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Central American University - UCA  
  Number 234 | Enero 2001



Agriculture to the Emergency Ward: Intensive Care Required

First, let’s look at the diagnosis. The numbers speak for themselves, and what they are saying to us so clearly forces us to think about more radical cures to shake us out of routine remedies.

José Luis Rocha

As the year 2000 ended, spokespeople for Nicaragua’s Central Bank presented their figures on national economic growth with the usual hurrahs that only go down well among misinformed optimists or other unconditional apologists for their own actions. They proclaimed that the official growth rate for the Gross Domestic Product was 6%, while independent economists skeptically calculate it at no more than 4%. The independents recall other figures as well. While construction grew by 53% in 1999, largely due to the rebuilding of infrastructure destroyed by Hurricane Mitch, its growth was barely 9% in 2000. Commerce, which increased in volume by 6% in 1999, only grew by 1-2% in 2000.

Economist José Luis Medal touched a sore spot when he pointed out that, according to official documents presented to the Consultation Group in April 1998, Nicaragua’s exports should have been US$1.04 billion and US$1.14 billion respectively in 1999 and 2000. In reality, they only hit US$544 million in 1999 and US$600 million in 2000. All optimism should evaporate with the fact that our imports surpassed our exports by over US$1 billion; as has been the case for years, we sold little more than half of the amount that we bought.
Apart from the not insignificant detail that official figures never specify how the proclaimed growth is distributed, the calculations themselves are done in the most conventional manner, adding up the good and omitting the bad. For example, where in the equation are the chemicals spilled into the Royal Estuary by shrimp farms, the advance of the agricultural frontier with its consequent deforestation and water table damage, the noise and congestion from the growing traffic, the tons of unrecyclable and unrecycled garbage, the lack of citizen safety, increased prostitution, child labor, near-extinct animal species, corruption that has sent investors fleeing and the many other evils that undermine future growth?
English economist E.J. Mishan hit the nail on the head when he observed years ago that "if countries added up these ‘evils’ or negative gains fairly each year, and took them into account in estimating the ‘real’ national income, we would probably find negative economic growth over the course of years."

We are hungrier

Failing to look at other indicators that give an even clearer view of present Nicaraguan life and the state of the agricultural sector in this traditionally agrarian country is an even more serious omission. Take the statistics from the UN Food and Agricultural Organization (FAO), for example, which are optimistic about humanity’s progress as a whole in terms of food intake, but show Nicaragua in a far from optimistic light. In 1950, per-capita daily consumption was less than 2,450 Calories, while the six billion of us who live in today’s world consume a daily average of 2,700. The developed countries have a daily per-capita intake of 3,220, while people in developing countries consume 2,627. In Latin America and the Caribbean, the increase, examined at certain 3-year intervals, has been notable. The average Calorie intake rose from 2,340 in 1961-63 to 2,600 in 1976-78 and 2,770 in 1988-1990. Nicaragua has not experienced this increase, however. It hit its maximum calorie consumption (2,400) in 1986, even then falling below the world average for 1950.

The FAO’s most recent data for Nicaragua is 1998, when per-capita daily intake was 2,208 Calories. This is below its 1972 intake level (2,249) and significantly lower than our Central American neighbors. Costa Rica’s per-capita daily intake is 2,781, El Salvador 2,522 and Honduras 2,343. In Central America, only Costa Rica surpasses the average for underdeveloped countries. Looking at these numbers, it cannot hurt to state the obvious: averages camouflage the coexistence of their two extremes, one of which is the obesity of our ministers and the other the malnutrition of the people in marginal neighborhoods. It is important to be clear that the great majority survives the best they can below these averages.

We are less nourished

A similar situation can be observed in the data on protein consumption. In 1998, Nicaragua’s daily intake was 53 grams of protein per person per day, well below its figure for 1977 (67 grams) and 1972 (66 grams). It also falls below that of Costa Rica (76 grams), El Salvador (63 grams) and Honduras (58 grams).
It is perplexing that Honduras, which is now ahead of Nicaragua, only reached Nicaragua’s 1972 level in 1988. Honduras’ progress is a result of sustained economic growth. In general, the region’s countries show a sustained growth trend, while Nicaragua oscillates in response to large influxes in food aid on one side and a continued slide in agricultural production on the other. This tragic combination has left the country with a nutritional level inferior to that of 28 years ago. If Nicaragua were now to experience a gradual rise similar to that of Honduras in the past several decades, it would take us 15 years to reach a per-capita intake of 2,400 calories per day. As with so many other things in our country, uncertainty dominates the future of our "daily bread."
The number of calories consumed from animal sources has fallen even more drastically. In 1972 Nicaraguans consumed 387 Calories from animal products and the maximum consumption reached 432 in 1976. The present daily protein intake from animal sources is 171 calories, putting us below Costa Rica (472), Honduras (348) and even El Salvador (291), where the diet is traditionally low in animal products. In this same category, the current protein intake (12 grams), which has not changed at all in the past five years, is not even half of what it was in 1972. We have moved backwards while our neighbors and the rest of the world have advanced.

Consumption patterns have also changed, and, as with food intake levels, not for the better. The majority of the population would not hesitate to stress the superiority of Coca Cola over pinolillo, a doughnut over a polverón or a hamburger over a plate of indio viejo, preferences which are neither cheaper, more nourishing or even better tasting. It is an issue of distinction, not a search for protein-energy balance. The market forces are creating changes in consumption patterns. There is no longer a demand for certain goods because they are no longer affordable or they are no longer offered because there is insufficient demand. Meanwhile, our preferences become shaped by the invasion of certain goods. In cacao-growing areas, which include Central America, discovering how we have switched from drinking the more nutritious chocolate to the non-nutritious coffee would be a good thesis topic. Nonetheless, the issue most urgently in need of analysis—so as then to transform—is a factor far more determinant to the Nicaraguan population’s diet: the drastic drop in food production.

Stepping fifty years back

The observations of Nobel Prize winning economist Wassily Leontief a quarter century ago hold true today. "The smaller and less developed a country is, the easier it is to decide to exploit its productive capacity independent of its immediate needs and to attempt to fill the gap between production and consumption through foreign trade. Consequently, to correctly diagnose the ills of an underdeveloped country and formulate a realistic development plan, one needs to do a detailed quantitative analysis of the dependence of all domestic industrial sectors, regarding not only final domestic demand but also the composition of the country’s foreign trade.

The prostration of Nicaraguan agriculture is demonstrated by the country’s growing dependence in areas where it was previously self-sufficient and by the precipitous drop in agricultural production. On the macroeconomic level, our poverty is reflected in the fact that today, per-capita income is not even half of what it was before the war (1978) and is lower than it was at the end of the war (1990). The FAO calculated per-capita food production to be 95.0 units, a little over half of what it was in 1972 (172.3) and less than half of what it was in 1979 (204.4). Per-capita agricultural production is calculated at 91.7 units, not even half of what it was at the end of the seventies.

We have lost a lot in food self-sufficiency. In the seventies, cereal donations to Nicaragua never reached 10,000 metric tons per year, except for the years of the earthquake (1972) and the insurrection (1979). In the years before Hurricane Mitch, the tons of donated cereals did not rise in proportion to the increase in population. The figures for donated cereals are 54,666 MT in 1993, 34,171 MT in 1994, 33,402 in 1996, 43,464 in 1997 and 28,386 in 1998. Not only has there been no progress in production, there has been a serious and obvious backslide. We are fifty years behind, in a different and more adverse environment.

Severe pathology in every branch of production

Every branch of production offers a picture of severe pathology. Fruit production is presently 234,000 MT, compared with 284,000 and 340,000, respectively, in 1973 and 1978. With a territory smaller than Nicaragua, Honduras produces 1.35 million MT of fruit, while Guatemala produces 1.25 million and Costa Rica 3.59 million.

Cattle production is languishing. There has been a drop from 2.78 million head of cattle in 1978 to only 1.37 million in 1999. In 1972, when the population was half of what it is today, 2.2 million cattle grazed in Nicaragua’s pastures. If in 1972 the cattle population equaled the human population, in 1999 the ratio was one to three. In 1972 there were 580,000 pigs, and in 1986, at the height of the war, there were 750,000, but by 1999 this had been reduced to 400,000, while in the same year, Honduras reported 700,000 and El Salvador, with a far smaller territory than Nicaragua, had 335,000.
This has had a negative impact on agricultural trade. Nicaragua’s agricultural exports in 1972 were US$191 million, compared with $26 million in agricultural imports. In 1998, the agricultural exports of $279 million barely surpassed the $245 million of imports. In Costa Rica, this relationship is $1.8 billion in exports versus $345 million in imports and in Honduras, $744 million versus $303 million. In many branches, imports exceed exports. For example, in 1972 we imported $1 million in dairy products and exported $3 million. In 1998 we imported $22 million in dairy products and exported a mere $8 million. This is an alarming drop for a country with a tradition of cattle rearing.

Fruit and vegetable imports in 1972 amounted to $4 million versus $6 million exported. In 1998, imports in this area reached $29 million dollars, surpassing exports of $24 million. Neighboring countries were singing a different tune, with Guatemala importing $55 million and exporting $318 million, Honduras importing $21 million and exporting $196 million and Costa Rica importing $59 million and exporting $928 million. In 1972 we exported $1 million of rice and imported none; by 1998, in contrast, we were importing $17 million of rice and exporting none. In cooking oil, 1972 exports were $5 million versus $4 million in imports. In 1998 this ratio was dramatically inverted: a mere $2 million in exports but $52 million in imports. Added to the multiple production problems in our agroindustry is a decrease in the number of products produced. For example, there is growth in the sale of forest products, but the clear trend is an increase in raw timber as opposed to products with some level of industrial preparation.

The paradigm of the 60s and 70s:
Unsustainable concentration

The present state of Nicaragua’s agriculture is the result of a process shaped in part by three different development paradigms. In a manner similar to scientific paradigms, development paradigms have the ability to survive way past their practical usefulness and demonstrated benefits. In part, they are models subject to ideology and interest groups.

Nicaragua has had three drastic paradigm changes during the past few decades. Each one proposed a strategy and methods and tried to solve a problem. Each one had an escape valve that prevented its collapse. And each one passed its prejudices on to those who put their money on the next paradigm.

The sixties and seventies took advantage of the enormous opportunities to expand the agricultural frontier, and the environmental damage was not questioned. This paradigm also profited from the considerable price increases for certain products such as coffee and cotton. It was the era of the cotton boom, the modernization of agriculture based on agrochemicals and improved seeds and the mechanization of large agroexport farms. The financial injection required by this model arrived via the Alliance for Progress, which was proposed by the Kennedy administration in 1961 and benefited only the associates of the Somoza dictatorship.

This survival of this paradigm meant that export crops crowded out basic grain crops, forcing them into other less favorable and less accessible zones and notably destroying virgin tropical forestland. This model ended with the revolution, but it was destined to sink eventually because of its ecological unsustainability and the disproportionate concentration of benefits in the hands of an elite oligarchy.

The paradigm of the 80s:
Sustainable only with foreign aid

The paradigm of the Sandinista revolution in the eighties made use of the redistribution of land and the partial consensus this policy earned. But overall, it relied on foreign aid and on irresponsibly increasing the fiscal deficit to subsist. One practice that fed the deficit was to successively grant loans to agricultural cooperatives loyal to the revolution even when the war raging around them, climatic disasters and other negative factors meant that the loans would have to be written off.

As obedient brokers of the state-party’s war-economy strategy, state businesses and peasant cooperatives accepted the various costs implicit in the macroeconomic policies. One example of these costs was the multi-tiered exchange rates, which worked against export-oriented businesses and affected the national food system’s ability to generate the dollars needed to expand and diversify. Another was the mechanism that set domestic prices for agricultural products far below those of the international market and thus acted as a disincentive for producers. While these and other controls on the availability of foodstuffs spurred the creation of a black market, the government, in a futile attempt to keep inflation down, offered workers a "social salary" (subsidized prices for the rationed food items, subsidized public transport, etc.) instead of nominal raises. The constantly shrinking value of real wages due to inflation made it virtually impossible for the average urban worker to supplement the rations with black market food purchases. Exacerbating that contradiction, the price controls that subsidized the urban workers deteriorated rural-urban terms of exchange while the introduction into the market of low-priced donated foods that either duplicated or substituted local production drove down local agricultural prices even further.

The Sandinista model was plagued with such contradictions, another of which was that the confiscation of properties, though done on a variety of legal grounds, fanned the flames of the counterrevolution and broke the revolution’s hegemony. In addition, the national finance system quickly ceased being viable for the above-mentioned reasons and others and certain aspects of institutionality were undermined.

The paradigm of the eighties put a premium on organization by sector (peasants, industrial workers, small businesses, professionals, etc.), but the top-down impositions of the Sandinista party and government created internal contradictions that utterly destroyed the peasants’ ability to negotiate. The low prices made it impossible for the agricultural enterprises to invest to stave off obsolescence, forcing them into a cycle of loans and subsequent pardons that perpetuated the "patronage" system. Although the revolution pushed the idea of "redistribute in order to grow," the stress continued to be put on large haciendas, either in the form of state enterprises called "Areas of Peoples Property" or in their private collectivized version, the cooperatives. The war’s distortion of this paradigm makes it hard to come to a single interpretation, but it is increasingly clear in hindsight that its administrative culture, based on an Olympian disregard of costs, makes this paradigm possible only if shored up by a fiscal deficit and foreign aid.

The paradigm of the nineties:
Cult of the market

The past decade was characterized by the cult of the free market and contraction of the state apparatus, which included slashing public credit, technical assistance, social services and the state’s role in production and commercialization—whether domestic or export/import. These are the central lines of a paradigm framed by privatization and the ceding of public services to the private sector. Private banking reappeared in 1991 and the state’s National Development Bank was closed in 1998. The National Agricultural Technology Institute (INTA) has adopted a model of selling its services and greatly reduced its coverage. The result of these policies is the restriction of credit and of technology transfer. The state’s role in the eighties of leader and protector was precipitously dismantled, leading to the disappearance of the public sector’s bureaucratic structures even before there was time for the emergence of private initiatives that could adequately institutionalize the market economy.

In theory, the paradigm is clear. Anyone with enough money can buy. Anyone who can pay for technical assistance can have it and anyone who can pay the high interest rates and put up collateral can get a loan. In practice, long-term credit has disappeared. Access to commercial bank loans has become a privilege of those who meet the conventional mortgage requirements. Between theory and practice, however, is a monumental reality gap. Land values in many areas barely exceed the value of the inputs needed to rehabilitate production and a high percentage of agrarian properties lack registered deeds, thus resulting in the exclusion of the majority of producers. The large farms or haciendas, especially those producing for export, have more credit possibilities, but even they are punished by the policy of overvaluing the currency, which decreases their purchasing power within the country, even as the international prices for various agricultural products are plummeting.
This paradigm presents the demagogic face of the new but already seldom proclaimed slogan—"grow in order to distribute." Growth is fundamentally concentrated in building roads and highways, on the supposition that cement will be the foundation for development and the "rest" will just come along behind as part of the bargain. This "rest" has basically consisted of a few social programs also mainly based on the "cement" option, such as schools, health centers, the paving of dirt roads and an electrification program, all financed by the Emergency Social investment Fund (FISE).

This paradigm demands that the government limit itself to building roads and manipulating monetary policy to shape macroeconomic conditions. Lacking any better ideas, the Alemán government tried to create cohesion and enthusiasm by announcing that he planned to turn Nicaragua into the "granary of Central America." This never amounted to more than an empty slogan, but it justified the distribution of credit through the Institute for Rural Development—with World Bank funds. Using criteria that were political more than financial, the recovery rate was pathetic.

The stature that the NGOs achieved in the nineties has meant the coexistence of two paradigms. That of the NGOs has been to take on technology transfer, food security programs, credit to small rural producers and micro-enterprises, housing programs, nutrition, gender, environment, organization, health, water, emergencies, disaster prevention and mitigation, etc. Although they have a more holistic vision and their work favors small and medium-sized producers, their coverage will never reach the over 300,000 rural families, especially now, with "donor fatigue" threatening their funding.

Is Qwerty responsible?

What is the result of this combination of paradigms? Not only has there been no progress, there has been backsliding. The FAO’s analysis of the state of agriculture and food in Asia in the mid-20th century sounds like a description of Nicaragua’s problems as it enters the 21st century. Productivity is below the average for underdeveloped countries; land use is extensive rather than intensive; a good part of the rural population is engaged in producing insufficient amounts of food, the majority of then subsistence farmers who consume almost everything they produce. We are fifty years behind, but in a distinct milieu that is unfavorable to agriculture. At the start of the 21st century, we are just emerging from the 19th. Perhaps so many problems are due to what many have dubbed the Qwerty economy. Maybe Qwerty is to blame for our ills. For more on this, stay tuned for next month’s episode.

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