Haiti - Agricultural sector study (Vol. 1 of 3) : Main Report

Document of The World Bank FOR OMCIAL USE ONLY Report No. 5375-HA HAITI AGRICULTURAL SECTOR STUDY VOLUME I MAIN TEXT June 14, 1985 Projects Department Latin America and the Caribbean Regional Office This document has a restricted distribudon and may be used by recipients only in the performance of their oeal duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit: Gourde (G) US$1.00 = G 51/ G 1.00 = US$0.20 WEIGHTS AND MEASURES Metric System 1 kilogram (Kg) = 2.2 pounds (lb) 1 hectare = 0.78 carreaux 1 carreau = 1.29 hectares ACRONYMS BCA = Agricultural Credit Bureau BNC = National Credit Bank BNDAI = National Bank for Agricultural and Industrial Development BRH = Bank of the Republic of Haiti (Central Bank) CCSA = Capital Consult S.A. CEPAL = Economic Commission for Latin America CPI = Consumer Price Index CIF = Cost, Insurance and Freight CRDA = Center for Agricultural Research and Documentation FAC = French Fund for Aid and Cooperation FAO = Food and Agriculture Organization FAVM = Faculty of Agriculture and Veterinary Medicine HASCO = Haitian American Sugar Company ICO = International Coffee Organization IDB = Inter-American Development Bank IMF = International Monetary Fund IHS = Haitian Institute of Statistics MARNDR Ministry of Agriculture, Natural Resources and Rural Development a Minoterie = Flour Mill OAS = Organization of American States OCEAR = Haitian Office for Marketing Aromatic Oils ODN = Organization for Development in the North ODVA = Organization for Development of the Artibonite Valley SENASA National Service for Improved Seeds SODEXOL = Societe d'Exploitation d'Oleagineux UPAN = Agriculture and Nutrition Planning Unit, Ministry of Planning USAID = U.S. Agency for International Development USDA = U.S. Department of Agriculture USND = National Sugar Company of Darbonne (Leogane) USMN = National Sugar Company of the North (Citadelle) GOVERNMENT OF HAITI FISCAL YEAR October 1 - September 30 1/ Since 1919, the gourde has been pegged to the U.S. dollar at G 5 = US$1. f FOR OFFICIAL USE ONLY HAITI AGRICULTURAL SECTOR STUDY Table of Contents - Volumes I and II VOLUME I - MAIN TEXT Page No. EXECUTIVE SUMMARY Basic Data ............................................. i * Resource Base and Farm Structure ....................... i Nutrition ............................................. ii Sources of Past Growth .. ................ il Pricing Policies ........................................ .il Public Sector Support .................. ......... ...... iii Comparative Advantage ............. iv Strategies for Future Growth ........................... iv Principal Short- to Medium-Term Recommendations . v Longer-Term Recommendations .......................... vi I. INTRODUCTION ...............................1 II. THE RESOURCE BASE AND PRODUCTION TECHNOLOGIES ....... 1 Crops and Land Conditions ................. I Structure of Land and Property . .............. 2 Irrigation ....................... 2 Labor and Wages ........................ 3 Land Prices and Rentals ............................... 4 Mechanization -.o.............. .......... 4 Seeds, Fertilizer and Pesticides ... .................. 4 Production Technologies ..................... 4 III. INSTITUTIONS AND FINANCIAL RESOURCES ................... 5 Agricultural Policies ................................. 5 Organization of Ministry of Agriculture ......... ... 6 Extension, Research and Training ..................... 6 Public Sector Expenditures ....................... .... 7 Agricultural Credit ........ ............... 8 IV. THE RURAL ECONOMY OF HAITI AND SMALLHOLDER BEHAVIOR ....... 9 Background ........................ .. 9 Forms of Land Tenure ............ .o-............10 On-farm Consumption and Marketable Surpluses -........ 11 V. AGRICULTURAL PRODUCTION COSTS AND COMPARATIVE ADVANTAGE ... 12 Introduction . ....... ................12 Estimates of Production Costs .......... ............ 12 Estimates of Comparative Advantage ... ........ This decunent has a restricted distribution and may be used by recipients only In the performance of their oMrsla duties. Its contents tay not otherwise be disclosed without World Bank authorization. - ii - Table of Contents - VOLUME I (Cont'd) Page No. VI. INCOMES AND PATTERNS ..................................... 15 Income Distribution .............. .... ....... 15 Rural Employment and Wages ...................... 15 Patterns of Consumption and Nutrition ......... ........16 Improving Nutrition and Farm Incomes -............... 17 Food Price Trends and Substitution Effects o.............. 17 VII. THE SUGAR SUBSECTOR .......... a .. ............. 18 Cane Production .................................... 18 Centrifugal Sugar Production ...-....... ........... . 19 Traditional Cane Processing Industries ................ 20 Sugar Supply and Distribution ............... ...20 Price Formation and Taxes .............................. 21 Recommendations ........................................ 22 VIII. THE WHEAT FLOUR SUBSECTOR .............................. 23 The Minoterie of Haiti ............... ........ 23 Flour Production ............................... .... 23 Production Costs ..................................... 24 Domestic Flour (Ex-Factory) vs. Imported Flour ......... 25 Minoterie Revenues and Costs ....................... 25 Price Policy ........................................... 25 Flour Sales ............................... 26 IX. AGRICULTURAL EXPORTS POTENTIAL ............................ 26 Coffee .................................................... 26 Mangoes ................................................... 28 Cocoa ..................................................... 29 Sisal ..................................................... 30 Essential Oils ....................................... 30 X. THE FISCAL AND PRICING SYSTEMS FOR AGRICULTURE ........... 31 Overview ............................................. 31 Haiti's Agricultural Fiscal System .................. 33 Trade Related Policies ............................ 34 XI. SUMMARY OF RECOMMENDATIONS ................................ 35 - - iii - Table of Contents - VOLUME I (Cont'd) Tables 1. Distribution of Agricultural Land, 1971 2. Production, Areas and Yields of Principal Crops (1978) 3. Staffing of MARNDR by Directorates and Location 4. Sectoral Allocation of Public Investment Expenditure by Years (1972-1982) 5. Public Investment in the Main Agricultural Projects, 1982-1983 6. Operating Budget of MARNDR 7. Haiti's Agricultural Production Systems by Smallhc1ders 8. Comparative Annual Yields by Crop, 1978 9. Cost Estimates for Maize Production 10. Cost Estimates for Rice Production 11. Cost Estimates for Coffee Production 12. Cost Estimates for Sugarcane Production 13. Field Costs f or Raw Sugar Production 14. Cost Estimates for Banana Production 15. Comparative Advantage Indicators 16. Cost Effectiveness of Different Foods in Providing Calories and Protein 17. Indices of Consumer Prices of Basic Foods, Port-au-Prince 18. Minoterie: Structure and Evolution of the Production Costs 19. Minoterie: Sales Price Structure and Evolution 20. Minoterie: Flour Sales, Costs and Revenues 21. Flour: Per Capita Consumption and Real Prices 22. Contributions to GDP and Exports by Sector 23. Coffee Exports and Total Exports 24. Coffee Supply and Distribution 25. Annual World Market Prices and Farmers' Prices for Coffee 26. Domestic and Border Prices for Selected Agricultural Products 27. Implicit Taxes (-) and Subsidies (+) in Agricultural Pricing Policy 28. The Agricultural Fiscal System d29. Consumer Price Indices in Haiti and the United States, 1953-83 Figures 1. The Coffee Marketing Systems 2. Distribution System for Export of the Francis Mango Map VOLUME II - ANNEXES A - F Annex A - SUGAR SUBSECTOR Annex B - WHEAT FLOUR SUBSECTOR Annex C - RESOURCE BASE AND AGRICULTURAL POTENTIAL Annex D -CRISIS IN SMALLHOLDER ECONOMY Annex E -AGRICULTURAL EXPORTS AND POTENTIAL Annex F -AGRICULTURAL PRODUCTION, ITS COST STRUCTURE AND COMPARATIVE ADVANTAGE VOLUME III - ANNEX G - STATISTICAL ANNEX - iv - This report is based on the findings of an agricultural sector mission that visited Haiti in May/June 1984. Mission members comprised Mr. J. Tellez and Mrs. S. Ono (Bank), and Messrs. M. Mazoyer, Dufumier, G. de Rincquesen, D. Lafontant, R. Norton and S. Oliver (Consultants). The sector mission was confinanced by the French Fund for Aid and Cooperation (FAC) and technical contributions were made by their representatives, Messrs. Sabatie and Brochet. USAID field staff shared with the mission the conclusions of their 1984 sector review and participated in mission trips and meetings. IDB field staff also participated in meetings. Mr. R. Hanan (Bank) took responsibility for processing the report following the departure of Mr. Tellez from LAC at end August 1984. Mrs. T. Ruhter (Consultant) assisted with editing the report. HAITI AGRICULTURAL SECTOR STUDY EXECUTIVE SUMMARY Basic Data 1. Until the late 1970s, the agricultural sector generated the largest sectoral share of GDP. Since 1980, the tertiary sector has become pre-eminent. Similarly, the agriculture sector's contribution to exports has declined, from over 60% between 1975 and 1977 to 40% between 1981 and 1983. The emerging industrial sector, especially the assembly industry, has increased its contribution to Eotal exports over the period from 25% to . almost 60%. 2. In real terms, the value of agricultural production has declined slightly over the past 10 years. The value of agricultural exports, however, has declined sharply, by an average of 3% per year from 1975-77 to 1981-83. Per capita GDP for the country in 1983 was US$334, but for the rural sector the figure was around US$125. The stagnation or decline of the sector's contribution to growth has become a major concern of the Government. 3. The country's estimated total population is 5.3 million (1983). Around 4 million, or 75%, reside in rural areas. Net population increase is 1.9% per year; 1.8% and 2.4% in the rural and urban areas, respectively. With the limited employment creation in urban areas, the mounting population pressures have led to a net migration abroad of some 25,000 people per year; 16,000 from rural areas and 9,000 from urban areas. Resource Base and Farm Structure 4. With temperatures averaging 24*C, Haiti enjoys a tropical climate. Rainfall is irregular, varying from 600 mm to 2,000 mm per year, depending on location, and is exacerbated by periodic severe droughts and sometimes by hurricanes. Only about 15% of the land area is reasonably flat. Most of the country is mountainous and steep; 50% of the land area has a slope greater than 40* and is suitable ecologically for forest cover only. Increasing population and felling of forests have led to serious erosion. From around 900,000 ha presently under cultivation, it has been estimated that 10-15,000 ha are being lost to soil erosion annually. Almost 1.1 million ha have been denuded of soil, becoming essentially wilderness with little or no vegetation. 5. Around 85,000 ha have been served with irrigation systems. Around 40,000 ha benefit from full water control, allowing double and sometimes triple cropping. The remaining 45,000 ha allow single cropping or are non operational. Most systems are in disrepair. With 180,000 ha considered irrigable, there is considerable scope for rehabilitation of existing schemes and investment in new ones. - ii - 6. Superimposed on the above resource base is a predominantly small-scale farm structure. Between 1950 and 1971, the proportion of the number of farms with more than 4 ha fell from 16% to 5%. The average size of those with less than 4 ha was 1.1 ha in 1971, fragmented into an average of 1.7 parcelles each, and covering 73% of the cultivated land area. Many properties are now too small to support family subsistence requirements. 7. Most smallholders have customary rather than legal rights to their land. The Government leases much of its land to individuals, charging them considerably less than market rates. The land is often then sub-leased to others at market rates, with the increment (economic rent) remaining with the original lessee. 8. Throughout most of the country, farm technologies are rudimentary, simple hand tools being the norm. Rural wages, around US$1.40 per eight-hour day, reflect the low productivity of labor. Fertilizer use in 1982 was only 7 kg/ha of cultivable land, compared to around 90 kg in Jamaica and 125 kg in Kenya. Pesticides use in 1982 was only 165 metric tons. Nutrition 9. Malnutrition in Haiti is widespread, especially in rural areas. Recent estimates show a nationwide calorie deficit of 14% and a protein deficit of 32%, compared to FAO/WHO recomended levels. These deficits increase to 40% and 50%, respectively, in rural areas, and are reflected in high rates of mortality, especially of infants. Sources of Past Growth 10. Traditionally, Haiti's principal crops have been maize, sorghum, coffee, beans, rice, bananas, mangoes, pigeon peas, cassava, sweet potatoes and sugarcane. Livestock, particularly goats and chickens, have also been important. Since the 1950s, the production of maize and sorghum has declined, while rice production has more than doubled. Production of sweet potatoes, beans and bananas has also increased. Increasing quantities of wheat are being imported, much of it under US PL480 concessional aid. Notwithstanding earlier trends, the production of almost all commodities has stagnated or declined since the late 1970s. 11. The main cash crop, and source of growth, has been coffee. In addition to providing a cash income for up to 50% of the rural population, it has been the main contributor to exports. Coffee production, however, has not increased over the past 25 years; its contribution to the value of agricultural exports in 1981-83 had fallen to 52%, or 20% of all merchandize exports. Similarly, the export tax base has been declining, constituting only 7% of Government revenues between 1981 and 1983, compared to 13% between 1976 and 1979. An encouraging exception to the above production and export trends is mangoes, whose export value increased from US$3.5 million in 1983 to around US$6 million in 1984. - iii - Pricing Policies 12. A major constraint to growth of the agricultural sector has been the Government's pricing policies. Farmgate prices of coffee have deteriorated relative to those of staple crops, especially maize, sorghum and rice. Prices of wheat flour, moreover, have been controlled at levels increasingly below the consumer price index, and substantially below the domestic free market levels for maize and sorghum. The Government's policy of restricting imports of staple cereals has helped force up prices of the locally produced crops. In effect, their prices at the farmgate are being "supported" above world prices. The contrary applies to coffee and cocoa prices because of export taxes. 13. These and other price distortions, e.g., producer prices of seed cotton have generally been maintained below import parity, have generated increasingly negative consequences, in terms of production and growth, loss of non-renewable resources and distribution of welfare. Maize and sorghum compete with coffee for scarce land in many smallholder areas, and indications are that farmers have been replacing their coffee trees with these crops. Planting grains rather than coffee on steep slopes hastens the process of soil erosion. Farmgate prices, therefore, have provided producers with signals contrary to the country's comparative advantage, and, not least, have contributed to the serious erosion problem. 14. The problems of the sugar industry deserve special mention. Sugar production has fallen from 55,000 tons per year in 1967-69 to 44,000 tons per year in 1982-84. With two sugar mills in production in 1967-69 and four mills in 1982-84, the capacity utilization of the mills has declined over the period from 88% to less than 40%. Concomitantly, the farmers' share of production costs of raw sugar has fallen from 50% in 1970 to only 29% in 1983. These figures contrast with an accepted international standard for an efficient sugar production enterprise of a 70% share for cane and 30% for processing. The controlled price of USS 13 per metric ton paid to producers for their cane constitutes a clear disincentive to sell the cane to the sugar factories. Rather, an increasing proportion of cane is being sold to the traditional guildives for production of potable alcohol. 15. Pricing policy for the sugar in6ustry has been self defeating as inadequate cane prices have led to lower cane supplies and further pressure on prices. As a result, sugar production has declined and Haiti has gone from a position of a net exporter until the late 1970s to a net importer; production between 1981 and 1984 averaged 46,000 metric tons per year and net imports averaged 23,000 metric tons. In addition to the relatively low cane prices, the Government imposes a hefty excise tax of US$8c/lb, culminating in a controlled retail price for raw sugar of US$34c/lb. This price is well above the costs of production of reasonably efficient sugar producers in other countries and constitutes a considerable cost to consumers' welfare. Public Sector Support 16. The Life President of Haiti expressed concern publicly in 1984 about the relative inefficiency and ineffectiveness of the Ministry of Agriculture (MARNDR). He stressed that the country's future economic growth will depend significantly on the agricultural sector, and that MARNDR must - iv - improve the quality and quantity of its assistance. Indicative of MARNDR's problems are that more than 50% of higher-levl staff are located in the Port-au-Prince headquarters, many of them in administrative positions. Key staff have changed frequently; there has been eight changes of Ministers in as many years and few people have viewed employment with the Ministry as a permanent career path. It has also suffered from a persistent shortage of operating funds, for fuel and maintenance of vehicles, supplies and even for staff salaries. Compounding the difficulties, the Ministry has an impossibly heavy workload, with almost 100 foreign-financed projects, 65 of which are under implementation. 17. Notwithstanding some encouraging improvements recently, the Ministry and foreign aid organizations have been unable to plan and execute effectively public investment in the sector. For example, in FY83, only 22% of the G 31.5 million budgeted for the Ministry was allocated by the Ministry of Finance and only-18% was actually spent. Worse, only 43% of the latter funds were spent on actual investments, the remainder being redirected to finance salaries (42%) and goods and services (15%). 18. Only 10-15% of the rural population has access to institutional credit. The main sources are the Agricultural Credit Bureau (BCA) and the National Bank for Agricultural and Industrial Development (BNDAI). BCA, with a portfolio in 1983 of US$3.9 million, provides loans to some 19,000 smaliholders, or 2.5% of rural households. The BNDAI, with a portfolio in 1984 of US$13.5 million, is geared towards medium- and larger-sized farms, especially those producing rice. It also lends to around 12,000 smallholders, including 4,000 cotton producers. For most improved technologies, credit is essential, but it is unlikely to be effective unless accompanied by the above-mentioned pricing policy reforms to improve farmer investment and production incentives. Comparative Advantage 19. A comparative advantage analysis was undertaken of five key crops under different production conditions; traditional and improved methods, intercropping, crops rotations and monoculture. The analysis showed that bananas under improved cultivation have the greatest comparative advantage. They are followed by monoculture coffee, irrigated rice, improved maize and sugarcane. The results indicate that at world prices, Haitian agriculture, even under traditional technologies, tends to be reasonably competitive, especially in coffee and bananas. It is also competitive in the production of sugar cane, assuming a world price of US$0.15 per lb, and sugar producers receiving at least 60% of the value of raw sugar produced (para. 14). Economic viability improves markedly with improved technologies. Pricing and trade policies, supported by technical services and credit, should be oriented towards providing farmers with effective incentives to respond to the potential of economically viable crops. Strategies for Future Growth 20. Five criteria were used to guide the acceptability of growth-oriented recommendations for the sector. Measures should contribute to: (a) increasing productivity, production and exports (or decreasing -v - imports); (b) improving nutrition; (c) preserving non-renewable resources, particularly inhibiting erosion and destruction of forests; (d) increasing the Government's fiscal revenues; and (e) improving equity and welfare. In addition, the recommendations should contribute to accelerated growth from the sector in the short and medium terms. The cumulative effect of population increase and stagnation has been to place the sector in a crisis situation in terms of nutrition and rural income levels. It is clear that past policies have not been sufficient to arrest a worsening trend, and that strong departures are needed. Hence, the recommendations in this report are fairly comprehensive. 21. The potential for productivity and growth rests much more with the better rainfed and irrigated flat lands than with the mountainous areas. Strategies for rehabilitation and growth in the mountainous areas, while equally if not more important, are necessarily long term. Strategies towards planting improved varieties of coffee trees, and improving maintenance of existing ones, are medium term. Short- to medium-term strategies should focus on pricing, technical support, credit, and rehabilitation and improved O&M of the existing irrigation systems. Particular emphasis should be given to expanding areas in rice and in developing industrial crops such as tomatoes and fresh and processed fruits and vegetables for export. These crops are labor intensive and serve to relieve some of the pressure on land in the mountainous areas. 22. The focus on increasing productivity and output in the shorter term must not be interpreted as meaning a reduction of emphasis on the rehabilitation of the hillsides. On the contrary, reforestation and erosion control measures must be intensified if the alarming loss of soils is to arrested. Success in these activities is indispensable to the longer-term viability of the agricultural sector. In the shorter term, rehabilitation of irrigation systems and construction of new ones must include stabilization and rehabilitation of the watersheds that feed such systems. Principal Short- to Medium-Term Recommendations 23. (a) Coffee Tax. The Bank should support the Government's agreement with USAID to decrease the export tax by a further 15%, thereby culminating in a 25% reduction over 15 months. The Government and USAID should ensure that the effects of the tax decrease, particularly on farm coffee prices in different localities, are closely monitored. (b) Fiscal Reform. To offset the recommended reductions in export and excise taxes, and otherwise to increase fiscal revenues from the sector, the Government should: raise rents on public lands to market levels; implement the constitutional tax on large land holdings; and introduce full user charges for O&M costs of irrigation. (c) Oil Seeds. A study should be commissioned by the Government to review options for making the State-owned soybean extraction and refining plant, SODEXOL, financially and economically viable. If its viability cannot be assured, it should be closed. - vi - (d) Centrifugal Sugar. The excise tax should be eliminated, the savings being passed on to farmers as increased cane prices, and to consumers as reduced retail prices. A system of payment to farmers for cane on the basis of its sucrose content should be introduced. A Government led Working Group should be established to review the status and future of the sugar industry. (e) Wheat. The Government should adopt a clear policy aimed at decelerating the increase in imports and consumption of wheat. The Minoterie wheat flour plant should not be expanded, and its operating costs should be reduced. Also, the Minoterie should be encouraged to substitute up to 10% of the wheat flour (in the flour mix) with ground maize or sorghum. (f) Irrigation. While longer-term plans for physical rehabilitation are being implemented, full operational and "ordinary" maintenance costs recovery through water charges should be introduced. The Government should introduce measures that will help ensure "extraordinary" maintenance of irrigation systems, as required to remove siltation brought on by deluges from the watersheds. Water users' associations should be estalished to manage the systems at the local level. These associations should have responsibility for management of the proceeds of the water charges, subject to review by MARNDR. (g) Credit. Constraints on the availability and terms of rural investment and production credit should be reviewed. Additional credit should be made available to support increased agricultural production and agroindustrial development. Credit policies should be consistent with the requirements for investments in new technologies. (h) MARNDR. A planning and monitoring unit should be established in MARNDR. The unit would: plan for new and ongoing investment and establish priorities, consistent with available resources; monitor and evaluate progress of ongoing projects; and advise on policy options related to the Government's established priorities for the sector. (i) Cotton. Farmer prices for seed cotton should be adjusted, as necessary, to ensure the equivalent of import parity. (j) Export Taxes. All export taxes, excepting for coffee (see para. 23 (a)), should be eliminated. Longer-term Recommendations 24. (a) Irrigation. Existing systems should be rehabilitated (in general, before new systems are constructed). Measures to protect and rehabilitate the watersheds feeding such systems should be included in the project investments. (b) Soil Conservation. External financing for substantial investments in soil conservation programs should be sought. - vii - (c) Forestry. Reforestation should proceed both as commercial cropping- on selected Lands and to help conserve the hillside soils within appropriate farming systems. (d) MARNDR. Besides establishing a planning and monitoring unit, MARNDR's overall capability should be strengthened through further reductions in excessive staff, increases in salaries and improvements to research, extension, seed multiplication, soil conservation, reforestation and livestock development. Increased attention should be given also to adaptive research on dryland and saline-tolerant crops, and to drainage of saline soils. (e) Land Reform. Studies should be initiated to determine the status of land tenure throughout the country. Based on these studies, a program of land tenure regularization and consolidation should be prepared and supported actively at the highest levels of the Government. (f) Marketing. Marketing infrastructure and information should be improved to support increases in production of fruits and vegetables, livestock and cereals. The Government should assist the private sector in identifying diversified export markets and in ensuring access on favorable terms. (g) Sugar. Possibilities for diversification of sugarcane lands to other, more economically viable crops should be reviewed. (h) Information Base. The Government should: (i) conduct a nationwide survey on consumption, nutrition and rural households expenditures; (ii) conduct a new aerial photographic survey of agricultural areas; and (iii) establish a system of regular collection and dissemination of faragate and rural markets prices. HAITI AGRICULTURAL SECTOR STUDY I. INTRODUCTION 1.01 The viability of most farms in Haiti is being steadily eroded due to pressures of an expanding population and a diminishing resource base. The average farm size has been falling. The consequencesare increasing rural poverty and urban migration, transferring the poverty to the perimeter of the capital city. The cumulative effect of a long period of virtual stagnation places Haitian agriculture in a state of crisis. 1.02 The possibilities for change have been analyzed in several studies. Basically, four problems have been addressed: (i) low nutrition levels; (ii) soil erosion and the displacement of coffee by annual crops on the hillsides; (iii) insecurity of land tenure; and (iv) inequitable and inefficient fiscal policies. This report draws on the lessons of these studies and utilizes new information in proposing measures that should stimnlate improvements in overall sector performance. The measures recom- mended relate mainly to institutional reforms and revisions of fiscal, pricing and trade policies. Priorities for public investment in the sector are also identified, as are improvements for agricultural research and extension. 1.03 Some of the recommendations present difficult choices for the Government. The crisis in Haitian agriculture, however, deserves a frank and thorough assessment. Increased productivity, production and exports from the sector, as well as improved resource conservation, income distribution and nutrition, are fundamental for long-term growth of the sector and of the economy as a whole. II. THE RESOURCE BASE AND PRODUCTION TECHNOLOGIES 2.01 Located between latitudes 18* and 21*N, Haiti has an essentially tropical climate. The terrain is relatively mountainous, with some 50% of the total land area having slopes greater than 40. Only about 15% of the area is relatively flat. Rainfall is irregular and sometimes intense, con- tributing to severe erosion. Periodic hurricanes also cause serious damage. Crops and Land Conditions 2.02 Around 1.4 million ha (50% of the total land area) is suitable for agriculture. Some 900,000 ha are cultivated, with the remainder in natural pasture. Satisfying domestic food requirements is absorbing increasing areas of land, at the expense of cash crops such as coffee, cocoa and sisal. Mixed cropping by smallholders using traditional methods is widespread. -2- 2.03 Occupying about 15% of the agricultural land, the humid mountain areas are located at altitudes between 500 m and 1,600 m. They have moderate slopes and an average annual rainfall of 1,500-2,000 mm. Beans, maize and coffee are predominant in these areas. Vegetables have been introduced near the urban perimeters. 2.04 The dry mountain areas comprise 25% of the agricultural land. They have variable rainfall (800-1,700 mm) and chalky or basaltic soils. Maize and sorghum are the principal crops. The exploitation of forests for construction and fuel has led to considerable erosion. 2.05 The semi-arid and arid plains are the most important economically. Occupying 45Z of the agricultural land, they have a variety of soil types, scant rainfall and variable water retention capability. Widespread cultivation of cereals and other crops has replaced cattle and forestry. 2.06 The humid plains, with altitudes of less than 100 m and more than 1,600 mm of rainfall, comprise 10% of the agricultural land. Principal crops are maize, beans, plantain, cocoa, fruit trees and sugarcane; rice, both rainfed and irrigated, is a recent introduction. Structure of Land and Property 2.07 Of more than 600,000 farms in Haiti, more than 90% have less than 3 ha. This predominance of small farms results largely from the customary law on division of property upon death and the amount of land held by the State. The proportion of farms classified as microfundia-farms of one carreau (1.3 ha) or less-increased from 39% in 1950 to 71% in 1971 (45% of these farms had less than 0.3 ha). Correspondingly, the proportion of farms with more than three carreaux decreased from 16% in 1950 to 5% in 1971. The State is the largest owner of real property, although most of its holdings (estimated at 1.5 million ha in 1928) were not reflected in the census data. Irrigation 2.08 Around 85,000 ha are equipped with irrigation systems. This compares with 180,000 ha (13% of the agricultural land) that is considered potentially irrigable. The four main types of "gravity flow- systems comprise: (a) The Artibonite Valley system. With about 30,000 ha presently under irrigation, it is the largest, most efficient system. The predominant crop is rice. About 7,400 ha are planned for rehabilitation with IDB financing by the late 1980s; (b) Medium-sized systems. Twelve such systems, with between 1,000 ha and 9,000 ha each cover 35,000 ha in the plains of Cul de Sac, Duvalierville/Archaire, Leogane, St. Raphael and others (see Annex C, page 21); - 3 - (c) Small-sized systems. Some 30 systems, each with up to 600 ha, .cover 5,300 ha; and (d) Artesian wells and surface water pumping stations. Roughly 200 of these stations are scattered over the country. 2.09 Irrigation Deficiencies. Of the 65,000 ha served by the Artibonite and medium-sized systems, around 40,000 ha are capable of delivering more than 95% of water requirements for a number of crops, enabling thereby double and sometimes triple cropping. Most systems are in need of repair. The availability of water is often limited' to areas near headgates and main canals because of the absence of functional tertiary canals. 2.10 Operation and Maintenance. Inadequate or non-existent O&M, exacerbated by periodic, severe silting from deluges from the watersheds, are the primary reasons for deterioration of the irrigation systems. Rehabilitating all the Artibonite and medium-sized systems (at a cost of US$2,000-3,000 per ha) would cost about US$140 million, without any assurance that the facilities could be operated effectively. New investments cannot be justified unless they include appropriate protection of the source water- sheds. There must also be assurances that the new or rehabilitated schemes can be properly operated, maintained and funded. 2.11 Water Pricing and Cost Recovery. The costs of operation and "ordinary" maintenance of the systems should be differentiated from the "extraordinary- costs of removing large-scale silting that results from the periodic deluges from the mountains. Where O&M systems have been operating, water charges have been well below variable costs, which typically are between US$100 and US$500 per ha. MARNDR 1/ should consider measures and identify sources of funds that will provide for the removal of the large-scale silting. It would be unreasonable to expect individual farmers to bear the full cost of such removal. The costs of operation and -ordinary" maintenance, however, should be covered in full through water charges to the farmers. Underpricing of water leads to transfers of rent from the Govern- ment to the private sector and to misallocation of resources. It also inhibits the creation and maintenance of water users' associations. Labor and Wages 2.12 Haiti's total population of around 5.3 million is growing at 1.9% per year. The rural population is around four million (75% of the total population) and the agricultural labor force 1.4 million. Life expectancy is short: 53 years for males and 56 for females, compared to 61 for males and 65 for females in the Dominican Republic. In rural areas, the expectancy is less by some five years. 2.13 The daily wage in rural areas averages US17c per hour, or US$1.40 for eight hours, including a mid-day meal. This compares to the legal minimum of US$3.00 per day elsewhere in the economy. Wages are higher in areas with more progressive agriculture and agribusiness. They also tend to be higher on farms near cities, given the competitive alternative of urban employment. 1/ Ministry of Agriculture, Natural Resources and Rural Development. -4- Land Prices and Rentals 2.14 The pressure on land, a scarce resource in a country of very small farms, helps explain the high values of land and tenant rents. The market value for poor lands has been increasing at a nominal rate of about 15% annually, while that for fertile lands close to towns has been increasing by rather more. Generally, the low-altitude plains command higher prices because of their accessibility, the availability of water and the presence of fruit trees. The Collections Bureau, charged with the management of State lands, collects an annual tenant fee. This fee is fixed at 6% of the estimated market value of the land. Inr'practice, the fee is low, ranging from US$3 to US$11 per ha. Tenant fees on private lands are sharply higher, relating more directly to the production potential of the lands (Annex C, Table 6). Mechanization 2.15 Haitian farmers employ simple tools. Mechanical equipment (tractors, plows and cultivators) is a recent introduction; a massive shift toward mechanization is unlikely, largely because of the country's topography. Other factors limiting mechanization include: (a) a lack of liquidity or access to credit at reasonable rates of interest to purchase equipment; (b) relative prices of labor and capital that favor labor-intensive technologies; (c) the small size and non-contiguous location of farmers' plots making for diseconomies in the use of machinery; (d) farmers' reluctance to accumulate capital as a fixed asset when their short-term priority is to remain as liquid as possible; and (e) land insecurity that tends to discourage tenants and sharecroppers from investing in mechanical technology. Seeds, Fertilizer and Pesticides 2.16 Farmers' seed supplies come mainly from (a) retention from previous harvests, (b) purchases from rural markets, and (c) exchanges with neighbors. MARNDR supplies quality seeds at the agricultural district level. Imports, primarily.from the United States, make up for shortfalls in local production. Fertilizer use, averaging only 7 kg/ha of cultivable area, is minimal. It compares to 90 kg in Jamaica and 125 kg in Kenya. Pesticide use is also minimal, although quantities rose from 85 mt in 1970 to 166 mt in 1982; around 30% of the amount has been distributed by the public sector, which sells it at cost through BNDAI2/ credit schemes or at subsidized prices through MARNDR. Production Technologies 2.17 The low levels of technology employed seriously limit agricultural production. A brief description of the technologies used in the production of selected crops follows. 2/ National Bank for Agricultural and Industrial Development. -5- 2.18 Food Grains. Rice, harvested year-round, is milled by hand after sun-drying. In the Artibonite Valley, yields of 2.5 t/ha could be increased easily to 4 t/ha. Maize yields average around 0.8 t/ha, or about one-third of what should be possible with locally adapted, improved varieties and methods. Because maize is the country's most widely grown crop, improvements in yields would have a major impact on food availability and farmer incomes, especially smallholder incomes. Sorghum, which accounts for 25% of total cereal calories, has similarly low yields, around 0.8 t/ha. Improved yields would come partly from development of short-season varieties that should also help to ensure reasonable harvests in dry years. 2.19 Mangoes. Naturally abundant throughout Haiti, mangoes are not cultivated per se. Resistance of the mango tree to long, hot dry spells and dry soils accounts for its persistence. Pulses. Red beans, pigeon peas and cowpeas are the most important. Their protein is basic to rural diets. Yields could be increased by introducing improved varieties from the international agricultural research centers in India and Nigeria. On-farm storage should be improved to minimize losses from pests. 2.20 Coffee. Coffee, the most important cash crop, provides 50% of the rural population's cash income. It is frequently intercropped with maize, sorghum, beans or bananas. At 200-250 kg/ha, yields are only one-half of those in the Dominican Republic and one-quarter of those in Brazil. Trees tend to be overcrowded, too shaded and unweeded. Harvesting techniques are crude. Cocoa. Cocoa, which is restricted to humid locations below 300m, occupies only one percent of the cultivated area. Yields are about 300 kg/ha. Like coffee, it competes for land that often has higher value alternative uses. Introduction of improved technologies could lead to a gradual shift from coffee to cocoa in lowland areas. III. INSTITUTIONS AND FINANCIAL RESOURCES Agricultural Policies 3.01 The Government's broad policy goals for agriculture are to: (a) increase production of basic food and export crops; (b) improve the agricultural trade balance; (c) increase rural employment; (d) improve living conditions in rural areas, and (e) protect the environment through the protection of watersheds and rational use of renewable natural resources. An Emergency Development Plan designed to guide economic activity from October 1984 to September 1986, accords high priority to agriculture and industry. Emphasis is placed on the private sector for the production of agricultural and industrial goods and services. Policies for the agricultural sector are to: (a) improve marketing channels to help producers receive higher prices (construction of storage facilities and roads in rural areas); (b) increase support for institutional credit; -6- (c) encourage the use of private capital and producer self-financing to enable maintainance of public expenditures at levels similar to the past; (d) subsidize the distribution ot inputs to farmers; (e) create a national organization for irrigation; (f) extend agricultural techniques that have worked well. and (g) reinforce existing rural organizations. 3.02 Institutional support for these policies has been weak. Little planning has been undertaken and it is not uncommon to find limited agricultural services duplicated between different service units, thus utilizing scarce qualified staff and budgetary resources inefficiently. In recent years, MARNDR has followed a policy of accepting "large" projects supported by foreign financial resources. Smaller projects, including technical assistance projects, are now being given more attention. Organization of Ministry of Agriculture 3.03 MARNDR recently reduced the number of directorates at its headquarters from 13 to five. Total staff in June 1984 were 2,050, of whom 420 (20%) were professionals (only four-were veterinarians), 1,015 (49%) were paratechnicians or middle level agricultural graduates, and the remainder were in administration (Table 3). While MARNDR is overstaffed as a whole, there is a shortage of qualified technicians in the field. More than half of the high-level professionals (52%) are located in headquarters, many of them in administrative positions. The overall effectiveness of MARNDR has been severely compromised also by the shortage of operating resources for vehicles, fuel, office supplies and other expenses. Exceptions to these constraints are the integrated rural development projects, financed by multilateral or bilateral sources, where investments and operating expenses are funded separately and concentrated at the field level. 3.04 Key agricultural staff have changed frequently. MARNDR has had eight ministerial changes in the last eight years and few people view employment with the Ministry as a permanent career path. Increased efforts must be made to: (a) reduce the numbers of staff, principally through attrition; (b) increase salary levels; (c) eliminate double and triple assignments; and (d) promote greater job satisfaction. Compounding the difficulties, the Ministry has an unrealistically heavy workload: 95 foreign-financed projects, of which 65 are under implementation and 30 are in the planning stage. MARNDR should drastically reduce the scope of its tasks, giving priority to projects under implementation before launching new ones. The Ministry accepts these criticisms and is embarking on a period of transition as it attempts to introduce the needed reforms. Extension, Research and Training 3.05 Of 175 extension staff, 120 are assigned to the field and 55 to headquarters. Paratechnicians (i.e., junior extension agents and home economists) comprise the majority of the extension staff. The ratio of -7- farmers to extension staff is an alarming 2,800:1, assuming that the agents work full-time on extension. In practice, their duties often include other activities such as crop reporting and seed distribution. 3.06 Research is normally coordinated by the Center for Agricultural Research and Documentation (CRDA). CRDA was transferred in 1983 from MARNDR's Agricultural Research Service to the Faculty of Agriculture and Veterinary Medicine (FAVM) of the State University of Haiti. Nationwide, CRDA's small but well-trained staff consists of ten agronomists, two agricultural technicians and one agricultural agent. From its inception, CRDA has been plagued by insufficient operating funds. Its transfer to FAVM should help improve the quality of research, since its operating budget is now linked to the university system. 3.07 Between 30 and 50 scholarships, financed by bilateral sources, are made available each year to Haitian graduates for studies abroad. Although most graduates return, almost none have remained in their field of training. Within a year of their return, they have often been appointed to administrative or executive positions. MARNDR is taking measures to resolve this problem. Public Sector Expenditures 3.08 Between 1971 and 1979, the average ratio of total investment to GDP in Haiti was 12%. The ratio of about 50% private to total investment was relatively low; many developing countries have sustained 60 to 70%. Since 1980, total investment has increased somewhat: by 1984, it had increased to 15.8% of GDP, although private investment had dropped to 36%. 3.09 Agriculture's share of total budgeted public investment increased from 10% between 1972 and 1976 to 17% between 1977 and 1981 (Table 4). Notwithstanding this increase, actual expenditures have been limited by amounts allocated by the Ministry of Finance and by MARNDR's capacity to disburse the funds received. A detailed analysis for FY82/83 (Table 5) shows that only 22% of the G$ 31.5 million budgeted was allocated and only 18% was actually spent. Higher expenditure rates were recorded by the transportation, power and communications sectors over the period. 3.10 Investment and Operating Budgets. A large share of MARNDR's public investment budget has been redirected to pay salaries. In FY82/83, 43% of investment funds were spent on actual investments; the remainder was spent on salaries (42%) and goods and services (15%). The central operating budget comprised 91% for salaries, 8% for operating expenses and 1% for transfers and subsidies. The raio of salaries to the total operating budget has been 50% higher than in Government administration as a whole (Table 6). At least two factors have been responsible for this high ratio: overstaffing and a shortage of operating expenses. The disproportion has limited employees' -8- operational effectiveness and the Ministry's efforts to increase investment. As noted in para 3.04, staff turnover has been high, especially at higher levels, and morale has been low. Rationalization of MARNDR's budgeting and expenditures is essential. The Ministry plans to hire a consultant in 1985 to give guidance on effective investment and policy planning, as well as for monitoring actual investment and operating expenditures, and physical progress of investment projects. Agricultural Credit 3.11 The main sources of institutional credit for agriculture and rural business are the Agricultural Credit Bureau (BCA) and the BNDAI. In addition to funds lent by BCA and BNDAI, rural credit is extended by several regional development organizations, most of which began operating within the past six years. Only 5%-10% of the rural population has access to formal credit. This is because of the difficult logistics and high costs of extending credit to large numbers of small and scattered farmers. The weakness of the agricultural economy and the lack of appropriate technical packages have also contributed to the limited demand for institutional credit. 3.12 BCA. Established in 1959 as a Government agency within MARNDR, BCA provides credit to about 19,000 smallholders, or 3% of all farmers. It is administered by a seven-member board, headed by the Minister of Agriculture. BCA's resources come from budgetary allocations, financed in part by IDA, USAID and other bilateral donors. The bulk of BCA's subloans are short term to Agricultural Credit Societies (SACs), in kind and in cash for inputs or small tools. A SAC has a maximum of 15 members with less than 2 ha each; loans are guaranteed jointly by all members. BCA occasionally lends to individuals with larger farms, 300-400 subloans annually. 3.13 Operating through seven regional offices and 46 local agencies, BCA selects its clients primarily according to their ability to repay their loans. During the late 1960s and early 1970s, BCA's loan portfolio was small (US$60,000), but since 1974 it has increased steadily, to US$3.9 million in 1983. The annual interest rate for a SAC is 12%; 2% is added for administra- tive expenses and an additional 2% of the loan amount is withheld. These charges compare to an inflation rate of about 10%. Subloans to individuals carry interest at 21% per annum. Arrears stand at about 25% of the one portfolio. 3.14 BCA should: (a) adopt measures to protect its capital base against inflation and bad debts; (b) avoid occasional lending to Government employees, a group clearly beyond BCA's target group; and (c) reduce its headquarters staff by 50%, thus significantly lowering its operating costs. 3.15 BNDAI. Established in 1961, BNDAI's agricultural lending is geared primarily to medium- and larger-sized farms engaged in (relatively) capital intensive production, especially of irrigated rice. About 12,000 small-scale farmers, including 3,000-6,000 cotton producers, also benefit from BNDAI's agricultural programs. In 1984, BNDAI's portfolio was around US$13 million. -9- 3.16 Regional Development Agencies. Some small-scale rural development schemes have provided credit to farmers directly. These channels have been developed because BCA and BNDAI have been unable to administer the credit demand. BCA and BNDAI are gradually taking over these credit operations. 3.17 Traditional Sources of Credit. Loans for consumption expenditures constitute the largest demand for rural credit. Traditionally, moneylenders charging high effective rates of interest (often over 100% on an annual basis) have been the main source of this credit. The demand for production credit is much smaller because most smallholders rely on family labor and purchase few, if any, inputs or equipment. IV. THE RURAL ECONOMY OF HAITI AND SMALLHOLDER BEHAVIOR Background 4.01 Haiti's rural economy is unique. Its development can be traced to the breakdown of the French colonial system in 1804 and the subsequent emergence of a new rural bourgeoisie. To escape slavery under new plantation owners, freed Haitian laborers fled to the mountains and established a simple rural economy: communities of small family farmers who owned their land as well as some livestock and a few tools. Their numbers rose from less than 500,000 at the beginning of the nineteenth century to over one million by the end of the century, and to over 3.5 million today. 4.02 A smallholder subsistence farm consists typically of a home occupied by the main wife, and sometimes other complementary homes, occupied by concubine wives and their children. These farms employ family labor (including children) to produce food to meet basic family needs, and a marketable surplus to cover cash needs (e.g., for schooling, clothing, and salt). These marketable surpluses are directed to the domestic market, e.g., animal products, fruits and vegetables, or for export, e.g., vetiver, cocoa, and coffee. Nearly all smallholders engage in some rural trade. 4.03 Around the main home, the smallholder family cultivates several types of crops in distinct ecosystems. These include, in decreasing order of intensity and fertility: (a) Fruit tree plantations: banana, avocado, citrus, coffee and cocoa, usually grown around the house; (b) Annual crops in enclosed gardens: roots, fibers and vegetables (no fallow), heavily fertilized by animal manure and organic residues; (c) Open field cropping: maize, sorghum and beans, characterized by minimal or no fertilization and by fallow periods during which spontaneous regeneration is grazed by animals; - 10 - (d) Poor pastures: used for browsing by goats, with no fertilization or control of erosion; and (e) Ravines: usually dry and eroded, although occasionally planted with breadfruit or coffee. 4.04 Although smallholders enjoyed relative prosperity until the early 20th century, cash income from coffee and other food crops has always been limited because the low levels of technology have prevented farmers from producing large marketable surpluses. Much of the equipment used is the same as in the colonial period: hoes, machetes and pickaxes. The few tools used are imported and there is practically no expertise in rural areas to repair them. 4.05 Ia addition, marketing charges, formal and informal taxes, high interest rates for informal credit and the high cost of surveyors' services have all kept a lid on discretionary income. With real farm income actually having declined over the last decade, smallholder agriculture finds itself in worsening crisis. Unless effective production incentives and other constructive measures are introduced, smallholders are likely to earn progressively less in real terms because of stagnant technology, further fragmentation of landholdings and possibly less favorable terms of trade. 4.06 Under these circumstances, farmers have opted for cropping patterns that have enabled them to harvest food crops throughout the year, thus minimizing the risk of poor harvests and the need to sell and buy food. They cultivate parcels in several different ecosystems, sometimes by leasing plots from neighbors. The intensity of effort and types of production on different plots are a function of tenure status and distance from the home. Forms of Land Tenure 4.07 The smallholder farm provides the basis for tenancy and its variations, including polygamy, and for employment of landless farmers. Most smallholders have customary ownership to the land they farm (which a relative some day might contest). Smallholders cannot normally afford the legal and title fees necessary to secure their claims. With subdivision upon inheritance, many farms have become too small to meet family needs. Inheritance traditions provide that all children, legitimate or not, are given a plot of land. Increasing population pressure on the land has been a major cause of urban migration. 4.08 The main forms of tenure are: (a) Owner operated. This predominates in the hills, where 60% of the land is occupied under customary ownership and less than 5% of the population is landless. Farmers who own insufficient land to meet family requirements tend to emigrate to other areas. - 11 - (b) Undivided land. It is often not feasible to allocate miniscule plots of land claimed by several lines of inheritance. Such plots therefore remain undivided; they are not regularly cultivated, deteriorate rapidly and receive little, if any, investment; (c) Share cropping. A 50:50 share in the harvest between owner and share cropper is most common. In the hills, the owner is usually a local farmer and the share cropper a neighbor with either little land or a desire to complement his cropping activity; (d) Leasing. The length of leases and amounts of rent vary widely. A lease arrangement is usually for one harvest period (six months to a year); (e) "Potek" or mortgage. This is a type of long-term lease, which covers several years for a fixed and rather low fee paid at the time of sale of produce; and (f) Government land. Individuals may lease Government land on a long-term basis. The arrangement can be passed on through inheritance. Lease fees are low and lessees often sublease the land to others or engage in share cropping. 4.09 Insecurity of tenure tends to discourage investment in the land. Together with smallholders' high priority for short-term income, it also discourages-good soil conservation practices. Livestock raising is the only technique employed to help restore fertility. Animals are grazed on distant plots (where ownership is less secure) and the residues are returned to plots closer to home. Residues are also used for fuel, as fuelwood reserves diminish. On-farm Consumption and Marketable Surpluses 4.10 Despite the lack of statistics on the quantities (and values) of farm production consumed and sold, some conclusions can be drawn from available studies such as those by MARNDR, FAC and UPAN. The rural economy of the hills and mountains is based on systems that combine on-farm consumption and marketable surpluses (Table 7). Home consumption by smallholders comprises: (a) roots and tubers (cassava, sweet potatoes); (b) fruits and vegetables (plantains, mangoes, avocados, breadfruits); and (c) dry legumes and cereals. Cash, for purchases of cereals and other goods, is generated by sales of: (a) coffee and vetiver; (b) animal products (pork, goats and cattle); and (c) whatever additional surplus is available (fruits, green legumes or cereals). Animal protein from domestic livestock has become too expensive for home consumption. Farmers have turned increasingly to dry legumes for both home consumption and a growing domestic market, putting further pressure on cultivated land. 4.11 The disappearance of the swine population has hurt the rural economy because pigs have been a major source of protein, cash and manure and have served as a savings mechanism for which farmers have no substitute. MARNDR should continue to give high priority to ongoing projects to rebuild the pig population, financed by USAID and IDB. - 12 - V. AGRICULTURAL PRODUCTION COSTS AND COMPARATIVE ADVANTAGE Introduction 5.01 Estimates of agricultural production in Haiti vary, but there is a consensus that food production per capita has been declining. The results of a nation-wide aerial photography survey, conducted in 1978, provide the most reliable estimates to date of areas cultivated and production (Table 2). In terms of areas cultivated, the most important crops are, in order: maize, sorghum, coffee, beans, rice, bananas, pigeon peas, cassava, sweet potatoes, and sugarcane. Yields for all major crops are among the lowest in the Caribbean region. Coffee yields are particularly low; in El Salvador, Guadalupe and Mexico, they are 3 to 3-1/2 times higher and in Cuba and Nicaragua, more than two times higher. Maize yields also are low by regional standards (Table 8). 5.02 The purpose of this chapter-is to review the comparative advantage of a few key crops. The analysis can serve as a useful guide to pricing and other strategies for increasing production. Initially, unit costs of production were determined for each crop. The data were then applied to measures of comparative advantage. An explanation of the three measures of comparative advantage employed in the analysis (para 5.10) may be found in Annex F. Estimates of Production Costs 5.03 Maize. Detailed cost estimates for three different farming regimes-traditional monoculture, traditional crop associations and improved methods-are shown in Table 9. Unit production costs are lowest for improved technologies using fertilizers, agrochemicals and some mechanization. They also are lower for crop associations than for monocultures under traditional methods. As may be expected, labor and land comprise the bulk of production costs, especially in areas using traditional methods. 5.04 In all production regions, Haitian maize can be produced at a lower cost than imported maize. Production costs of traditional monoculture maize (the most costly production regime), for example, was $205/ton in 1982, compared to $220/ton in 1982 and $249/ton in 1983 for imported maize, c.i.f. in bags Port-au-Prince. Without detailed information on consumption and marketing patterns (including transport costs), the most relevant comparison of price should be c.i.f. versus producer, or farmgate prices. (Both c.i.f. and farmgate prices represent essentially the same point in the marketing chain: wholesaling and retailing costs must be incurred before the product reaches the consumer). Using this comparison, Haitian maize seems to be competitive with imported maize, even at the low yields typical of traditional cultivation methods. This conclusion differs from that of other studies, which have based their reasoning on a comparison of c.i.f. and domestic retail prices (rather than c.i.f. and faragate prices). - 13 - 5.05 Rice. Cost data for rice production are shown in Table 10. The most striking fact about these costs is the extent of variation between the production regimes-irrigated, swamp land and rainfed rice. Unit production costs/ton under traditional techniques are as much as three times those under modern techniques. The price of rice also varies greatly between localities and over time. According to Muskin (1983), the c.i.f. price of imported rice in 1982 was US$420/ton and in 1981 US$576/ton, with a 1973-82 average price of US$486/ton. These figures indicate that irrigated rice, in Haiti, especially that grown in the Artibonite (US$263/ton), would be competitive at world market prices, but that swamp rice (US$754/ton) and rainfed rice (US$794/ton) would not. Labor's proportionate share of production costs is lower for rice than for maize, while the proportionate share for land is higher. This reflects a higher opportunity cost for land in rice areas, varying from US$115 to US$190/ha. 5.06 Coffee. Cost estimates for coffee are given in Table 11. Yields vary considerably, depending on cropping techniques, but are low by international standards. Nevertheless, Haiti remains a competitive producer. The world market price, f.o.b. Haiti, in 1981 and 1982 averaged $2,375/mt while prices received by Haitian producers in those years averaged $1,175/mt. (Export taxes accounted for about half of this difference.) Although fertilizer has been available at subsidized prices for use on coffee, in practice it has been diverted largely to other crops where it generates a higher marginal value return. Land and labor, therefore, account for nearly all production costs. For the farmer, an important advantage of growing coffee is that its harvest -may be sold in advance to raise cash. The practice creates an implicit discount on the price of coffee, encouraging farmers to grow it when they might not if the sole consideration were profitability. 5.07 Sugarcane. The field cost of Haitian raw sugar, i.e. the cost of cane divided by the percentage sucrose content, ranges from US$120/mt to US$150/mt (Table 12). Compared to other cane-producing countries, Haiti is a relatively low-cost producer, at least in monoculture cultivation (Table 13). Sugarcane competes with rice in irrigated areas and with bananas in rainfed areas. This competition is reflected in land rentals. Whichever crop may have a comparative advantage, the choice is complicated by two exogenous factors. The first is soil erosion. Sugarcane is less labor intensive than rice. Rice, therefore, offers greater employment opportunities, as well as contributing to the basic food supply. There is correspondingly less pressure on the land and on marginal farmers to displace coffee by planting more food crops on steep slopes. The second factor concerns the susceptibility of bananas to theft. Undernourishment is such in Haiti that crop theft has become widespread, especially in the north. Due to the nature of bananas, they are easily stolen for immediate consumption, whereas rice and sugarcane are not. - 14 - 5.08 Viewing the sugar production process as a whole, Haiti is considerably less efficient in processing cane than it is in producing it. An important conclusion of the cost analysis is that, at least for monoculture technologies, it would be economically justified for Haiti to attempt to expand its cane production, provided the increase were such as to expand significantly the utilization of existing mill capacity. Any expansicn should be sought through increases in yields rather than in areas cultivated, and through diversion of cane to the mills from the traditional guildives (para 7.08). 5.09 Bananas. Cost estimates for bananas are shown in Table 14. Like other crops, bananas have been cultivated using traditional and improved techniques; both are profitable at local and border prices with the improved technique being the more profitable of the two. Land costs form a high proportion of total unit costs, so bananas constitute a relatively efficient use of land resources. They are also one of Haiti's more profitable crops when evaluated on a profit per man-day basis. Estimates of Comparative Advantage 5.10 As detailed in Annex F, this report employs three measures of comparative advantage: (a) net economic profit, including all imputed costs of land and family labor; (b) the domestic resource cost (DRC) of earning or saving a dollar of foreign exchange; and (c) the nominal protection coefficient (NPC), which is the ratio of the domestic price to the border price of a good. For each crop, the measures have been applied to the different techniques or regimes of cultivation. The results of the * calculations are shown in Table 15. 5.11 Because estimates of domestic producer prices are rather crude, the NPC is a less reliable indicator of comparative advantage than the economic profit or DRC measures, which rely on estimates of costs of production. By both these latter measures, bananas under improved cultivation techniques show the greatest comparative advantage of any Haitian crop. According to the DRC measure, monoculture coffee is next, followed by irrigated rice, improved maize and sugarcane. Coffee, however, is not normally grown as a monoculture crop, and little maize is grown with improved techniques. Taking this into account, the crop rankings should be: bananas, irrigated rice, coffee, sugarcane and maize. Bananas and rice are sufficiently profitable to have export potential. Sugarcane also is sufficiently profitable that fulfillment by Haiti of its share of the US sugar quota may be economically justified (assuming a substantial increase in capacity utilization of the sugar mills and that the sugar quota continues as a substantial market outlet). 5.12 The rankings by profitability per ha differ in that sugarcane and improved maize move ahead of coffee. These rankings are based on classifying land as the most scarce factor in Haitian agriculture. They also help explain why coffee production appears to be in decline, even though it has a favorable DRC. - 15 - 5.13 The calculations in Table 15 show that at border prices, Haitian agriculture tends to be relatively inefficient under traditional techniques of cultivation. With improved techniques, however, efficiency increases markedly- This is evident particularly for rice and maize. In other words, for a number of crops, Haiti has the potential to be competitive inter- nationally. The main surprise from the analysis is that Haiti is a relatively low-cost producer of sugarcane. It may, though,be a relatively more efficient producer of other crops, including maize and rice, on sugarcane lands. Also, a change in policy to encourage increased production of export grade bananas is indicated. VI. INCOMES AND PATTERNS 6.01 With a 1983_per capita GDP of US$320, Haiti ranks lowest in income among countries in the Western Hemisphere. Although per capita GDP rose slightly during the 1970s, fluctuations rather than steady growth have been the rule. Agriculture's large share of GDP (40%) has been declining slowly and the small industrial sector has been growing. The service sector, in part a subsistence sector, accounts for most of the income shift from agriculture. With the increasing number of urban poor in recent years, poverty is no longer an exclusively rural phenomenon. Income Distribution 6.02 According to an unpublished socioeconomic survey conducted in 1970 by the Haitian Institute of Statistics (IRS), more than 80% of the population has very low incomes. The top 2% of the population received 16% of income and the top 13% received 44%. According to the survey, income distributions for rural and urban areas were roughly comparable. A household survey conducted by IRS in 1973 provides additional evidence on income distribution. Per capita income nationwide was estimated at US$163 per year, while for the poorest 83% of the population, it was only US$52 per year. The corresponding 83% figure for the rural sector was US$45 per year. The 1973 survey showed also that 4% of the population enjoyed a per capita income of more than US$1,540, accounting for 35% of all family income; 0.4% of the population had per capita incomes of more than US$6,000. Rural Employment and Wages 6.03 The following table shows the distribution of the rural working population by economic sector and geographic region in 1982. It indicates that there is little economic activity in rural Haiti other than the production and marketing of agricultural products. Because the latter is carried out almost exclusively by women, there are few employment opportunities for rural men other than farm labor. - 16 - Distribution of the Rural Labor Force by Economic Sector and Region, 1982 Sector West South Transversal North Nation % Agriculture 471,705 337,515 578,412 219,186 1,606,818 82 Industry 28,685 19,425 30,182 9,957 88,249 5 Construction 4,774 2,124 3,327 988 11,213 1 Commerce 63,218 26,870 44,656 25,706 160,450 8 Transport and Communication 2,615 583 844 280 4,322 - Services and Others 22,734 21,592 26,674 10,320 81,320 4 Total 593,731 408,109 684,095 266,437 1,952,372 100 Source: Ministry of Plan and ILO, Bureau of Territorial Planning, June, 1984. 6.04 Despite large reserves of agricultural labor, seasonal shortages do occur. Peak demands vary from region to region, and are pronounced for labor intensive crops, e.g., coffee, sugarcane, cassava, rice, vegetables and tobacco. The degree of spatial mobility of the rural labor force suggests that wages approximate market equilibrium rates. They are not pushed upward by the official minimum wage, and the fact that there are seasonal surpluses of labor suggests that rural wages are not biased downward either. While it may be argued th&t family labor has limited mobility and may be prepared to work for less than the market wage, the market wage essentially is at a subsistence level and family labor could not normally work for less. Hence, it is reasonable to value rural labor at the market wage, plus the traditional meal. For the usual eight-hour agricultural day, this means a wage of US$1.00 + US$0.40 = US$1.40. Patterns of Consumption and Nutrition 6.05 Nutritional studies dating back to the 1950s suggest that malnutrition is significant and widespread in Haiti, especially in rural areas. In keeping with the slow growth of per capita incomes, per capita intakes of calories and proteins have also increased slowly over time. Recent estimates show a nationwide calorie deficit of 14% and a protein deficit of 32%, compared to nutritional levels recommended by FAO and WHO. The deficits are greater in rural areas-40% and 50%, respectively-and are reflected in high rates of morbidity and mortality, especially among infants. 6.06 Rural diets consist mainly of: cassava, maize, sweet potatoes, raw sugar, sorghum, beans, mangoes, bananas and vegetables. Meat and dairy products are consumed principally in urban areas, where rice and wheat flour are replacing cassava and sorghum and, to a lesser extent, maize. Given the need to improve nutrition, a detailed national household survey of income and consumption patterns should be undertaken. - 17 - Improving Nutrition and Farm Incomes 6.07 Programs for improving nutrition should focus on the products that - give the greatest nutritional improvement per unit of expenditure and on crops that show the greatest promise for increasing yields. Agronomists have identified*two potentially high-yield crops-high lycene maize and a new variety of pigeon (congo) peas. Both could contribute significantly toward eliminating the nutritional deficits. 6.08 High lycene maize. In the past, high lycene maize has been unacceptable to consumers. With the recent identification of new varieties in Mexico, however, field cultivation and consumer acceptance tests should be conducted. If the maize proves acceptable, then MARNDR should sponsor propagation of the necessary seed. 6.09 New bean varieties. Agronomic and economic analyses carried out at the Levy Farm near Les Cayes show that photosensitive varieties of pigeon peas (beans), which have a shorter growing season, give much higher yields. An adequate extension program should be mounted to promote the new bean (and maize) varieties. 6.10 Rice. Yields of rice could be increased substantially with more fertilization. Surpluses for export are a reasonable possibility. Rice is not as effective as maize in contributing to nutrition, however, since production costs per calorie and per gram of protein are higher. But it could be an important vehicle for improving farm incomes (thus indirectly improving nutrition) and earning foreign exchange. 6.11 Table 16 compares the calorie and protein content of various foods in Haiti per unit of consumer expenditure. Maize ranks first, even without accounting for the possibility of high lycene varieties. Wheat flour and rice are considerably less cost effective (at Haitian prices) than maize and sorghum. The relative cost efficiency of maize and sorghum becomes more * pronounced, moreover, if one takes the costs of production as a basis rather than consumer prices. The data imply that pricing policies (para. 5.02) should recognize that maize, sorghum and beans are among the most cost effective products for increasing the intake of protein and calories. Food Price Trends and Substitution Effects 6.12 Progress towards achieving better nutrition in Haiti has been impeded by the rising prices of most basic foods relative to the prices of other foods. Consumers, therefore, have been encouraged to eat less nutritious food. This is especially evident in the case of wheat flour whose price, although slightly high by international standards, has been falling relative to prices of maize and sorghum. Table 17 shows that recently, prices of all principal foods except wheat flour have risen more rapidly than the consumer price index. The price of rice also has declined relative to prices of maize and sorghum. - 18 - 6.13 Because the Minoterie authorities3/ are aware of the tendency to substitute wheat flour for domestic grains, they have been experimenting with nutritionally reinforced flour and are planning to investigate demand substitution effects. The mission conducted its own inquiries on this subject and found that flour consumption does ap ear to be affected by the relative prices of ground maize and wheat flour./ Given that maize is more nutritionally cost effective, these results suggest that: (a) the Minoterie should strengthen its programs aimed at fortifying wheat flour; and (b) the Government should reverse the relative price trend, thereby encouraging increasing consumption of maize relative to wheat. VII. THE SUGAR SUBSECTOR 7.01 Centrifugal sugar production in Haiti has declined to the point where the country has become a net importer, while the capacity utilization of its production facilities has fallen to less than 40Z. At present, the impact of this low level of production on the balance of payments is not serious because imports are being effected at the prevailing low world prices and exports to the US are receiving the US market stabilization price of US 20.7c per lb (c.i.f. New York). This arbitrage effectively provides the country with *free- sugar. In the medium- to longer-term, however, fluctuations of the world price and uncertainty surrounding the level of quotas to the US market, may lead to foreign exchange losses and/or reductions in imports. Cane Production 7.02 The main growing areas for centrifugal sugar are the coastal., alluvial areas of the Plaine du Nord, Plaine des Cayes, Plaine de Leogane and the Plaine du Cul-de-Sac. Traditional cane processing industries compete for 3/ The Minoterie is a State owned enterprise established in 1969 to import wheat and operate the milling plant. 4/ For the 1966-83 period, the following regression results were obtained: Ln F = 4.606 + 1.791 Ln GNP - 0.339 Ln (PF) (5.420) (3.005) (-2.297) (PM) R2 = 0.8930, D.W. = 1.2308, F = 58.39 T-ratios are shown in parentheses F = flour consumption GNP = real GNP PF = consumer price of flour PM = consumer price of ground maize - 19 - cane in these locations. With the exception of the HASCO mill in Port-au-Prince, the mills are completely dependent on farmers' production. The mills have begun to experiment with new cane varieties and to promote improvements in cane cultivation and in the provision of extension and credit services. A great deal remains to oe done, however. 7.03 The total area under cane is about 45,000 ha. Average yields are low-approximately 35-40 tons/ha for a total production of around 1.7 million tons of cane. The large number of smallholder cane producers is typical of the land ownership pattern of Haiti as a whole. Many larger land holdings are also devoted to cane, in part because cane has advantages over other cash crops, particularly for absentee landlords. 7.04 Cane production in Haiti employs a relatively low level of agricultural technology. Inter-cropping with food crops in the newly planted ratoons is a comon practice because of the priority for subsistence requirements over cash crops. To analyze cane production costs, three benchmark systems have been defined: traditional, semi-improved and improved. The average total variable costs are estimated at $6.60 per ton, giving a gross margin (at the fixed controlled price of cane) of $6.40 per ton. 7.05 One of the sugar industry's major problems has been the absence of constructive Government support. Extension and credit in the growing areas have been lacking, as have appropriate maintenance of irrigation and drainage systems and roads. The mills, farmers and consumers, moreover, have not been organized or coordinated. They have been able to discuss their problems and requirements only on an ad hoc basis with the relevant Government agencies: the Ministry of Commerce, MARNDR and Ministry of Finance. Centrifugal Sugar Production 7.06 The four centrifugal sugar factories operating in Haiti (two Government and two private) have a capacity of 10,750 tons of cane per day (TCD), yielding about 114,000 tons of sugar per year. The centrifugal process, however, absorbs less than 50Z of the cane produced because of competition from traditional industries, in particular from those that produce clairin (potable alcohol) from fermented cane juice, cane juice syrup and molasses. Despite the increase in installed capacity over the years (a new mill at Leogane, began operating in 1984), there has been no increase in sugar production. HASCO, the first modern sugar mill, produced more sugar by itself in 1950 than all four mills combined in 1984. HASCO has also experienced a more rapid decline in production over the past tea years than have the other mills.- 7.07 Detailed information on cane milled and sugar produced from 197D to 1984, by mill, is in Annex A, Table 4. The average data for 1970 to 1974 and 1980 to 1984 show marked declines in production and yields: - 20 - Cane Ground Sugar Produced Yield (t/year) (t/year) 1970-74 810,766 65,194 8.0% 1980-84 694,943 45,778 6.6% Traditional Cane Processing Industries 7.08 In addition to clairin (alcohol), the traditional cane processing industries produce heavy syrup and crude open-pan sugar. Clairin is-by far the most important product, however. Open pan sugar, which is produced largely on the Plateau Central, serves as a substitute for centrifugal sugar, as does syrup. Clairin is produced in *guildives,- a term covering the smallest- to the largest-scale stills. The guildives operate for a longer period of the year than the centrifugal mills. They are registered with the Bureau of Revenue (BC), which levies a modest tax based on capacity, but keeps no records of and charges no excise duty on the clairin produced. No data on the amount of cane used to produce alcohol are available. 7.09 Some guildives, especially the smaller ones, are crude and inefficient at fermenting and distilling, whereas the larger ones with steam-heated stills obtain good yields of up to 15 gallons of alcohol per ton of cane. According to mission estimates, the installed capacity of the clairin industry is around 70,000 gallons per day, which would require at least 4,600 tons of cane per day. This is equivalent to 43% of the installed capacity of the centrifugal sugar industry. At 200 days of operation per year, total production would be about 14 million gallons of clairin from 930,000 tons of cane. Given that the centrifugal sugar industry used less than 600,000 tons of cane in 1984 and has never exceeded 862,000 tons (1980), such a volume of cane used in alcohol production is consistent with the estimate of total cane production (1.7 million tons) mentioned in para 7.03. Sugar Supply and Distribution 7.10 Formerly a modest exporter of raw sugar, Haiti has become a net importer (refined sugar). From 1970 to 1972 exports averaged 21,000 tons per year; from 1977 to 1982 net imports averaged 4,500 tons per year, rising to 19,300 tons in 1983 and 1984. Production, Exports, Imports, Consumption (m.t./year) 1970-72 1981-84 Production 64,900 43,800 Net exports 21,600 - Net imports - 12,700 Consumption 43,300 56,500 - 21 - 7.11 Data on sugar supplies and distribution have been compiled from d%;mestic and international sources, including the International Sugar Organization and USDA. Consumption, the sum of production plus imports minus exports, is now around 60,000 tons per year. Responsibility for importing sugar, through competitive bidding, rests with the Central Bank (BRR). The Department of Commerce also plays a role in sugar marketing by collecting data on mill production. 7.12 There has been considerable smuggling of refined sugar into Haiti, particularly from the Dominican Republic, because of lower (controlled) Dominican sugar prices and an exchange rate that has favored Haiti. Price Formation and Taxes 7.13 The absence of a constructive policy for the sugar subsector is nowhere more evident than in the formation of prices. Although the Government sets the farmer price of cane as well as the ex-factory, wholesale and retail prices of sugar, the criteria by which it does so are not clear. In most cane sugar producing countries, the sales proceeds of sugar and molasses are split between the cane growers and the factories according to mutually agreed formulas. A 60:40 or 65:35 split between farmer and factory is accepted as an equitable division of rewards for producing the cane and extracting the sugar and molasses. But in Haiti, the farmer/factory split has declined from 51:49 in 1970 to 39:61 in 1976 and to 29:71 in 1984. An important effect of this low relative price of cane is the reduction in cane supplies to the mills, which puts pressure on their unit fixed costs of production. The supply response that would be achieved if the cane price were a more equitable proportion of the sugar value can only be guessed. 7.14 The ex-factory price of sugar is augmented by an excise tax. The price structure for raw and refined sugars, in effect since 1980, is as follows: Price (USc per lb) Raw Refined Ex-factory 24.00 28.00 Excise duty 8.00 8.00 Wholesale 32.00 36.00 Retail margin 2.00 2.00 Retail 34.00 38.00 - 22 - 7.15 Consumption taxes on sugar raise some US$8 million per year, based on the excise duty of US$8 per 100 lbs and total consumption of around 60,000 tons. In addition, duties on imports of sugar (to replace exported sugar and augment domestic prodaction) amount to between $3 million and $5 million per year, depending on quality and classification. By contrast, the major user of cane-the domestic alcohol industry-is barely touched by taxation; refined sugar retails at US$0.38 per lb, while clairin of 590 G.L. retails at US$4 per gallon. Recommendations 7.16 There is little incentive for farmers to produce more and better quality cane because the price received for it is low relative to the price of alternative crops, e.g., maize. Furthermore, the present method of purchasing cane, which is based on weight alone, cannot be expected to encourage improved cane quality even if the price were to be raised. Thus, it is essential that purchases of cane be based on cane quality (sucrose content) and on an equitable price formula for sharing the revenues from sugar and molasses sales between the cane growers and the factories. 7.17 The Government should eliminate the excise tax on the centrifugal sugar industry. The corresponding savings should be directed to increase prices to farmers for cane sold to the centrifugal mills and to reduce prices to consumers. Measures should also be considered to increase taxation of the traditional alcohol industry, for fiscal reasons and to support an effective policy to redirect cane to the centrifugal mills. 7.18 Because the problems of the sugar subsector are complex (much more so than the purview of this report), the Government should establish a Working Group to define objectives and policy for the subsector. The Group should comprise representatives from the Ministries of Commerce and Finance, MARNDR and the mills, assisted in specific areas by specialists. Notwithstanding the measures designed to increase farmers' allocation of cane to the mills, the fundamental distortion between installed cane processing capacity and the amount of cane available is expected to remain. The Working Group should review, as a priority issue, the future prospects of the sugar industry. The new mill at Leogane is illustrative of the problem. To operate at full capacity, this mill would require a cane area of around 6,000-7,000 ha, compared to a cultivatable area of around 8,000 ha in the Leogane Plain. Yet, in excess of 2,000 ha are devoted to vegetable farming and many traditional alcohol producers are absorbing about 50% of the roughly 5,500 ha presently under cane. Covering the financial deficits of the Leogane Mill, as well as of the Usine Du Nord Mill (formerly La Citadelle) in the north, constitutes a considerable burden on the Government's development budget. The Working Group should develop proposals for a permanent system for collecting technical and financial data for cane, sugar and molasses production as well as for alcohol and syrup production. - 23 - 7.19 Notwithstanding this discouraging scenario, the Government believes that yields of cane and sucrose can be increased in Leogane and Usine Du Nord, and in the other two sugar areas. This, together with fiscal measures to help redirect cane from the guildives, and expansion of arrangements for the mills to sell molasses to the guildives for their alcohol production, may increase capacity utilization sufficiently to render the mills financially and economically viable. In the meantime, MARNDR should be given sufficient resources for expanding the multiplication and adaptive testing of new varieties of cane. These functions should be handled by a new division within MARNDR, which should work in the main cane growing areas in close cooperation with, but independently of, the mills. These research - activities, as well as technical support for the proposed Working Group, could be the focus of a multi- or bilateral aid package. VIII. THE WHEAT FLOUR SUBSECTOR The Minoterie of Haiti 8.01 Wheat milling is an important activity in Haiti. It produces flour for home consumption and generates revenues from flour taxes. It also impacts upon prices and production of competitive substitutes, including maize, rice, sorghum and fruits. The Government administers the flour subsector through the State-owned Minoterie Mill, which has a monopoly on imports of wheat, processing it into flour and selling the flour wholesale at specific distribution points. Outside consultants provide management and technical assistance to the mill. Retail flour sales are by the private sector. 8.02 Established in 1969, the Minoterie mill is located near Port-au-Prince and has access to a wharf. After two plant expansinns, its present production capacity is about 135,000 tons annually. Storage capacity for wheat is 32,000 tons (about four months' requirements), but for flour it is only 2,250 tons (50,000 45-kg sacks), which is about one week of sales. Due to the high grade of wheat imports and the use of additives, most of the Minoterie's output is good quality, nutritious bakery flour. Purchasers take delivery the flour and bran at the Minoterie. Much of the bran is now exported because domestic demand has fallen as a result of the African swine fever eradication program. Flour Production 8.03 About 75% of wheat imports comes from commercial sources (US and Argentina) and 25% from US PL480 and other'donations. At a cost of US$25-30 million annually, wheat is the largest agricultural import, accounting for about one-third of the trade deficit. The evolution of processing and imports is summarized below (see Annex B for further details): - 24 - Total Flour Extraction Flour Flour FY Produced Chaff Rate Imported Supply ('000 sacks) Z ('000 sacks) 1976 1,409 493 74 36 1,445 1977 1,661 583 74 306 1,967 1978 1,397 477 75 109 1,506 1979a/ 900 348 72 827 1,727 1980 2,059 813 72 217 2,276 1981 2,248 954 70 272 2,520 1982 2,032 813 71 44 2,076 1983 2,614 973 73 0 2,614 a/ The mill was shut down for plant expansion in 1979. Production of flour has increased three-fold from an annual average of 711,000 100-lb sacks in the sixties to an average of 2,240,000 between 1980 and 1983. Production reached a maximum in 1983; additional demand can be met only by imports. Despite improvements in the last two years, the Minoterie's 73% extraction rate is below world industry standards because of outdated equipment and a shortage of qualified technicians. In France, the industry standard is 76% and Nigeria achieves 80% with wheat imported from the US. One percentage point increase in the Minoterie's extraction rate would be equivalent to an annual increase in plant profits of US$600,000 at current levels of operation. Production Costs 8.04 The structure and evolution of production costs is illustrated in Table 18. In the last three years, the cost of producing flour has remained relatively stable. At the same time, the cost of wheat as a proportion of all production costs of flour has decreased from 80% to around 72%. The increase in other production costs has been due to: (a) a decline in the extraction rate; (b) increased charges in financing purchases-annual interest rates have reached 20%; (c) increasing costs of purchased inputs; and (d) increasing costs of administration and personnel. The latter increased from US$2.2 million in 1980 to US$3.4 million in 1983, a nominal increase of 55%. - 25 - Domestic Flour (Ex-Factory) vs. Imported Flour 8.05 The cost of financing flour imports is a key factor in determining price relationships. If the imports are paid for in cash upon delivery, the costs can be 20% to 30% less than for flour from domestically milled wheat. But when flour imports are financed on credit, the costs may be higher than those for the domestically milled product. In general, however, the costs of domestically milled flour are 10 to 20% higher than direct imports, depending on the terms and conditions of import financing. If the Minoterie's operations were streamlined-by increasing the extraction rate, decreasing excess employment and purchasing wheat more prudently-the ex-factory costs of flour production would be reduced and the differential with border prices could be lessened or eliminated. 8.06 Domestic Flour Price Structure. The Ministry of Finance sets the ex-factory selling price for flour, which includes an excise tax. The price structure from 1969 to 1984 is shown in Table 19. The proportion of the sale price retained by the Minoterie increased from 56% in 1969 to 87.5% in 1984, while the percentage of the sale price taken by taxes decreased from 42% to 12.3%. In nominal terms, taxes have stayed relatively constant between US$3.15 and US$3.37 per sack since 1981, or 12% and 14% of the ex-factory selling price. The increasingly high proportion that the Minoterie retains of the ex-factory selling price explains its substantial profits. Minoterie Revenues and Costs 8.07 The Minoterie's revenues and costs are shown in Table 20. Fiscal tax revenues have varied from US$6-8 million annually. From a loss of USS1.4 million in 1979/80, profits increased to US$10.8 million in 1982/83, and were expected to reach US$17 million in 1983/84. These high profits were to accrue from a record volume of sales, purchases of low-cost wheat and improved milling productivity. All of the Minoterie's profits are passed to the State, except for management fees and provisions for investments. Price Policy 8.08 The Ministry of Finance establishes the selling price of flour according to two implicit objectives: (a) To ensure a healthy financial position for the Minoterie. The amount the Minoterie pays the State in rent for the mill facility (US$600,000 in 19B2/83) does not correspond to its full asset value. When compared to an industry standard of 1% profit on sales, the Minoterie's 17% profit was excessive. This profit was after provision of US$2.5 million for an investment program (1982/83); and - 26 - (b) To provide financial resources to the State. In 1983, the Minoterie's profit constituted about 30% of net profits accruing to public sector enterprises. Among the five leading parastatals, the Minoterie has been the only one to show a profit. It represents an important source of cash for the Central Bank, where in 1983 it held deposits of US$13 million. Flour Sales 8.09 The Minoterie's records show it has about 220 clients, although about 65% of sales value goes to only 32 of them. Because little is known about subsequent distribution and pricing at the baker level, the Minoterie has initiated a marketing study to analyze distribution channels and consumption patterns. The Minoterie also plans to diversify its range of products and introduce wheat substitutes in flour. 8.10 Based on time series sales and price data (Table 21), the price elasticity of demand for flour in Haiti has been estimated at -0.86, while the long-term price elasticity for wheat in developing countries has been estimated at -0.51. The income elasticity of demand for flour in Haiti has been estimated at 2.1, and the cross elasticity between the price of maize and sales of flour at 0.84. Thus in Haiti, the estimated response of flour consumption to price and income changes is high relative to that in many other developing countries. IX. AGRICULTURAL EXPORTS POTENTIAL 9.01 Until the late 1970s, agriculture had been the main production and export sector. Major changes in sector contributions have taken place recently. Table 22 shows that in the six years from 1975-77 to 1981-83, the tertiary sector has become the major contributor to value added, while the emerging industrial sector, especially the assembly industry, is now contributing around 60% of total export value. Agriculture's share of total export value has not only declined from 60-70% th:ough the mid 1970s to below 40%, but its contribution in real terms has also declined, by an average of 3% per year from 1975-77 to 1981-83. The sector's disappointing contribution to growth and exports has become a major concern of the Government. The remainder of this chapter reviews the prospects for the country's main agricultural exports. Coffee 9.02 Coffee is the major product of the economy. Jesuits introduced it in the north in 1725; by the end of the eighteenth century, there were more than 3,000 coffee plantations in the northern and northwestern provinces. After independence in 1804, the large coffee plantations were gradually - 27 - replaced by small, family-owned holdings. While estimates of the number of coffee growers vary widely, from 150,000 (World Bank, 1961) to 380,000 (USAID, 1974 and 1978), there is no doubt that more than a million people depend on the crop for their livelihood. Coffee is also Haiti's leading export product, although its percentage contribution to total export value has declined since the 1950s and 60s (Table 23). The tonnage exported, while fluctuating with production cycles, has declined by about 20% over the period (Table 24). 9.03 Production Conditions. Coffee is grown on foothills and mountain slopes, at altitudes between 300 m and 1650 m. Most coffee farmers interplant food crops and .hade trees with their coffee trees. Cultivation practices are rudimentary and yields are low-approximately 250 kg/ha/year. Fertilizer is rarely applied; weeding and cultivation are undertaken in July only. Crude methods of harvesting lessen the coffee quality. Harvest is August to October in areas with less than 500 m altitude, and one month later in cooler areas. Since 1975, MARNDR has been promoting the replacement of old plants with seedlings of improved varieties, including Bourbon, Caturra, Villa Lobos, and the hybrids Catuai and Catimor. The impact on total coffee output, however, has been slight. USAID's recently approved PL 480 Title III financing (US$45 million) includes a component for coffee production, processing and training. 9.04 Processing and Marketing. Ninety percent of the coffee crop is processed by the traditional "dry" method, which limits its quality but offers distinct advantages to farmers, including processing and storage of dried beans at the farm, and reduced weight for transport and sale. Although middlemen pay a somewhat higher price for washed coffee, this incentive is insufficient to outweigh the advantages of the dry method. Allocation of production to the local market has increased gradually-from 27% in the 1950s to 33% in the 1960s and 41% in the 1970s. Incentives to increase investment in coffee are low because food crops generate a faster and better return. Yet, despite these disadvantages, coffee serves as an important sect.Zity item for farmers. It requires less labor than food crops and guarantees a minimum income at old age. 9.05 The domestic system for marketing coffee exports is comple- (see Figure 1). Besides the producer, many agents are involved: some 27 exporters, almost 750 licensed intermediaries, known as "speculators" or wholesalers, and an unknown number of unlicensed intermediaries knowt. as submarines." 9.06 Oligopsony Controversy. Exporters, wholesalers and submarines together enjoy a marketing margin estimated at 24% of the f.o.b. coffee price. The State deducts another 24%. In the end, the producer receives about half of the f.o.b. (international) price, although this observation is subject to some dispute. Girault (1980) believes that the average price most producers receive actually may be less than 50%. The market shares of the three largest exporters and their intermediaries have been around 40% of total exported volume over the last 30 years. Therefore, the author concludes that the domestic market for coffee exports is oligopsonistic. A recent study by Capital Consult S.A. (1983) argues that there is strong - 28 - competition in the market. This view is based on the absence of classical barriers to entry, such as cost advantages, product differentiation and economies of scale. 9.07 Notwithstanding their differences, the Girault and Capital Consult studies recognize that producer prices for coffee are too low to stimulate increased production. High prices for food products in recent years, due in part to urban growth, inflation and droughts, have encouraged farmers to switch from coffee to maize, cassava and beans, despite low yields of the latter crops on steep slopes and the resultant erosion. With coffee production remaining essentially stagnant and domestic consumption increasing, Haiti faces a dilemma in meeting its International Coffee Organization (ICO) entitlement, set at 421,000 bags (25,340 mt) for 1985. The Government made a symbolic 10% reduction in the coffee export tax, effective for the 1984 harvest. It has also agreed with USAID under Title III (para 9.03) that the coffee tax will be reduced by a further 15% for the 1985 crop. Under the circumstances, this agreement seems reasonable, and the results, especially the effect of the measure on farmer prices in different locations, should be monitored closely. Mangoes 9.08 Haiti is the world's sixth largest producer of mangoes, third largest in the Americas, according to Food and Agriculture Organization (FAO) .1980 data. Domestic production in 1980 was escimated at 326,000 tons. Mango trees are abundant in the arid parts of the country and at altitudes below 2,000 feet; those from the plains are of better quality, selling at higher prices domestically and abroad. Mango trees are raised primarily by small-scale farmers. (The only large-scale mango plantation is in the Artibonite.) Cultivation techniques are simple; neither fertilizers nor pesticides are used. The main export variety is the Francis (or Haiti) mango. The main harvest season runs from April to September. 9.09 A high percentage of the Francis mangoes from the plains and a smaller percentage of those from the mountains and plateaus are exported to the US. Distribution channels are illustrated in Figure 2. Producer prices in 1984 ranged between US$0.30-US$0.60 per dozen fruit, depending largely on quality. Exports are controlled essentially by one company, ASDEK, which has been the main promoter of mango exports for the past 15 years. In 1982, ASDEM accounts for around 70Z of all mangoes shipped to the US. Mango transactions yield high product margins; risks are high because the fruit is perishable (only one to two weeks of life after harvest) and fragile. Price variations in the US market introduce further risks, depending in part on competing supplies from Florida or other exporting countries, including Brazil and Mexico. - 29 - 9.10 Mango exports exceeded 6 millian kg in 1983 and 1984, for a value of US$3.5 million and US$6 million, respectively. This compares to exports in 1974 of 135,600 kg for a value of only US$13,190. Prices have risen steadily, from US$0.10/kg in 1974 to US$0.54/kg in 1983 (see following Table). Recent Trends in Haitian Mango Exports Year Volume Value Unit Price (kg million) (USS) (USS/kg) 1973-1974 135,625 13,190 0.097 1974-1975 1,107,861 203,699 0.184 1975-1976 967,774 184,173 0.190 1976-1977 3,325,980 691,189 0.208 1977-1978 2,491,530 615,679 0.247 1978-1979 2,292,648 789,688 0.344 1982-1983 6,600,000 3,564,000 0.540 1983-1984 6,545,000 6,000,000 a/ 1.090 a/ Estimate Sources: Administration Generale des Douanes, CCSA 1982; AGRICORP 1984. The outlook for this market was promising until recently when the Food and Drug Department of the USDA banned EDB, a fumigant used to treat the fruit. The ban is to become effective in September 1985. Because the alternative cobalt irradiation method is unlikely to be acceptable to US consumers and because of its high cost (roughly US$1.5 million for an irradiation locker), the Government is concerned that mango exports may disappear completely. Possibilities for treating the fruit with hot water are currently being studied. Cocoa 9.11 A tropical plant, cocoa requires a warm and humid climate and elevations no higher than 500 m. It is also sensitive to wind. The crop is grown primarily in the northern and southwestern parts of the country and, like coffee, is cultivated on small plantations ranging in size from 0.5 to 1.5 ha. Haitian farmers grow a criollo variety, which is usually mixed with a forastero type of cocoa. 9.12 Due to substantial increases in international cocoa prices in the mid 1970s, the value of cocoa exports rose from US$1.2 million in 1974 to US$6.7 million in 1979. Since then prices and export values have declined (US$2.2 million in 1982). As with coffee, the volume of cocoa production has remained essentially stagnant in recent years. Furthermore, cocoa consumption in Haiti's four principal customers-the US, Holland, France and Germany-is stagnant or falling. This coincides with structural changes in -30- the cocoa processing industry worldwide. While confection industries in western countries are making greater use of substitute products, the processing of cocoa beans is moving to the eastern countries and to the producing countries themselves. 9.13 Haitian cocoa is marketed through the same channels as coffee-i.e., producer-wholesaler-exporter. Four companies currently control cocoa exports: Wiener, Madsen, Bennet and Novella. Until 1978, one company, HAMASCOSA, had a monopoly on cocoa purchases. There may be oligopsonistic power on the part of these four exporting firms. Sisal 9.14 Sisal is grown primarily as a monoculture on an 8,000 ha plantation owned by the Haitian American Development Company in the northeast of the country. Exports have been declining, both in volume and value. They fell from 12.2 million kg to 3 million kg from 1974 to 1983, while the value fell from US$4.6 million to US$2 million. Expansion of the local sisal processing industry is one reason for the reduction of fiber exports. By the end of the 1970s, the local market was taking an average of 65% to 70% of the volume of sisal produced. 9.15 Opportunities for exporting sisal in raw form are expected to decrease, considering the following trends in the international raw sisal market: competition from synthetics and reduced imports by consumer countries, in particular the US; excess supplies worldwide froA. a wave of replantings, mainly in Africa and Asia; and the transfer of raw fiber processing to the producer countries. Haitian sisal exports have been replaced in part by sales of finished products (e.g. twines) and handicrafts (e.g. bags and small carpets). Exports of twines amounted to approximately US$1 million in 1979. If sisal production in Haiti remains controlled by a small group of companies that (a) has solid contacts with foreign firms and (b) can secure a stable market, then increased exports of more finished products should compensate for declining shipments of raw fiber. Essential Oils 9.16 Excluding partially processed coffee and cocoa, essential oils are the most important agroindustrial export from Haiti. Vetiver accounted for 54% of essential oils exports in 1982 (US$5.7 million), followed by lime, 28%, and amyris, 12%. Vetiver grows spontaneously in tropical and subtropical countries. Although it adapts to poor soils, it prefers clear, light, well-drained and slightly sandy soils because they enable the plant to spread out better. Vetiver is an ideal crop for Haiti's poor soils. It is grown in locations where rainfall is moderate to abundant-1,200 mm to more than 2,000 mm per year-as well as in the dryer regions. Cultivation is dispersed among small farms, most of which are no larger than one carreau. Fertilizer is not generally applied and cultivation methods result in considerable soil erosion. - 31 - 9.17 Responsibility for exporting essential oils lies with the OCEAH51, which has had monopoly rights on exports since 1975. Three countries, the US, France and Guadelcupe, purchase almost 99% of Haiti's essential oil exports. Unfortunately, the country's share of the US vetiver oil market has dropped from around 75% in 1978 to only 40% in 1982. The loss of market share has been the result of aggressive marketing by Indonesia and China, despite the fact that the Haitian oil is considered to be of superior quality. Besides over-pricing and relatively uncompetitive marketing on the part of OCEAR, the Government imposed a relatively small tax of around 10% on vetiver and the other essential oils. This tax was abolished in early 1985. Given the competitive position of Haiti in producing good quality vetiver and amyris oils, the Government should try to ensure that the OCEAH becomes more active in market diversification and penetration, possibly with greater participation of the private sector in its marketing policies. X. THE FISCAL AND PRICING SYSTEMS FOR AGRICULTURE Overview 10.01 Agricultural prices are influenced by fiscal, monetary and trade policies. Fiscal policy in agriculture includes taxes, subsidies and Government regulatory interventions that create rents for the public and private sectors. Monetary policy in the sector involves guidelines for credit allocation and interest rates. Trade policy refers to tariffs, import licensing, export taxes and exchange rates. 10.02 The prices of a small number of agricultural products are administered by the Government. The producer price of sugarcane for the centrifugal mills is fixed, while that for the traditional guildives is not subject to control. The producer price of cotton is also fixed. Consumer prices are established for flour, sugar, vegetable oil, milk and lard, none of which are major items in the Haitian rural diet (see Chapter VI). According to UPAN, the annual consumption of wheat flour is 2% of total food intake by weight; sugar consumption (excluding alcohol, syrup and open-pan sugar) is about 3% of total weight intake. Milk and lard consumption is nominal. For most products, supply and demand (affected in some cases by trade policies) determine prices, e.g., for cassava, maize, sweet potatoes, sorghum, rice, legumes, vegetables and fruit. Overall, price controls are not as important in Haiti as in many countries, although prices for a few products have departed considerably from border price levels; ex-factory prices of flour, sugar and vegetable oil have been above international norms, while producer prices of cotton have generally been below. 51 Haitian Office for Marketing Aromatic Oils. - 32 - 10.03 Fiscal policy has a much greater impact than credit on agricultural pricing. High export taxes reduce producer prices in gourdes, particularly for coffee, but also for cocoa and sisal. Taxes on domestic flour and sugar, on the other hand, contribute to the high consumer prices of these goods. Higher than equilibrium prices for flour and sugar appear to exist primarily for the purpose of raising revenues from parastatal processing plants. 10.04 The pricing of grains is complex. Flour, which is a substitute for domestically grown food grains, is priced well above the c.i.f. equivalent and hence does not serve to reduce food prices. Sorghum is unique because it is largely a subsistence crop grown and consumed by low-income farmers in remote areas. Its localized price is higher than the imported c.i.f. price would be, but it is unlikely that imports would lead to lower prices due to the cost of marketing the imported product in isolated areas. Cassava and sweet potatoes are important items in rural diets, as well as partial substitutes for sorghum and maize, but there is insufficient price data to evaluate them. 10.05 The average producer price of rice is somewhat higher than it would be under conditions of free trade. Foods processed in Haiti (flour, sugar, edible oils) also have high prices. The high consumer price of sugar, however, is not reflected in producer cane prices (para. 7.13); the producer-consumer price ratio for sugar is perhaps the lowest in the world. And since all wheat is imported and Haiti produces only small quantities of edible oils (mainly cottonseed oil), the Government rather than producers benefits from the high administered prices. 10.06 Consumption taxes are applied to rice, centrifugal sugar, flour and edible oils. Rice plays only a small role in the diet of the poor, because it is a costly source of nutrition. (Rice is two to three times more expensive than maize per calorie and per gram of protein;-see Chapter VI). Overall, pricing policies impose a considerable burden on consumers. Table 26 compares domestic and border prices for selected products, while Table 27 provides estimates of the net tax or subsidy for each product implicit in pricing policy. The latter table shows that the combination of pricing policies has a greater adverse effect on consumer than on producer welfare. These observations contrast with the situation in many developing countries, where consumption, particularly urban consumption, is often subsidized. They are noteworthy also because Haiti's nutrition levels are the lowest in the hemisphere. Thus, consumers and producers are both taxed by a combination of pricing and trade policy instruments. 10.07 Estimates of the distributional consequences of pricing policy are not available, but some observations can be noted. First, on the consumption side, taxes fall largely on urban groups. In rural areas, a high proportion of the sugar is consumed in the form of open-pan sugar, raw cane and alcohol, for which little, if any, taxes are imposed. While wheat flour products have penetrated some rural areas, their share of the average diet is much higher - 33 - in urban areas. And very little rice is consumed by the poorest groups. Second, on the production side, while most coffee and cotton producers are smallholders, they are not the poorest farmers. The poorest, essentially subsistence, farmers grow sorghum or cassava and small amounts of legumes or vegetables. Hence, pricing policy taxes tend to spare the very poorest. The burden of rural taxes is carried largely by the lower-middle and middle classes, and revenues go to the Government directly, or implicitly to the rural entrepreneurial classes via policy induced rents (para 10.09). The pricing system, therefore, is regressive for roughly the top two-thirds of the income strata, but does not materially affect the lowest strata. Haiti's Agricultural Fiscal System 10.08 Haiti's fiscal system is under pressure to generate more revenues. Close examination reveals considerable potential for flexibility in the agricultural part of the system. Agricultural tax revenues can be grouped into eight categories: export taxes, taxes on luxury foods and alcohol, taxes on cigarettes, import tariffs, lease fees on public lands, irrigation water charges, agricultural marketing taxes and the profits of parastatal food processing plants. About half of these revenues are generated by two sources-coffee export taxes, and profits and taxes from the Minoterie flour mill. 10.09 The final element of the fiscal system is what may be called "policy-induced rents," which accrue to both the Government and certain private sector interests as a result of public licensing or regulatory arrangements. The largest of these rents is the income earned from sub-leasing public lands leased from the Government. Because the Government lease fees are well below market value (para. 2.14), lessees normally sublease the land at higher rates. The second category of rent accrues to the use of irrigation water, which is priced well below the reasonable O&M costs of the systems. A third category is ad hoc exemptions from export taxes, and a fourth is mandated supernumerary employment by parastatal entities, e.g. the food processing plants. The mission estimates that this excess employment transfers annually US$1.5 to US$3.0 million from the Government to private hands. Finally, there is the failure to implement the August 1983 constitutional provision for taxes on large landholdings. This tax could generate additional revenues of at least US$5.0 million per year. All together, these policy-induced rents, which essentially are foregone revenues to the Government, amount to about 50% of budgetary revenues actually collected from the sector. Table 28 provides estimates of the value of all main components of the agricultural fiscal system. '10.10 There is considerable potential for expanding Government revenues through capturing the above policy-induced rents. Moreover, incorporation of these rents and the extra budgetary revenues into the regular budget would support pricing policy reforms in terms of improving production incentives and efficiency. First, the additional revenues would enable a reduction of export taxes which, as noted, distort relative producer prices. Second, higher lease fees for public lands and higher irrigation charges, for fee - 34 - increases up to the marginal value product of the resource, would have no direct effect on product prices. Similarly, the taxing of large landholdings would have no direct effect on product prices. And third, a reduction of supernumerary employment in the parastatals would enable a reduction in costs, translating into increased revenues to the Government. Thus, the proposed fiscal reforms should increase net revenues but have neutral or positive effects on prices. It should be pointed out that some of the existing pricing policies are self-defeating over the longer run. The coffee export tax has probably contributed to stagnating coffee production and declining exports, and hence to a decline of the revenue base for the tax. And the low producer prices of cotton, designed to favor the textile industry, are probably responsible for the declining cotton production. 10.11 The distributional effects of fiscal reforms, including the transfer to the Government budget of the policy-induced rents, should also be positive. The net effect would be an increase in economic welfare for the lorar-middle and middle income strata, a more equitable sharing of the tax burden by large landholders, an increase in Government revenues and price incentives towards increased investment and production of export (or import substitution) crops. Trade Related Policies 10.12 Apart from export taxes, the trade-related policies that have the greatest impact on prices concern restrictive import licensing, especially for rice, wheat flour and sugar. Agricultural experts agree that Haiti has considerable potential for raising rice yields. With improved technologies, the country should enjoy a significant comparative advantage in rice (see Chapter V). Accordingly, the existing producer price incentives for rice should be maintained, over the medium term, to help develop that potential. In the case of maize, the picture is less clear, although nutritionally it is an important crop. There appears to be no justification for departing from the present policy of importing maize for poultry and animal feed. A deceleration or reduction in wheat imports should increase demand for, and thus producer prices and production of maize, especially under improved technologies on better quality lands, leading to increased rural income, and improved nutrition. Imports of maize and rice by the private sector should be permitted, initially under licencing arrangements and with a protective tariff. The tariff need not be high, say 20%, in order to protect producer incomes and price incentives for these crops and generally to ensure market stability in the short- to medium-term. Greater imports under a tariff, morecver, would generate additional fiscal revenues. In the longer term, maize and rice prices should fall as production increases from the dissemination of improved varieties and technologies. Restrictions on imports of edible oils do not-appear justified economically. Their only apparent justification is fiscal: protecting the profits of the parastatal oil processing plant. - 35 - KI. SUMMARY OF RECOMMENDATIONS 11.01 Recommendations are listed under short- to medium-term, and longer-term recommendations. An attempt has also been made to list them in some sort of priority, although given their complementarity, prioritizing them may be academic. Several of the recommendations could be supported with external financial and/or technical assistance. Short- to Medium-term Recommendations 11.02 (a) Coffee Tax - The Bank should support the Government's agreement with USAID to decrease the export tax by a further 15%, culminating in a 25% reduction over 15 months. The Government and USAID should ensure that the effects of the tax decrease, particularly on farm prices in different localities, are closely monitored. (b) Fiscal Reform - To offset recommended reductions in export and excise taxes, and to otherwise increase fiscal revenues from the sector, the Government should: raise rents on public lands to market levels; implement the constitutional tax on large land holdings; and introduce full user charges for O&M costs of irrigation facilities. (c) Oil Seeds - A study should be commissioned by the Government to review options for making the State-owned soybean extraction and refining plant, SODEXOL, financially and economically viable. If its viability cannot be assured, it should be closed. (d) Centrifugal Sugar - The elimination of the excise tax should be passed to the farmers and consumers as increased cane prices and reduced retail prices, respectively. A system of payment to farmers for cane on the basis of its sucrose content should be introduced. A Government led Working Group should be established to review the status and future of the sugar industry, including the merits of divesting the State facilities to the private sector, diversifying sugar lands for production of other (possibly more economic) crops, and increasing taxation levels of the guildives. - 36 - (e) Wheat - The Government should adopt a clear policy aimed at decelerating the increase in imports and consumption of wheat. The Minoterie's plant should not be expanded. The efficiency of its operations should be streamlined-and include a major reduction in numbers of its staff. Otherwise it should be closed. (f) Irrigation - This subsector should be the lynch pin of the Government's plans for accelerating growth from agr:culture in the short.to medium term. Where possible, while plans for physical rehabilitation are implemented, full operational and "ordinary" maintenance charges for water delirery should be introduced. The Government should introduce measures that will help ensure -extraordinary" maintenance of irrigation systems, as required to remove siltation brought on by deluges from the watersheds. Water users' associations should be established to manage the systems. (g) Credit - The Government should review constraints on the availability and terms of investment and production credit, especially for the farming enterprises with greater short- to medium-term potential. The need for increased investment credit for the sector should be supported through external funding. Projects should include provision for tne employment by agricultural credit institutions (e.g., BNDAI) of technical experts in the field of agro-industrial development. Credit policy should be consistent with the requirements for investments in new technologies. (h) MARNDR - A planning and monitoring unit should be established within MARNDR. The unit would: plan for new and ongoing investments and establish priorities, consistent with available resources; monitor and evaluate progress of ongoing projects; and advise on policy options related to the Government's established priorities for the sector. (i) Cotton - Farmer prices for seed cotton should be adjusted,as necessary, to ensure the equivalent of import parity. - 37 - (j) Export Taxes - Notwithstanding the cautious approach recommended in para (a) for reducing coffee taxes, all export taxes on agricultural products should in principle be eliminated. Longer-term Recommendations 11.03 (a) Irrigation - Projects for rehabilitation of existing systems should be prepared and implemented. Measures to protect and rehabilitate the watersheds feeding such systems should be included in project investments. (b) Soil Conservation - The Government should continue to seek external support for substantial investments in soil conservation programs. (c) Forestry - Reforestation should proceed on two fronts: as commercial -crops" on selected lands under good management to help satisfy the demand for fuel (charcoal) and construction timber; and on the hillsides to help conserve (rehabilitate) the soils within appropriate farming systems. The Government should acti rely encourage financial and technical support from bilateral donors and NGO's for both these activities. (d) MARNDR - In addition to establishing a planning and monitoring unit, MARNDR's overall capability should be strengthened. A plan should be developed to reduce substantially the excessive numbers of staff and increase salaries. Priority should be given to strengthening the Ministry's applied research (e.g., of high lysine maize varieties), extension and training, and to supporting the Ministry's promotion of seed multiplication and distribution, soil conservation, reforestation and livestock development. (e) Land Reform - Land Reform. Studies should be initiated to determine the status of land tenure throughout the country. Based on these studes, a program of land tenure regularization and consolidation should be prepared and supported actively at the highest levels of the Government. - 38 - (f) Marketing - The Government should review constraints to expanding production of fruits and vegetables, livestock, and cereals (including maize) for local consumption because of inadequate marketing infrastructure and disemination of information (e.g., producer and wholesale prices). For export products, the Government should assist the private sector in the identification of markets and in ensuring access on favorable cerms. (g) Sugar - The Government should consider the merits of systematically diversifying the use of sugarcane lands for production of other, more economically viable crops (see comments on sugar under the short-term recommendations). (h) Information Base - The Government should: (i) conduct a nationwide survey on consumption, nutrition and rural households expenditures; (ii) conduct a new aerial photographic survey of agricultural areas (in support of the cadastre mentioned in sub. para. (d) above); and (iii) establish a system of regular collection and dissemination of farmgate and rural markets prices. - 39 - Table 1 HAITI AGRICULTURAL SECTOR STUDY Distribution of Agricultural Land, 1971 Farm Size No. of % of Cumula- Area in % of Cumula- (carreaux) Farms Farms tive % Farms Area tive % 0.01- 0.08 16,820 2.7 2.7 850 0.1 0.1 0.09- 0.16 36,050 5.9 8.6 4,495 0.7 0.8 0.17- 0.25 107,480 17.4 26.0 27,410 4.1 4.9 0.26- 0.38 28,485 4.6 30.6 10,220 1.5 6.4 0.39- 0.50 104,890 17.0 47.6 51,045 7.6 14.0 0.51- 0.78 68,260 11.1 58.7 49,270 7.4 21.4 0.79- 1.00 76,010 12.3 71.0 74,585 11.1 32.5 -1.01- 1.55 65,920 10.7 d1.7 89,710 13.4 45.9 1.56- 2.00 44,340 7.2 88.9 85,320 12.7 58.6 2.01- 2.33 9,260 1.5 90.4 21,160 3.2 61.8 2.34- 3.00 27,370 4.4 94.8 75,010 11.2 73.0 3.01- 3.87 8,440 1.4 96.2 30,070 4.5 77.5 3.88- 4.00 4,300 0.7 96.9 17,150 2.6 80.1 4.01- 5.00 7,810 1.3 98.2 37,200 5.6 85.7 5.01- 7.75 6,440 1.0 99.2 39,310 5.9 91.6 7.76-10.00 2,660 0.4 99.6 22,610 3.4 95.0 10.01-15.00 1,285 0.2 99.8 15,480 2.3 97.3 15.01-20.00 590 0.1 99.9 10,260 1.5 98.8 More than 20.00 300 0.1 100.0 8.240 1.2 100.0 Total 616,710 100.0 100.0 669,395 100.0 100.0 SOURCE: Haiti, IHS (1973:38-41); reported in Zuvekas 1978. Note: 1 carreau = 1.29 ha. HAITI AGRICULTIMAL SECTOR STuDOY ProducrIon, Areas. and Yields of Principal Crops (1978) TRANSVERSAL SQX Th wEST NCRTH COUNIRT CROPS AREA YIELD PROUION AREA YIELD PROUCTION AREA YIELD PRODUCTION AREA YIELD PROUCTION AREA PRODUICTIN AVERAGE YIELD I t/h t h /h t h t/h t h i/ha t h t Maize 74,456 0.62 61,059 69.953 0.66 45,212 SS,0ta 0,99 52,486 36,534 0.61 24,344 233,743 183.143 0.78 Sorghsu 66,687 0,84 56,011 38,051 0.62 23,524 41,902 0.96 40,226 10.035 0.53 3.516 156,195 123,065 0.79 Rice 29,640 4.00 Iia,7201/ 5,920 1.50 8,80 4.680 1.40 6,552 42.100 1.80 11,040 83,060 211,192 2.54 Beans 21,554 0.60 12,932 23,SS6 0,47 11,190 25,460 0.59 i6,11 16,128 0.72 11,612 89,678 $2.524 0.59 Pigeon Peas 24,629 0.40 9,932 16,561 0.12 5,6S1 17,744 0,36 6,384 7,240 0.48 3,475 68,380 23.446 0.31 Vigna Beans 14,029 0,55 4,910 6,420 0.35 2,243 9,839 0.29 2,853 8,666 0.45 4,000 39,174 14,006 0.36 Bananas 22,164 6.55 145,114 25,369 5.07 133,641 14.953 6.71 101,232 19,006 6,90 131,141 61,492 51t,186 6.21 Swat Potatoes 16,1.9 4,34 78,691 16,427 4.30 10,491 15,715 4.16 65,574 12,209 9.08 49,813 62,530 264,35 4.23 Casseva 19,474 3.90 75,948 15,845 3.93 62,351 12,1)2 4.00 50,928 14,909 4.50 64,109 62,960 253,336 *4.02 Yams 6,779 1.77 IS,448 11.909 3.69 43,928 6,118 3.44 21,252 6,771 2.56 1,349 33,643 97,977 2.91 Sugarcane 23,61 41.90 1,000,614 6,110 49.90 401.605 14,450 60.50 674,225 12,610 56.50 715,321 59.171 2,995,643 50.6 Coffee 18,196 0.25 4,549 45,697 0.25 11.414 40,041 0.25 10,012 33,619 0.25 8,420 151,619 34,455 0.25 Cocoa 178 0.25 45 3,105 0.30 932 18 0,25 47 632 0.25 Is8 4,103 1,182 0.29 Cotton - - - 2,819 0.31 1,031 4,419 0.36 1,571 13.4 0.36 463 7,251 3,099 0.43 Sisal 10,760 1,00 10,750 1,160 1,00 1,160 7,140 1.00 1,140 15,320 1.50 22,960 35.600 45.260 1.22 Vativer - - 5,180 2,00 to,560. f - 5,180 10,560 2.00 Peanuts 8,672 0.77 6,831 7,110 0.85 6,622 11,MO 0.70 12,292 12,660 0.65 6,102 47,062 33,654 0.72 Coco * 1,300 - - 49,645 - 10159 * - 1,336 * 62,440 Mangoes * - 136,151 - - 61,491 - - 85,129 - 5,156 - 338,327 Oranges - - 10,020 - - 13,010 - - 7,969 - - 29,351 - 61,150 Grapefruit - - 7.573 - - 23,999 - - 31,120 * - 20,212 - 85,504 j Paddl rice, bi Tons at vetiver roots. Sources HIPti, Ministry of Plan. OATPE, Schim d'Amenagement, Complexe PrImere, 19a4. 'a 5 5 -41 - Table 3 HAITI ARICULtL SECTOR SnIW Staffing of MAIOR By Directorates and Location (Fiscal Year 196485) Agrlcultu- Other Pars- AdIulnaistra- ralists Engineers Professioas Technicians tive Support Others Total 1' * F MD F HO F 11 F Mi F HO F Bureau of Minister and Secretary of State 4 1 1 - 7 - - - 44 - 2 - SB Directorate General 4 3 - - I - - - 7 - - - 12 3 Directorate of Agriculture 12 67 - - I - 5 21 17 - 1 - 36 288 Directorate of Natural Resources 24 - 5 4 4 7 4 166 35 - - - 72 177 Agricultural Districts (20) - 94 - 11 - 2 - 96 - 102 - 7 - 314 Direct..rate of'Programming 8 1 - - 2 - - - 13 - - - 25 1 Directorate of Rural Economy 4 - - 5 - 8 19 5 - - - 22 19 Directorals of Livestock / 15 1 - - 1 - 9 84 17 7 6 - 48 92 Directorate of Rural Engineering - - 31 - 3 - 5 81 16 3 - - 55 84 Directorate of Aministration 2 - - 16 - 33 - 10 - 8s - 245 - Directorate of Financial Affairs - - - 14 - 13 - 19 - - - 46 - Directorate of State Farm 2 4 - - - - - - 5 - - - 7 4 Directorate of Decentralized Units I - - - 4 - 69 - 12 - - - 86 - Directorate of Organization and Pronotlon of Rural Camunities 4 1 - - I - 21 120 26 - 3 - 55 121 Directorate of Research and Training (Faculty of Agronomy and Veterinary Madacine) 32 5 1 - 8 3 11 48 31 24 13 7 96 67 TUTAL 112 176 38 15 67 12 178 837 353 136 113 14 861 1,190 ai HO - Headquarters, F - Field. Source: Ministry of Finance and MAIR Payroll Records May, 194 HAITI AGRIicUURAL SEMIOR SlUDY Sectoral Allocation of Public Investment Expenditure by Years (1972-1982) (X of Total) Budget Actual Data Eatimte Sectors 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Agriculture 9.3 12.1 12.9 9.0 8.6 10.8 15.7 27.0 16.1 15.0 23.4 Mines and Qarrim? 0.8 - 0.6 0.2 0.7 0.8 1.1 1.5 1.1 0.9 1.4 Industry and crafts 5.7 1.5 2.7 3.5 2.3 1.1 2.0 7.9 6.7 7.0 6.7 Power 19.2 16.7 10.3 5.5 6.0 21.9 138 11.1 7.9 23.7 5.6 Drinking water 2.3 1.1 1.0 1.9 7.7 1.8 0.5 0.7 1.0 2.7 2.6 Tourism 0.7 0.9 0.7 0.6 0.2 0.1 0.3 0.4 0.5 0.3 0.2 4. Transport 15.7 8.0 24.2 47.6 46.6 36.7 38.5 25.2 26.7 18.1 20.9 Comunications 8.0 13.2 18.2 10.1 7.4 3.3 1.9 3.5 8.6 2.3 3.7 Urban developnent, housing - - - 0.7 0.2 0.1 0.1 0.4 1.0 3.0 6.0 Education 2.7 9.1 4.1 7.3 3.7 4.2 4.2 9.3 10.4 10.0 8.1 Health 15.3 17.1 7.5 5.8 3.1 5.7 6.3 6.4 9.7 8.3 7.9 Social affairs - - - - - - 0.1 0.1 0.4 0.1 0.2 Cmvuaity developnent 11.3 9.1 12.1 3.5 10.4 9.9 11.7 4.2 7.3 7.2 8.9 Admdnistratioa 9.0 1143 5.7 4.3 3.1 3.6 3.8 2.3 2.6 1.4 4.4 Total; 100.0 100.0 100.0 100.0 100.0 1000 100.0 100. 100.0 100.0 100.0 Realization (%) 80.6 69.1 87.7 101.3 84.2 79.3 80.3 72.7 57.8 51.9 - Source: IBRD, Gurrent Economic Position and Prospects of Haiti, Dec. 22, 1978. M Budget 1980 and information from Planning Ministry, Departnatt of Evaluation and Control. Mission estimates. -43- Table 5 H&TE RICUIRAI, SEC1R SITUDY Pblic Investnment in the Main Agrimiltumal Projects, 1982-1983 (G '000) Code Budglted Allocated Disbused % No. Title of Progran or Project local Foreign Total 1 2 2/1 01V05 Productimn of Ior Livestodc 800 0 800 914 138 15 01V16 Producim of Cattle 400 3,205 3,605 4 - 0 01V04 Erradication of Sine Fever and ivestodc Development 800 57,000 57,800 766 602 79 OIAD1 Support tu the Ministry of Agriculture 8,000 0 8,000 5,002 4,807 96 01A2 Development of AgrLc. Progmming 300 0 300 876 399 46 OlA04 Staff training 866 1,514 2,380 456 455 99 DIA5 Natioal Centers of Agric. Docmnta- tioand Infornatim .250 0 250 64 54 84 01V11 Itegrated egicoal Dev. at Asile 400 7,105 7,505 1,697 481 28 01V12 Agri. Dav. of RILviere Blanche 700 7,105 7,805 5,235 3,742 72 01V18 Itegrated Regional Dav. at Petit Goave and Petit Trou de Nppes 1,300. 0 1,300 2,519 1,256 59 01V32 Orgmizatio for the Day. of the Artibanite Valley (00VA) 2,000 7,563 9,563 2,183 1,281 59 01V33 Org. for the Dev. of the Ganaives Flaine 1,000 2,701 3,701 1,407 3,184 226 01V09 Org. for the Dev. of the North (011) 900 9,000 9,900 108 2,365 2,190 01V07 Watershed Develop. (SCMAR ) 1,700 935 2,635 2,587 1,172 45 01V02 Productim of Basic Food Crops 2,000 1,525 3,525 1,618 1,125 70 01V08 Agricultural Credit to BCA 5,000 5,000 10,000 4,150 4,150 100 01VO Coffee and Cocca Productioa 2,500 750 3,250 122 122 100 01V30 abailitation and Extension of Irrigation System 1,500 0 1,500 334 220 66 01POl Iventory of Water Resources and Mtereolog 400 1,100 1,500 516 211 41 01V03 AnInol Bealth 400 48 448 308 168 55 01V26 AgraIndustries Developrent 300 0 300 184 60 33 01V27 Iprovent of Marketing Structures 150 1,202 1,352 928 661 71 01V13 Integrated Agric. Dvelp. (PDAI) 1,500 15,350 16,850 432 206 48 01P05 iesearch Spport to Agric. Prod. (ADS II) 1,500 4,000 5,500 1,858 922 50 34,666 123,103 159,769 34,268 27,781 81 IB $ M1lion 6.9 24.6 31.5 6.8 5.6 SCUCE: Mission calculations fra MARlR, Qarterly Reports on the Progress of Agricultural Projects, October 1982-SepteDber 1983. HAITI AGRICULTURAL SECTOR STUDY Operating Budget of MARNDR (Current G '000,000) 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 Ministry of Agriculture 14.0 14.9 15.3 16.6 20.8 19.4 34.0 33.4 29.2 27.8 of which (%) Salaries 90.8 91.8 92.2 86.7 93.7 89.5 70.3 77.0 84.9 90.8 Operating Expenses 5.3 4.6 4.6 N.A. 5.5 4.4 21.5 15.2 10.6 7.9 Transfers and Subsidies 3.9 3.6 3.2 N.A. 0.8 6.1 8.2 7.9 4.5 1.3 (No. of employees) 3,204 3,275 3,300 .3,392 3,613 1,887 2,938 3,104 2,259 2,051 Other Ministries 133.0 155.4 172.9 196.2 251.5 326.7 528.6 557.6 513.5 Subtotal 147.0 170.3 188.2 212.8 272.3 346.1 562.0 586.8 541.3 Agriculture/All Government (%) 9.5 8.9 8.2 7.8 8.3 5.6 5.9 5.0 5.1 Extraordinary Allocations 3.0 29.4 72.5 20.6 1.9 3.5 N.A. N.A. N.A. n.a Grand Total 150.0 199.7 260.7 233.4 274.2 349.6 562.0 586.8 541.3 of which (%) Salaries 50.0 62.9 65.5 59.5 Operating Exp 41.2 25.6 21.1 24.4 Transfers 8.8 11.5 13.4 16.1 Sources: 1974-75, Plan Annuel FY 1978/80, Secretariat du Plan, Aug. 1980, p. 54 and Le Moniteur, Extraordinary Issue, Years XVII, XVIII, and XIX of MASI p. 25. 1976-1979, Plan Annuel, FY 1980/81, Secretariat du Plan, September 1980, pp 75-76. 1983, Le Moniteur, FY 1982/83. I 4 9 I - 45 - Table 7 HAITI AGRICULTURAL SECTOR STUDY Haiti's Agricultural Production Systems by Smallholders Types of field Vegetal products Animal products Fruits Rome orchard Bananas Creole pork Avocadoes Poultry Cafe Citrus Breadfruit Giromon Roots and Tubers Home orchard Alata yams a/ Creole pork Intensive garden Cayenneasis yams and corrals enclosed and Cassava for cattle fertilized Sweet potatoes Fresh vegetables Vetiver b/ Dry Vegetables Open fields Beans All animals: with fallow Vines - pork Peas - cattle Pigeon peas - goats Cereals Open fields Maize with fallow Sorghum Uncultivated land Goats ("raks", wooded areas, paths) a/ Cultivated both in home orchards and enclosed gardens. WI Cultivated both in enclosed gardens and open fields. - 46 - Table 8 HAITI AGRICULTURAL SECTOR STUDY Comparative Annual Yields by Crop, 1978 Country Rice Maize Beans Sugarcane Coffee Cuba 2.09 1.25 0.71 53.29 0.54 El Salvador 3.51 2.14 0.81 77.48 0.89 Guadalupe - 1.20 - 47.89 0.95 Haiti 2.54 0.78 0.59 50.63 0.25 Mexico 3.28 1.33 0.59 71.87 0.75 Nicaragua 2.92 0.92 0.77 60.79 0.66 Dominican Republic 2.67 2.10 0.82 62.35 0.31 Units: MT/Ha. Source: Schema d'amenagement du Territoire, Ministry of Plan, Haiti, and Table 5.1. - 47 - Table 9 HAITI AGRICULTURAL SECTOR STUDY Cost Estimates for Maize Production Improved Farming, Traditional Farming, North Monocrop Monoculturea/ Associations b/c/ All d/ Cul-de-Sac Cost/ton 205 162 173 146 Yield/ha 0.54 n.a. n.a. 4.06 Labor inputs: a) Total per ton 141 132 134 36 b) Per ha: total 79 52 59 146 harvest 14 12 13 25 other 65 40 46 121 Shares of costs (%): Labor 84 82 83 51 Land 13 14 14 11 Profit/ha: 1) at local output prices 6 22 17 167 2) at border prices e/ 6 25 19 300 Profit/man-day at border prices e/ .08 .48 .32 2.07 Cost/ton with labor at 80% of market wage 171 129 140 130 n.a. = not applicable. Units: Cost/ton and profit in $US. Yields in tons/ha. Labor inputs in man-days. a/ St. Raphael, Plaine du Nord, Dondon. In the crop associations, unallocated inputs and costs are assigned to maize in proportion to maize's share in the total revenue of the association. c/ St. Raphael, Plaine du Nord, Terrier Rouge, Dondon. The averages for traditional farming are calculated with weights of 75% for crop associations (which are predominant) and 25% for traditional farming. e/ At a border price of US$220/ton. Sources: Compiled from ODN and FAC (1983) and ONAPI (1982). - 48 - Table 10 HAITI AGRICULTURAL SECTOR STUDY Cost Estimates for Rice Production Traditional Farming, North 1983 Irrigated Cultivation Artibonite Swamp Rainfed North Valley Cultivation a/ Cultivation b/ 1983 c/ 1982 Cost/ton 754 794 473 263 Yield/ha 0.61 0.65 1.36 3.83 Labour inputs: a) Total per ton 277 380 196 49 b) Per ha: Total 169 247 266 186 Harvest 36 31 77 69 Other 133 216 189 117 Shares of Costs (M): Labor 66 65 57 55 Land 25 23 26 18 Profit/ha: 1) at local output prices 37 -47 354 452 2) at border prices d/ -110 -154 14 702 Profit/man-day at border prices d/ -0.49 -0.62 0.05 3.59 Cost/ton with labor at 80Z of market wage 654 691 419 234 Units: Costs and profit in US$. Yields in tons/ha. Labor input in man-days. a/ Plaine du Nord, Camp Louise, Dondon, Haut Maribaroux. i/ Camp Louise. c/ St. Raphael. T/ Using the 1973-82 average border price of US$486/ton. - 49 - Table 11 HAITI AGRICULTURAL SECTOR STUDY Cost Estimates for Coffee Production In Crop Associations Coffee a Coffee a Major crop Minor crop Monoculture Cost/ton a 364 851 430 Yields/ha / .16 (2.11) .03 (0.39) 0.14 (1.84) Labor inputs: c a) Total per ton 375 433 337 b) Per ha: Total 60 13 47.2 Harvest 44 7 25 Other 16 6 22.2 Shares of costs (%):d/ Labor 51 61 60 Land 49 39 40 Profit/ha: a) at local output prices 37 6 163 b) at border prices e/ 46 9 - 105 Profit/man-day at border prices e/ 0.77 0.69 2.22 Cost/ton with labor at 80% of market wage 327 747 378 Units: Cost/ton and labor rent/ha in US$. Yields in tons/ha. Labor inputs in man-days. a/ Including the annualized cost of planting. 9/ Annualized yields (over 13 years) are given first, and then total yields over the plant's life are given in parentheses. c/ Annual, including annualized planting labor. / Shares of annualized costs. e/ At a "border price" (for producers) of $1,175/ton. - 50 - Table 12 HAITI AGRICULTURAL SECTOR STUDY Cost Estimates for Sugarcane Production Quartier Morin Flaine du Nord Les Cayes (North) a/ (North) b/ (South) b/ Traditional Semi-Improved Improved Cost/ton 8 8 10 Yield/ha 42 46 65 Labor inputs: a) Total per ton 2.7 3.7 1.9 b) Per ha: Total 113 169 124 Harvest 54 60 85 Other 59 109 39 Shares of Costs (%): Labor 52 56 20 Land 14 10 27 Profit/ha: a) at local output prices 210 232 186 b) at border prices ct 312 335 314 Profit/man-day at border prices c/ 2.76 1.92 2.53 Units: Cost and profit in US$. Yields in tons/ha. Labor input inputs in man-days. a/ From ODN and FAC (1983); costs are based on monoculture. b/ From ONAPI (1982); costs are based on monoculture. E/ Evaluated at a "border price" of $15.40 per ton of cane. This corresponds to an f.o.b. price of sugar of 14c/lb. (15c world price), a 12:1 cane-to- sugar conversion ratio, and the assumption that under normal conditions cane growers would receive 60% of the value of the sugar contained in the cane. Note: Annex A, Table 3 reports some other cost calculations based on monoculture cane; they range from $6 to $7 per ton. - 51 - Table 13 HAITI AGRICULTURAL SECTOR STUDY Field Costs for Raw Sugar Production (USS/mt) Malawi US$114 St. Kitts 120 Kenya 129 South Africa 139 Mauritius 150 Fiji 153 Brazil (center-south) 155 Australia 158 Source: W. McNally, W. David, and D. Flood, Sugar Study, draft, World Bank, July 1984. - 52 - Table 14 HAITI AGRICULTURAL SECTOR STUDY Cost Estimates for Banana Production Improved Cultivation, Traditional Cultivation, North Plaine de Monoculture a/ Associations b/ l'Arcahaie C/ Cost/ton (US$) 96.9 59.1 84.6 Yield/ha (tons) 4.06 1.85 15.4 Labor inputs (US$): a) Total per ton 37 28 n.a. b) Per ha: total 93 32 n.a. harvest 26 8 n.a. other 67 24 n.a. Shares of Costs (%): labor IZ 42% 32% land 31% 56% - 14% Profit/ha: a) at local output prices 330 148 1,750 b) at border prices d/ 384 170 1,811 Profit/man-day at border prices 4.13 5.31 n.a. Cost/ton with labor at 80% of market wage 85.1 54.1 79.2 af Bord de Mer/Limonade, Quartier Morin, Plaine du Nord. Source: ODN and FAC, 1982. b/ Dondon, Grande Riviere/Bahon, Grison Garde, Grande Bassin. Source: ODN and FAC, 1982. c/ Source: ONAPI, 1982. / Since bananas are potentially an export crop, the relevant border price is the f.o.b. price reduced by a marketing margin. In this case, the f.o.b. export price has been taken to be 12.5c/kg ($2.07/bunch) on the basis of information from the Dominican Republic. The marketing margin is estimated at 25% of the export price. That leaves a producer-equivalent border price of 9.4c per kg. HAITI AGRI(CJUIURAL SECIOR STUDY Comparative Advantage Indicators Maize Rice Bananas Coffee Sugarcane Irrigated, Traditional, In Quartier lea Traditional rmproved &mw Artibonite Mmnoculture Improved Association Mbnoculture Mbrin Cayes Profit/ha 19 300 -110 702 384 1,811 46 105 332 374 Profit/man-day 0.32 2.07 -0.60 3.59 4.13 n.a. 0.77 2.22 2.94 3.01 DRC 0.88 0.57 1.57 0.47 0.51 0.29 0.56 0.36 0.57 0.64 1 NPC 1.25 1.25 1.20 1.20 n.a. n.a. 0.5 2.0 0.84 0.84 Source: Tables 9, 10, 11, 12 and 14. Note: Valuations are at border prices. -l Ln - 54 - Table 16 HAITI AGRICULTURAL SECTOR STURY Cost Effectiveness of Different'Foods in Providing Calories and Protein a/ Calories per Grams of Protein 0.05 Gds. of per 0.05 Gds. of Consumer Consumer Food Expenditure Food Expenditure Maize (dry grain) 201 Maize (dry grain) 5.2 Maize (moulu) 130 Beans 4.2 Sorghum 107 AK-1000b/ 3.2 AK-1000 b/ 86 Maize (Goulu) 2.8 Wheat flour 76 Sorghum 2.8 Brown sugar 74 Wheat flour 2.2 .White sugar 74 White bread 1.9 Vegetable oil 70 Kid 1.8 Rice 69 Whole milk 1.8 Beans 65 Beef 1.7 Sweet potatoes 64 Rice 1.4 White bread 61 Yams 1.1 Yams 45 Pork 1.0 Avocadoes 43 Sweet potatoes 0.7 Bananas (plantain) 41 Eggs 0.7 Whole milk 31 Evaporated milk 0.6 Bananas 30 Potatoes 0.6 Mangoes 27 Avocadoes 0.5 Potatoes 25 Bananas (plantain) 0.3 Beef 23 Bananas 0.3 Pork 21 Mangoes 0.2 Kid 16 Brown sugar 0.1 Evaporated milk 13 Vegetable oils - Eggs 9 White sugar a/ At Haitian prices of 1978. b/ AK-1000 is a gel of maize and beans. SOURCE: Ministry of Plan, UPAN, Diagnostic de la Situation Alimentaire et Nutritionelle de la Population Haitienne, 1980, 1982. - 55 - Table 17 HAITI AGRICULTURAL SECTOR STUDY Indices of Consumer Prices of Basic Foods, Port-au-Prince Consumer Ground Wheat Price Maize Sorghum Rice Plaintain Beans Flour Index a/ 1970 100 100 100 100 100 100 100 1971 140 186 104 110 109 100 110 1972 145 107 112 86 136 100 113 1973 290 175 122 109 172 100 - 139 1974 270 182 119 100 215 130 160 1975 410 282 222 253 221 150 186 1976 315 246 220 390 224 150 199 1977 460 293 218 400 246 150 214 1978 335 232 203 216 234 150 208 1979 430 339 257 265 299 150 228 1980 581 381 294 n.a. n.a. 150 269 1981 650 421 359 355 313 181 312 1982 181 337 a/ Weights: food, 68.5%; clothing, 19.5%; housing, 11.9%. Source: Haitian.Institute of Statistics. - 56 - Table 18 HAITI AGRICULTURAL SECTOR STUDY Minoterie: Structure and Evolution of the Production Costs Cost Price per Sack (100 lbs) in US$ . (Flour and Semolina) 1978/79 1979/80 1980/81 1981/82 1982/83 Wheat (less sales of wheat bran) 11.83 13.49 14.31 12.59 10.79 Sacks and Additives 0.54 1.01 0.87 0.97 1.05 Other Variable Costs (electrical & salaries) 0.76 1.00 1.11 1.48 1.47 Fixed Costs of Operation 1.00 0.96 1.11 1.33 1.27 Administration Costs 0.40 0.35 0.30 0.51 0.52 Financial Costs (0.16) a/ (0.14) a/ (0.06) a/ 0.20 C.05 Total Costs 14.37 16.67 17.64 17.08 15.15 Other Costs Provision or revenues (0.15) - 1.58 (0.08) 1.99 TOTAL 14.22 16.67 19.23 17.00 17.14 a/ Exchange bonus. Source: Minoterie d'Haiti (Profit and Loss Accounts). -57- Table 19 BA3II AGRC011ALSELER STUK tinotede: Sales Price Structure and Evolutia - "Sperior Flour- (1969-1984) (US$ per 100 lb) 1969-1972 1973 1974 1975-79 1980 1981 i982 1983 1984 (avg.) (avg.) (avg.) (ag.) (avg.) (avg.) (avg.) Sale price 13.255 13.255 !5.75 i9.90 20.48 24.0G 24.64 24.64 25.90 Minoterie 7.5 8.554 13.42 15.38 16.53 20.54 21.38 21.45 22.66 Z Mioterie 56% 64.5% 80% 77% 80.7% 85.5 86.7% 87% 87.5% Fort Administration 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 Special Account - - - 1.14 1.02 0.93 0.93 0.93 0.93 Excise Tax a/ 3.38 2.326 1.47 1 1 1 - - - General Administration of Taxes or -Pegle des Tabacs" a/ 2.225 2.225 2.23 2.23 1.77 1.44 2.38 2.22 2.26 Total Taxes 5.605 4.55 3.70 4.37 3.79 3.37 3.31 3.15 3.19 Percentage of Taxs 42.0% 34.0% 20.0% 22.0& 18.5% 14.0% 13.4% 12.8% 12.3% Freight b/ 0.10 0.10 0.1C 0.10 0.10 0.10 - - - a/ Excise Tax and "Admnistration Generate des Contribations' or "Regie des Tabacs" are taxes. From 1982, these taxes (mainly value added tax of 7% of sales) were luoped tngether and collected through "TegLe des Tabacs. The Regie sas abolisbed in early 1985. b/ Freight: 10 ets used to be paid back to the purchaser for the transportation of the flour from the miU. Source: Data fran Minoterie d'Haiti. - 58 - Table 20 HAITI AGRICULTURAL SECTOR STUDY Minoterie: Flour Sales, Costs and Revenues (in US$'000) Iscal Years 1978-79 1979-80 1980-81 1981-82 1982-83 Sales a/ b/ 33,902 46,407 56,727 49,987 63,572 Taxes a! 5,424 6,543 6,126 4,848 5,785 % Taxes 16.0 14.1 10.8 9.7 9.1 Special Account a/ 1,932 2,413 2,382 1,914 2,415 (in percentages) 5.7 5.2 4.2 3.8 3.8 Port - Freight a/ 255 345 372 142 130 Revenue Minoterie 26,105 36,987 47,821 43,139 55,244 % Revenue Minoterie 77.0 79.7 84.3 86.3 86.9 Production Cost 24,420 38,401 43,785 34,645 39,332 Other Costs or (Revenues)c/ (248) (1) 3,926 (174) 5,159 Profit 1,933 (1,413) 109 8,668 10,752 % Profit on Sales 5.7 (3) 0 17.3 16.9 a/ All those figures are estimated and calculations are based on Minoterie's revenues, applying the percentages of distribution of the sale price indicated in Table 19. b/ In all calculations sales of wheat bran have been deducted from charges. For 1982/83, taxes on sales of wheat bran allocated to the Department of Agriculture should reach about US$300,000 (US$6 for a short ton). c/ Other costs or revenues: this heading groups financial revenues and costs outside the processing of flour. For fiscal year 1980/81: US$3,926,000 represent a US$365,000 loss on the sales of wheat bran, US$181,000 financial expenses, and US$3,742,000 of non-identified contingencies. For fiscal year 1982/83: US$5,159,000 represent US$291,000 financial expenses, US$2.5 million provision for investments, and US$2.95 million provision for various debtors, corresponding to a debt of the State to the Minoterie which the latter is recuperating by deductions from profits. Source: Balance Sheets, Minoterie d'Haiti. - 59 - Table 21 HAITI AGRICULTURAL SECTOR STUDY Flour: Per Capita Consumption and Real Prices 1, Flour Sales Population Per Capita Year- (Million lb) (Million) Sales (lb) Flour Prices 1973 152.5 4.43 34.4 13.3 1974 129.9 4.51 28.8 14.8 1975 153.5 4.55 33.8 14.9 1976 - 150.5 4.58 33.5 14.0 L977 191.9 4.75 40.4 13.0 1978 146.7 4.83 30.4 14.0 1979 185.3 4.92 37.7 12.1 1980 249.3 5.01 49.8 9.9 1981 229.7 5.10 45.0 10.7 1982 205.3 5.20 39.5 10.4 1983 273.0 5.29 51.6 9.7 1/ Real prices in 1973 US$ per 100 lbs (high quality flour). Prices taken from Annex B, Table 12 and converted with Consumer Food Price Index from Table 9.1 of Statistical Appendix to Haiti: Economic Memorandum, IBRD, 1985. Flour sales also taken from Annex B, Table 12. - 60 - Table 22 HAITI AGRICULTURAL SECTOR STUDY Contributions to GDP and Exports by Sector GDP (G million, 1976 prices) 1975-77 1981-83 Agriculture 1.636 40% 1,646 34% Minerals 75 2% 44 1% Industry 874 21% 1,134 23% Services 1,541 37% 2,027 42% Total 4,126 100% 4,851 100% Exports (current US$ million) Agriculture 67.6 62% 77.3 40% Minerals 15.3 14% 12.6 6% Industry 26.9 24% 104.6 54% Total 109.8 100% 194.5 100% Source: IMF; Haiti - Recent Economic Developments, December 1984. - 61 - Table 23 HAITI AGRICULTURAL SECTOR STUDY Coffee Exports and Total Exports (US$ '000,000) Total Coffee Coffee Exp. in Year - Export Export % of Total Export 1950 38.5 20.5 53 1951 50.4 26.0 52 1952 53.2 32.7 61 1953 38.2 25.1 66. 1954 56.7 43.6 77 1955 34.9 23.0 58 1956 46.5 33.4 72 1957 32.9 20.2 61 1958 42.1 31.4 75 1959 25.9 13.0 50 1960 38.1 20.2 53 1961 30.3 12.1 40 1962 40.8 20.7 51 1963 43.2 16.8 39 1964 36.0 17.6 49 1965 37.8 19.4 51 1966 37.7 20.7 55 1967 32.0 13.7 43 1968 36.2 14.6 40 1969 36.7 13.7 37 1970 47.3 15.2 32 1971 55.5 19.0 34 1972 59.5 15.7 26 1973 81.7 20.6 25 1974 110.9 24.0 22 1975 131.5 18.5 14 1976 111.9 44.0 39 1977 137.6 63.6 46 1978 154.6 62.3 40 1979 138.6 39.3 28 1980 212.3 90.9 43 1981 153.7 33.1 22 1982 150.6 30.8 20 Source: Various reports of World Bank on Haiti except for 1982: IMF-Haiti-Request for Stand- y Arrangement EBS-82-120, July, 1982, Table 18. - 62 - Table 24 HAM AMICOGIIRAL SEC1R S1M Coffee Supply and ILstritim Crop Adjusted Seasm Begimiug Total Domesic (July-June) Stocks Production Consmptia Exort Stocks '000 ait 1949/50 8.4 26.2 50/51 8.6 25.4 51/52 8.8 31.3 52/53 9.0 23.1 53/54 9.2 31.8 54/55 9.4 19.6 55/56 9.6 31.1 56/57 9.8 17.5 57/58 10.0 34.6 58/59 10.3 16.7 59/60 10.5 28.2 2.5 60/61 2.5 25.9 28.4 10.7 16.7 1.0 61/62 1.0 45.0 46.0 10.9 32.6 2.5 62/63 2.5 36.2 38.7 11.1 26.4 1.2 63/64 1.2 34.6 35.8 11.3 22.5 2.0 64/65 2.0 33.3 35.3 11.5 22.6 3.2 65/66 3.2 36.8 40.0 11.7 24.4 3.9 66/67 3.9 26.7 30.6 11.9 16.9 1.8 67/68 1.8 32.0 33.8 12.1 19.5 2.2 68/69 2.2 33.9 36.1 12.3 18.6 5.2 69/70 5.2 27.0 32.2 12.5 16.1 3.6 70/71 3.6 33.7 37.3 12.7 21.5 3.1 71/72 3.1 36.9 40.0 12.9 23.8 3.3 72/73 3.3 32.9 36.2 13.1 19.4 3.7 73/74 3.7 32.7 36.4 13.3 18.7 4.4 74/75 4.4 36.3 40.7 13.5 17.8 9.4 75/76 9.4 34.7 44.1 13.7 26.8 3.6 76/77 3.6 28.2 31.8 13.9 15.6 2.3 77/78 2.3 32.6 34.9 14.1 19.1 1.7 78/79 1.7 28.1 29.8 14.3 14.2 1.3 79/80 1.3 40.5 41.8 14.5 24.9 2.4 80/81 2.4 29.1 31.5 14.7 14.7 2.1 81/82 2.1 29.2 31.3 14.9 15.6 0.8 82/83 0.8 44.0 44.8 15.1 28.1 1.6 83/84 1.6 34.2 35.8 15.3 19.5(Est) 1.0(Est) Sources: USD& (1984); Iaterinual Coffee Organization (1981, 1982, 1983); and USAID (1983). - 63 - Table 25 HAITI AGRICuLTaRAL SEC1MR STUDY Aumal Torld Market Prices and Farner's Prices for Coffee World Market Farmers 1t Price Coffee Price Pevenue Distribution IS/kg Ratio Crop (FCB Haiti) Coffee Marketing Export local Export Cffee/ Year JS/kg Tax Costs FarnErs Coffee Coffee Local Coffee 49/50 .78 16 12 72 50/51 1.02 16 11 73 51/52 1.04 17 15 68 .71 .74 .96 52/53 1.08 17 15 68 .73 .86 .85 53/54 1.37 19 24 57 .78 1.01 .77 54/55 1.17 27 14 59 .69 .76 .91 55/56 1.07 27 17 56 .60 .71 .85 56/57 1.15 27 13 60 .69 .63 1.10 57/58 .90 24 19 57 .51 .56 .91 58/59 .78 28 19 53 .41 .45 .91 59/60 .72 39 26 35 .25 .38 .67 60/61 .72 N.A. N.A. N.A. N.A. N.A. N.A. 61/62 .63 43 20 37 .23 .33 .71 62/63 .64 40 20 40 .26 .34 .76 63/64 .78 32 18 50 .39 .42 .93 64/65 .86 32 28 40 .34 .26 1.33 65/66 .85 32 27 41 .34 .29 1.18 66/67 .81 34 25 41 .33 .28 1.20 67/68 .75 36 22 42 .32 .30 1.05 68/69 .74 37 24 39 .29 .42 .69 69/70 .94 29 22 49 .46 .36 1.29 70/71 .88 32 31 37 .33 .40 .82 71/72 .84 32 25 43 .36 .33 1.09 72/73 1.06 26 23 51 .54 1.08 .50 73/74 1.28 24 25 51 .65 .59 1.10 74/75 1.04 26 34 40 .42 .68 .61 75/76 1.64 21 17 62 1.02 1.78 .57 76/77 4.05 24 22 54 2.19 2.67 .82 77/78 3.25 26 26 48 1.56 2.14 .73 78/79 2.90 24 25 51 1.48 2.21 .67 79/80 3.63 26 24 50 1.82 1.89 .96 80/81 2.42 26 27 47 1.14 1.50 .76 81/82 2.33 26 22 52 1.21 Source: USAID (1983), Table 1.2, 1.5, and 1.6. S64 Table 26 HAITI AGRICULTURAL SECTOR STUDY Domestic and Border Prices for Selected Agricultural Products (Gourdes/MT, 1982) Domestic Domestic Price Product Border Prices Prices Definition Coffee - 2,340 1,732 Intermediary Cacao 9,000 6,372 Exporter Cotton Fibre 7,574a/ 4,950b/ Producer Maize c/ 1,100 1,380 Producere/ Rice 2,101 2,524 Producere/ Sorghum (1981) 1,155 1,558 Producere/ Flour 2,107 2,638 Ex-factory Sugar (raw) 1,650d/ 3,960 Wholesalef/ / Average of U.S. and Mexican prices. / Fibre equivalent price. c/ In sacks. At $0.15/lb. f These producer prices were derived by taking 60% of consumer prices, to allow for marketing margins; see Roe (1978). For rice, a further deduction was made for processing. f/ Ex-factory price plus taxes. - 65 - Table 27 HAITI AGRICULTURAL SECTOR STUDY Implicit Taxes (-) and Subsidies (+) in Agricultural Pricing Policy (Million Gourdes, 1982) Producers Consumers Coffee -92.5 n.a. * Cotton Fibre -7.1 n.a. Maize 0 0 Rice +37.5 -37.5 Sorghum n.a. n.a. Flour n.a. -22.9 Sugar -7.2 -142.5 Total -69.3 -202.9 n.a. not applicable. - 66 - Table 28 HAITI AGRICULTURAL SECTOR STUDY The Agricultural Fiscal System Value in 1982 (USS million) 1. Instruments of Budgetary Taxation 1.1 Coffee export tax...............................9.0 1.2 Flour tax (V.A.T.).......................... 3.5 1.3 Flour tax (other).......................... 1.1 1.4 Sugar tax.... ........................... 5.2a/ 1.5 Vegetable oil tax...........................0.9 1.6 Taxes on luxury foods and alcohol...............2.1 1.7 Cigarette tax.............................. 8.4 1.8 Profit from flour milling (determined by administered sales price).....................13.0b/ 1.9 . Government profit from sugar mills (determined by administered prices of cane and sugar).... (negative) 1.10 Export tax: cacao............................. 0.2 1.11 Export tax: sisal............................. 0.005 1.12 Export tax: vetiver, lime, amyris.............. 1.13 Export tax: meat -............................ 0.016 1.14 Other export taxeso...........o.................negligible 1.15 Tariffs on agricultural inputs... 1.16 Lease fees on public landso..............approx. 0.04 1.17 Irrigation water charges ......... o............0.2 1.18 Agricultural marketing taxes... ................ 43.96 2. Extrabudge2ary Revenue Sources c/ 2.1 Special account tax on flour...............a......1.9 2.2 Special account tax on sugar ....................2.6 2.3 Profit on sugar re-export ......... o...............6.0 10.5 3. Policy-Induced Rents (to private sector) 3.1 Rents on public lands ........... o.......o.........8.0 3.2 Rents from irrigation.....o.o.....o...............6.9 3. Exemptions from e.?ort taxes ...... .............1.0- 5.0 3.4 Supernumerary employment at parastatals in food processing............................ 1.5- 3.0 3.5 Failure to implement constitutional tax on large land holdings..... ....... ..... o. .05.0 3.6 Profit on coffee re-export... ............... .2 22.4-27.9 a! USM8. million in 1983. bIncludes advance of US$2.9 million to the Government but.does not include capital reserve fund of US$2.6 million. c/ Extrabudgetary taxes were eliminated in early 1985, the revenues therefrom being included in the Government's regular budget. Source: ission estimates. - 67 - Table 29 HAITI AGRICULTURAL SECTOR STUDY Consumer Price Indices in Haiti and the United States, 1953-83 Haiti United 1 2 3 States 1953 - 75.4 - 70.4 1960 76.0 76.5 - 77.6 1961 78.9 79.3 - 78.8 1962 78.4 78.9 - 79.3 1963 81.8 82.8 - 80.4 1964 89.4 89.9 - 81.7 1965 91.4 91.9 - 82.6 1966 98.9 99.4 - 84.2 1967 96.1 96.6 - 87.0 1968 97.3 97.8 - 90.0 1969 98.7 99.2 - 94.2 1970 100.0 100.0 - 100.0 1971 109.5 110.0 - 105.2 1972 113.1 113.7 - 108.7 1973 138.8 139.6 - 112.7 1974 159.5 161.1 - 123.3 1975 186.3 188.1 - 137.8 1976 199.4 199.2 199.3 147.1 1977 214.2 213.9 214.0 154.7 1978 208.0 208.0 207.9 165.2 1979 228.1 235.0 228.0 180.7 1980 269.2 276.9 269.1 205.8 1981 312.3 307.2 291.2 229.9 1982 337.2 329.5 315.1 249.3 1983 est. 335.6 258.7 Growth rates: 1953-82 5.3%a/ 5.2% 5.1%a/ 4.5% 1960-82 7.0% 6.9% 6.6%a/ 5.4% 1965-82 8.0% 7.8% 7.5%a/ 6.7% 1970-82 10.7% 10.4% 10. 1%a/ 7.9% 1975-82 9.2% 8.7% 7.9% 9.2% 1976-83 7.7% 8.4% Notes and Sources: The Haitian indices all are estimates of the CPI for Port-au-Prince. 1. Series 1 for Haiti is from the Ministry of Plan and Zuvekas; its base year is 1970. 2. Series 2 for Haiti is from the IRS. Until 1980, its base was 1948; from 1981 to the present its base has been 1980. The IHS does not consider it advisable to link the 1948-based and the 1980-based series, because of their wide differences in coverage and data collection methodologies. 3. Series 3 is also from the IHS, with a 1976 base, and with IMF staff estimates. 4. The U.S. index is the all-urban CPI from the U.S. Bureau of Labor Statistics (1967=100). a/ Using series 2 as the starting point. - 68 - HAITI Figure 1 AGRICULTURAL SECTOR STUDY The Coffee Marketing System Port-au-Prince EXPORTER PORT-AU-PRINCE BUYER Provincial Coastal towns Provincial Branch Exporter Wholesaler Bagger Broker Market towns Receiving Agent Exporter Agent Rural areas "Submarine" Underground Dealer (Illegal System) * PRODUCER Movement of Coffee Movement of Credit Advances without credit Usury Credit Wholesaler Principal agents in marketing system Source: Girault 1980 - 69 - HAITI Figure 2 AGRICULTURAL SECTOR STUDY Distribution System for Export of the Francis Mango EXPORTERS (1) EXPORT AGENTS (2) MIDDLEMEN/ DEALERS (3) LOCAL MIDDLEMEN (4) PRODUCERS (5) Source: AGRICORP 1984 ．卜’户、 二