Agricultural crisis and reactivation plans

Processo, No.743, 29 January 1997

The crisis in the agricultural sector is one of today's principal economic problems, and its roots actually transcend the conditions which arose in the 1990's. Besides short-term conditions, there is also historic evidence that the agricultural sector and the majority of rural residents have lived in an almost permanent state of crisis. Conflicts such as the campesino rebellion of 1932, the land reform of the 1980's, and then the postwar Land Transfer Program are solid evidence of still-unresolved structural problems in the agricultural sector.

A recent example of the need to address the problems in agriculture was the January 21 unveiling of the "1997 Agricultural Program." In reality, President Calderon Sol had already mentioned that he would present "an integrated plan to reactivate agriculture." Specifically, in his speech commemorating two years in office, he offered eleven economic emergency measures, including one to "launch an integrated plan to reactivate agriculture, the principal points of which are: legal security over land titles, timely credit which favors agricultural activities, technology and market information, as well as improvements in methods to preserve basic grains..."

As we will see in this article, these measures are all part of the 1997 Agricultural Program which, besides mirroring the already- frequent setbacks in the implementation of economic policy measures, also raises serious doubts about the internal coherence of government development plans and, thus, about their viability in the medium and long term. The fact that privatizing the banking system has been one of the chief factors behind limiting credit, investment and production in agriculture, shows that the privatization policies put into practice by the government are not compatible with others: specifically, the economic reactivation of the agricultural sector.

Some of the most critical problems seen in this sector are of a structural nature, and thus their solutions are even more complex than what has been proposed so far by the government. Problems such as the agrarian debt, low technology and yield, unattractive prices for basic grains, drops in export prices and the scarce diversification of agriculture, all persist even after the land reform and Land Transfer Programs. In this article we will present some of the general contents of the 1997 Agricultural Program in order to evaluate its possible implications for the sector, and to reflect on possible complementary measures.

1997 Agricultural Program

According to the Minister of Agriculture, Ricardo Quin~onez, the 1997 Agricultural Program contemplates actions in nine different areas: citizen security, legal security, tax measures, trade and price policy measures, financing, transfer of technology, improvements in infrastructure, environmental policy and modernization of institutions. Here are some of the most important measures:

In the area of citizen and legal security, the program proposes the creation of police outposts, a speedup in issuance of property titles, and freedom to lease out land reform properties; in terms of trade policy, the program proposes a uniform tariff and deregulation of inputs; in terms of financing, there would be measures to facilitate access to credit, refinancing and loans for basic grains, which would altogether require a total of 3.5 billion colones; furthermore, the transfer of technology would be achieved by imports of certified seeds, a speedup of technology transfers and by offering the National Agricultural Training School as a concession to private enterprise. Other measure mentioned are the modernization of the Ministry of Agriculture, building rural roads and other public works, and adopting measures to protect coffee production.

Some implications

Strengthening police activity and legalizing land ownership indicate, on the one hand, a stepped-up war on crime (which hits all economic sectors equally), and on the other, the promotion of trends toward renting out land or using land titles as mortgage guarantees to gain access to the credit system. The trade measures are actually part of a set of reforms being negotiated with the rest of the Central American nations (eliminating tariffs on inputs and capital goods, and unifying Central American tariffs); as they deregulate commerce, they could have a negative effect on subsectors such as basic grain producers, poultry farms and livestock.

In terms of measures aimed at promoting the transfer of technology, it is interesting to note that the majority of these measures are also nothing new: introducing certified seeds goes back several decades, while the National Center for Agricultural Technology has been used forever to speed up technology transfer, with meager results. Other measures included in the plan are also part of other government plans, such as the modernization of the state and public works projects, as well as the traditional policy of government protection for the coffee sector, a measure in place since the mid-nineteenth century. This is why we cannot expect significant results from this program, since the measures have been in the process of implementation for some time now, without any meaningful results.

Furthermore, the measures included in the financing part of the program are very well-thought-out, but there is still no sign of where the 3.5 billion colones will come from to make up the new credit lines. According to the Ministry of Agriculture, some of them will be provided by farmers who pay off their debts on time, which is not currently a very viable prospect.

Considerations

The most serious criticism raised by the agricultural development plan is that it proposes no solutions to the structural problems of the sector, such as low productivity, low diversity and low prices on basic grains. The financing measures will probably have the greatest effect on the agricultural sector, but they will be limited by the absence of sources of the necessary funds.

An important measure for reactivating the agricultural sector is to intensify the transfer of technology, but first there must be a revision of the methods used so far by the government in this field; this implies, among other things, a larger budget for government offices which deal with agriculture, instead of this year's cuts. Furthermore, the state must guarantee profitable prices to basic grain producers, and a trade policy designed to protect national producers instead of deregulating trade, as well as financing programs -if necessary, financed by the state- which reflect a policy of export diversification and agro-industrial development.