain and perhaps worsening the overall balance of trade situation. Thus. the total effect on the balance of trade of the various situations is also analyzed.
The following are the basic assumptions upon which the analyses are based:
1) Constant prices: the prices of inputs and outputs do not change with changes in quantities
supplied or demanded.
2) Fixed demand: a deficit in quantities produced
compared to current demand must be filled by
import and represents a loss in foreign exchange
earnings# while an increase In production over
present levels substitutes for imports.
3) Import variations are affected only by production
in the District while production In the rest
of El Salvador remains constant.
4)Exports are not affected by production in the
District except for sugar cane, a special case.
This requires that the upper limits on production
be set equal to domestic demands.
5) The supply of chemicals, fertilizer and seed
is unlimited,
6)Production takes place In one year and there
are no multiple year crop rotations.




31
7) The level of technology used in the production
budgets will be in general use in 1975, and
thus 1975 is the target year.
8) An appropriate objective function to maximize
income to the people of the area is return to
management (as a residual) plus local (not
migratory) labor earnings. This combination does not favor management to the detriment of
the laborer, nor labor (employment) to the
detriment of the land owner.
The Working.Model
Each enterprise, excluding fruits, sugar cane, and dairy production, has several production budgets, each corresponding to a different planting date. The vegetables, excluding cabbage, lettuce, and onions, have six budgets each, representing a planting every other month. Onions are represented only five times, the April planting is excluded because of the photo period sensitivity of the varieties used in El Salvador. Beans are represented by five planting dates, corn by four, rice by six, and tobacco by three, The budgets are based upon budgets supplied by the extension agents of the District and the Department of Research of the Division of Irrigation and Drainage, Ministry of Agriculture. Unfortunately, these budgets are generally for October or 'November only and input levels are not always consistent with yields, as demonstrated by production experiments. Thus, the basic budgets




ISA




32
were revised when necessary to correspond to seasonal plantings. The monthly product price variations to be discussed later, as well as input variations, were specified to make the proper revisions.
All inputs, such as land, labor, credit, fertilizer,
pesticides and seed, represent direct costs. The costs.are based on the most current price available for the inputs. The levels at which fertilizer, seed, and pesticides are used are realistic but not optimum. That is, the levels are set at amounts which a farmer is apt to use in 1975 and not the optimum amounts determined by production experiments. Since land, labor, and credit ;re available in limited quantities which cannot be readily expanded, they also form constraints. The costs and constraints used in the models for these resources are discussed below, Land Costs and Constraints
The amount of land available is specified on a monthly basis with drained and poorly drained soils considered separtely. Well drained land in the District has an upper limit of 1035.66 manzanas (one manzana = .6 hectares) for each
--month, and the upper limit for poorly drained land is 4678.84 manzanas for each month. Rainy season vegetable production is limited to the well drained land, but dry season vegetable production is possible on either soil type. Production of livestock and all other crops is p rmitted on either land type.




0 33
The cost of land regardless of type is $300.00 per
manzana, per year, a rental fee fixed for the District by the Ministry of Agriculture. Land rental fees and use requirements for a product are adjusted by the products'length6f growing season. Because the seedbed and transplant practice is common, this method is represented in most of the production budgets. Thus, the land requirement for a crop that used a seedbed and transplant operation is reduced, but corresponding labor costs are present. Credit Costs and Constraints
Credit, like land, is separated into two groups. One
group represents the credit available via CODEZA and commercial loans, at a twelve percent interest rate. The other represents the credit available through the Agricultural Promotion Bank and has an eight percent interest rate.
The credit requirements in the models for an enterprise are set equal to sixty percent of the operating costs plus interest charges. The credit year is divided into quarters. Each production activity uses credit during the appropriate quarters, when a loan ha been repaid the money can be loaned again in the first full quarter after repayment. This arrangement corresponds to the actual situation described by the Agricultural Bank, CODEZA and the extension agents in the District.
To determine optimum credit use patterns, all credit is initially allocated to the first quarter. Any unused
credit can be transferred to the second 6v sucessive quarters




at no cost. Loan repayment is another source of credit for the second, third, and fourth quarters. If a crop has a short growing season, e.g. radishes, it can generate credit for the quarter immediately following the quarter in which it is required. For most products, however, the credit generated is not made available until the second quarter after it is required. There is a credit dumping activity in the fourth quarter to transfer unused credit to the following year. This credit, however, is not used by the model.
To avoid repeating all production activities, the eight percent funds are permitted to be increased by the twelve percent funds at an additional cost of four percent. This transfer of funds can take place only during the first quarter, but the money can be used in whichever quarter it is needed because of the inter-quarter, no cost transfer activities. The interest payment required from an eight percent loan is deducted from the gross return as a cost. Interest payments are considered to be part of the credit requirements the credit available to the District through the Agricultural
-Bank is increased by eight percent, to 0626,4oo from 580,000 to form the eight percent interest constraint and to avoid double counting. Similarly, the credit available at the twelve percent interest rate is increased from 5,427,5OO to %5,861,700. Of the 05,427,500 the amount available through CODEZA is 0427,5OO. The remaining V59000,000 is an estimate of the credit that is available to the District through commercial loans. If necessary, the twelve percent credit




35
constraint can be increased in the models to determine approximately how much credit is required by the District to maximize the annual net return to labor and management. Labor Costs an Constraints
Unlike lahd and credit, labor is assumed to be homogeneous. There are twelve monthly labor constraints calculated in number of man-days per month (Table 8). To form the constraints, the predicted number of economically active people in the District for 1975, reduced by ten percent to account for illness, lack of mobility, and imperfect knowledge on the part of the workers, is multiplied by the number of work days per month.
Excluding the labor required for the sugar cane -harvest, all labor is assumed to be from the District, Labor is migratory during the sugar cane, coffee and cotton harvest season and flows into the District to cut the cane. In November, 1972, approximately 64,000 man-days were required to harvest 650 hectares of sugar cane and plant, care for, or harvest other crops and livestock. Approximately 48,000 man-days, were available from the District for all tasks. If all the 34,000 man-days required for tasks other than. those related to sugar (.ne production were taken from within the Districtg 1 000 man-days would be available from the District to work s.gar cane The 14000 man-days is approximately forty-seven percent af the 30 000 man-days that were
required for the sugar 1v.v h .-v t Thus, he labor coefficients used in the mod>.. fo.r t.h I .e c -!st are forty-




36
Table 8. Man-Days Available by Month for Employment within
the Zapotitan District.
Month Work Days Man-Days Availablea-/
January 23 46,529
February 22 44,506
March 25 50,575
April 20 40,460
May 25 50v575
June 24 48,552
July 25 50,575
August 23 46,529
September 23 46,529
October 25 50,575
November 24 48,552
December 20 40,460
-4/2023 laborers multiplied by the work days per month equals the number of man-days available par month.




seven percent of the man-day requirements for harvest, which prevents the utilization of migrant labor for tasks other than the sugar cane harvest. This reduction is also reflected in the objective function. All labor requirements represent costs to management, but only forty-seven percent of the labor income for the sugar cane harvest is included in the Objective function.
Coefficients of the objective function are calculated by
adding labor costs to the net returns to management. Although the addition of labor costs to the objective function is not in strict accordance with mangerial profit motives expressed in economic theory, labor costs are included because of the desire of the government to increase employment. Also, approximately one-half of all land owners in the District supply their own labor in which case labor and management returns are one in the same. Labor costs are calculated at the rate of g2.857 per man-day, while the minumum Salvadorean agricultural wage is .275. The additional amount allows for over-time,
Demand Constraints
The vegetable demand constraints are equal to present production from the District plus total imports. To guarantee that Salvadorean demand is satisfied by either production or import, the constraints are equalities, forcing a comparison between the two alternatives. Baby corn, a corn that is approximately two inches long with tender kernels
and a cob whc is nmitd, a 1 un xPtion. Baby
corn production Is limited on~ly pr bound




38
Because baby cron is a speciality product with a
limited fresh market demand, its demand constraints are based upon the capacity of the largest baby corn processing plant in El Salvador. The corn is grown from a special seed, H-101, which is not used for other purposes. The monthly capacity of the processor is 2,000, twenty pound boxes. The constraint places an upper limit on production which is slightly greater than the capacity of the processor to account for limited fresh market sales and a newly founded processing plant. There are no imports recorded or allowed in the models for baby corn.
The non-vegetable products might or might not be imported, but their import is not explicitly accounted for in the models. The non-vegetable products are tobacco, citrus, peanuts, rice, beans, corn, plantains dry-lot and pasture milk production, and sugar cane. Citrusa, plantains, and tobacco production are not permitted to exceed, but can be less than, their present production levels in the District, Grain and milk production are not limited, Milk production is not limited because of the government's concern to increase milk
production and protein oonosumption, Zapotitan is well situated relative to thv major Salvadorean markets, :so milk, a highly perishable product, can be shipped to market without fear of spoilage, The consumption capacity for peanuts, determined by interview with and Israeli technician in El Salvador forms the uppr limit for peanut production. Sugar cane is treated d Iiffeentl in tha, present production levels
form the upper limit on production, ,cant did not




39
enter the solution of the competitive model on the basis of the crops net return, it is forced into the second solution at the present level of production.
For all crops present production was calculated as
the average seasonal production from November 1970 through October 19721 The production through this period was determined by studies conducted by the extension agents and Development of Research Division of Irrigation and Drainage. Import levels are determined from two government publications
(3,4).
Imports
In order to compare the District with Guatemalan vegetable sources, import activities are included explicitly in the two situations studied under the competitive model. The monthly per unit value of import2 plus ten percent for transport costs comprise the import costs used in the models (Appendix B). The gross return for import is the same as the .gross return for production, That is, the District receives the farm price for a product, no matter what source is used. Thus, the net return for import is equal to the farm price less the cost of import.
- The valu htPZ 'by dividing the monthly per unit value of import and the total v*lue imported of each 'vegetable by the total volume imported as reportedin the 1971 and 1972 editions of Noticias de Meroadeo Agricola and the 1969/1970 .nd 9'0/194 .dit .ons of the Anuario de Estadisticas AgropeCuaria,




40
Quality of imports as well as value of imports, had to be determined relative to the quality of the product from the District to know whether or not the produce from the District could be sold as easily as the Guatemalan produce. If it had been determined that produce from the District was inferior to Guatemalan produce, a reduction in price would have been necessary for produce from the District. Produce quality information was obtained from Salvadorean wholesalers and retailers and personal observation in El Salvador and Guatemala. It was determined that produce from the District is as high',in quality as the Guatemalan produce. Farm Prices
Unfortunately, Salvadorean farm prices have not been recorded or reported to any great extent. The production budgets that were supplied by the Zapotitan extension agents and the Department of Research, Division of Irrigation and Drainage report far m prices only for the plantings to which they pertain. Two methods to determine farm prices for the remainder of the yea were .sed The first method employed the wholesale prices of either San Salvador or Guatemala City as bases for comparisons with prices specified in production budgets. The fa.r price given in a production budget was used to form a ratir xith thi wholesale price for the harvest months in 'the Sn Salvdor central market, as reported by the Ministry of AgrLculture, When the Salvadorean wholesale price was unavailable, the Guatemala City wholesale




41
price was used. The ratio was then multiplied by the wholesale price of the harvest month in question, giving a farm price estimate. This method assumed a constant marketing
3
margin.
A symbolic representation of the method is:
FP x WPaiq FPiq
ai j
where FP the farm price of product
i in period j1
WPaj = the wholesale price of
product i in period j in country al
.- WP = the wholesale price of
aiLq product i in period q in
country al
FPiq= the farm price of product
I in period q,
a =, Guatemala or El Salvador,
and j q.
Interviews with wholesalers were the second method utilized in determining farm prices. Wholesalers in the central market in San Salvador were asked how much they usually paid for a given product in a given month. Since the wholesalers specialize in a small group of products or in a single product, the information obtained in this manner was thought to be reasonably accurate. The farm price was multiplied by
3
yield to determine the gross return for production.
Recent work has shown that Salvadorean prices are highly dependent on Guatemalan prices fov many products. Thus the author feels that the use of Guatemalan prices is justified.




42
Net Return
Gross return less product acquisition costs equals net return to management. The costs of product acquisition are equal to the total cost of production or the cost of import. For each production activity labor costs are added to this net return figure to determine net returns per manzana to labor and management in each growing season. Because imports require no resident labor, the net returns for imports are the coefficient used in the objective function for the import activities. In reality, the returns for imports do not accrue to the people of the District. To calculate the actual return to the District the sum of the net returns for import is subtracted from the maximized net return figure after the solution is obtained.
The Models and Analyses
When imports were explicitly included in the competitive model, all vegetable demand constraintsp excluding baby corn form equations, and a11 the non-vegetable demand constraints, including sugar cati foi. upper bound inequalities. A variation on the competitive model forced sugar cane pro..duction to be equal to Its present level. The second model, or non-competitive, did not explicitly include vegetable imports, The vegetabl demand constraints of those products
which are not produced 'in competitive model were changed to inequalities with, lowe:i' limit of zro and an upper limit equal to the len .. .. i hh the previous constraints were fixed. The second- model rIo s et the vegetable demand




constraints of those products which were produced in the competitive model unchanged (they had all been produced at their upper limits), Sugar production was forced into the solution of the non-competitive model, and the other nonvegetable demand constraints formed inequalities. It was assumed in the non-competitive model that all vegetables not produced in the solution would be imported, but income accruing from vegetable imports was not included in the objective function of the model.
To analyze proposition 1 the net return figures of the
budgets are examined to determine whether vegetable production is profitable. Then, the net returns to labor and management per manzana for all specified crop and livestock alternatives are used in the objective function of the non-competitive model to determine the relative position of vegetable production in the District., The competitive model evaluates proposition 2 by including vegetable imports in the objective function.
Proposition 3 is examined by comparing the estimate of present income and employment in the District and total vegetable import values to the income, employment and import levels in each of the runis Although imports are excluded from the non-compettiive model it is assumed that commodities not produced are imported so the import value for the noncompetitive model can be calculated.
The profitability of vegetable production, credit availability and the role oi sugar p t- a production relative to




44
vegetable production are the only part of proposition 4 that can be analyzed directly by the models. Market coordination and the ability of the District to compete with Guatemala are intertwined to some degree because of the marketing channels that now exist between Guatemala and El Salvador. If the competitive model indicates that the District can compete with Guatemala, then it could be said that a combination of extension problems, market coordination
-problems and the periodic presence of gluts are barriers to vegetable production in the District. On the other hand, if vegetable production is determined to be unprofitable in an absolute sense, unprofitable relative to the other crop and livestock alternatives or that the District cannot compete with Guatemala, the other partseof proposition 4 become irrelevant.
uMMary
The goal of this thesis is to determine the potential for increasing the employment and real income of the people of the Zapotitan Irrigation and Drainage District. Special emphasis is placed on determining the economic feasibility of increased year-round vegetable production, to improve the employment and income situation. To do this, the maxi.
*izationof annual net return to labor and management is used as the objective function in the linear programming models. The government desires to decrease agricultural imports. 'To determine whether or not the District can'compete with Guatemalan sources of vegetable supply, imports are explicitly included as alternative supply sources in the competitive model.




45
The constraints of the model are labor$ credit, poorly drained and well drained soils, and demand. Rainy season horticultural production is limited to the well drained soils, but dry season horticultural production and all other production can take place on either soil type. Thus when imports are included explicitly, the demand for a vegetable grown during the rainy season must be met by production on well drained land or by import, When imports are not explicitly included, and the vegetable demand constraints are inequalities (not equations) the demand constraint of a vegetable grown during the rainy season can be met by production on well drained soil, although production does not have to occur. Since demand must be satisfied, imports are implicitly included in the latter case.




CHAPTER III
RESULTS AND ANALYSIS
This chapter presents the results of the competitive
and non-competitive models by.showing how changes in assumptions and policy objectives affect product mix, land use, employment, income, credit, imports and the balance of trade. A comparison of the non-competitive model (no direct competition from Guatemala) with the actual situation is accomplished first. Then the non-competitive model is compared to the model in which vegetables from Guatemala compete with those from the District. Finally, the effect of eliminating sugar cane is studied in the competitive model. Also when appropriate, the competitive model is compared to the actual situation.
Production and Land Use
Land is used more fully and uniformly in the non-competitive model than it is currently being utilized (Figure 3)
4
as indicated by a land use index of 87 percent land utilization in the model compared to 62 percent at present. The major cause for this difference is an increase in pastures for dairy production to 6.84 times the current area devoted to pastures. There is also an increase in vegetable production during the latter part of the dry season and during the
The. land use index represents manzana-months used divided by manzana-months available,
46




47
r000
570 0 ACTUAL
5400 510 NON
COMPETITIVe 4000
WITH SUGAR CAN 4200 3900 3600 CAN'EIIV / 3300 3000
2700 2 400 2 100
19500 1 200
* 900
600 300
0 *
5 6 7 8 9 10 11 12 1 2 3 4. 5 Figure 3. Total land op Ii the,. Zapotitan District.




48
entire rainy season. Grain production decreases in the noncompetitive model. This causes greater uniformity in land use due to an increase in vegetable production, the most profitable enterprise alternative. The decrease in grain production permits more land to be used for the less labor intensive dairy enterprise which requires land throughout the year.
When competition from Guatemala is considered, there is not only a decrease in vegetable production, but also in corn, rice, and dairy production. The decrease in vegetable production occasioned by an inability to compete with Guatemala makes more labor available for the production of beans, the most profitable and labor intensive of the three grains considered. The large increase in beans, which is seasonal, causes a decrease in corn, and rice because these enterprises cannot compete favorably for labor and also a decrease in pasture because less land is available for pasture production (Figures 4,5,7t and 8). In all, less land is used in the competitive model (an 80 percent land use index compared toEV percent) and there is greater variation in monthly land use than in the non-competitive model (Figure 3).
When sugar cane is not produced, hnd use becomes less uniform and declines the year (Figure 3). Land
use intensity in the competitive model would decline to 76 percent without sugar cane from 80 percent with sugar cane.




49
m.1.055 MZS. AVAILABLE __1000/
945 \GRAND TOTAL /
690 835 780
660 605
SUGAR CANE S550
S495
440
U 35 -VEGETABLE SUBTOTAL
275
22'0 165
1 10 BEANS
PEANUTS_ .-O --.--~---~-~ --- -I ------ W2 3
Figure 4. Non- compe 2v model, well drain ed land use.




50
1110
1055IA~E______-__ _ _MZS.
1000
/ GRAND TOTAL
690/
.635 / I
700
725 660
605
W
!! 550 SUGAR CANE
495.
Li 440 3065
330BEN
220
165 VEGETABLEE SUS ITAL /
YOU 0 S PEANUTS'
0 ~--.-~- ~ 0~ 1 H 12 I 2 3 4
Figur moai wt iga0anes well




51
1110
mzs. 1055 MZS. AVAILABLE
8 000
945 / RAND TOTAL
090 835 780 725 660 605
W
E 550 495 BEANS
ui 440 PASTURE 330 275
220
f.6ETABLE SUBTOTAI, 165
PEANUTS
4
guir e W.itfio xt sugar eane a well




52
5000
m zs. 4750- MZS. AVAILABLE
4500 iGRANO TOTAL
4250
4000 /
3750 3500,
3250- PASTURE
3000 o 70 2500 2250
S2000
I750 1 500
1250
5 00'EN
250\/
... ........ ----ki I 2 I4
~ (~y ~ ne 'land




5000
MZS. 4750 M5. AVA LA8LE M 4LAND TOTAL
4500 4250 4000
3750
3500 /
3250
\ i
3000
2 750 PASTURE
C)
W
O
2500
22 50 .J 2000
0
I I 750 BEANS
1500
1250 I 1000
750 \VEGETABLE SUBTOTAL
500
250
SUGAR CANE
0 ... 'ACCO T
5 6 7 9 10 it1 12 I 2 3 4 5
-- 0 N TH .5 -. .
Figure 8, Competitive model with sugar canes poorly
drained land use.




514
WZ*. 4750 _MZS. AVILABLM _-4500A
4250
4000 GRAND TOTAL
3750 I
35001
3250 3000
2750,
D 2 2 5 0 P A S T U R
X 2000
0
0
9750
BEANS
I 500 1250 1000
750 VEGETABLE SUBTOTAL
500 CORN
2 50 I
fEA NUTS
0 rri I
5 6 7 a 9 90 II 12 92 3 4 5
.Figuxre 9 Competitive model without sugar cane:
poorly drained land use,




55
The decline is caused by a decrease in pastures, even though seasonal bean and corn production increase (Figures 5,6,8, and 9). Bean production increases because labor is no longer required for the sugar cane harvest, permitting plantings at times that would utilize labor during the sugar cane harvest period. The increase in bean production also requires some land that is used for pastures when sugar cane is produced. Thus, the release of labor by the sugar cane harvest to bean production permits beans to displace pasture. Vegetable production in these two situations is the same, showing that sugar cane production has no effect either on land used for vegetable production or the ability of the District to compete with Guatemala.
Land use intensity is greater in the competitive model with or without sugar cane than at present primarily because of the large increase in pastures (Figure 3). Vegetable production, although less than current levels on an annual basis, is more uniform throughout the year.
Credit
Although the total amount of credit required by the
models varies (Table 9), no model utilizes all of the credit
-available, The models require very little more than the %l,007,500 supplied by CODEZA and the Agricultural Promotion Bank in 1973. Because the relative quantities of credit vary directly with area, the pattern of credit use is the same in all of the models. The highest use of credit is during the first quarter followed by the fourth quarter (Table 10).




56
Table 9, Summary of Credit Use (Colones).
Non- Competitive Model
Competitive With Without
Model Sugar Cane Sugar Cane
Total Used 2,674,000 2,265,000 1,940,000
Less Generated 1,281,000 1,095,000 803,000
Net Used 1,393,000 1,170,000 1,137,000
Table 10. Credit Use by Quarter (Colones) Non- Competitive Model
Competitive With Without
Quarter Model Sugar Cane Sugar Cane
1 1,063,000 995,000 962,000ooo
2 320,000 175,000 175,000
3 518,000 544,oo000 225,000
4 773,000 561,000 578,000




57
Employment
Both models utilize more labor than is currently
employed, but the employment level in all is still relatively low (Table 11). Much of the increase is caused by the large increase (approximately 2,000 manzanas) in pasture for dairy production# even though it is a relatively low labor intensity enterprise.
Employment in the non-competitive model is approximately 23 percent greater than current employment and the index of
5
labor use intensity increases from 60 percent to 72 percent. The increase is caused by greater vegetable and dairy production which offset a decline in employment in grain production. Approximately 11 percent of the labor in the District is employed by grain production in the non-competitive model, yet at present over one-half of the labor-in
the District is so employed. The percentage of labor employed by vegetable production increases from approximately 15 percent to 4+0 percent (Table 12).
Employment from January through March and from June
through August is much greater than at present. The differences are caused by increased vegetable production in the late dry season (January-March) and in the rainy season as well as the large increase in dairy production.
The decrease in vegetable production that occurs
in the competitive model creates less labor demand during the
5The index of labor use intensity'-is specified as mandays used divided by man-days available.




58
Table 11,. Labor Available and Labor Utilized Under Actual
Conditions and in the Models.
Actual Man-Days
Month Man-Days Available in Non-Competitive Model
Used the Models Man-Days Used Percent
January 26,031.48 46,529.00 46,529.00 100.0
February 9,031.25 44,506.oo00 37,065.48 83.3
March 42,298.17 50,575.oo00 42,804.86 84.6
April 28,047.83 40,460.00 27,646.57 68.3
May 45,312.26 50,575.00 50,575.00 100.0
June 15,740.88 48,552.00 45,843.84 94.4
July 17,117.23 50,575.00 31,257.99 61.8
August 17,316.89 46,529.00 23,001.04 49 4
September 18,593.39 46,529.00 17,532.21 377
October 37,523.01 50,575.oo00 16,569.35 32.8
November 42,876.03 48,552.00 41,027.35 84.5
December 30,037.05 40,460.00 25,155.73 62.2
T 22.7 64417.00 405008.42 71.---------------------------------------------8-------TOTAL 329,925.47 564,417.00 405t008,42 71.8




59
Table 11. Extended.
Cometitive Model
With Sugar Cane Without Sugar Cane
Man-Days Used Percent Man-Days Used Percent
46,529.00 100.0 46,529.00 100.0
36,510.72 82.0 34,762 34 60.o
30,750.74 61.0 30,334.36 60.0
22,246.99 55.0 20,039.56 50.0
33,942.09 67.0 32,204.80 64.0
35,539.98 73.0 35,790.65 74.0
21,053.03 42.0 20,823.75 41.0
22,612.03 49.0 22,201.93 48.0
19,891.56 43.0 19,663.28 42.0
18,883.44 37.0 48,292.97 96 0
40,119.77 83.0 41,684.56 86.0
17,526.68 43.0 29,692.90 73.0
345,606.03 -------- --61.0 382-- ---------021.10 68.--345,606.03 61.o 382,021.10 68.o




60
first eight months of the year than in-.the non-competitive model and the labor index drops from 72 to 61 percent (Table 11). The decrease in labor required for vegetable production permits an increase in bean production which has relatively large labor requirements, although less than for vegetables. This shift in the enterprise mix due to labor availability makes less land available, causing a decrease in pastures for dairy production in the competitive model.
In spite of greater vegetable production in the noncompetitive model than in the competitive model, the differences in monthly labor requirements are not great during the last five months of the year. This is true because the influence of sugar cane production on labor requirements is greater than that of all other enterprises.
If sugar cane were not produced, local employment would be higher (Table 11) as indicated by a 68 percent labor index compared to 61 percent. The difference is due to increased bean and corn production. Without sugar cane, about 35 percent of the labor employed in the District is for grain production, while with sugar cane production only 6 percent is used for grains and there is a decrease in the' relative importance of peanuts and tobacco in reference to employment (Table 12).
The differences in monthly labor requirements when
sugar cane is not produced are great only for the last three months of the year because of the high amount of labor that is required for the cane harvest. Without sugar cane there




61
Table 1?. Annual Labor Use by Product Group Under Actual
Conditions and in the Models.
Baby and Sugar a
Situation Vegetables Dairy Grains Fresh Corn Cane Other
------------------ per cent-------------------Actual 15.45 3,54 52-30 16-57 10.08 2.06
Non-competitive Model 40.45 24.25 11.26 15.34 5.35 3.35
Competitive
Model with
Sugar Cane 17.69 24.32 6.06 18.71 6.27 26.95
Without
Sugar Cane 16.00 21.08 34-80 16.26 0.0 11.86
aTobacco, peanuts and fruits.




62
is a large October bean planting, with heavy labor requirements in November. Because of the large November labor requirements for sugar cane, bean plantings in October are nearly curtailed when sugar cane is produced. Because labor can be used more profitably in bean production than in dairy and the additional bean production requires land that, is used for pastures when sugar cane is produced, dairy production decreases when sugar cane is not produced.
Income
The total net return to the District increases relative to the actual situation by almost $1,400,000 or 38 percent in the non-competitive model (Table 13). Labor income is approximately 68 percent or $600,000 greater than current labor income because of the increase in vegetable production. Due to more intensive land use, the net return to management in the non-competitive model is approximately 28 percent greater than the current net return to management.
In the non-competitive model, a higher proportion of the nct income to the District is from labor earnings than in the actual situation. The non-competitive model displays this result because of an increase in the relative importance of vegetable production, which is labor intensive, and a decrease in the relative importance of sugar cane production, which produces high returns to management relative to labor. The, increase in the share of net income from labor earnings occurs inspire of the decrease in the relative importance of grain production which is more labor intensive than d~iry production.




63
Table 13. Income, Summary and Comparisons Under Actual
Conditions and in the Models.
Net Return
Labor Income to Mana ement Total
7A-ct ~2,597 2#647,470 3,590,07
% of Total 26.3 73.7
Non-Competitive
Model 1,582,387 3,378,637 4,961,024
% of Actual 167.9 127.6 138.2
% of Total 31.9 68.1
Competitive Model
With Sugar
Cane 1,154,473 2,290,893 3,445,366
% of Actual 122.5 86.5 96.0
% of Total 33.5 66.5
Without
Sugar Cane 1,433,804 2,728,610 4,162,413
% of Actual 152.1 103.1 116.0
% of Total 34.4 65.6




64
Relative to the non-competitive model the total not
return to the District decreases by approximately V1l,500,000 in the competitive model when sugar cane is produced. Labor income decreases by approximately 4O0,0OO and net return to management decreases in vegetables. corn, rice, and dairy production, but these income decreases are mitigated by increases bean production and by tobacco production.
Although labor income in the competitive model is approximately 0200*000 (23 percent) greater than current labor income the current net return to labor and management is approximately 0150,000 or 4 percent greater than the competitive solution.
For the competitive model total income to the District would increase by approximately /700,000 is sugar cane were not produced. Income of local labor would increase by P380, 000, and total labor income* that of migrant (not included.,in the model) and local labor, would increase by approximately V11l5,0OO. The net return to management is 0437,700 greater when sugar cane Is not produced than when it is produced because of increased corn and bean production. The net return to labor and management when sugar cane is not produced is greater than current net return to labor and management,
Total income earned by labor in both-solutions of the
competitive model. is less than in -the non-competitive model because of the decrease in relative importance of labor intensive vegetable production. Although the relative importance of grin production increases it is not sufficient to offset the decrease in income and employment from vegetable 'production.




65
Impots an h q.Ineo.
Both imports and exports are relevant to the role
played by the Zapotitan District in the balance of trade. The importation of three product groupings-vegetables, grains, and dairy products-is important in the models, Sugar cane is the only export crop considered.
Compared to present import levels, vegetable imports decline sharply, by nearly (904,.000 in the non-competitive model (Table 14). The number of vegetable products imported is also less as celery, cauliflower, and salad and cooking tomato imports are eliminated (Appendix C), Carrot, cabbage, guisquil, lettuce, onion, potato, string bean, and sweet pepper imports are greatly reduced, while only yuca shows a large increase in import value.
The increase in dairy production in the model is large enough to eliminate the importation of dairy products, presently valued at V12,357,200. Corn production is approximatley VlO0,000 less than current production, ,so corn imports increase appreciably. Rice imports increase by over 3'4,000 and bean imports also increase. Overall, the balance of trade improves by over 13,000,000 in the non-competitive model due almost entirely to the elimination of dairy product importation.
SThe need for dairy importation is also eliminated when competition from vegetable imports is considered. Vegetable imports increase sharply and are greater than current imports




66
Table 14. Potential Changes in the Agricultural Trade Surplus
Indicated by the Models.
Non-Competitive
Model Competitive Model
Without
With sugar cane Sugar Cane
Vegetables + 903,627.70 131,08 191.08
Corn 123,398.93 142,209,33 107,127.33
Rice 9,876.49 34,209.33 34,312.69
Beans 18,662,76 + 17,911.04 + 44,247.44
Dairy +12-357,200.00 + 12,357,200.00 +12,357,200.00
Sugar Cane 0.0 0.0 2,672,000,00
Total Change +13,108,989.52 + 12,198,397.94 + 9,587,816.34
% of Current
Agricultural
Trade Surplus 3.5 3.2 2,5




67
with the composition of vegetable impor :c changing compared to the non-competitive model (Appendix C). Imports increase markedly for carrots, celery, cucumbers, guisquil, lettuce, onions, sweet peppers, potatoes, string beans, and cooking and salad tomatoes. Corn, and rice imports increase, bean imports decrease, and no change is indicated for sugar cane exports and the imports of dairy products. The agricultural trade surplus is reduced by approximately gl,OOOOOO, caused primarily by an increase of over.0903,000 in vegetable imports.
Vegetable production is not affected by sugar cane production at present levels. Although dairy production decreases when sugar cane is not produced, sufficient milk would still be produced in the District to eliminate the need for the importation of dairy products. Corn production increases when sugar cane is not produced, causing a reduction in corn imports. Imports of corn in the competitive model without sugar cane are greater than current imports. As when sugar cane is produced bean production increases over current levels. In fact, the increase when sugar cane is not produced is so great that a potential for export exists. In neither solution of the competitive model is ibe. produced, causing an increase in imports to compensate for the decrease in production.
Sugar cane production is important when the balance of trade is considered. When sugar cane is not produced at present levels, there is a reduction in foreign exchange earnings of %1,672,000 with respect to sugar. Although




68
corn and rice imports increase, and the elimination of sugar cause an increase of over O9,50,OOO relative to the current balance of trade surplus, due to the elimination of dairy imports, but a reduction of over 02,600,ooo compared to when sugar cane is produced.
Polioy Alternatives
If vegetable imports were limited, land use, employment, labor income, net return to management and the contribution to the trade surplus would be higher than when vegetable imports are unlimited (Table 15). Much of the increase in land use is due to the increase in dairy production and 94 percent of the increase in the trade surplus is from replacing dairy imports. Prices paid by consumers for vegetables would increase to cover part of the increases returns created by import restrictions, when the District produces at costs in excess of those in Guatamala. The greater incomes, however, would improve the well being of consumers in the District and could provide an effective demand stimulus for other goods and thereby contribute to the development process. Relative to the entire economy, a policy to limit vegetable imports. would have a very minor impact and such a policy is also in conflict with the free trade goals of the Central American Common Market. For both these reasons it is unlikely that vegetable imports will be restricted. Hence, the ability, to compete with Guatemala becomes an important concern,
The District can compete- with Guatemala in the production of several vegetables whether or not sugar cane is produced (Table 16). Production of these vegetables would




69
Table 15. Summary of the Results from the Models: Land Use, Labor Use,
Income and Trade Conditions.
Non-Competitive Competitive Model
Actual Model With Sugar Without Sugar
Land Use 62 87 8o 76
Index
Labor Use 6o 72 61 76
Index
Labor a! 942.6 1,582.4 1,154.4 1,433.8
IncomeNet Return k 2,647.5 3,376.6 2,290.9 2,728.6
Management -Labor and
Management 3,590.1 4,961.0 3,445.4 4,162.4
Income a!
Change in
Balance? of --- +13,109.1 +12,198.4 +9,587.8
Trade-a
- /1,000's Colones.




70
Table 16, Yegetables in Which the Zapotitan District can Compete.
Product Months Planted
Beets April
June
August October
Cabbage January
February March October November December
February Cucumber February
April
Onion February
Potato February
Radish April
June
August October
Cooking Tomato February
Salad Tomato February
April June
August
Watermelon January
March September November
Yuca May




71
increase employment, labor income and net returns to management in the District. If slight yield increases were made in the production of several vegetables shown in Table 17 without increasing production costs--that is, if there is a shift in the production function rather than a movement along the function--the District could compete with Guatemala in producing these vegetables. If a competitive advantage can bt attained in producing these vegetables increases in land use, employment, labor income and net returns to management could be realimd without increasing costs to consumers. The research required to make this change would utilize many of the limited resources available to researchers in El Salvador and could thus delay possible advances in areas that might have greater effects on the varied development objectives of the government,
In a free trade situation with and without sugar cane
production, the District could contribute to the agricultural trade surplus by increasing dairy production. This increase would also serve to intensify land use in the District. Sugar cane production intensifies land use and adds to the balance of trade surplus, but it causes a decline in employment and income.




72
Table 17. Vegetables Which Require Slight Yield Increases for the
District to Compete with Guatemala.
Percent Increase in Yields
Product Months Planted With Sugar Cane Without Sugar Cane
Cabbage April 20.89 20.95
May 29.17 29.24
June 28.80 28.86
Celery April 25.71 25.73
June 27.09 26.86
August 13.38 16.54
October 7.05 8.12
December 12.12 16.46
Cucumber June 22.74 22.82
August 27.93 34.27
October 16.10 19.11
December 17.12 21.22
Guisquil January 5.23 5.48
Onion October 15.40 15,00
December 2.07 3.55
String Beans February 32.87 25.86
Sweet Pepper April 29.39 22.59




CHAPTER IV
SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS Summary
El Salvador has a very high population density and suffers from high seasonal unemployment, low rural income, arnd a generally deficient national diet. To improve the situation, the Ministry of Agriculture embarked on an agricultural. diversification program with emphasis on promotion of vegetable production. It is believed that increased vegetable production can improve rural incomes and employment while simultaneously improving -the balance of trade by substituting locally produced vegetables for Guatemalan imports, The primary objective of this study was to determine the feasibility of expanding vegetable production in the District, the most important vegetable growing area in the country, and to ascertain the effectiveness of doing so as a means of reducing rural unemployment and increasing rural incomes. Another objective was to define barriers to increasing vegetable production when vegetable enterprises were found to be economically feasible. A, third objective was to determine the potential of the Zapotitan Irrigation and Drainage District for producing sufficient quantities of vegetables to reduce imports..
Two linear programming models were used to maximize the annual net return to management and resident labor in the Zapotitan District and to determine the effects of increasing




74
vegetable production on employment and income as well as the balance of trade In the competitive model vegetable imports were considered explicitly to determine the competitive position of the District relative to Guatemalan vegetable supply sources. In this model the District received the farm price for a product whether it was produced or imported The cost of production, excluding labor costs, Was sub-. tracted from the gross return to determine the net return for importation. Thus, the supply source of vegetables that would maximize the net return to resident management and labor, given the resource limitations and other production potentials of the District, could be found.
The non-competitive model included an assumption that
vegetables not produced would be imported, but no income was earned from importation. This model is more analogous to the farm management situation of producers and permits determination of an optimum enterprise mix Without import
--competition. Thus, the District might not be able to compete with Guatemala in production of a particular commodity but this commodity could be a very profitable production alternative within the District itself.
Limitations of the Study
The assumption of constant prices combined with fixed
vegetable demands is a limitation of the study. A future study should hold either demand levels or prices constant and vary the other. Prices, technology, and consumption
change over time. Because of these changes this study should




75
be updated periodically. The prices of fertilizer and other
petroleum based inputs are greater than they were when the analyses were conduced so appropriate changes should be made to reflect these price increases.
The quantities forming the vegetable demand constraints are subject to question because of the reliability of the Import figures. The Salvadorean estimates of quantities and
values of the Guatemalan imports are not equal to the Guatemnalan export estimates. B ecause more Salvadorean data were available to the -author 'and the Guatemalan figures are not thought to be any more accurate than the Salvadorean estimates, Salvadorean data were used entirely. Work is presently being conducted to improve the quality of the Salvadorean information. The changes in information based upon this work should be included in a future study.
Another shortcoming of the study is the maximization
of the net return to management and resident labor. I t is possible, although the situation did not occur In this research, that an unprofitable, highly labor intensive enterprise would enter the solution, Other similar studies might maximize the net return to management and thus provide for comparisons between the two solutions. To maximize the net
return to management And resident labor and to then develop policy recommendations from the research presupposes that. the government can direct production patterns and enterprise combinations within the District. This is necessary in particular If returns to management conflict with returns to labor.




76
p 1usions and Recommendations
Limited domestic demand prevents vegetable production from having a major impact on employment, income and the balance of trade through import substitution. The increased production of certain vegetables, particularly during nontraditional production periods (Appendix D), would, however, increase income in the Zapotitan District. This holds even though the District can compete with Guatemalan supply sources in only a few vegetables during specific months (Table 16). Demand should be determined for those vegetables whose production would increase income and employment with particular attention given to vegetables consumed most frequently including cabbage, onion, potatoes, and tomatoes. Experiments to improve the yields of several vegetables where the District is in a poor competitive position relative to Guatemalan sources should be undertaken (Table 17).
Increasing the production of vegetables for exportation could serve to increase the employment and income effects of vegetable production. In the near future Quality Foods of Central America, Inc. will open a vegetable freezing facility on the outskirts of the District. The impact of this facility should be included in a future study which includes the potential for vegetable exports. At present levels of technology, labor limitations in key months restrict the potential for export of fresh vegetables to the United States.




77
As indicated by the amounts of credit required in the
models, there is sufficient credit available to the District for increasing vegetable production through credit generation via loan repayments. For credit to be effective requests for loans must be made with ample time for processing. Extension agents need to better inform producers about credit availability and procedures for requesting loans.
A recently completed study on the support services in the District, conducted by the Department of Research, Division of Irrigation and Drainage, shows that the extension agents visit approximately 60 percent of the vegetable producers at least once a week during traditional production periods. If these producers were to produce vegetables during the nqntraditional production periods, production in the District could increase greatly. The extension agents, therefore, must be able to deliver a complete package of technology for each season. To accomplish this task the extension service must work closely with the credit agencies and researchers, and have adequate personnel and transportation facilities to give the necessary coverage. A method of alleviating the' extension contact problem and for delivering part of the technical knowledge package would be well organized field days during various seasons and stages of the growth cycle. These field days would, 1) demonstrate to producers improved methods for producing specific vegetables, especially in non-traditional periods 2) emphasize costs, thus explaining credit requirements, and 3) illustrate the importance of




78
vegetable production as a means of augimienting employment and income.
The most important vegetable marketing problems to be considered are the present seasonal scarcities and the firmly established marketing channels with Guatemala during non-traditional Salvadorean production periods. If the present production pattern were changed, Salvadorean buyers would probably seek the closer source and buy from the producers in the District as they do presently during the traditional production periods. Such a change, however, would require a permanent and stable production pattern in sufficient quantities to meet the produce needs of the Salvadorean buyers. That is, a new production pattern must emerge with market dependability for both producers and buyers. For vegetables from the District that can compete with Guatemalan sources (Table 16), marketing facilities would require improvements to provide for year-round production.
An increase of over 2,000 manzanas in pastures for
dairy production would have a much greater effect on employment, income, and import substitution than an increase in vegetable production in the absence of export considerations. The increase should take place primarily on poorly drained land, replacing much of the seasonal corn and rice production.
Dairy production increases would require an expansion of the dairy herd lwvithin the District and the origin of these




79
cattle would be important to agricultu .al trade balances. If the cattle were from other parts of El Salvador, there would be no increase in the national dairy herd size. Similarly, a transfer of cows from one part of the country to another would not change trade balances. On the other hand, cattle importation would have a large adverse, but one time, effect on the balance of trade and potential long term benefits through import substitution effects of the projected increased milk production to the cost of cattle import.
An increase in the dairy production could also take
place because of dairy herd improvement it is recommended that credit and extension agencies promote herd improvement programs.
Officials of the Ministry of Agriculture are planning to promote livestock and grain enterprises in the recently created Atiocoyo Irrigation and Drainage District. A study should be made which includes the Zap6titan and the Atiocoyo District as competing and complimentary sources of dairy products.
Sugar cane adversely affects employment and income in
the District. When approximately 600 manzanas of sugar cane are produced (equal to present production levels), resident employment declines 10 percent and total employment, including migratory labor, decreases by 4 percent from the hypothesized situation when none is produced. The net return to management decreases by 16 percent and earning to the




80
District, including net returns to management and resident labor income, decreased by 1?7 percent W~717,000). Reasons for the increase in amount of sugar cane production in the District have not been determined so further research is. recommended to better understand this trend.
Labor requirements of the sugar cane harvest necessitate
a reduction in the production of beans and corn. The decrease makes more land available for the entire year, permitting an increase in pastures used for dairy production. Recently, Ministry of Agriculture officials have stated that they want bean production in the District and in El Salvador as a whole, to increase (6, P. 3). An increase in production can take place if sugar cane is produced, but the increase would be less than if sugar cane were not produced. The increase when sugar cane is produced would cause a reduction in vegetable production-because bean production would then compete for labor at the beginning of the dry season. Because of the adverse effects of sugar cane production,
-th is research suggests that cane production should not be expanded in the District. Although sugar cane production in the District accounts for over 02,600,000 In foreign
exchange earnings, the production from the District is relatively unimportant to total foreign exchange earnings (Table 1). Thus, given the income and employment objectives of the government it appears that sugar cane production in the District can be reduced or eliminated without creating trade problems.




81
Grain production uses labor that is made available by changing conditions in the models and acts as a buffer to extremely low employment. When dairy production increases, grain production declines in the models because these enterprises compete for land. If grains are to become more important, their profitability must increase. That is, yields and/or prices must increase, yet present domestic prices are high relative to world prices. Thus, research and extension programs are needed to increase yields if the desire to augment grain production is to be fulfilled without adversely affecting Salvadorean consumers.' It should also be noted that the use of labor for increased vegetable production causes a decline in grain production and that grains do not compete favorably with vegetables for labor.
In summary, vegetable producti6n can increase in the
Zapotitan District, and thereby employ more people, increase incomes, and substitute for imports. Vegetable production increases, in the absence of extensive exports, cannot solve the rural unemployment and ,income problem. At present, vegetable imports are relatively unimportant to the balance of trade. Thus, vegetable production research and the research related to vegetable consumption levels may be of lower priority than research on dairy herd improvement and expansion. Relative to employment and income, however, the importance of vegetables could increase if exports (expecially to the United States) were to increase suggesting that research oriented toward export'demand potentials is necessary.




APPENDIX A




83
A symbolic representation of the model ist Maximize Piq Y.iq + Siq Ziq + Iiq Xiq
iq iq iq iq iq iq Subject to A iq(Yq + Ziq < B
C q(Y + Z) < D
iq iq iq q
Eiq(Yiq + Zq) < F
iq iq iq q
G iq(Yiq + Ziq) < Hr Yq + X = Lq (competitive model)
or Yiq < L (non-competitive
- model)
Zq N
z ~ iq- iq
1 == 1,2,... ,12
r = 1,2,3,4
Where
P = the net return to labor and management per maniq zana for producing vegetable i in period qI
Y = the quantity of vegetable i produced in period q:
iq
S = the net return to labor and management per manzana
iq for producing non-vegetable or baby corn i in
period q;
Z = the quantity of non-vegetable i or baby corn
iq produced in period qI
I = the net return per hundred weight for importing
iq vegetable i in period qI
Xiq = the quantity of vegetable imported in period qt
A = the labor required to produce product i in period
qi
B = the labor available in period qI
C iq the well drained land required to produce product
i in period qI
D = the well drained land available in period q#




84
Eiq prd c np rothe poorly drained land required to produce
F q =the poorly drained land available in period qj G iq eidthe credit required to produce product i in
Hr =the credit available at eight percent in
quarter rl
L q =the quantity of vegetable i demanded .in period qt
N iq the quantity of non-vegetable i or baby corn
Niq demanded in period q.




APPENDIX B




86
Table 18. Net Return from Import.
A B C D E F
Product Month Import Value .10 C Total Im- Farm Price
Planted per cwt. port cost per cwt.
BEETS October 2.98 .30 3.28 3.00
December 3.05 .31 3.36 2.85
February 3.16 .32 3.48 2.85
April 2.84 .28 3.12 2.93
June 2.00 .28 3.08 2.70
August 2,66 .27 2.93 2.70
CABBAGE October 3.13 .31 3o44 2.66
November 2.26 .23 2.49 2.92
December 2.65 o27 2.92 2.75
January 2.69 .27 2.96 2.42
February 2.47 .25 2.72 2.16
March 2.49 .25 2.74 2.50
April 2.37 .24 2.61 2.42
May 2.17 .22 2.39 2,33
June 2,17 22 2.39 2.42
July 2.16 .22 2.38 2.58
August 2.09 .21 2.30 2.50
September 3.11 .31 3.42 2.50
CANTALOUPE November 2.4o .24 2.64 3,6o
May 3.12 .31 3.43 4.50
July 5.18 .52 5.70 9.00
September 4.36 .44 4.80 4.50
CARROT November 2.89 .29 3.18 15.00
January 3.06 .31 3.37 16.25
March 4,31 .43 4.74 17.00
May 2.97 .30 3.27 18.75
July 2.68 .27 2.95 17.25
September 2,75 .28 3.03 16.75
CAULIFLOWER October 2.67 .27 2.94 22.22
December 2.66 .27 2.93 26.10
February 2 84 .28 3.12 28.33
Arpil 3.39 .34 3.73 26.10
June 2.99 .27 2.96 22.22
August 8.26 .83 9.09 23.35
CELERY December 4.45 .45 4.90 26.00
February 4.26 .43 4.69 24.00
April 4.05 .41 4.46, 18.00
June 372 .37 4.09 240
August 6,59 .66 7,25 22.00
October 3.62 .36 3.98 20.00




87
Table 18. Extended,
Net Return Months
for Import Consumed
-0.28 12-1
-0.51 2-3
-0.64 4-5
-0.19 6-7
-0.38 8-9
-0.23 10-11
-0.78 1-2
-0,43 2-3
-0.17 3-4
-0.54
-0.56 5-6
-0.34 6-7
-0.19 7-8
-0.06 8-9
0.03 9-10
0.20 10-11
0.20 11-12
-0.92 12-1
0.,96 2-3
1.07 8-9
3.30 10-11
0.30 12-1
11.,82 2-3
12.88 4-5
12.26 6-7
15.48 8-9
16.30 10-11
13.72 12-1
19.28 12-1
23.17 2-3
25.21 4-5
22.37 6-7
19,26 8-9
14.26 10-11
21.10 4-5
19.31 6-7
13.54. 8-9
19.91 10-11
14.75 12-1
16.02 2-3




88
Table 18. Continued.
A B C D F
Product Month Import Value .10 C Total Im- Farm Price
Planted per cwt. port cost per cwt.
WATERMELON November 2.29 .23 2.52 2.10
January 2,36 .24 2.60 2.10
March 1.89 .19 2.08 3.15
September 5.81 .58 6.39 2.8
GUISQUIL August 2.86 9 3,15 6.60
December 3.14 .31 3.45 6.60
April 3.56 .36 3.92 6.60
September 3,14 .31 3.45 6.60
January 3.56 .36 3.92 6.60
LETTUCE September 2.70 .27 2.97 10.00
October 3.94 .39 4.33 10.83
November 3.22 .32 3.54 13.33
December 3,27 .33 3.60 12.50
January 2.77 .28 3.05 1167
February 2.42 .24 2.66 10.83
March 2.46 .25 2.71 10.00
April 2.94 .25 3 23 7.50
May 2.51 .25 2.76 8.33
June 2.51 .25 2.76 9.17
July 2.81 .28 3.09 9.17
August 4.61 .46 5.07 10.00
ONION August 4.46 .45 4.91 8.00
October 4.32 .43 4.75 10.00
December 5.07 .51 5.59 11.20
February 9.36 .94 10,30 1l.65
June 4.40 .44 4.84 -8.65
POTATOE November 4.04 .40 4.44 10.00
January 4.12 ,41 4.53 11.05
March 3.56 .36 3.92 8.55
May 3.86 39 4.25 6.05
July 4.25 .43 4.68 8.05
September 3.75 .38 4,16 6.70
RADISH October 3 74 .37 4.11 4.00
December 3.00 .30 3.30 5.00
April 22,50 .25 2.75 3.00
June 1.00 .10 1.10 8.00
August 3.73 .37 4.10 8.00
SWEET PEPPER October 4.25 .43 4.68 15.00
December 5.12 .51 5,63 17.59
February 3,95 .40 4.35 11.25
April 3.80 .38 4.18 12.15
June 6.O0 .60 6.60 12.64
August 3.31 .33 3.64 15.41




89
Table 18., Extended.
G
Net Return Months
for Import Consumed
-0.42 1-2
-0.20 3-4
1.07 5-6
-3.59 11-12
3.45 2-5-8-11.
3.15 3-6-9-12
2.68 1-4-7-10
3.15 3-6-0-12
2.68 1-4-7-10
7.03 1
6.50 2
9.79 3
8.62 5
8.17 6
7.29 7
4.27 8
5.57 9
6.41 10
6.08 11
4.94 12
3.09 2-3
5.25 4-5
5.62 6-7
1.358;
3.81 1
5.56 3-4
.652 5-6
4.63 7-8
1.80 9-10
3.37 11-12
2.54 1-2
-0.11 11-12
1.70 1-2
0.25 5-6
6.90 7-8
3.90 9-10
10.32 12-1
11.96 2-3
6.90 4-5
7.97 6-7
6.04 8-9
11,77 10-11