Abbreviated economic analysis of the small farmer development project (520-T-0233)

Material Information

Abbreviated economic analysis of the small farmer development project (520-T-0233)
Series Title:
Office of Rural Development report
Smith, Gary H
USAID/Guatemala -- Office of Rural Development
Place of Publication:
Publication Date:
Physical Description:
iv, 44 leaves : maps ; 28 cm.


Subjects / Keywords:
Cooperative marketing of farm produce -- Guatemala ( lcsh )
Vegetable trade -- Guatemala ( lcsh )
federal government publication ( marcgt )
non-fiction ( marcgt )
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General Note:
"Prepared for AID/Guatemala under Budget Allowance No. COEA-83-25520--U000."
General Note:
"May 1983."
General Note:
Includes 4 folded map sheets.
Report (USAID/Guatemala. Office of Rural Development) ;
Statement of Responsibility:
Gary H. Smith.

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0o. 7q'-/




Office of Rural Development
Report lo. 6

Gary H. Smith

May 1983


Prepared for AID/Guatemala under
Budget Allowance No. COEA-83-25520-U000

Office of FRral Development
Report No. 6


Gary H. Smith

Mhy 1983









A. Background
B. Conceptual Framework
C. Field Work
D. Sites Visited

A. Short-term Costs and Benefits
B. longer-term Costs and Benefits
C. Recommendations


Short-term Costs and Benefits
longer-term Costs and Benefits

A. Short-term Costs and Benefits
B. longer-term Costs and Benefits
C. Recommendations

A. Conclusions
B. Recommendations




Because the original plan to conduct a four-week evaluation of Project
520-0233 with a four-man team was reduced to a three-week study by a one-man
"team", the author had to make some drastic compromises with methodology.
These included rapid visits to three or four sites for each type of activity
(access roads, soil conservation, small-scale irrigation) and quick, informal
interviews with participating farmers and other rural inhabitants to get their
impressions of changes in agricultural yields and sales, family earnings, and
other activities. Although the data were not always detailed and exact, at
least they indicated orders of magnitude. If the information obtained from
more than one source was consistent, it was accepted; if inconsistencies
appeared, the alternative least favorable to the activities in question were
chosen in order to reduce excessive bias in favor of the Project. In brief,
the findings were as follows:

1. Rural Access Roads

bad sub-projects in Region V tended to favor non-farmers.
Commercial activities depending upon roads restaurants, stores,
transportation firms -- and upon outside sales (including tourism)
did well in the sites visited. Farmers producing only for family
consumption before roads were built did little better afterwards,
since transport costs had not been their main production constraint.
However, instances were noted where, had the road been accompanied by
other infrastructural improvements and technical assistance for the
farmers (e.g., soil conservation and snall-scale irrigation), the
favorable impact of roads would have been much greater.

S Roads built under the Project have held up very well structurally,
and they have been reasonably well maintained, although some local
residents complained of problems during the rainy season on steep


In parts of Region V and most of Region I, roads have contributed to
increased agricultural activity. Savings in time previously needed
to travel to markets over poor trails (about one person-day per week
per family) and in transport costs resulted in up to 30% more produce
getting to market in Region I.

An unintended negative impact appears to be accelerated deforestation
in some Region V sites as increased sales of charcoal and firewood -
usually to truckers using the new roads -- have begun to deplete
local forest resources.

2. Soil Conservation

Where traditional crops continue to be raised on terraced land,
output has risen by approximately 100%. The principal effect has
been to reduce the amount participating families previously had been
obliged to buy of staples such as corn, beans and squash, with little
resulting change in dietary patterns or sales.

Where non-traditional crops (mainly vegetables and sane fruits) had
been grown prior to terracing, yields have risen an average of 50%
with terracing. Increases in cash earnings have been roughly

Beneficiaries seem to be enthusiastic about terracing, taking pride
in their work and frequently extending terracing without social

3. Small-scale Irrigation

In Region I all irrigation sites obtained water by gravity flow from
springs via plastic piping to sprinkers. Where farmers have used
irrigation to plant new vegetable and fruit crops, they have been
able to get up to three harvests per year. Their earnings per unit

- ii -

of land rose by as much as ten times the first year, ultimately
stabilizing at levels approximating 600% of the pre-Project earnings
from sales of traditional crops. Here farmers continued to plant
traditional corn and beans, total output increases were reported to
be about 150% due to the harvesting of a second, dry-season crop and
a small (up to 20%) increase in overall yields due to a more
regulated water supply. In some instances, it appeared that such
farmers could benefit from assistance in diversifying their crops.

Half of the sub-projects in Region V are serviced by electric pumps
lifting water from nearby rivers. In such instances, electricity
costs become an important cost of production, and there seems to be a
problem with reliability of same pumps. Judging from experience in
Rincon Grande and Santa Maria Cauque, the larger the sub-project, the
better it is able to handle large electricity bills. In these two
sites costs, while high, were offset by high returns from such
non-traditional crops as strawberries, snow peas and chrysanthemums.

In some instances (e.g., Lo de Silva in El Progreso Department) the
favorable impact of gravity-flow irrigation is offset by poor access,
excessive dependence upon traditional crops, and other related

S In most instances gains in earnings have been at least 20% for farms
with cash crops, and yields of corn and beans have approximately
doubled for those participating farms which still fall within the
"semi-subsistence" sector.

4. General Conclusions

S Maps prepared by Marko Ehrlich showing locations of soil
conservation, small-scale irrigation, and rural access road
activities indicate little overlapping; that is, sub-projects are
rarely combined in one site. Instances were observed where impacts
on yields and earnings would probably have been much greater had
there been a more "integrated" approach.

- iii -

- The pending AID Small Farmer Diversification Systems Project
(520-0255) logically should be coordinated with soil conservation,
small-scale irrigation, and rural access road activities. The
largest gains in earnings were found in areas where irrigation was
combined with crop diversification.

Marketing considerations will become increasingly important as farm
output continues to rise. Farmers have already noted that second and
third-year price levels have significantly declined from high
first-year levels, although not sufficiently to offset net gains in
post-Project earnings. They have become aware that, within any given
year, varying sowing and harvesting times helps "iron-out" seasonal
price fluctuations. Strategies should be developed for maintaining
existing markets and finding new ones for Project farmers.

- Future evaluations will be greatly improved if baseline studies are
undertaken before work begins on new soil conservation, small-scale
irrigation, and rural access road sub-projects.

- The 'bottom line" is that all three kinds of sub-projects should be
continued and expanded. The farmers accept them enthusiastically,
and even in "worst-case" scenarios (where high costs and low gross
earnings are assumed) real income gains have been substantial (e.g.,
20% per year and greater). However, future sub-projects should be
coordinated, crop diversification and marketing considerations should
be given heavier weight than in the past, and systematic data
collection from sub-project sites should be instituted, preferably
under the supervision of the Ministry of Agriculture's Office of
Sectoral Planning (USPADA) in cooperation with USAID.

- iv -



A. Background

During the three-week period May 2-24, 1983, I undertook an evaluation of
three components of the AID Small Farmer Development Project (520-0233),
specifically, soil conservation, small-scale irrigation, and rural access
roads. At the outset, I should like to clarify the limitations which affected
my evaluation.

First, I was a participant in the early stages of the Project from 1977 to
1981 as an advisor to the Guatemalan Ministry of Agriculture's Sectoral
Planning Office (USPA, now USPADA). In that role, I spent considerable time
in the field with the Project's soil conservation advisor (Jerry Arledge) and
the irrigation advisor (Bert Embry). I formed a strong opinion at that time
in favor of continuing and expanding the conservation and small-scale
irrigation components, and I expressed that opinion during USAID/Guatemala's
preliminary Country Development Strategy Statement (CDSS) meeting in January
1981. Consequently, I could be subject to the charge of bias in the present
evaluation report.

Second, there was to have been a four-person team for this evaluation for
which I was to undertake an economic assessment of the Project. Subsequent
limitations imposed on funding, however, reduced the team to one member,
namely me. This resulted in a simultaneous expansion and contraction of my
responsibilities: an expansion of the scope of my investigations to include
at least a few of the pertinent, non-economic aspects of the Project, and a
contraction in the detail, rigor, and statistical reliability of my economic

- 1 -

Third, during my stay in Guatemala I was asked by USAID/Guatemala and
ROCAP to undertake a number of additional tasks which,.while individually not
excessively time consuming, collectively reduced my time available for the
Project evaluation by approximately two days.

B. Conceptual Framework

I was aware from the beginning that time was my biggest problem, and I set
about organizing ways of offsetting both that constraint and any intrinsic
bias that I might have about the Project.

A major problem affecting the Project throughout its lifetime has been the
lack of baseline studies and interim evaluations. The reasons for this are
beyond the scope of this study, but the consequence has been the insertion of
an inevitable element of subjectivity in any attempts to evaluate the Project
now. Only the most carefully designed and executed sample survey could hope
to capture data sufficiently detailed to allow the usual calculations of
economic impact (e.g., internal rates of return, social costs vs. social
benefits). These would necessarily have to depend upon the memories of the
respondents, both farmers and public sector officials.

Therefore, I decided on a different approach, one which would yield
roughly accurate estimates of benefits in a relatively short time but which
would guard against biasing the results excessively in favor of the Project.
Together with Marko Ehrlich, a contractor preparing an environmental impact
assessment of rural access roads for USAID/Guatemala, I decided upon the
following set of "rules-of-thumb":

1. Instead of interviewing a statistically significant sample of the
same kinds of individuals in the Project areas (e.g., farmers), I
would seek out as many different kinds of people as possible (e.g.,
farmers, storekeepers, bus drivers). The reasoning was simply that
if a consensus in favor of or against the Project activities (roads,
terracing, irrigation) emerged from a widely heterogeneous group,
there could be reasonable confidence in the information gathered.


2. While I would try to get precise data wherever possible, I would
concentrate on (a) orders of magnitude and (b) trends in such things
as cash incomes, yields, labor and other costs. In my experience,
small farmers in Guatemala have excellent memories, but, like their
counterparts everywhere, they tend to think about their individual
activities as all-encompassing in terms of orders of magnitude. When
pressed for exact figures, they will either toss out a quick estimate
(which may be wildly inaccurate) or they will deliberate for more
time than I had available.

3. I would seek data in the field before even looking at available data
in Guatemala City. The Ministry of Agriculture's Extension Service
(DIGESA) has produced numerous estimates of the changes brought about
in agricultural yields and net earnings following the Project, and
the National Agricultural Development Bank (BANDESA) has published a
comprehensive set of production cost estimates by crop and by
Department. Prior to looking at this information, however, I wanted
to get at least rough estimates from the farmers themselves,
especially since.some time has passed since the DIGESA and BANDESA
figures were published. Since only one or two years have passed
since completion of the infrastructural work under the Project, I
reasoned that markets, at least, were still structurally adjusting
themselves in response to changed patterns and levels of agricultural
production in the Project sites.

4. Whenever there appeared to be a conflict in the data, I would
intentionally select the least favorable figure, that is, I would
bias my results against the Project wherever I had a choice of
estimates. That way, if my results were still positive or only
marginally negative, decision makers could feel some confidence that
the actual situation was better than the one I was describing.


Having followed the above rules, I would sort my information into broad
"benefit" and "cost" streams by farm, regional, and national categories and by
short versus long-run time spans.

C. Field Work

During my first week (May 2-6) I concentrated on rural access roads, since
I had had the least experience with this component of the Project. Together
with Marko Ehrlich and officials of the Direccion General de Caminos, I
visited several roads completed under the Project in the Departments of
Chimaltenango and Guatemala (See map). Mr. Ehrlich and I followed our plan to
interview a wide variety of people at each site.

During this time, we decided on the need for a set of overlay maps of
DIGESA Regions I and V showing the locations of each kind of activity -
roads, soil conservation, irrigation (See Appendix A). These would be useful
to us as a guide to sub-projects worth visiting, and as a method of vividly
illustrating coordination or lack of it among the Project components.
Mr. Ehrlich completed work on the maps within two weeks.

I spent my second week (May 9-13) visiting soil conservation and
irrigation sites in region I in the Quezaltenango and San Marcos Departments.
Simultaneously, Mr. Ehrlich obtained some of the information I needed at each
site he visited in the region.

During my third week (May 16-20) I visited soil conservation and
irrigation sites in Fegion V in the Guatemala and El Progreso Departments.

During the final two days (May 23-24) I did some preliminary calculations
and presented a rough estimate of my findings to Harry Wing, Cecil McFarland
and other USAID/Guatemala officials during a debriefing session.




Departments of Guatemala

i J. .* i .
* 1*


"\ i


.r '6



- 'i



D. Sites Visited

During field work, I visited the following sites and activities:


Montufar Los Pirir
Certo Alto Los Ajvix
San Juan Sacatepequez Los Yax
Las Barrancas
San Juan Ostuncalco La Victoria


Los Encuentros
Xepaton, near Patzun
Various areas in the Department of Guatemala


Santa Rita
San Juan Ostuncalco
Rincon Grande
Santiago Sacatepequez/Santa Maria Cauque
Lo de Silva, near Palencia/Los Mixcos




A. Short-Term Costs and Benefits

According to data supplied to USAID/Guatemala by the Guatemalan Ministry
of Communications and Public Works, approximately 331 kilometers of access
roads had been completed under the Project by 1982. Since the data. is not
organized strictly according to the regional systems used by the Ministry of
Agriculture, and since there seems to be no very great differences from region
to region in Project characteristics, I have summarized the information in
USAID/Guatemala's possession in Table 1.



Total number of sub-projects 58 --
Total kilometers constructed 331
Kilometers constructed per sub-project 5.7 1.6 15.0
Total cost for all sub-projects (Q.) 7,040,127 --
Cost per sub-project (Q.) 121,381 23,515 345,258
Cost per kilometer (Q.) 21,269 7,300 26,100
Total workers employed in any one day,
all projects 3,132 -
Cost per worker, all projects (Q.) 2,248 .786 7,826
Total man-days employed, all projects 590,489 -
Cost per man-day (Q.) 11.92 3.20 27.69
Man-days per sub-project 10,180 4,480 58,016
tMn-days per kilometer 3,364 746 8,169
Number of months per sub-project 15 3 36



Before continuing, I should point out that these figures are suspect. In
working with the data to calculate the composite figures on the preceding
page, I came across instances where certain figures repeated themselves with
suspicious regularity. For example, in calculating man-days per kilometer, I
found no fewer than 18 sub-projects where the figure turned out to be exactly
2,170 and five projects where the figure was 5,120. Having had experience
with data collected in Guatemala, this wasn't especially surprising, but it
does indicate that the "official" data does not lend itself to sophisticated
economic analysis.

Although I question the internal consistency of the data, my conversations
with Marko Ehrlich and personal observations in the field indicate that the
data roughly represent the correct orders of magnitude with respect to costs
and numbers of workers. With this in mind, we can proceed cautiously.

In the medium-term (from 2 to 5 years) the initial benefit of the rural
access roads sub-projects was intended to accrue to workers engaged in
building the roads. Hence, the sub-projects were to'be as labor-intensive as
possible. The data indicate that, on the average, these sub-projects jointly
employed 3,132 workers for 15 months; total cost per worker (not total wages)
averaged Q.2,248 and total cost per man-day (not a daily wage) averaged

Assuming at least three persons per household per worker (a husband, a
wife and one child), approximately 9,400 persons benefitted from wages earned
in road construction. The data at my disposal do not show how many of the
3,132 workers lived in the vicinity of the roads constructed (versus engineers
and other technical personnel from outside the construction area), but I
presume that most of them did and that they would benefit in the future from
payments received for road maintenance. I understand that the maintenance
program is presently under review.


From the viewpoint of road construction workers, the benefits of receiving
wages for working on the roads would be offset by the opportunity cost of not
working on their farms or of other alternative income-generating tasks. In
theory, the alternative costs of working on the roads should not be high if
the justification for constructing the road in a particular place is the
prevalence of low incomes which exist there. Moreover, the worker/farmers are
expected to benefit in the longer run from increased commerce which the road
allegedly will bring. In practice, the fact that more than 3,000 people were
willing to work on the roads suggests that the incomes earned exceeded
existing alternatives during the periods of construction;

In the immediate term, the main cost to the national government were the
wages paid to the workers and the cost of machinery and tools. In theory,
these costs should be offset in the longer run by increased commercial
activity, rising local incomes (theoretically leading to a larger tax base),
and greater levels of rural savings which could be mobilized for additional
capital formation.

B. Longer-Term Costs and Benefits

The ultimate purpose in building or improving a road, of course, is to
make it easier and/or cheaper for people and things to go into and out of a
given place. Good roads reduce transport costs, and if transport costs have
been a barrier to the development of an area, a good road can promote
development. Thus, my initial hypothesis was that a crude indicator of the
success of a new road would be an increase in the volume and value of
commodities moving into and out of the region serviced by the road and a
consequent rise in the incomes of farmers and others living near the road.

What Marko Ehrlich and I found was that, in general, a new road by itself
does indeed expand pre-existing commercial activity, but that it may have
little impact on activities -- mainly agricultural -- constrained by other
than transport costs. For example, in several sub-project areas in Region V
we visited in the Department of Guatemala (Montufar-Los Pirir, Cerro Alto-Los
Ajvix, San Juan Sacatepequez-Los Yax), we found evidence of vigorous new


commercial enterprises: new trucking and bussing firms, increased movement of
local handicrafts and charcoal to the capital, increased roadside business,
and longer and more frequent visits by government service personnel (DIGESA,
Salud Publica, etc.). On the other hand, local farmers told us that prior to
road construction they had barely grown enough on their dry, rocky soil to
feed their families. Consequently, construction of the road had little impact
on their income, because they still had no surplus to sell, either locally or
elsewhere. The one exception we saw was an individual from the capital who,
having purchased one of the few flat plots of land and having installed his
own water system, was growing snow peas for export.

At Ios Yax, previously a rather isolated Indian village, the main effects
of the new road were increased sales of charcoal to intermediary truckers and
a small increase in the number of children attending school near San Juan.
There, too, the farmers were not able to produce enough surplus for sale to
benefit directly from the road.

In the Western Highlands of Region I, however, transport costs seem to
have been a greater constraining factor. Farmers in Las Barrancas (San Marcos
Department) told us that, on the average, the new road saved them one day's
labor time per week by permitting more rapid access to local markets. The
cost of transport via bus along the new road ranged from Q.0.35 to 0.0.50 one
way, depending on which market the farmers and/or their wives were bound for.
Before road construction several hours on foot or on horseback were required
each way to get to market. Assuming that most of the approximately 200
households in the Las Barrancas area saved at least one-half person-day per
week due to the road, 100 person-days per week or 2,000 person-days per year
(assuming a "low-technology" work year of only 150 days) are saved for the
community by a three-kilometer stretch of road.

Wherever farmers had already been selling surplus output (or where they
were capable of expanding production, given lower transport costs/times), we
found that new or improved roads permitted them to bring up to 30% more

- 10 -

produce to market in any given time period, and reduced the costs of purchased
inputs, such as chemical fertilizer and pesticides.

Mr. Ehrlich and I determined from the beginning, however, that few rural
access road sub-projects coincided with soil conservation and/or irrigation
sites. We were told by both DIGESA and Caminos personnel that the latter
usually tried to accommodate Ministry of Agriculture requests for .a road in a
particular place, but that engineering considerations often ruled out certain
locations. On the other hand, it was not clear to us that DIGESA has
systematically included the pre-existence of a soil conservation or
small-scale irrigation sub-project among its criteria for requesting an access
road. While not all the soil conservation or irrigation sub-projects I saw
needed a new access road, many of the road sub-projects I saw could have used
a soil conservation/irrigation sub-project.

Some irrigation and conservation sub-projects would benefit from a road
sub-project. For example, an irrigation sub-project in to de Silva (El
Progreso Department) seems to be faltering in part due to the miserable state
of the road connecting the community with the town of Palencia. The road is
in such bad shape that DIGESA extensionists told me land values near the town
are triple those further up the hill, even though the quality of the land
itself is comparable. The community has other problems, of course, but the
poor road contributes strongly to them.

In short, we concluded that the impact of the roads built to date has been
positive but uneven, and it could have been much stronger with accompanying
soils, irrigation, and other kinds of extension activities. Benefits have
generally consisted of increased incomes to persons depending directly on the
quality of the roads (truckers, bus operators, roadside businesses, businesses
catering to tourists), increased agricultural output and sales for those
farmers previously constrained principally by transport costs, and reduced
travel times.

- 11 -

Longer-term costs are less tangible, but we found evidence of them. The
most obvious of these have been some cases of increased deforestation of the
areas penetrated by the roads. In Region V much of this is related to
increased production and sale of charcoal, probably due to the region's
proximity to the capital city and other urban areas. Also, some rural
inhabitants interviewed in Region V mentioned to us an increase in
out-migration to Guatemala City and smaller towns from regions serviced by new
roads. It is too early to tell what the net effect of such migration will
be. One could argue that there will be a longer-term effect leading to a rise
in the local population as increased incomes from non-agricultural activities
permit greater man/land ratios. In any case, the main negative impacts are
likely to be environmental in the near future. The integrated approach
recommended in Ehrlich's report (and in Section V below) Would significantly
reduce these.

C. Recommendations

1. Continue with rural access road sub-projects, but only in the context
of an integrated package of sub-projects designed to maximize the
potential positive impact of the road (e.g., connecting the road to
the existing marketing network, complementary extension services to
help farmers exploit the new road, complementary infrastructure such
as water and terracing of hillside lands).

2. Insure that decisions regarding location of new roads are coordinated
with decisions about priority areas for agricultural and health
projects (e.g., the National Economic Planning Council, together with
Agriculture and Health sector planning units and the Ministry of
Communications and Public Works programming unit, should be
encouraged to work out institutional machinery for flexibility in
policy coordination, project design and execution).

- 12 -

Although I am not an engineer, I have travelled over a large number of
"rural roads", and I was impressed by the quality of the Project-constructed
roads I saw. Most were properly crowned and frequent culverts exist to insure
adequate drainage. The only problem seems to be difficulty in maintaining the
surface on steep grades during the rainy season -- a fairly frequent complaint
of people we talked to. It seems to me that construction of cobble-and-
cement "tracks", such as those still found on old colonial era roads, would
solve that problem. Such tracks, while not "modern" or technologically
sophisticated, provide a solid base for tires and seem to last forever.

- 13 -



A. Background

The term "soil conservation" broadly refers to activities designed to
protect the qualities of a given area of land (mechanical, nutritive) from
degradation due to environmental conditions and cultivation practices. Under
this Project, the focus was upon reducing water erosion and increasing
agricultural yields via promotion of contour cropping on gentle slopes and
bench terracing on steep slopes (over approximately 10%). Since most land
slopes in the Central and Western Highlands in Guatemala are more than 10%,
and since most sub-project sites contained cultivated areas much steeper than
that (up to 80%), bench terracing was and continues to be the primary focus of
soil conservation practices in both Regions I and V.

A bench terrace, constructed along level contours of a hillside and
characterized by a small "backslope" which encourages water to run away from
the edge of the terrace back towards the hill, accomplishes the following:

Reduction of hillside erosion, thus "conserving" the soil
Reduction of fertilizer and pesticide runoff with rain, thus
contributing to higher yields
Increase in the effective cropping area of the original hillside
plot, thus increasing the farm's land resources
Increase in the planting density and in the variety of crops which
can be sown on a given plot, thus increasing output and marketable
In conjunction with an assured water supply, an increase in
flexibility regarding sowing and harvest times, thus enhancing the
farmers' ability to take advantage of shifts in prices and other
market conditions

- 14 -

Where soil is easily worked (this was the case in many conservation
sites), the terraces can be constructed using the farmers' "digging hoe" and a
simple "A" frame levelling device. To anchor the terraces, rye grass,
elephant grass and other resilient varieties of grasses are planted on the
facing edges. In addition to protecting the terraces, this grass can be used
as forage for cattle (which, of course, are themselves efficient generators of

Beyond providing direct technical assistance to farmers in constructing
.the terraces, DIGESA soil conservation extension workers have trained more
than 50 local farmers (guias agricolas) to promote terracing among their
neighbors in communities participating in the Project.

Finally, to compensate farmers for the time needed to terrace their
hillside fields, the Project has included "social payments" for those willing
to act as "pioneers" in their communities. The payments have served to reduce
the perceived risks of undertaking a significant investment, in time and
labor. In the longer run, it is expected that such payments would diminish as
farmers' incomes improve and as they see advantages in further terracing on
their own.

B. Short-Term Costs and Benefits

During my time in Guatemala, the only completed set of data from DIGESA
concerning soil conservation available to me was a report entitled Breve
Informe: Proyecto de Conservacion de Suelos which covers all projects
completed or pending in FEgion I to date. This summary report-gives data
aggregated by Department. Assuming the data are approximately correct, they
permit a rough estimate of the results of social payments in terms of areas
terraced and farm families benefitted. Table 2 is a translated copy of Cuadro
No. 1 from the report, showing by Department the numbers of sub-projects,
total social payments, hectarage and numbers of families affected with and
without social payments. From this I derived Table 3 .which converts the data
into percentages and average values per sub-project and per family.

- 15 -

Table 2 -

(1978 1982)


El Quiche
San Marcos




(4) (5) (6)
86.23 51.52 137.75
154.48 28.50 183.34
23.51 12.97 36.48
60.52 26.16 86.72
39.46 14.17 56.62
59.57 17.01 76.58
424.07 152.39 577.49

(7) (8) (9)
440 97 537
310 104 414
185 49 234
219 102 321
313 81 394
280 67 347
1,747 500 2,247

SOUICE: Cuadro No. 1, Breve Informe: Proyecto de Conservacion de Suelos, Ministerio de Agricultura, Ganaderia
y Alimentacion, DIGESA, Region I, Quezaltenango (n.d.).



(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Huehuetenango 28 4.9 112.7 19 5.9 79 1,247 11.00 82
Quezaltenango 72 2.5 57.5 6 10.0 140 602 10.30 75
El Quiche 13 2.8 64.4 18 3.6 42 596 9.20 79
Solola 34 2.6 59.8 9 6.2 66 426 7.30 68
Totonicapan 65 2.6 20.7 6 3.3 39 190 9.50 79
San Marcos 29 2.4 59.8 12 5.0 112 1,080 17.70 81
TOTAL REGION I 241 2.4 55.2 9 5.6 83 598 10.90 78

SOUWCE: Derived from Table 2.

I/ One hectare = 25 cuerdas of 25 x 25 varas
2/ These data include only those families actually having received social payments; some families did not
(see column 10).

I have used the data in Table 2 because the derived values shown in Table
3 which are based on them come close to the ones I've observed in the field --
number of families in a given sub-project area, surface terraced per
sub-project and per family, and the approximate amounts of social payments per
family (according to the responses of individual farmers interviewed).

It should be noted that the Project was intended to consist of a number of
pilot activities of which soil conservation was one. It was not expected that
all farms in a given area would necessarily be terraced by the end of the
Project. Thus, the global averages of 9 families per site (Table 3, column 5)
is not as trivial as it might seem to someone unacquainted with the levels of
poverty found among these farmers. DIGESA extension workers told me that
approximately 15% of all farmers in any one sub-project area have terraced to
some extent, and new terraces are being constructed with the aid of guias
agricolas independently of the Project. It should be noted, too, that
approximately 22% of all farmers terracing have done so without any social
payment at all (Table 3, column 10).

A total social payment cost of Q.144,000 for Region I over a four-year
span (1978-1982) does not seem excessive, especially when that figure is
expressed in terms of payments per cuerda (Q.10.90) or per family (Q.83). If
we assume a low figure of three family members, the payments per capital come
to Q.28. This payment is on a one-time basis; once constructed, the terraces
are to be maintained by the farmers without further input from the
government. Presumably the terraces will improve output enough to more than
offset such maintenance costs as purchasing seed for the grass to be planted
on the facing of the terraces and repair of occasional cave-ins and erosion

The social payments presumably represent roughly the opportunity cost, as
perceived by the farmers, of working on the terraces rather than on more
traditional tasks. This could include an allowance for risk, at least at the
beginning of the Project. Once farmers see what terracing can do for their
yields, the risk element theoretically should diminish and the necessary

- 18 -

social payments with it. This does seem to be happening. Farmers I saw
terracing in the Patzun/Lake Atitlan area were voluntarily extending areas
initially terraced under the Project.

Thus, social payments in the short run are substitutes for alternative
sources of income as the farmers see them; at the margin there would be no net
benefit. In the longer term, of course, there is a net benefit, if the
terraced land proves to be more profitable than it was unterraced.

From the government's standpoint, social payments (and salaries of
extensionists, payments for vehicles and gas, etc.) are short-run costs which
represent an investment one hopes will yield a longer-term social benefit to
the country. As in the case of rural roads, any innovation which raises rural
incomes will contribute to the rural sector's ability to accumulate capital
and to the overall decline in the costs of feeding the population, including
the urban/industrial sector. Viewed in this perspective, the government's
expenditure to date in Region I does not seem unreasonable.

Unfortunately, I was unable to obtain detailed information on soil
conservation sub-projects in Region V. However, I see no reason to believe
those data to be significantly different. The terracing activity observed in
Region V (near Patzun, San Juan Ostuncalco, and El Progreso) was similar to
that in Region I and, if anything, the social costs should be even smaller.
The land in the Western Highlands, especially in the San Marcos,
Huehuetenango, and Quezaltenango Departments, can be difficult to manage,
since it is steeper and more severely eroded to start with.

C. Longer-Term Costs and Benefits

Unfortunately, no baseline studies of pre-Project farming, marketing, and
household consumption activities were made. To assess changes brought about
by soil conservation in a short time requires faith in the memories and

- 19 -

veracity of both farmers and DIGESA extensionists. 1/ In Table 4 I have
summarized information given me by farmers in both Region I and Region V
concerning pre and post-terracing yields.



CORN 2-3 qq 5-6 qq 100-133 50 141
BEANS 1.3 qq 3 qq 131 95
WHEAT 2.0 qq 3.5-5 qq 75-250 70 81
POTATOES 5-6 qq 9-11 qq 80-120 110 98
BROAD BEANS 1.5 qq 2 qq 33 -
ONIONS 5 qq 7 qq 40 -
GARLIC 4.5 qq 6 qq 38 -
CABBAGE 35 bunches 47 bunches 34 -
CARROTS 38 bunches 55 bunches 45 -

SOURCE: My own interviews, Breve Inforn
and Jerry Arledge's Informe Fin

re: Proyecto de Conservacion de Suelos,

1 cuerda = 25 x 25 varas = 0.043 hectare

1/ If time and resources permit, I would reccmnmend a more detailed survey of
(a) farmers having participated in the Project and (b) a set of
closely-matched farmers who have not. This would probably require two or
three months of field work, but it is something that the Guatemalans could
do for themselves with a bit of instruction.

- 20 -

These data, sparse as they are, seem roughly of the same magnitude. M3ny
of the farmers I spoke with have continued to raise the traditional corn,
beans and wheat on their terraces, and there seems to be an overall consensus
that yields of these crops have "about doubled". Other farmers, especially in
Region V who already were growing non-traditional vegetable and root crops for
cash prior to terracing, reported increases in yields varying from about 30%
to nearly 100%. The following are additional non-traditional crops for which
a scattering of farmers provided "on-the-road" estimated yield increases from
45% to 100%: radishes, strawberries, snow peas, lettuce, beets, and squash.

For the most part, farmers continuing to raise traditional crops on their
terraces reported that, prior to terracing, their families had consumed most
of their own output and often had to purchase additional corn and beans prior
to the next harvest. Some of those living in the Patzun area (Region V)
earned the necessary cash by seasonal migration to the coastal sugar and
cotton plantations. With the increased output on their terraces, these
farmers still seem to be consuming rather than selling corn and beans, but
they are purchasing considerably less. A few indicated that they no longer
migrate seasonally. 2/

Most of the conservation sites I visited during the evaluation (and, in
fact, during my travels with Jerry Arledge) had no supplementary irrigation.
Since the greatest increases in yields, incomes, and crop varieties appear in
the irrigation sites, there is a strong likelihood that a combination of
irrigation and terracing sub-projects would make the farmers I saw even better
off than they presently are.

2/ One hypothesis that appears frequently is that innovation in the Highlands
will raise the cost of labor in the lowlands because of the drying-up of
seasonal migrants. If profitable labor-intensive crops continue to
proliferate in the Highlands, this would seem to be a persuasive
argument. It is certainly one meriting empirical investigation.

- 21 -

In sum, taking the lowest reported figures, terracing alone without
irrigation, additional access roads or crop diversification -- permits a
sustained increase in yields of traditional crops (corn, beans, wheat,
potatoes) of about 75% and of vegetables of about 35%. In the case of the
traditional crops, this additional output seems mainly to be consumed by the
family, thereby releasing resources which otherwise would have been used to
obtain additional food or for seasonal migration. Since most vegetable crops
seem to be raised mainly for cash, the addition represents an increase in
gross cash income, assuming no significant change in prices.

I asked most farmers what they did in instances where their cash incomes
rose as a result of both soil conservation and irrigation sub-projects. I was
interested specifically in whether or not their food consumption habits had
changed. Surprisingly, very few farmers reported changing the pattern of
their diets. Where the volume of traditional corn and beans rose as a result
of terracing,.families eat about the same daily diet as before but are not
obliged to purchase as much of it as before. Farmers with cash crops tend to
use the cash for specific purposes: some said that they spent the money on
further improvements to their land and/or houses (i.e., investment); others
said they used some of the increased earnings to hire an extra hand and let
their older children go to school. Virtually no one said they bought more
food, although I expect a more detailed survey would find that at least some
of them did (e.g., snacks at the local store, extra liquor). This suggests a
version of the "permanent-income" hypothesis: farmers are not sure that their
recent gains in earnings are sufficiently permanent to justify significant
intrafamily changes in habits, including-diets. Instead, the money is used to
finance deferred "one-shot" expenditures such as home repair, another year of
school for the children, additional seed and fertilizer. This kind of
information is very important from a development perspective, and the
"tracking" of changes in household behavior with technological change is a
major justification for baseline and follow-up studies. It is also a
justification for using anthropologists and/or sociologists in future

- 22 -

With respect to changes in cost, the most important of these in soil
conservation sites seems to be increased labor. Aside from the labor needed
to construct the terraces originally, the increased density of planting
permitted by terracing requires more work at sowing and harvest time and more
attention to interim weeding. When I asked how much labor was needed, I got
answers ranging from 15% to 25% more than pre-Project levels where traditional
crops were involved, and 50% or more where vegetable and root crops
(intrinsically more labor intensive) were grown. In a few instances, farmers
growing the latter reported increases in expenditure for fertilizer and
pesticides, although still others reported a reduction in these costs due to
the reduced levels of water runoff from the new terraces.

D. Recommendations

1. Continue with soil conservation sub-projects, with special emphasis
upon training of additional guias agricolas.

2. Future soil conservation projects should be built in conjunction with
irrigation and access roads sites wherever possible.

3. Where farmers continue to grow traditional crops on terraced land,
follow-up extension services should be considered to help such
farmers benefit from crop diversification.

- 23 -



The purpose of the irrigation component of this Project was to increase
small-farm incomes by insuring a reliable supply of water throughout the
calendar year via relatively inexpensive, simple technologies which exploit
existing supplies of ground water and/or nearby river water.

In Region I, virtually all sub-projects use a gravity/sprinkler system
whereby water from nearby springs is concentrated in a catchment basin and led
to simple sprinkler systems via low-cost plastic piping. Aside from
simplicity, this system has the virtue of very low maintenance costs,
involving mainly the care of valves and the springer mechanisms. The
mountainous terrain in Region I contains many springs with adequate water flow
throughout the year.

In Region V, however, 10 of the 20 sub-projects involve pumping water from
nearby rivers, often requiring electric pumps from 25 to 50 hp, in some cases
two connected in series, to hoist water as much as 200 meters to the level of
the fields. Three Region V sub-projects (El Tempisque, San Jose Pacul, and La
Vega I) do not use sprinklers, the water being turned directly into furrows
from small canals. Sub-projects involving pumping also involve significant
maintenance and electricity costs.

A. Short-Term Costs and Benefits

Table 5 summarizes salient features of irrigation sub-projects in Regions
I and V. Region I data at my disposal was broken down by Departments and the
scale of operation there was larger than in Region V. Hence I have lumped the
20 Region V sub-projects together. Since this lumping tends to mask some of
the higher costs of pumped irrigation sub-projects in Region V, I have broken
out the latter and listed them in Table 6.

- 24 -



(1) (2) (3) (4) (5) (6) (7) (8) (9)
Huehuetenango 6 258.8 5,952 147,100 24.71 305 482.30 51
San Marcos 20 244.9 5,633 136,934 24.31 509 269.03 25
Quezaltenango 3 16.5 379 30,100 79.46 397 75.81 132
Totonicapan 1 3.7 85 1,600 18.80 8 200.00 8
TOTALS/AVERAGES 30 523.9 12,050 315,734 26.20 1,219 259.01 41

All Departments 20 172.2 3,961 188,559 47.61 349 540.28 17


DIGESA report sent to USAID/Guatemala by Ing. Agr. Francisco Jose Mazariegos on October 19, 1982
(tables on pages 3 and 4 containing data for Region V projects); the author's calculations.
DIGESA, El Sub-programa de Mini-riego: Sus Logros y su Necesidad de Implementacion DIGESA Region I,
November 1982 (tables on pages 5-7); the author's calculations.

1/ One hectare = 25 cuerdas of 25 x 25 varas


(Q) (Cuerdas) 1/ (Q) (Q)
(1) (2) (3) (4) (5) (6)

El Tempisque I 2,383. 92 4 25.90 595.75
El Tempisque II 3,750 35 1 108.70 3,750.00
San Jose Pacul 3,876 58 7 66.83 553.71
Rincon Grande 30,500 460 46 66.30 663.04
Santa Maria Cauque 25,000 472 50 52.97 500.00
San Francisco 2,900 28 2 103.57 1,450.00
San Jose 4,100 58 2 70.69 2,050.00
Paso Ancho 2,400 46 .2 52.17 1,200.00
Tempisque III 2,400 46 2 52.17 1,200.00
Santiago Sacatepequez 30,000 460 40 65.21 750.00
Tulio Garcia 1,000 81 11 12.35 90.91
AVERAGES 9,846 167 15 61.53 1,163.95

1/ One cuerda of 25 x 25 varas

= 0.043 hectare

- 26 -

A comparison of the average cost of materials per irrigated cuerda of
Q.26.20 in Region I (Table 5, column 6) with that of electric pump
sub-projects of 0.61.53 per cuerda (Table 6, column 5) gives some idea of the
differences between pump and gravity irrigation. The figures for average cost
per family are even more striking (Q.259 for gravity vs. Q.1,164 for pump).
Comparable figures for soil conservation social payments from Table 3 are Q.11
per terraced cuerda and Q.83 per participating family.

Costs of installation of pipes, catchments, pumps, sprinkers and other
materials are financed by the individual families participating in the
sub-projects, either individually or collectively with loans from BANDESA. In
some of the larger-scale sub-projects such as Rincon Grande (Chimaltenango
Department), participating families contributed labor to the construction of
the system for laying pipe, aiding in the installation of pumps, etc.
Participants also contribute to maintenance of the systems, with the help of
teams of extensionists from DIGESA.

Unlike the soil conservation sub-projects, there are no "social payments"
for irrigation sub-projects. BANDESA loans carry the immediate burden of the
farmers' expenses, and at least those farmers I talked with did not seem to
regard this work they did installing the systems as excessive. In the longer
term, of course, the loans must be repaid out of the expected increases in

B. Longer-Term Costs and Benefits

Of the many impacts expected for small-scale irrigation sub-projects, the
following three are especially important:

A reliable year-round water supply permits significant
diversification into a variety of crops, including fruits,
vegetables, and tubers.
For any given crop, two or more harvests per calendar year are
possible; some vegetables can be harvested as many as four times per

- 27 -

The farmer can, through diversification of his "expanded portfolio of
crops", vary sowing and harvesting of certain crops to take advantage
of price fluctuations; in the longer term, all farmers acting in this
way should contribute to a reduction in traditional wide swings in
commodity prices over any given calendar year.

In short, farm incomes are expected to rise and become more secure.

I was able to visit the following six irrigation sites where systems had
been in operation for one year or more: Santa Rita, San Juan Ostuncalco,
Santiago Sacatepequez, Santa Maria Cauque, Lo de Silva, and Rincon Grande.

Each of these sub-projects is different from the others, but collectively
they give a feeling for how irrigation has affected yields, incomes, and
participating farmers' outlooks.

Santa Rita is doubtless one of the more impressive sub-projects. This is
partly due to the fact that this community of some 17 families lies along the
main highway connecting the cities of Quezaltenango and San Marcos. Both are
large vegetable and fruit market centers. Thus, this site is a good example
of how a mix of more than one kind of activity (e.g., marketing, crop
diversification and irrigation) can interact synergetically. The farmers in
Santa Rita report that, prior to the Project, they were earning an average of
Q.10 to Q.15 per cuerda from sales of surplus corn and beans. Since the
average holding is 5 to 6 cuerdas, this amounted to a yearly cash income of
0.50 to Q.90. Additional cash income had to be earned from off-farm sources
(including seasonal migration) and sale of handicraft. Following installation
of gravity/sprinkler irrigation, most Santa Rita farmers began diversifying
into suchcrops as cabbage, lettuce, carrots, onions, radishes, and garlic.
Irrigation water permitted 2 to 3 crops per year for most of these crops, and
sales to Quezaltenango and San Marcos were uninterrupted during the first
year. Average earnings from land under the new crops rose to Q.80 to Q.100
per cuerda (counting sales from multiple crops during the calendar year), and
several farmers gave up corn and beans entirely, preferring to purchase these
in the market rather than "waste" irrigated land on them. In the second year,
prices declined and total earnings fell to an average of 0.60 to Q.80 per


- 28 -

Prices seem to be stabilizing for the present. Meanwhile, a farmer I
talked with said that he and some of his neighbors were continuing to
experiment with new crops and different sowing/harvesting times. In addition,
some farmers were using their new earnings to purchase additional cattle, both
for milk and reproduction purposes, as a source of additional income.
Finally, most of the farmers at Santa Rita had received extension help in
constructing compost pits to augment the quality and quantity of fertilizer.

In Santiago Sacatepequez and Santa Maria Cauque, areas of relatively flat
land not far from Guatemala City, several of the crops presently irrigated
were being sown prior to the Project. Here the main impact has been the
opportunity to sow an extra harvest during the dry season: snow peas,
radishes, lettuce, beets, carrots, guicoy, and watercress. The main cash crop
-- snow peas -- now sells for about Q.150 per cuerda per year, up about 50%
since installation of irrigation. In general, the "rule of thumb" is about
50% increase in earnings for most crops, since the second harvest does not
bring as high prices as the original main harvest. Farmers in both areas
commented on the decline in prices due to the increased supplies, but they
emphasized that the decline has not been in proportion to the increase in
marketed volume (i.e., total earnings are still significantly above
pre-Project levels).

Both areas, however, are irrigated with electric pumps, and this has added
to monthly costs of production. Labor requirements have increased by about
100%, counting additional time needed for second and third cropping, more
attention given to field preparation and weeding, and occasional work on the
irrigation system itself.

To give a simple example of how these farmers may be doing, given the
'"worst-case" situation, suppose a farmer with 10 cuerdas of snow peas had been
earning the following before irrigation:

- 29 -

Gross.income (10 cuerdas @ Q.100) Q.1,000
Less costs:
Fertilizers and
Insecticides (10 cuerdas x Q.37) Q.370
Soil Preparation (10 cuerdas x Q.7) 70 440
Q. 550

However, with irrigation and an extra crop:

Gross income (10 cuerdas @ Q.150) Q.1,500
Less costs:
Fertilizers and
Insecticides (10 cuerdas x Q.56) Q.560
Sail preparation (10 cuerdas x Q.9) 90
Electricity (10 cuerdas x Q.19) 190 840
Q. 660

In this scenario, net income has gone up by Q.110 per year or by about 20%
despite increased costs.

It should be emphasized that these figures do not take into account the
opportunity cost of the farmer's extra labor time, nor extra earnings/costs
associated with other crops.

Assuming the 20% figure to apply to all farmers in the Santiago
Sacatepequez/Santa Maria Cauque areas, it is clear that irrigation has not had
as strong an impact on net earnings as in Santa Rita. But Santa Rita does not
have electricity costs. If we eliminated the Q.190 electricity costs above,
the increase in net earnings would be Q.300 or 60%, a figure more in line with
what I was hearing from farmers using a gravity flow-system. Nevertheless, a
20% gain, if sustained, is significant by most investment standards and is a
low estimate.

- 30 -

San Juan Ostuncalco and Lo de Silva are examples of how, unless a good
road exists and/or crop diversification takes place along with irrigation,
there may be relatively little impact. Although a gravity-flow sub-project,
San Juan was relatively costly -- Q.22,000 total costs of installation and
materials, or Q.70 per cuerda and Q.73 per family due to the large area
irrigated (316 cuerdas) and the large number of households connected to the
system (300). I originally visited this sub-project with Bert Embry about
four years ago and remember being impressed with its scale; it is the largest
single sub-project in the irrigation component of this Project. What struck
me this time was the fact that, although the system is still functioning well
and the farmers seem to be content with it, many are still sowing traditional
corn and beans, similar to that in the terraced areas near Patzun. The
ability to sow two staple crops instead of one in a given year and to get
measurably better yields (10% to 20%) mean that farmers have more staples to
eat and fewer to purchase. But it doesn't mean the impressive gains in cash
incomes seen in other, diversified irrigation areas. The problem, according
to three farmers I talked with, is the cost of getting produce out of the area
to vegetable consuming centers like Quezaltenango or Guatemala City. Some
farmers, however, are diversifying, judging from some of the fields I
observed, and I suspect this giant sub-project deserves closer study.

In the case of Lo de Silva (a community near Palencia, El Progreso
Department) a number of circumstances including a very poor road, disputes
over rights to water use from certain springs, plant diseases affecting the
area's two main crops (guisquil and potatoes), and a decline in the national
market for these same crops have combined to cancel any advantages which
the gravity-flow system may have contributed. The road is so bad that it took
our four-wheel drive vehicle more than an hour to travel the relatively short
14 kilometers from Palencia to the far end of the sub-project area. An
extension agent who accompanied us commented that land values fall by some
300% from plots near the town to similar plots near the end of the road.
While we were unable to get good production data, it is clear that an improved
road and help with crop diversification would be welcome.

- 31 -

Finally, Rincon Grande (near Zaragoza, Chimaltenango Department) -- with a
reported gross income of Q.130,000 per year for its 46 families from the sale
of strawberries, vegetables and flowers -- is certainly one of the more
commercially active Indian regions participating in the irrigation system. It
also has been experiencing some of the highest monthly electricity costs,
about Q.5,000 per month, or some Q.30,000 per year, assuming irrigation during
the full 6-month dry season. The farmers I talked to complained about this,
but my impression was that the sub-project, nevertheless, has been moderately
successful despite occasional problems with the electric pumps. I think a
full economic analysis of this sub-project would be worthwhile to determine
whether or not 0.5,000 per month is, in fact, excessive and, if so, how
alternate power sources (e.g., wind) could be tapped for extra power

In summary, where farmers have access to good roads and have been able to
introduce a variety of short-season crops, irrigation has had a major impact
on net earnings. Where traditional crops continue to be grown, the result has
been similar to that found on terraces planted to the same crops -
approximately a doubling of total output over the calendar year due to at
least one extra crop permitted by a reliable water supply. Only where a
sub-project has been severely.handicapped by lack of complementary
infrastructure and/or resources, such as Lo de Silva, are the merits of even a
gravity-flow irrigation system in doubt. Clearly, gravity-flow systems are
more economical than pumping systems, but it is not clear that pump
unreliability and seemingly high power costs have necessarily offset the gains
in outpout and incomes generated by the irrigation. If pressed, I would say
probably not. Even at Rincon Grande, the prosperous appearance of the farmers
and the excellent condition of their fields and buildings suggests that they
still are doing very well indeed.

C. Recommendations

1. Expand gravity-flow irrigation systems wherever reliable water
sources can be found, especially in areas such as San Marcos where
deforestation has severely diminished the quality of the land and the
yields of even non-traditional crops.

- 32 -

2. As before, any new irrigation sub-project should be viewed in the
total context of the agronomic and economic environment of the
proposed site. Attention should be given to the quality of the road
system nearby, the location of the markets for potential
non-traditional crops, and whether or not terracing would be
indicated. In short, irrigation should form part of an integrated
package including soil conservation measures, crop diversification
and roads.

3. Where electric pumps are needed, local opportunities to augment
electric power supplies (windmills, pelton wheels) should be
explored. Forms of irrigation other than sprinklers (e.g., trickle)
should not be ignored in some cases where water might be saved
through reduced evaporation.

- 33 -



Given limitations on time and resources, this evaluation has unavoidably
been sketchy and impressionistic. Fortunately, the kinds of activities
discussed herein are conceptually simple and technologically straightforward.
It does not require a great deal of economic or social sophistication to see
the strengths and weaknesses of this Project.

A. Conclusions

First, it is clear that the majority of farmers participating in soil
conservation and small-scale irrigation sub-projects have benefitted
economically. Most are conscious of having made what they see as an important
commitment in their lives, and many are beginning to make long-run adjustments
in their work and lifestyles in response to gains in income. The few figures
I was able to obtain directly from the farmers range, from gains of 20% to 'k4 2d 0
in net income in the first two to four years following termination of the
sub-projects. Even those continuing to sow traditional crops on
newly-terraced or irrigated plots report an approximate doubling of total
annual output.

As we have seen, rural access roads by themselves seem to benefit
non-farmers more than farmers -- at least in the short run except in those
areas where transport costs, rather than poor or insufficient land, are the
principal barriers to expanded agricultural sales. In San Juan Ostuncalco and
Lo de Silva, for example, there is evidence that improved roads and/or
diversification would significantly increase the impact of the irrigation
sub-projects there.

- 34 -

Second, there is evidence that most soil conservation, irrigation, and
access road sub-projects would have had a much greater impact if they had been
accompanied by complementary activities: terracing and irrigation, roads and
terracing, all infrastructure projects coupled with crop diversification
assistance, etc. As the maps prepared by Marko Ehrlich show (See Appendix A),
most of DIGESA's and Caminos' sub-projects have been constructed independently
of each other. hhile it is obvious that not all soil sites, for example, need
a new road, or not all irrigated fields need to be terraced, both Mr. Ehrlich
and I observed enough to convince us that attention to coordinated planning by
DIGESA and Caminos will greatly increase the yield of their sub-projects in
the future.

Third, since the overall number of farms participating in sub-projects was
relatively small, the impact of their increased production on local markets so
far has been small, but noticeable. Farmers in both Regions I and V commented
on declines in prices in the year following their increased sales of crops
from terraced/irrigated plots, and it was clear they understood why. Some
even seem to have a dim sense of price elasticities in that they spoke of
prices not declining as much as their saleable produce had increased. But,
.unless attention is given to new market channels for non-traditional crops, -
both domestic and foreign -- the more trouble farmers will have clearing the
local markets at prices which will motivate them to continue improving

Fourth, a complementary conclusion is that there should be coordination
between the infrastructure sub-projects which have been discussed, on the one
hand, and the up-coming Small Farmer Diversification Systems Project, on the
other. For one thing, the largest gains in earnings encountered occurred on
farms which have combined soil terracing or irrigation with crop
diversification; the smallest gains were observed on farms which have not.
Logically, the wider the range of crops the farmer has at his disposal, the
greater the flexibility in response to fluctuating relative prices, the less
prices will be likely to fluctuate, and the smaller the likelihood that prices
of any single commodity will decline precipitously relative to others in the
longer run. Finally, larger volumes of a wider variety of food crops will
ultimately benefit the consumer via lower aggregate food costs and improved


- 35 -

Fifth, the limited information I was able to compile regarding the impact
of altered technology and enhanced incomes on the family life of partipating
farmers suggests that, while family labor patterns have accomodated to the
needs of the altered technology, traditional expenditure and consumption
patterns have yet to adjust to enhanced incomes. For instance, soil
terracing, irrigation and crop diversification have meant longer hours in the
fields for the men; where vegetables and fruits have been introduced, women
are busy preparing these for the market -- cleaning, sorting, bunching,
storing. On the other hand, extra cash has been used mainly for reinvestment
on the farm and/or to finance deferred "one-shot" expenditures (e.g., home
repairs, a new cow, new clothes) and/or to send one or more children for an
extra year of schooling. None reported significant changes in diet, although
a few farmers at Santa Rita said they were "eating a little more vegetables"
than before.

Nevertheless, there is definitely a need for a closer look at intrafamily
changes accompanying these sub-projects, both now and in the future as
families continue to adjust. Among other things, we need to know not only how
a family adjusts, but how long the adjustment takes, how changes in
expenditures will affect the markets for commodities purchased, how changes in
consumption affect the health of family members (and the quality of
agricultural labor), and how all these things are likely to interact with
other projects (e.g., health, home economics, education) affecting the family.

Sixth, there is a serious lack of hard data concerning all sub-projects
under this Project. No baseline studies were made back in 1977, and only one
was attempted by the Ministry of Agriculture in 1979 (Santa Rita). This by
itself need not have been a calamity, had there been time to make a detailed
survey of both participating and non-participating farm households later in
order to do an indirect comparison of pre and post-Project farm
characteristics. But lacking time for that, these findings have been sketchy
and the conclusions necessarily broad. There definitely should be baseline
studies made of farms in future soil conservation, small-scale irrigation,
roads and diversification sites. This is the sort of thing planning units

- 36 -

should be able to coordinate and oversee, and the USPADA is no exception,
especially since it supervises a well-established area sample frame. The
studies themselves need not be exhaustive; doublely stratified samples (by
site and by farms within sites) chosen for each region (I and V) with
carefully worded questions designed to capture both production and household
characteristics (including family expenditures) would be sufficient and well
within USPADA's capabilities with some technical assistance, say, from
USDA/SRS. If done well, final evaluations would be immeasurably improved and
simplified, and USAID could start lobbying Washington earlier and more

Seventh, the field personnel I encountered in both DIGESA and Caminos,
both in Region I and Region V were, without exception, hard-working, competent
technicians who enjoy an informal and friendly relationship with the farmers
we encountered in the sub-projects under their supervision. Judging from what
I observed, I can only echo Bert Embry's positive comments about the
continuing momentum of the soil conservation and irrigation sub-projects.
Especially impressive has been the "guia agricola" system, designed to enhance
acceptance by local farmers and to relieve extensionists of the burden of
frequent visits to many sites. In a different context, I heard the Vice
Minister of Agriculture comment that the Ministry's goal is to broaden local
participation and leadership in the implementation of rural development
projects, a policy I solidly endorse.

Eighth, at the risk of being accused of polishing apples, I want to go on
record here as having been agreeably surprised at the interest taken in my"
field work by USAID officials, especially "Doc" Odle, Cecil McFarland, and
George Like, and their willingness to visit the field themselves. This is in
very pleasant contrast to my experience in Guatemala and elsewhere in years
past. There is no substitute for direct, personal contact with project sites
and participating families from time to time to "flesh out" dry reports and
columns of data. Equally important, if not more so, is the need to encourage
Guatemalan planners and public sector officials to do the same thing. The
ones I know who have done this have acquired a sense of commitment to their
work they hadn't had before.

- 37 -

B. Recommer~at ions

In summary, my recommendations are as follows:

1. Move ahead with sub-projects to expand soil conservation, small-scale
irrigation, and rural access roads. Such projects, even undertaken
in isolation from each other, have been profitable in most instances,
and the changes they impose on beneficiaries have been acceptable and
often enthusiastically received.

2. Future sub-projects should be coordinated wherever it is clear that
an integrated approach is indicated.

3. Baseline studies should be made of selected sites (selected randomly
or by some carefully considered criteria), and sites for all kinds of
activities -- including crop diversification and marketing -- should
be reconsidered on the basis of a systems analysis of longer-term
strategies for the Highlands. (Incidentally, studies and
coordination should include activities promoted not only by the GOG
and USAID but all other significant donor agencies, such as IDB, FAO,
IICA, etc.).

4. There should be additional assistance to enhance the capability of
USPADA and the National Economic Planning Council to coordinate,
monitor, and evaluate integrated rural development projects.

- 38 -



A proper economic study of a project, whether it be a feasibility
assessment or a final evaluation, would seek to determine its "cost
effectiveness" or "economic efficiency", that is, the spread (presumably
positive) between the value of the project outputs in comparison with the
value of its inputs and to compare this with similar calculations for
alternative projects or activities, either in the same place or elsewhere.

This sounds simple on the face of it, but in practice project design and
justification can be a very complex business. Much depends upon the
definition and context of terms like "efficiency" and "cost effective", and
upon whose definitions are used. For budgetable time periods like one year,
it is fairly easy to define costs of resources to be used for the project.
Complications arise in attempts to define returns when they are expected to be
more than strictly economic and to accrue over extended time periods.

For rural infrastructure projects such as access roads, hillside terracing,
and simple irrigation, economic costs in the short run include those of
initial construction and (possibly) curtailment of other activities through
switching resources to road, terrace, or irrigation system construction,
(i.e., opportunity costs). In the longer term, recurring costs include
operation and repair.

In the case of returns, it is necessary to make three distinctions: (a)
returns to whom? (b) returns over what time period? (c) what kind of returns
(economic, social, environmental)?

- 39 -

The simplest case from a narrowly economic point of view is the
small-scale activity. Participating farmers individually or collectively
-- take out twenty-year BANDESA loans to finance installation of pipes,
sprinkers, pumping systems, catchment construction, etc. The cost to the Bank
is the initial opportunity cost of lending money to specific groups for this
purpose rather than doing something else with it. Over twenty years, the
minimum expected return to the Bank should be 5% per year. Since, according
to Embry, many irrigating farmers have been paying off their loans much faster
than this, the Bank's rate of return is correspondingly higher.

But since BANDESA is a government bank, this really means that the GOG
gets the return. Again, whether or not this represents an economic gain or a
loss (i.e., a subsidy) depends on what BANDESA/GOG could get for the funds
used for other purposes. If the economic opportunity costs exceed the returns
from investment in small-scale irrigation, then other than strictly economic
criteria enter the equation, and we need to look at longer-term development
strategies and project priorities. If, on the other hand, investment in
irrigation does represent the best economic return, then the overall gain to
the GOG will depend on what is subsequently done with the government's
"profits" and on the long-run impact on Guatemala's economy and society of
irrigated farmlands. Farmers with higher incomes can pay higher taxes and
they can save. Higher taxes mean higher government revenues, and higher
savings mean more rural capital available for further investments in all
sectors, both public and private.

For the farmer, the long-term costs of irrigating include amortization of
loans, maintenance and repair costs for the irrigation system, plus costs of
any additional inputs necessitated by altered cropping patterns and new
production techniques (e.g., fertilizers, pesticides, opportunity costs of
additional labor). To cover these additional costs over a twenty-year span
(or less), he expects an increase in annual earnings of at least 5% or more in
order to make the change worthwhile in the first place. The precise figure
for an acceptable rate of return for the farmer also will be a function of
certain intangibles; his perception of risk and his desire for the increased

- 40 -

security that dependable water and more stable market prices presumably will
bring are probably the most important of these. Others include attitudes
towards self-improvement, consumption propensities and elasticities. Some of
these things can be estimated through sample surveys undertaken as part of
baseline studies. Since much of development involves changing some of the
basic parameters of a society (e.g., consumption elasticities, production
functions), such studies -- before, during, and after a project should be
integral parts of a project.

Soil conservation projects in principle involve consideration of the same
kinds of variables as those for irrigation projects. In practice, the
analysis is simplified from the viewpoint, of costs and returns to the-
government. Terracing is very labor intensive, and it was originally thought
that farmers would have to be subsidized by the government ("social payments")
to get farmers to take enough time off from their other tasks to build
terraces. While this was initially true, there is evidence now that the
farmers' main concern is not labor itself (i.e., the opportunity cost of
terrace construction) but risk. Once farmers begin to see the advantages
terracing brings, they continue to build them without additional inducements.
We have seen that more than one-fifth of the terraces completed under Project
520-0233 did not require social payments, and, according to Embry, this trend
is continuing. As a matter of fact, it is possible to overestimate the
opportunity costs of terrace building in the first place, since studies have
shown that traditional, near-subsistence farmers have literally months of idle
time between sowing and harvesting of traditional crops.

In the longer run, the farmer doesn't have to amortize his terrace
building labor. However, even if he continues to plant corn and beans on the
terraces, he will have more work to do than before -- including maintenance of
the terraces, more dense planting of individual crops, greater attention to
weeding and compost management, and, possibly greater applications of chemical
fertilizers and pesticides. Moreover, if the terraces absorb enough water,
more than one corn crop per year may be possible. The offset, again, will be
increased earnings (if crop surplusses are marketed) and/or increased

- 41 -

consumption (if surplusses are consumed at home or if the family splits the
difference between increased sales and consumption). Again, the marginal
return that will induce the farmer to make the change is difficult to measure
without asking him, (i.e., undertaking carefully structured baseline studies).

The sketchy evidence from this evaluation suggests that 20% increases in
annual earnings or less is a conservative estimate of returns to farmers of
irrigation and soil conservation activities. How much less than 20% which
would continue to motivate farmers needs to be determined in specific cases.
If market prices for commodities produced by participating farmers begin to
fall, such questions will be of more than academic interest.

Access road projects are more difficult to evaluate, since many kinds of
people and enterprises are affected by them and since they span relative large
distances. Roads are effectively "public domain", and although initial
construction costs can be readily quantified, how these costs are to be
amortized and hho will be responsible for maintenance are debatable issues.
The GOG seems to have adopted a relatively straightforward division of
responsibility: the government will build (or renovate) the road and major
infrastructural items such as bridges and culverts, while local residents and
users will be responsible for routine maintenance (filling potholes, removing
stones, digging out from minor slides). An issue right now is whether or not
to pay the latter for these activities and, if so, how much and over what
lengths of road would individuals/communities have responsibility.

Whether or not they participate in maintenance, users of the road
presumably will benefit from increased earnings via lower transport costs and
a rise in the volume of potential transiting customers. The impact upon each
kind of enterprise would have to be estimated separately, since each will
enjoy a different kind of utility from the road. Farmers presumably would
benefit from easier physical access to traditional market centers and access
to new ones; this was the benefit I heard cited most often by the farmers
themselves, especially in Region I. However, it has been seen that farmers may
not benefit at all, if transport costs are not their principal barrier to
increased production.

- 42 -

From a national point of view, roads stimulate commercial activity, raise
incomes and broaden savings and tax bases. They also are essential
complements to any activities undertaken to assist communities in remote
locations, including extension, soil conservation, irrigation and health
projects. We have also seen that roads can cost the nation trees and other
forms of environmental quality. The acceleration of deforestation observed in
the vicinity of new roads is more than merely an academic, environmentalist
matter. If unchecked, it can lead to serious offsets to any gains engendered
by other development projects, as the terrible erosion and desertification of
western San Marcos attest.

All of these considerations make life difficult for the economist. If he
wishes to make a real contribution to development analysis, the economist is
obliged to recognize that an optimum, all-encompassing strategy for
development will involve less-than-optimum economic components in some
instances. If optimum economic strategies are not consistent with existing
political realities or if they conflict with desired social changes,
trade-offs need to be recognized and balances struck. Nevertheless, it is the
responsibility of the development economist to point out where strategies
involve compromises with economic optima so that decision makers will
understand and properly weigh the economic consequences of their policies.

To help sort out some of these things, I have listed them schematically in
Table 7. For each of the items listed (the list is not intended to be
exhaustive), a quantifiable indicator should be specified (as is done in
logframes, for example). In general, the items listed under "long term" are
related to project GOALS, and the "short term" items to project PURPOSE(S).

Whatever variables and indicators are used, I hope I've made clear the
most important thing I think we can do at the outset: get enough data and
qualitative information about prospective project sites so that intelligent
decisions can be made about (a) priorities (geographic, project, time), (b)
resources needed for given sub-projects vs. returns to be expected, and (c)
ways and means of combining two or more sub-projects at the same site where

- 43 -

needed. Baseline studies can also yield clues about the kinds of
institutional structures and resources needed to implement and manage projects
in the field, that is, ways of improving the performance of DIGESA, Caminos
and other public sector personnel.

- 44 -

TAX !?7 7 n. r tr arr ii% ruflhii A ii";TTIYri:t! 011i h f.iiVATOlffL .
Pilt',I -I Ifi,. h.A 1I..-4. ,A 1 i : >l. Al. A' t I ''+ 1 9. V- P.,) II ( IJ

bA J 'i .L ...


I -t

Improved fam family
food consu.ptio land
nutritional status;

Increased special.
nation In production
for market; less
dependence upon
traditional "nilpa"

Seller families;

Increased rate of
savings ad returns
from saving

.. ki\O UF


Increased tendency to
purchase relatively
costly processed food;

Greater vulnerability
to market forces, loss

is I I 1 II-I

Increase from one
to two crops per
calendar year of
traditional corn end
bean crops;

Increase in variety
of crops-fruits,
vegetables, roots;
2-4 crops per calen-
dar year;

Sustained increases
In earnings from
sales; ability to
take advantage of
,sifts in relative
food prices by
Iltering sowing and
harvesting times;

Improved drinking
vater nd mitntiton

Ibre efficient use
Of water resources
within toe hbuse-
hold; Improved fam-
Ily health;

Creiter prospects
for fally employ.
ment (e.g.. In
atroindustry, off-
fara work. etc.).

Anortization of loan
contracted to finance
construction -d

Monthly electricity
charges (where sater
is ppied only);

Maintenance of pipes,
catchment, sprinklers

Increased production
costs st.oting from
additional inputs to
traditional crops and
fertilizers, seed.
pesticides for neo

Risk of decline In
earning front sales
as prices fall in
response to nEgretate
increases in supply;

Maintenance of pumps
(where .apJicrble).
Increased likelihoodd
of purchasing rore


____________ 'I I

Increased commer-
cial activity for
roadside business a
connecting urban

Lowered transport
cOSts for agTicul-
tural and other
commodities and for
passengers (busses);

Stlmulatlon of new
agricultural and
supporting connier
.flt .elvitty.

Sustained hlheor
Incomes for all
local residents

Increased onnortu.
alticL for children
to e to ctchhol and
for huschold to

Increased variable
costs of corrcrcial
enterprises stimula-
ted by roads;

Labor contributed by
residents for road


I -I

Road enlntenanceo
(via contributed
labor or increased

l tll i uc .las In
v it- s.. .dstlonal
cil. (corn andl btilns
S;il incrcaso In
fields vegetables and
uaot crops;

Sustalned Increase
In earnings and/or

Increased use of
f.aily labor. less
'under employment";

Improved production
efficiency overall:
sore output for given

tower overall costs of
food, especially to
urban/industrial sector;

Shift of grain crops to
coast, lbecr-intenslvr
to Highlands; promotion
of private aCroindustry;
laproved general public
health and physical
quality of labor--In-
creased returns to
investments in education
and health programs;

lover population growth;
Lower capital costs due
to increased rural :
Savings rates

Increased sales of
consuncr goods and agri-
cultural inputs to rural

Increased flow of labor
from rural to urban

Returns to 8LADIESA from
loans mnde to finance
installation of irriga-
tion systems;

Increased and more re-
liable supplies of food
to both rural and urban

; etc.

(same as for conserva-
tion projects)

Pore stable seasonal
and secular prices;

MHre efficient use of
national water resour-

(Same as for conserva-
tion projects)

Accelerated commercial
activity ii areas
serviced by roads and
increased incomes gener-

Improved nrtlculation and
coordination of national
road system;

Stlaulatlon of new kinds
of commercial and agri-
cultural activity.

Increased incomes
throughout system I

Ilnrovd articulation
and coonlination of
nation's nal.ctlnr
sylne: oriculltural
and nolongricultural

Improved food storage

Create dependence on
international markets;

Increases in sizes and
capitalization of farms:
Reduced fare and increased
urban population;

Risk of urban uneMploymenl

Essentially the sauce
as for soil conserva-
tion projects.


(Saea asfor conserva-
tion projects)

Accelerated deforesta-
tion ;,

Unpredlctable shifts
in population through
movement of farmers to
city, increa..d densit)
of overall population
In rural areas

Increased costs of
maintenance of road
system Wad related

Accelerated =eplolts-
tntion of land resour-
ces.**ree,. water;

Need to divert develop
nent resources to
maintenance of system
(especially bridecs
aJn culverts).

Inlllttl Itor of con*
btructing terraces
fitf not offset by
social p.tymonti)

Increased production
coals St.-Jing (-rvI
additional inptsot to
traditional crops and
Ifrtllitcrs, seed.
pesticides on new

Risk of decline In
earnings from sales
as prices fall in
response to aggregate
increases in supply,

Ilcroised and mro re- Snrial payments made to
li.le supplies of food cuver ifrmers* opnpolt
ti both rural and urban nity costs in building
sectors; terracesi

Inrreased Ineones for Nccd for greater In-
farmers; extent in coaplren-
tary activities: roads,
Increased overall comn Irrigation. extension
mcrclal activity as services end acco=ranyitn
farmers spend their in- institutional iaprovc-
creased lncooesi cents.

More efficient use of
national slriculturil

Increased prospects for
food exports and exc ge
savings from reduced foo


;Over Syr)


o. Km
* tome

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