Bolivia - Agricultural sector review

Report No. 9882-B0 Bolivia Agricultural Sector Review April 6, 1992 Country Department Ill Latin America and the Caribbean Regional Office MICROFICHE COPY Report No. 9882-BO Type: (SEC) FOR OFFICIAL USE ONLY PANZER, J./ X39363 / I5059/ LA3AG scmuwAtitof tbeWM Bdank~ This documnent'has a restricted distribution and mnay be used by, recipients o4y in the performance of their official duties. Its contents may not otherwise be disclosed withou World Bank authorization.  FISCAL YEAR January 1 - December 30 CURRENCY AND EOUIVALENCY UNITS Currency Unit - Boliviano (Be) Official Exchange Rate Effective April 31, 1991 US$1.00 - Bs 3.54 US$0.28 - Bs 1.00 WEIGHTS AND MEASURES Metric System GLOSSARY OF ABBREVIATIONS ADP - Alternative Development Program BAB - Bol'vian Agricultural Bank BCB - Bolivian Central Bank CDF Centro de Desarrollo Forestal CIAT - Centro de Investigaci6n de Agricultura Tropical CIFP - Centro de Investigaci6n Fitogenetica Pairumani CNIEA - Consejo Nacional de Investigaciones y Extension Agropecuaria CNRA - Consejo Nacional de Reforma Agraria CNS - National Seed Council CORDECRUZ - Santa Cruz Regional Development Corporation CRA - Certificado Reintegracion Arancelaria FAO - Food and Agricultural Organization of the United Nations FDC - Peasant Development Fund FRFM - Formal Rural Financial Markets GDP - Gross Domestic Product IBTA - Instituto Boliviano de Tecnologia Agropecuaria IBTEN - Instituto Boliviano de Tecnologia Nuclear INC - National Colonization Institute INE - National Institute of Statistics MACA - Ministry of Agriculture and Peasant Affairs MINPLAN - Ministry of Planning and Coordination NEP - New Economic Policy NGO - Non-Governmental Organization NLP - New Lands Policies PSIP - Public Sector Investment Program RDC - Regional Development Corporation UDAPE - Unit for Political and Economic Analysis USAID - United States Agency for International Development  FOR OFFICIAL USE ONLY BOLIVIA AGRICULTURAL SECTOR REVIEW Table of Contents Paxe No. COUNTRY DATA EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . I. OVERVIEW OF SECTORAL PERFORMANCE: 1980-90 . . . . . . . . . 1 A. Output Structure and Trends .I.. . . . . . . . . . . . . . Structure of Production . . ......... . 1 International Trade 99.9. .9.9. 999.9. 3 B. The Impact of the 1985 Economic Reforms on the Agricultural Sector . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Period 1952-85.. ... . . . 3 The 1985 New Economic Policy (NEP) . . . . . . . . . . . . 4 Agriculture in the Aftermath of the NEP . . . . . . . . . 5 Relative Prices ... . 6 C. Growth and Sources of Growth . . . . . . . . . . . 7 D. Conclusions . . . . . . . . . . . . . . . . . . . 9 II. LEGAL TRADITIONAL AGRICULTURE IN THE HIGHLANDS AND VALLEYS . 10 A. Background . . . . . .... .... . . . ..10 HIistory ........ .... .. .. .. ... 10 The Politicai Economy of Government Interventions . . . . 10 B. Agricultural Production and Productivity . . . . . . . . . . 11 The Geography and Structure of Production in the Highlands 11 The Geography and Structure of Production in the Valleys . 11 The Current State of Agricultural Technology and Productivity . . * . .* . . . . . .. . .. . . 13 Agricultural Export Potential . . . . . . . . . . . . . . 14 C. Underlying Factors of the Current Agricultural Productivity 15 Technology Generation . . . . . . . . . . 15 Technology Transfer 99999.9.......... . 16 Land Tenure ...... ........... . 16 Supply and Distribution of Inputs . . . . . . .18 This report is based on the work of a World Bank mission which visited Bolivia in April 1991. The mission comprised Mr. John Panzer, Chief of mission, Mr. Hugo Diaz (Senior Economist), Mr. Robert Schneider (Principal Economist) Mr. Marcelo Mendez (Economist, FAO/CP), Mr. Dale Adams (Economist, Consultant), Mr. Doug Masterton (Agriculture Consultant), and Mr. Gaston Labadie (Sociologist, Consultant). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - lii - Table of Content. D. Proposod Strategy to Increase Agricultural Production nd Productivity . . . . . . . . .. . . . . .. . . . l9 3. The Role and Potential of Irrigation in the Highlands and Background . . . . . . . . . . . . . . . . . . . . . . . . 20 Water Resources . & . . . . . . . . . . . . * . . * . . . 21 Current Status and Performance of Irrigation . . . . . . . 21 Public Irrigation Districts . ... .. .. . . . ... 21 Mixed Private/Public Systems .. t *. .. 22 Private Systems P . m . . . . . . . . . . . . . . . . . . 23 Current Institutional and Policy Pramevork . . . . . . . . 23 P. The Potential for Irrigation Development . . . . . . . . . . 23 G. Proposed Strategy for Irrigation . . . . . . . . . . . . . . 24 H. The Rural Population's Income and Migration Patterns . . . . 25 I Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . 27 III. RURAL FINANCIAL MARRETS AND THE DEVELOPMENT OF SMALLHOLDER AGRICULTURE . . . . . . s . . o - * . - . . . . . . 27 A. The Structure of the Formal Rural Financial Market (PRFM) 27 Institutional Makeup of the FRM. ............ 27 The Volume and Distribution of Formal Rural Loans . . . . 29 Smallholder Access to Deposit Facilities . . . . . . . . . 30 B. The Performance of Rural Financial Markets . . . . . . . . . 30 Absence of Deposit Mobilization ... . . . . . . . . . . 31 Loan Recovery Problems .................. 31 Lending Costs . . . ... . . . . . . . . . . . . . . . . . 32 Informal Financial Market ................ 32 C. Recent Financial Sector Reforms und Future Policy Options . 33 Policy Actions . . . . . . . . . . . . . . . . . . . . 34 D* Conclusions . . . . . . . . . . . . . . . . . . . . . . . 35 IV. THE COCA SUBSECTOR . . . . . . . . . . . . . . . . . . . . . 36 A. The Characteristics of Coca Production . . . . . . . . . . . 36 B. The Size and Importance of the Coca-Cocaine Industry . . . . 37 The Impact of the Coca-Cocaine Industry on the Exchange Rate . . . a . . . . . . . . . a . . . . . . . . . . . 37 C. Government Policies and Programs to Curtail Coca Production 38 The Voluntary Eradication Program . . . . . . . . . . . . 39 The Alternative Development Program (ADP) . . . . . . . . 39 Assasing the Impact of ADP . . . . . . . . . . . . . . . 40 Do Conclusions . . . . . . . . . . . . . . . . . . . . . . . 42 V. AGRICULTURE IN TTLOWLANDS . . . . ... ................ 42 A. The Structure of Agricultural Production . . . . . . . . . . 43 Crop Production Technology and Yields . . . . . . . . . . 43  - Iii - Table of Contents Page No. B. Performance and Potential of the Lowlands' Agriculture . . . 44 Soybean Exports and Wheat Production . . . . . . . . . . . 45 The Sugar Industry .r. ........ 45 Other Non-Traditional Exports a . . . . . . . . . . . . . 47 C. Potential Constraints to the Sustained Development of Agriculture . . . . . . * . * * * . * * 47 Absence of a Comprehensive New Lands Policies (NLP) . . . 47 Transportation Policies a ...............a 50 The Alleged Negative Impact of Donated Wheat . . . . . . . 51 D. Conclusions and Racomendations . . . . . . . . . . . . . 52 VI. THE&STRYSUBSE CTORYSUBSE 53 A. Overview of the Forest Sector .........53 Inefficiency in Forest Management . . . . . . . . . 55 Forestry Sector Taxation: Equity and Efficiency Considerations . . . . . . . . . . . . . . . . . . . . . . 56 Needed Reforms . . . . . . . . . . . . 57 Be Conclusions * * . . * * 58 VII. CONCLUSIONS REGARDING PRIORITIES FOR THE PUBLIC SECTOR . . . 58 APPENDICES I - Policy Matrix . . . . . . . . . . . a . . . . . . . 62 2 - The Environmental Impact of Smallholder Agriculture in the Lowlands . . . . . . . . . . . . . . . . . . . . . 66 3 - The Organization of the Public Sector Investment Program (PSIP) . . . . . . . . . . . . . . . . . . . . . . . . . ........ 70 4 - Statistical Appendix . 77 Mes (IBRD 20516)  Pa, I of 2 BOLIVIA COUNTEY DATA SHEET M109.6 (1989): (mtllions) 7.1 DENSITY: 6.46 pop./sq. km. 1Pou sq. km.) Rate o Grozth: 2.8X POPULAIlON CHARACTEEISTICS Crude birth rate (per 1000): 42.0 (n portetIty (per 1000 live births): 106 Crude death rote (per 1000): 13.5 Population per physician: 1538 $CCESS TO S Fl WATER of population - urb n: 82 - rural: 27 NUTRITIC EDUCATION Dailt catorie supply per person: 2086 Primary school enrollment-(X) of Per capits protefn intake (g/day): 57 relevant age group: 91X iNP pLer toaft CUSS 1989) 630 GROSS NATIONAL PRODUCT 90 US$ .n X 1980- 5wz 1958