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  Number 386 | Septiembre 2013
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The priority has to be enabling people to eat at least tortillas and beans all year

A close-up look at the reality of the rural sector and the peasant economy, the changes that have been wrought since the agrarian reform of the eightiesand what the FSLN government is doing about it all.

Alfredo Ruiz

Every day they tell us Nicaragua is having significant cconomic growth, recovery and improvement. Is this true of the rural sector? What do the rural sector’s dynamics since 2007 indicate?

According to Central Bank statistics, Nicaragua’s economy grew at an annual rate of 4% between 2007 and 2011. In 2011 it hit 4.7%, the highest growth rate in Central America. but dropped to below 4.1% in 2012. In its 2012 report, the Economic Commission for Latin America and the Caribbean (ECLAC) said that poverty declined significantly in the country between 2001 and 2009, with the 69.4% of the population in poverty (42.5% in extreme poverty) dropping to 58.3% and 29.5%, respectively, over those years.

Why the drop in poverty?

Has the decline in poverty been a result of the FSLN government’s social programs and/or the economic reactivation? Wouldn’t it in fact be better explained by the growth in remittances from emigrants and by the number of people in households who are working? ECLAC found that the increase in income among the poor in 2012 is mainly due to more revenue from paid work which, on average, represents three quarters of this income.

As for remittances, they have already exceeded $1 billion in Nicaragua. And we know that many emigrant families come from the rural sector, mainly from areas of highly concentrated poverty. In rural communities in the municipality of Macuelizo, Nueva Segovia, a dry area with a lot of poverty, there are families that no longer grow corn or beans for their own consumption yet their household storerooms are filled with both. How are they doing it? A colleague from the Soynica technical team explained to me that these families have two or three sons or daughters working in El Salvador, where they earn more than in Nicaragua, and they send remittances home. This is becoming the surest way of ensuring food security in very poor rural areas.

Reduced inequality or
just improved consumption?

Another general fact provided by ECLAC is that the inequality gap is shrinking in Latin America—which has always had more inequality than any other part of the world. Nicaragua is included in this progress. We must bear in mind, however, that ECLAC measures inequality by consumption levels, which give the statistics a questionable skew. In large Latin American countries with progressive governments, such as Brazil, Venezuela, Ecuador and Bolivia, social policies that help alleviate poverty have improved the consumption levels of the poor but not necessarily their income. By improving the continent’s consumption statistics, these programs inadvertantly hide the fact that the inequality statistics remain the same.

If we were to measure inequality in terms of wealth or income distribution, Latin America’s results would be diametrically different. The famous image of the champagne glass we’ve used to explain the unequal distribution of world wealth remains in effect, just as it has been for the last 50 years: 20% of the world’s population is in the widest part of the glass with 82% of the world’s wealth, while 80% are in the narrow stem of the glass sharing 18% of the world’s resources. We can see that, just as on a global level, the inequality gap remains unchanged in Latin America and the trend is even towards the further concentration of wealth.

We still depend heavily on the rural sector

The inequality gap is also widening in Nicaragua, despite economic growth, despite the reduction of extreme poverty and despite improvement in grassroots’ consumption levels.

This framework lets us see something of what’s happening in rural Nicaragua, which continues to be very relevant to our economy. The data shows how much we, and especially our exports, still depend on the rural sector. An estimated 20% of Nicaragua’s gross domestic product (GDP) comes from agriculture—30% when agro-industry is added—and the rural sector generates 70% of exports and 40% of employment. Nicaragua is the only country in Central America where the agricultural sector is still the main single contributor to national GDP. Manufacturing, which is the biggest contributor in the other Central American countries, is in second place in Nicaragua with 18%.

What remains of agrarian reform?

A crucial aspect of understanding why extreme poverty and poverty remain more acute in the rural sector is the unequal distribution of land in the countryside, given that land is the fundamental resource for generating the rural wealth that largely maintains the national economy. Despite all the agrarian reform processes, 57% of Nicaragua’s land is again concentrated in the hands of 7% of the population, according to the 2011 agricultural census. Showing the trend towards land concentration, the same percentage of land was in the hands of 10% of the population ten years earlier, in 2001. The next year, French researcher Michel Merlet analyzed the land tenure data in Nicaragua more minutely, focusing on the tenure of the largest farms. His work demonstrated the more alarming fact that only 4% of the population has 43% of the land.

Of the 40% of Nicaragua’s productive land reformed by 1990, it was back down to only about 10% by 2002. Studies show that there’s been a very intensive counter-reform since the 1990s in the areas where there was agrarian reform, so that today we are witnessing the return of the large-scale estate. One statistic explaining rural poverty is that at least 160-170,000 rural families (40%) have no access to land today. And the FSLN government’s political will to address this reality isn’t conspicuous.

Increases in exports

In recent years, regional and global free trade and economic integration processes have boosted the national economy and are restructuring the rural sector. This dynamism can be seen in a significant growth in the export of all the rural sector’s products, which doubled in volume between 2007 and 2012. This growth has been facilitated by good international prices that have held despite the global crisis. And they have also grown because the liberalization and integration processes in recent years have brought transnational companies to Nicaragua that are playing a major role in the economic recovery and also in land concentration. That’s how the rural economy’s revitalization is closely related to the concentration of wealth.

Coffee and cattle: Let’s look at some growth figures from the exports generated by the agricultural sector. In the last six years, the income generated from coffee exports rose from $200 million to $500 million, even in 2012, despite the rust fungus that was already affecting coffee plantations. In the same period, the income from beef exports went from $179 million to $450 million. Cattle-raising is one of the crucial areas of the rural economy’s revival.

A lot of heifers and young bulls were being exported on the hoof just before the FSLN government came into power, generating $40 million. This method has been reduced to just $20 million today, increasing the export of processed meat relative to the export of live cattle. The reduction in the export of heifers and young bulls to Venezuela and the arrival in Nicaragua of the Mexican company SuKarne in 2011 are two factors that explain the rise in the export of cuts of beef over live animals.

What’s the effect of coffee and beef export reactivation? Unlike coffee, in which 90% of Nicaraguan growers have small coffee plantations and are from the peasant economy, with very few large coffee growing entrepreneurs, meat production is in the hands of medium to large-scale cattle ranchers. The reason is that, unlike in Europe or the US where cattle are fattened in sheds and eat grain, our cattle-fattening method requires a lot of land because here the cattle only graze on grasses, so trees are cut down to turn what was forest into pasturelands.

Although this beef production method has a harmful impact on the environment, everyone who’s involved in cattle-raising in Nicaragua—whether on a large, medium or even small scale—will tell you: “There’s profit in cattle.” It’s a sure profit, a safe investment, with less risk… even if it’s at the expense of the environment.

Peanuts and sugar: Other crops showing significant export growth are peanuts and sugar. Over the same period of time peanut exports grew from $56 million to $132 million and sugar from $74 million to $194 million. Does this improve the rural economy? No. Sugar in particular is in the hands of two or three companies that own large tracts of land planted with cane.

And the sugar refineries aren’t like those of 20 years ago, which employed a lot of labor. Not anymore. The Monterrosa refinery, for example, has substantially changed its technology so cane production is now very mechanized, which means that in addition to concentrating large expanses of land by taking it from poor farmers, leasing it from them to plant sugarcane or, more recently, buying it, the refineries no longer employ a significant number of workers.

Sugarcane is currently competing with peanuts. All over the Masaya plain and around Granada, where only sorghum and rice competed with peanuts until recently and there was no industrial cane production, big businesses are extending their sugarcane plantations and today competing with peanuts. In that area people talk of the Chinandegan’s peanuts, because big peanut growers from Chinandega who no longer have land there to plant their peanuts came to find it here, at first leasing it by the year and now buying it.

Peasants can’t compete

What does this “revival” mean for that area’s rural economy? It means, for example, that four or five years ago, before the big producers came in, many small farmers with no land of their own leased plots to grow corn and beans for their own consumption, ensuring their food security. At the time a manzana (1 manzana = .7 hectares) of land for an agricultural growing cycle cost of under US$100; it now costs $140-180 so poor landless peasants can’t compete with big entrepreneurs to produce their food. This means poverty and hunger.

Sugarcane is even worse than peanuts because cane is a year-round crop that stays in the soil for many years. Even though many poor families in that area of Masaya no longer had land, they had a couple of milk cows which they kept tied up by the roadside during the rainy season, when the land was being used for the peanut crops, hoping to take them to graze on what was left in the areas cleared by the peanut growers in the dry season. They could get a good price for their milk in Masaya, where people make a kind of soft caramel candy with it. But they can’t do this now because the land taken over for sugarcane cultivation leaves no place for cows to graze. The Mexican company SuKarne is also competing with the local peasantry because it collects all the stubble produced in the area, including the waste from the peanuts, to use as feed in its cattle sheds, leaving the local farmers’ cows nothing to graze on. These changes are having a major negative impact on this area’s rural economy.

Milk and cheese: The export of milk and cheese, another rural product, has also increased: from $50 million to $94 million. National and transnational industrial milk-processing companies have linkages with small and medium cattle raisers, having created an extensive chain of collection centers along the country’s main dairy routes, many belonging to cooperatives. The milk chain is less damaging to the peasant economy. The growth of the dairy industry has enabled many small dairy farmers from the milk routes to sell their milk to the industry and attain better prices so this chain stimulates a sector of the peasant economy by encouraging the formation of collection and marketing cooperatives. Those who benefit, however, aren’t the poorest segments of the population.

We’ve observed an interesting characteristic with cheese: cheese isn’t made where the milk is produced and sold. It’s made on the fringes of the milk collecting areas, beyond what are referred to as the mountain gateways. The price of milk has risen considerably, as the industry used to pay a rural producer C$3-4 per liter and now pays C$8 to C$10. Because local cheese makers can’t compete with these prices, they go into the hills, where the industry doesn’t go; there they create a relatively better market because it gives the small remote cattle rancher has a chance to sell milk to the cheese maker. The cheese makers thus create their own network, made up of the peasant cattle raiser and poor hill people, who live in isolation, tucked up in the hills, without roads, in the worst conditions.

Beans: Bean exports have also increased, although to a lesser extent: from $39 million to $51 million. Bean production is strictly a peasant economy; there are no medium or large bean growers. It’s usually also hill production, and suffers constant ups and downs in prices, largely but not only due to weather problems. In 2012 the problems affecting the marketing of beans surprised us. The previous year, bean growers were being paid up to C$1,200 ($50) per hundredweight but in 2012 they were only getting C$600 ($24) and even as low as C$300 ($12) per hundredweight. Even more serious than the plummeting price was that there were no buyers.

What happened? One of Nitlapan’s young researchers, who was doing a study of the bean chain, discovered that all exports are currently controlled by the government, which has a set of requirements. Export permits aren’t granted openly and a detailed permit is required for each amount to be exported. This bureaucracy affects the exporter, who has to reapply for a permit and submit new invoices each time he wants to increase the amount exported. Not just any producer can get these permits. All this created serious problems for exporting to the Central American markets. Nicaraguan beans are mainly exported to El Salvador, followed by Costa Rica then Honduras.

Corn: Corn, from which peasants and everyone else make tortillas, isn’t exported. Corn production, also an unadulterated peasant crop, has expanded as well. Even the poorest produce corn. Reviewing the agricultural censuses of 2001 and 2011, we saw that 51,600 acres of forests disappeared in those ten years, taken over by agricultural production in a process that’s nearly always the same: migrants from the Pacific first cut down the forest to produce corn and beans for a year or two, then since the forest soil can’t sustain further agriculture they turn the land into pasture to raise cattle or sell it for the price of “improvements” (i.e. the clear-cutting) and move further on into the forest and repeat the circle, all at the cost of fewer forestry resources and greater climatic vulnerability, not to mention potential conflict over land as these marginal and poor mestizo peasants move into land historically owned by the indigenous populations of the Caribbean side of the country. The logic of the prevailing damaging is that cattle-raising in Nicaragua grows at the expense of the forests.

Economic growth but with consequences

So, we see positive growth figures, expansion of agricultural production and more exports of the rural sector’s products but with consequences, not excluding the fact that Nicaragua’s rural sector still has the lowest productivity per hectare of any Central American country. Growth and expansion haven’t been achieved through an increase in productivity. Although there are some positive glimmers in certain sectors, we’re at the same productivity levels as 30 or 40 years ago and, while each hectare in Guatemala or Costa Rica produces between $350 and $560, in Nicaragua we’re producing less than $210 per hectare.

At this stage the most relevant point is that economic growth and dynamism in the rural sector are restructuring the rural economy, and doing so in a process that is increasingly re-concentrating more land in fewer hands. We’re once again seeing the reappearance of the large estate, which concentrates lands by disposing their former holders.

Land re-concentration for
German chocolate and corporate coffee

Let’s look at some examples of how this works. The German chocolate manufacturing company, Ritter Sport, took an interest in the quality of Nicaraguan cocoa. It began by working with small producers but has recently bought 3,500 hectares in the North Caribbean to create its own cocoa plantations, thus guaranteeing the quantity and quality of the cocoa needed to produce chocolate in Germany. It first tried getting some of the growers to change the technological model and cocoa varieties they were using, but once the farmers saw how much investment would be needed to make the change, they balked. So Ritter decided to buy land and have its own cocoa plantations in Nicaragua. They call this “alternative trading.”

Another example is the CISA Agro Company, part of the Pellas Group, which is planting Robusta coffee in Nueva Guinea. The 45,000 peasant families who grow coffee don’t produce Robusta, which is a stronger, bitterer but hardier species of coffee than Arabica, grown in most of Nicaragua. We can expect to see negative impacts on the economy of Nueva Guinea’s coffee-growers in the medium term.

Foreign capital takes over forestry

Here’s another example that augurs negative results for the peasantry. Since the present government took office, transnational capital has purchased over 100,000 hectares of productive Nicaraguan land. This new accelerated dynamic is transforming the rural economy, particularly that of the peasants, because not only do the lands come into foreign hands, but also involve dispossession strategies.

Let’s look at some cases. For purposes of reforesting and timber-related businesses, Hemco, a company with Canadian capital, bought 10,000 hectares in the North Caribbean; Norteak, with Norwegian capital, bought 6,000 hectares in Boaco; Futuro Forestal, with US capital, bought 10,000 hectares in Nandaime and El Sauce to plant and export teak (you can already see extensive teak plantations along the banks of the Río Ochomogo); Precious Wood, with Swiss capital, bought 5,000 hectares in Rivas; Maderas Cultivadas del Centro, with Costa Rican capital, bought 7,000 hectares in the south of the country; and Proyecto Teca, with Costa Rican capital, bought 5,000 hectares in Río San Juan.

So, we have six foreign companies that are now planting thousands of hectares with exotic, non-native, species for export. In the future, these teak plantations, like those of African Palm or any other monoculture, will prove negative for soil fertility because a monoculture continually extracts the same nutrients from the soil, thus impoverishing it.

More land in fewer hands

There’s also land concentration for other purposes. Capital from Costa Rica and Honduras bought 16,000 hectares in the South Caribbean and in Río San Juan for the African Palm project. Capital from Mexico (SuKarne) and Guatemala bought 15,000 hectares in León, Rivas and Chontales for fattening cattle. The Mexicans have cattle sheds in León where they plan to fatten 30-40,000 head of cattle per year, while the Guatemalans have traditional systems for fattening cattle, similar to those of our cattle farmers.

Nicaragua’s Pellas Group bought 6,000 hectares in Río San Juan to grow oranges. The Pantaleón Group, with Guatemalan capital, bought 10,000 hectares in Chinandega to extend its sugarcane plantations. National and foreign capital from different sources have already bought 15,000 hectares for beach tourism in Tola and San Juan del Sur, department of Rivas, where the Pellas Group’s Guacalito de la Isla luxury tourist resort and Hotel Mukul is already functioning, charging US$500 for an overnight stay.

Buying not just land
but people too

This economic growth that is re-concentrating the land has enriched a few and impoverished many, altering the rural economy. I recently met with a civil society network that was defining a plan for monitoring the Association Agreement with the European Union; there an associate from the Nochari organization of Nandaime reported that the Pellas Group had bought land there to develop a rural tourism project “with the people and everything.” They want to use the river, promote sports, motorcycles, hunting, horseback riding...

Listening to her, I thought: Isn’t it better that these powerful companies buy the land «with the people» because if people sell their land, where do they go? Usually, as has happened in all these cases I’ve mentioned, the people sell their land to foreigners or become the workforce for the African Palm or lumber company or else they go and buy land in the hills, repeating the traditional cycle: cut down the forest, plant grains and make pasturelands for cattle. There’s an increase in internal migration, of those who follow the agricultural routes. Migration from the countryside to the peripheries of the urban centers is also still increasing, as Managua proves. And of course emigration is continuing to increase: to Costa Rica, Panama, the US, Spain and, to a lesser degree, other countries. The considerable increase in emigration can be measured through the increase in remittances, which in 2012 reached the record amount of over US$1 billion. It shouldn’t be forgotten that emigration and remittances are one of the main reasons why poverty has been reduced in the country.

The agricultural frontier has reached its limit

Agricultural revival is based on encroaching on forest lands and occupying underutilized areas. This process reduces fallow land, while the rural sector’s traditional cycle—to sell lands so as to buy in another place—is increasingly unfeasible.

If the agricultural frontier keeps advances we’ll hit the Caribbean Sea or the indigenous communities where land conflicts are increasingly more intense between Caribbean Coast indigenous peoples and the arriving mestizos, driven from their lands or selling their degraded lands and seeking new territories, as Boaco or Matiguás farmers have traditionally done. While there are numerous causes for the violence on the Caribbean—drug-trafficking, mining, the timber mafia—much of it has to do with land problems.

The FSLN and land concentration

Is the FSLN government taking any part in this accelerated land re-concentration, the buying of land involving foreign capital? We have no way of knowing, since if this government won’t give us information about issues of public interest, much less will it give us any about whether or not it’s participating in these businesses.

All we can say is that the re-concentrating of land in foreign hands or those of national and foreign big businesses is occurring alongside the FSLN government’s strategies to combat poverty and hunger. I believe that the magnitude of land re-concentration and the lack of political will to give land to the 40% of rural families who have no access to it means that the government’s solutions have feet of clay.

Zero Hunger bonuses:
Who benefits?

The government’s flagship program to combat rural poverty and hunger has been Zero Hunger, the rural food production bonuses. Let’s remember that these bonuses consist of giving female heads of family certain assets: a cow, a farrowed sow, hens and a rooster, seeds, fruit trees and building materials to pen in the animals, all totaling US $1,500. The women must organize themselves in «nucleuses» and contribute annually to a revolving fund paying 20% of the value of the bond. The goal is that the beneficiaries capitalize on the assets they’re given, and they’re trained and organized in how to do this. The condition is that the must have at least one and no more than ten manzanas of land. If they don’t have land of their own, they are still considered eligible if they have access to land belonging to some family member.

No official figures are available showing us exactly how many families have received the Zero Hunger Program’s bonus. Searching through the data and asking questions lead to the tentative figure of about 100,000 bonuses handed out over this government’s almost seven years in office. If that’s true, why do we consider that the Zero Hunger program has feet of clay? First, and most significantly, because if 40% of rural families, at least 160,000 families more, don’t have access to land, they also don’t have access to this program. And they are the poorest of the poor.

A qualified success

On the other hand, although there sre no official, publicly available evaluations of the program, it is unofficially said to be a remarkable success and the government has received recognition for reducing poverty and hunger. Is this true? In my experience, traveling around the different areas of the country where we work—Pantasma, Wiwilí, Río Blanco, Matiguás, Masaya, Somotillo, Ocotal—I’ve seen relative success: some positive aspects in the short term, some improvement in the families’ lives and diet. Are they lasting achievements? Poverty and hunger are very complex realities that have no quick fixes or magical answers. The viability of this program in the medium and long term is doubtful, just as can be said about so many of international cooperation’s projects that show certain results and help alleviate poverty and hunger for a time but nothing remains once the project ends because there was no structural change.

For how long is a program like the production bonus viable without continual injections of support, of aid? Based on talks we’ve had with many of the women beneficiaries, we estimate that more or less half of them manage to capitalize something of what they received with the production bonus: they managed to reproduce the cow, pigs and hens and produce something with the milk and the meat. But the other half didn’t. They ate the animals and are waiting for more aid. Although the idea is to capitalize on the production bonus, in situations of poverty and hunger it just gets eaten.

Organized but for what?

The Zero Hunger Program also includes an organizational strategy for the program’s beneficiaries, which is a crucial aspect for medium- and long-term sustainability. Some of the organizations emerging from the program have consolidated and formed into women’s cooperatives. But this process seems more designed to address the ruling party’s political strategy of managing its social base than to respond to the peasantry’s socio-economic interests.

We’ve confirmed this as well: many of these groups face difficulties with organization and participation. In several places we’ve been able to identify that only roughly half the beneficiaries participate actively; the rest don’t because they have to walk two hours to meet with their organization yet feel that its logic doesn’t address either their life strategies or interests. On balance, we see Zero Hunger’s success as relative and short term.

The community’s concept
of “food security”

The problem of hunger is extremely complex. I recently led a food security awareness workshop in Arrayanes and Guasure, two communities in Las Segovias. We began by trying to grasp what the community understands by food security in order to build a collective concept. I thought they would define it as what they eat. And so they did. When I asked them to describe what was on their food security «plate,» they said corn tortillas and beans: cheese only appears when they go to pick coffee, meat almost never, and eggs now and again.

Later, we did an exercise where they grouped themselves according to food security because I wanted to know the level of hunger in these communities. They formed four groups. Only one group, comprising 20% of the participants, said their “plate” of food was guaranteed throughout the year. Of the other three groups, one said that they had problems eating starting with the first month of the year, which is the dry season and the end of the coffee harvest period, the second that they only had food fully guaranteed for half the year and the third they had it guaranteed for eight or nine months. Some said that when hunger gets bad they close up the house and the whole family goes to the hills to pick coffee and find something to eat there, out in the bush: dasheen, bananas, something…

Organizations have come to these communities donating goats but when pressed by hunger they ate them rather than keeping them to reproduce them. That’s because when people are hungry they get desperate and would even eat a hen that lays golden eggs… A worried peasant told me: “Erasing hunger isn’t easy.” He’s right; it’s a structural problem that can’t be resolved by short-term programs or with palliatives that only generate a certain consumption level for a while.

What can be done?

There’re no magical solutions and no generalized ones either because the problems are diverse and structural. In these Segovian communities, where there are different levels of hunger, people told the organization Soynica, which is helping them, that it’s putting the cart before the horse because it’s working to improve the community’s nutrition while the peoples’ own priority is how to fill their bellies.

The priority is how the whole community can have tortillas and beans, which is what they see as food security, throughout the whole year. We would make a huge change if we could enable people to eat that throughout the year. Only after that can we concern ourselves with achieving nutritional security. In these communities, three or four families own all the land and 80% of the people have no access to it. So I started thinking that setting up a land-lease program that would allow them to grow food (beans and corn for their tortillas) on rented land could be a major project. But leasing a manzana of land for an agricultural cycle in these communities costs C$1,500 (about US$60) today but most of them can’t afford that. Sometimes three or four families join together to lease a manzana where they can all grow something to eat.

The agricultural sector has had important growth in production and exports, mainly by opening to foreign markets and taking advantage of good international prices, despite the global crisis. But this economic growth is linked to increased land concentration in the hands of foreign capital.

The large private estate has returned, now very modernized and generating increasingly fewer jobs. And the agricultural frontier has reached its limit; it can’t take any more. Forcing land expansion for agriculture and livestock will eliminate the few forests we still have and exacerbate conflicts. In such a context, the government’s poverty and hunger programs in the rural sector aren’t addressing the problems of either the peasant families with no access to land or those that do have access but must battle the accelerated land re-concentration in conditions of enormous inequality.

Alfredo Ruiz Garcia is a researcher in the Central American University’s Nitlapan Institute and author of Revisiting Nicaraguan Agro: Typology of the production systems and socio-economic zoning.

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