The Farmer Program: an Alternative
Some 96 million dollars is the estimated cost of this program of economic reactivation, ecological rescue and promotion of private enterprise. A million Nicaraguans could be benefited.
Nicaragua's economic growth depends on the reactivation of agricultural production. It also depends in great measure on an increase in export production.
The changes in the world economic system have advanced more rapidly than the Nicaraguan economy has been able to restructure. Its agricultural production apparatus has adapted very slowly to new world market opportunities, and structural adjustment programs have concentrated on stabilization instead of economic reactivation.
Over the past 30 years, no significant changes have been made in the products or technical practices of Nicaragua's agricultural production apparatus. It is very far behind, and this backwardness has already begun to reach its limit in the environmental crisis; in a massive pool of unemployed and impoverished workers, who are excluded from the market; and in the viability of trade deficits.
Marginalized BusinesspeopleIn the new context of economic adjustment, Nicaraguan private enterprise has not spearheaded economic recovery as was expected. Its failure to do so can be explained by the difficult economic situation, the serious underdevelopment of the national economy compared to the world market and the persistence of political instability.
Another element that aggravates the situation is that the opportunity to participate in decisions about economic reorganization has varied widely for different sectors of Nicaraguan private enterprise. The potential of all of private enterprise has not been sufficiently tapped.
For example, in contrast to the 4,000 urban families that make up the country's large agricultural businesses, the majority of medium sized rural businesses the farm sec tor have been marginalized. They have little or no information about new technologies and market opportunities; they have less presence in the national power structures; and their possibilities of directing their capital to anything other than rural activities are very limited.
Their productive potential, technical and economic logic and social characteristics, however, make them crucial subjects for economic growth, environmental conservation and the institutionalization of democracy in Nicaragua.
Key People for DemocracyThese farmers' productive potential is limited by unfavorable stabilization policies, by the drop in prices of their products and because institutional structures are inadequate for organizing the modernization of their production systems.
Although farmers have numerical weight in private enterprise, they have almost no influence in national development decisions. This is even more serious because, in rural areas, farmers not only play an economic role, but are also socio cultural leaders. And that means they are decisive figures in promoting the participation of these areas in Nicaragua's emerging democracy.
This sector of Nicaraguan private enterprise includes family farms, where the farmers are "bosses" who establish personal relationships with their workers. The farm sector is also characterized by having sufficient agricultural resources to allow for an acceptable living standard, differentiating them from the rural poor.
They also differ from urbanized agricultural producers, because they live on their farms and have a rural upbringing, with more austere and national consumption habits. They also participate directly in rural production and generally run their farms with technical and economic practices that put an appropriate value on the country's resources.
Their projection and social participation, however, do not extend beyond the borders of their very small territories (municipalities or villages), where dialogue and negotiation between the state and private enterprise have not been institutionalized. They live where there are no telephones nor friendships with Managua's government officials.
These limitations hinder the effective incorporation of farm families into democratic practices. The promotion of institutional innovations for the effective participation of farmers in development is one way to strengthen democracy, to guarantee political stability and to tap into the economic potential of Nicaraguan private enterprise.
Fat Cows and Skinny CowsA broad sector of farmers benefited in the 1960s and 1970s from an economic situation favorable to coffee and cattle production. They were times of accelerated expansion of the agricultural frontier with the support of public investment. During those years, there was also a rural credit program from the state bank which ultimately included 23,000 clients.
Sandinista development policies in the 1980s favored state production and legitimized the agricultural production collectives created through the agrarian reform land distribution. Private farmers, however, were marginalized as economic and social subjects under Sandinista policies. Because of this, especially in the country's interior, they participated as leaders in the anti Sandinista peasant movement, and many of them were contra leaders. Their farms were the theaters of the worst battles, and their lands and families suffered the war's greatest social and material destruction.
In the 1970s, private farmers began the accelerated organization of agricultural service cooperatives in important cotton, coffee and cattle zones. The key to those cooperatives were to adapt to local potential and offer agricultural services that each farmer could not afford individually. This important experience was lost during the Sandinista period. The majority of those service cooperatives were affected by the nationalization of trade, by the centralization of credit and because the Sandinista government isolated this type of autonomous local organization.
The change in government did not improve the situation; on the contrary, the new government's structural adjustment policies made it even worse. Since 1989 a series of factors have hurt farmers: greater credit restrictions; the plummet of prices for their products; the loss of infrastructure in zones affected by the war; and the disintegration of public commercial and financial networks, with a weak rebuilding of private networks.
A Difficult TransitionThis farm sector is potentially larger now due to the 1980s land distribution. Sandinista policies of assigning land in the form of collective or organized property did not give the beneficiaries autonomy to decide how to exploit the land. This led to a slow and hidden parceling process, initiated by the beneficiaries, which continued until 1990, when it openly accelerated after the change in government. Nevertheless, an agrarian reform beneficiary does not work the land the same way as this sector of farmers. The one who received land recently uses extensive and low risk agricultural practices due to insecurity. The other thinks long term. The transition from beneficiary to farmer depends on the new land owner acquiring the security of an individual private property title, as well as obtaining basic material resources for the farm. There are currently some 30,000 families going through the difficult process of consolidating the transition from beneficiary to farmer.
Protagonists of ChangeDuring the last 40 to 50 years, farm families experienced an important economic dynamism and growth, based primarily on the exploitation of lands in the moist tropical forest, with the production of basic grains, coffee and extensive ranching. This productive system is no longer sustainable, however, due to the crisis in those products' profitability, as well as the damage caused to the environment. The new, potential agricultural export products in which these farmers could most likely participate are linked to the organization of many small land plots, unlike traditional exports such as coffee, sugar, cotton and beef. This reality and the effective leadership role that these farmers play at the local level make them the potential protagonists of the agricultural innovations that Nicaragua needs. Below, we present seven closely related projects which together could reactivate the national economy through the reactivation of the farm sector.
These projects that make up the Farmer Program are a concerted development action in which the state plays the role of animator and facilitator. The rules of the game will be made clear to farmers, as will the opportunities for their business development as a part of national reconstruction.
The program promotes production and farm business renovation, aiming at both short term reactivation and medium term productive and organizational restructuring. Because of the resources the farmers themselves would contribute, this is a program of economic growth rather than social compensation. This program would have a positive macroeconomic impact on the trade gap. In the short term, farmers will produce more export goods than consumer or productive goods, which are currently imported. Also in the short term, farmers will bring dollars into the country.
The Farmer Program would promote national agricultural production and strengthen private initiative in Nicaragua's economic takeoff.
REACTIVATION: 25% OF NICARAGUA
Around 70% of Nicaragua's total agricultural production is produced by the hands and labor of these farmers the majority of the country's medium sized rural businesspeople. There are 42,000 farm owning families. Their economic activity directly involves another 120,000 rural families as farmworkers, traders, truckers and wage workers in rural industries. Reactivating the farm sector means reactivating 1,070,000 people, a quarter of Nicaragua's population.
The development of these farmers' lands is also key ecologically. While their farms are dispersed throughout the country, 30,000 are located in zones in which the agricultural frontier has advanced upon the moist tropical forest and threatens to destroy it.
1. NEW PRODUCTSStopping the advance of the agricultural frontier into strategic tropical forest reserves depends in great measure on the creation of opportunities for more intensive agricultural production rather than the extensive cattle grazing practiced over the last 50 years.
Thirty thousand farm plots provide enormous potential, both as a labor force and in productive experience, for incorporating the production of new agricultural products in the lowlands. There have already been successful experiences with coffee on agricultural frontier lands at 400 meters above sea level.
Farmers already produce certain vegetables for the domestic market that have good potential for the world market. What is lacking are institutional efforts to research possibilities for these products in the Latin American market, NAFTA (Mexico, US and Canada) and Europe, as well as possibilities for joint investment ventures between farmers and trade production enterprises.
Opportunities also need to be identified in the foreign market for lines of production with development potential in the farmers' production systems. Global strategies as well as strategies by production line also need to be defined, in areas such as technology, fiscal and financial policy, public investment, and trade association with foreign capital.
A team of 15 national experts could carry out this research, which would open the door to economic reactivation and ecological recovery. (The estimated cost of this project in its first year is $2.2 million.)
2. IMPROVED INFRASTRUCTUREThe territories in which farm production predominates are also those most affected by the war's destruction. The farms located in these zones are in a very slow reactivation process of their traditional production systems of coffee, cattle and cocoa.
The primary road system of the country's interior must be reactivated, and, on the other hand, new roads that offer an incentive to expanding the agricultural frontier should not be built. For their part, the new products also need a specialized infrastructure for storage and conservation, transport, and so on.
This project also tries to help farmers continue to live on their farms, and to create the material conditions so that the 20,000 families of new farmers will live on the lands that have been returned or given to them. The organization of banks of construction materials at the municipal level would help promote this, as would the construction of basic social infrastructure (water, electricity, schools, health centers) in areas where families are more concentrated.
(First year estimated cost: $40.6 million.)
3. LOCAL BANKSSince 1989 farmers have suffered from increasingly restricted credit. Most common is the decapitalization of their increasingly fragile family economies, or, at best, a very slow reactivation. The new private banks that operate out of Managua are not financing these farmers' agricultural production, and state rural credit programs have been reduced by 75%. On the one hand, more credit needs to be made available to farmers. On the other, local banks should be organized to offer financial services (savings, loans and other agricultural services) to farmer businesses. This would foster economic innovation and would be a necessary complement to traditional banks. Experience with these local banks already exists nationally and could be built upon.
(First year estimated cost: $43.6 million.)
4. LAND TITLESSome 30,000 families of potential new farmers face a difficult and insecure situation. Having individual land titles for lands received under the agrarian reform is a necessary condition for these families to decide to make investments (digging wells, planting trees), risk new crops and live on the farm. Individual land titles will also stimulate them to seek methods of agricultural cooperation with other farmers. Land titles will help farmers adapt to the current institutional and market conditions.
There will also be an immediate positive ecological effect: the titles will motivate farmers to build live fencing using local trees, thus contributing to reforestation.
(First year estimated cost: $1.4 million.)
5. LOCAL ASSOCIATIONSFarmers are not sufficiently organized at the local level. This limits their possibilities of dialogue and negotiation with the state and limits any potential trade negotiation with other economic sectors. Without a relationship between local producers and national entities, private initiative will not be effectively tapped. Technical and promotional support must be offered to local farmers' associations, which should be the ones that promote local agricultural development.
The essential element of this innovation is to open spaces, through these associations, to local development proposals formulated in a decentralized manner. It is estimated that 105 of these associations could be formed, in tegrating 25,000 farmers from 35 municipalities where this sector is well represented. (First year estimated cost: $1.5 million.)
6. FOREST PRESERVATIONThe agricultural frontier began to advance again with the coming of peace to Nicaragua. This has led to the deforestation and destruction of the country's forests. The estimated rate of deforestation during the past two years is from 310,000 to 370,000 acres annually. The country still has a large geographical area around 10 million acres in forests, but the situation is critical. Producers are currently putting pressure on the two principal national forest reserves (Indio Maíz in the south and Bosawás in the north), areas that are not easy to control.
These two reserves must be preserved, as well as the areas colonized 10 to 20 years ago by farmers moving from the country's central plateau. These areas still have important forests. The third territory that needs to be preserved are the pine forests of the North Atlantic, which have great economic and environmental potential.
Effective forest protection (forest rangers, fire control, educating the population), ground and satellite monitoring of the advance of the agricultural frontier, specific subsidies to farmers so that they do not cut down the forests, support for non lumber forest exploitation, and so on, will be key elements of this project.
Some 15,000 farm families from the Pacific and central regions of the country who settled at the edge of the agricultural frontier and 10,000 indigenous families (Sumos and Miskitos) living near latifoliate or pine forests could benefit from this project.
(First year estimated cost: $6 million.)
7. UNIVERSITY EXTENSIONNew products and new agricultural technologies are not possible if farmers do not have access to information and knowledge.
The technical training of farmers' children involved in production, of technical experts who need to learn up to date information, of farmers with a basic education, and so on, are key elements for the success of any reactivation program.
The majority of countries with developed agricultural systems went through experiences of human capital formation in farm families, implementing decentralized training systems tied to local technical and institutional realities. This is also possible, and necessary, in Nicaragua.
(First year estimated cost: $1.65 million.)