Haïti - Examen du secteur agricole

Report No. 9357-HA Haiti Agricultural SectorReview April30, 1991 CountryDepartment IlIl LatinAmericaandthe Caribbean Regional Office FOR OFFICIAL USEONLY DoCkent of the WorldBank Thisdocumenthas, restricted distributionandmay be usedby recipients only in the performance of their official duties.Its contents maynot otherwise be disclosed withoutWorld Bankauthorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized FISCAL YEAR October 1 - September 30 CURRENCY-AND EOUIVALENCY UNITS Currency Unit - Gourde (G) Official Exchange Rate Effective February 1990 US$1.00 = G 5.00 WEIGHTS AND MEASURES Metric System GLOSSARY OF ABBREVIATIONS APA - Agriculture Producer Association BCA - Agricultural Credit Bank BNDAI - National Bank for Agricultural and Industrial Development BRH - Bank of the Republic of Haiti (Central Bank) CIAT - International Center of Tropical Agriculture CIDA - Canadian International Development Agency CIMMYT - International Center for the Improvement of Maize and Wheat CIP - International Potato Center CNC - National Corporative Council CRDA - Center for Research and Agricultural Documentation CRIN - Caribbean Rice Improvement Network DGI - Direction General dea Impots (Internal Revenue Service) FAO - Food and Agriculture Organization IDB Inter-American Development Bank IICA - Inter-American Institute for Cooperation on Agriculture IMF - International Monetary Fund IHSI - Haitian Institute of Statistics MARNDR - Ministry of Agriculture, Natural Resources and Rural Development Minoterie - Flour Mill ODPG - Organization for the Development of the Gonaives Plain ODN - Organization for the Development of the North ONACA - National Cadastre Office ODVA - Organization for the Development of the Artibonite Valley PRECODEPA - Regional Cooperative Program for Potato PROFRIJOL - Bean Cooperative Program for Central America, Mexico, and Caribbean PRONATHAR - National Bean Production Program PRONATMA - National Maize Production Program SIGR - Rural Irrigation ServJce SOFIHDES - Haitian Financial Corporation for Development UNDP - United Nations Development Program USDA - U.S. Department of Agriculture USAID - U.S. Agency for International Development FOROmCIALUSE ONLY AGRICZLTRA SECTORREVIEW Table of Contents C2D.LRAZ& ABSZ=iC SARY AD CONCLUSIONLS . . . . . . . . . . . . . . . . ... . I. 2MERlEW OF SECTORAL PERFORMANCE AND POLICYs 1970-89 . . . . 1 A. Output Structure nd Trends .. . . . . . . . . . . . .o. . 1 B. Growth and Sources of Growth . . . . . . . . . . . . . . . . 3 C. Fiscal end Trade Polices, and Relative Prices . . . . . . . 5 Fiscal and Trade Policies ................ 5 The 1986 Reforms . . . . . . . . . . 6 TheEvolutionofPrices ................. 6 D. Conclusions . . . . . . . . . . . . &. . . . . . . .. . . . 7 II. AGRICUj.UuAL TXADE AND PRICING PQLICIES . . . . . . . . . . 8 A. The International Trade Regime. . . .. . .. . .# . . . . . 8 The Legal Import and Export Regime . . . . . . . . . . . . 8 Application of the Legal Trade Regime . . . . . . . . . . 8 Contraband . . . . . . . . . . . . . . . . . . . . . . . . 9 B. Agriculture's Trade Regime end PricingPolicies . . . . . . 9 Import Substtutng Sector ................. 9 Effect of Trade and Pricing Policies on Import Substitute Prices . .... ............... .. a 12 Export Sector . . . . . . o . ...... * * * * * * a * *# * 14 Non-Traditional Exports o.. 15 The Coffee Sector . 16 C. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . 17 III. AGRICULTURAL CREDIT ... .................... 18 A. Government Credit . . . . . . . .*. . . . . .. . . . . . . 19 BCA . . .. .o. .... .. o... . .. . .. . 19 B. Comercial Banks . . . o . . * * . . . . . . . . . 19 C. Credit Unions . . . . . . . . . . .. . . . . . . . . . . . 20 Constraints to Credit Union Development . . . . . . . . 21 This report is based on the work of a World Bank missianwhich visitedHaiti in September 1990. The mission comprised Mr. Hugo Diaz, Chief of mission, Mr. John Panzer (SectorEconomist), Mr. Adrian Guissarri(Economiet, Consultant), Mr. George Mosselman.(Irrigation Consultant), Mr. Edward Pulver (Agriculture Consultant), Mr. Peter Jennings(Agriculture Co'nsultant) sad Mr. William Amponsah (SummerIntern). The reportwas writtenby Mr. John Panzer,who also led the discussions with Government, March 27-28, 1991. This document has a restricteddistribution and may be used by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout World Bankauthofization. - ii - Table of Content. PA-AoNo0 D. Informal Credit ... * 22 General Considerations Regarding Informal Credit 22 Rs Conclusions 23 IV. LCNDluion . . . . . . . . . . . . . . . . . . . . . . . . 23 A. Land Tenure Patterns and Characteristics 24 Lan Distribution .... 24 Public Lands ta . . . 24 Land's Exclusive Rights and Use . . . . . . . . . . . . 26 B. Land Titling and Tenure Security 27 Land Titling snd Land Security 27 The Supply and Dmand of Land Titling .. . . 28 National Cadastre .o . 29 C. Land Tenure and Economic Performance.. 29 Tenure Security and Desired Investment . . . . . . . . . 29 Access to Creddt .t... . . . .. ... 30 Land Tenure Patterns and Productivity . . . . . . ... . . . 30 Land Tenure, Tenancy and ProductionDecisions . . . 31 Do Conclusions . . . . . . * . . . . . . . . . . . . . 31 V. THE IRRIGATION-SUBSECTORECTOR......... .. 32 A. General Background un....... . 32 B. Design and Effectivenessof RehabilitatedIrrigationSystems 33 Design Maintenanance ........... . 33 Effectivenessof IrrigationSystems . . . . . . . 33 C. Water Pricing and Water Charges . . . . . 35 Gravity Systems . . . . . . . . . . . . 35 Pumping Systems . . . . . . . * .. . . .36 D. Subsector Strategy and Program .. ... ... . 37 E. Conclusions . . . . . . . . . . . . . . . . 37 VI. AGRICULTURE PRODUCTION.TECHNOLOGY GENERATIONAND DISSEMINATION . . . . . . . . . . . . . . . . . . . . 37 A. Assessment of the Current Situation . . . . . . . . . . . 37 Rice o oo*9o-ooo 37 Maize o ooooo&o-*o38 Sorghum . . . . . . . . . . . . . . . . . . . . . . . . . 39 Grain Legumes . . . . . . . . . . . . 39 Ot'ter Food Crops. .......... *., 40 Nom-Food Crops . . . . . . 41 a . . * 41 Other Won-Basic Crops 41 Livesttck Production 42 B. Organization of Research and Extension Activities . . . . . 42 Varietal Development........... . . 42 Crop Management .. 4.44.44544404 43 Fertilizer and Pesticide Use . O s.... . 43 Seed Production .............. *. .44 - iii - Table of Contents Pare No. Research, Extension and Irrigation . . . . . . . . . . . . 44 C. Institutional Arrangements .t . ... . . ..... .... . 45 Research . . . . . . . . . . . . . . . . . . . . . . . . 45 Extension . . . . . . . . . . . . . . . . . . . . . .. 45 D. Conclusions . . . . . . . . . . . * . . 46 VII. THE FORESTRY S JBSECCTOR .. O................... . 48 A. Forestry and the Environment. . . . . . . . . . . . . . 48 B. The Renewable Energy Sector ............... . 48 C. Agro-Forestr Activties ................... 48 D. The Government'sInstitutionalResponsibilities and Constraints . . . . . . . . ... . ... . * . . . . . . . . 49 E. Conclusions . . . . . . .. . * . . . . *.* . . . . . . . . 49 APPENDICES 1 - Policy Matrix . . . . . ... *.. *.. . ... . .. *.*.. 51 2 - Statistical Appendix .................... 5 Ms: (IBRD 21143) Pegs t of 2 HAITI - COUNTRYDATA SHEET __________________________ Area: 27,800 eq km Populatlon: 6.4 million(1069) Density: 223 per sq km _____ ---------- -------- _ Rate of growths1.6 X (1989) Population characteristics Health Crude birth rate (per 1,000): 34.4 Infentmortality(per 1,000 live birthe):117 Crudedeuth rate (per 1,000): 12.7 Popuustion per phyolcln: 7179 Population per hospital beds 1897 Incomedistribution Distrlbutlon of land ownership X of nationalIncome, highestquintile: X ownod by top 1OX of owners: lowestquintilo: X owned by smallest1OX Access to safe wator Accessto electricity X of population - urban: 59 X of population - urbans 45 - rural: 80 - rural 8 Nutrition Education CalorieIntake as X of requiremnts: 80 Adult llteracy rate () 062.4 Per capita proteinintake(g/day): 8o Primaryschoolenrollment (X) of relevant age group:78 eyp per capita (US8,1989)1/ : 400 ______________ GROSS NATIONAL PROWUCT, FY89 ANNUALRATE OF 661W4H ( X , FY80 priece) US$ Mn X FYTS-60 FYSO-I6 FY6S-67 FY66 FY89 OWF at Market Prices 2552.3 100.0 5.2 -0.9 0.1 -1.6 -0.6 Gross Dometic Investment 291.6 11.4 10.1 -2.1 -5.0 -1.0 -1.0 CrossNationalSaving 14i.4 5.6 14.0 -8.5 -11.2 -1.9 -12.0 Current Account Bolance -126 9 -5.0 Exportof Goods,NfS 259.8 10.1 10.8 -1.8 -6.6 0.8 -0.5 Importof Goods, NFS 428.5 16.6 10.0 -2.9 -5.6 -1.1 2.2 OUTPUT, EMPLOYMENT AND PRODUCTIVITY IN FY89 Value Added LaborForce V.A. per Worker US8 Mn U Mn x US$ Agriculture 889.9 19.1 2.0 6o.7 170.0 Industry 514.9 29.0 0.8 10.0 1716.8 Services 922.1 51.9 0.7 28t. 1817.8 Total / Average 1776.9 100.0 8.0 100.0 592.3 GOVERNMENT FINANCE __________________ ConsolidatedPublicSector Geneal Government a Mn Percent of CDP a Mn Percentof GOP FY69 FYN6 FY89 FY89 FY66 FY89 Current Roe-lpto 2097.4 16.1 17.7 1140.2 10.1 9.S Current Expenditure 2189.0 17.7 18.5 18898. 11.4 11.7 Current Surplus -91.6 0.4 -0.8 -249.6 -1.8 -2.1 Capital Expendituro 588.6 8.8 4.6 896.8 8.9 8.8 1/ World Bank Atlas ethodology. Page 2 of 2 HAITI - COUNTRYDATA SHEET MONtJ,CREDIT A PRICES FY86 FY88 FY87 FY88 FY89 (Mn Gourdesoutstanding at end of period) Broad MoneySupply 2647.6 2S86.3 8133.6 348.8 8909.2 Bank Creditto Public Sector 2160.2 2113.6 2199.8 2828.0 2688.9 Bank Creditto PrivateSector 1184.7 1172.4 1186.0 1279.2 1870.0 (Percentage or IndexNumbers) Broad Money as % of GDP 26.4 26.8 29.0 81.8 88.0 GeneralPrice Index (FY80- 100) 148.7 160.8 144.1 149.6 164.9 Annual porcentage changesin: General Price Index 8.4 8.6 -11.4 4.0 8.6 Bank Creditto Public Sector 12.0 0.9 8.2 8.0 9.1 Bank Creditto PrivateSector 8.8 0.7 1.1 7.9 7.1 BALANCEOF PAYMENTS MERCHANDISE EXPORTS (AVERAGE FY84-89) F '"8 FY87 FY88 FY89 US$ Mn x (USS million) Coffee 42.8 20.3 Exportsof Goods,NFS 291.8 281.S 273.4 269.3 Cocoa 4.8 2.8 Importsof Goods,NFS 423.3 461.8 426.6 423.6 Easential Oil. 4.8 2.1 ----- ----- ----- ----- Other Agriculture 6.7 8.2 Resource Gap (deficit = -) -131.7 -170.3 -162.2 -164.2 Manufactured Goods 180.9 62.7 Other Cormoditieo 19.8 9.6 Interest Payments (net) 9.1 8.4 6.8 10.9 ----- ----- Other Factor Payments (net) 7.6 6.9 10.7 11.1 Total 208.7 100.0 Net Current Transfers 62.0 66.8 68.4 59.8 ----- ----- Balance on Current Account -96.4 -129.3 -106.8 -120.9 EXTERNAL DEBT, SEPTEMBER 80, 1989 Direct Pvt. For. Investmont 4.8 5.0 10.1 9.4 -------------------------------- Net MLT Borrowing 83.0 56.2 34.4 15.5 Disbursements 43.8 67.0 48.3 28.9 USS Mn Amortization 10.8 11.8 18.9 13.4 ------ ___ - - ----- ----- PublicDebt, nel. Quaranted 760.0 Subtotal(Dir.Inv.+Net MLT) 38.8 60.2 44.5 24.9 Non- Guaranteed Private Debt Total Outetonding A Disbursed 760.0 OtherCapital (net) end Copitaln.e.l. 89.8 104.6 122 98 NET DEST SERVICERATIO FOR FY67 2/ Increasein Reserves (-) -31.2 -85.6 -60.2 9.0 Public Debt, inel.Guaranteed 19.8 Non- Guaranteed PrlvateDebt GrossReserves1/(end-year) 15.7 28.6 22.8 21.8 TotalOutstanding A Disbursed 19.8 RATEOF EXCHANGE IBRD/IDA LENDIW' (Sept. 80,1987) Annual Average (end of period) IBRD IDA FY86 FY87 FY88 FY89 (USS Mn) ---- ---- ---- ---- Outstanding & Disbursed 0.0 268.8 US51.00 a 0 6.00 6.00 6.00 6.00 Undisbursed 0.0 SA.6 01.00 a USS 0.20 0.20 0.20 0.20 Outstanding incl.Undisbursed 0.0 345.9 ------------------------------------------------------------------- __--------__-----_--------------------_-- 1/ Includeo gold holdings. 2/ Debt service,not of interest earned on foroign exchange reserves, as a percentage of Exports of Goode and NFS. TITLE t Haiti - AgriculturalSector Review COUNTRY t Haiti REGION t Latin America and the Caribbean REPORAT t mE CLASSIF NUMBER LANGUAGES SEW Restricted 9357-HA English PUBDATE s April 30, 1991 ABSTRACT X The performance of Haiti's agricultural sector has been disappointing. Between 1985 and 1989, agriculture'saverage annual growth rate was -0.52, continuing the negative trend that began in 1980. Agriculturalvalue added has been decreasing even though land and labor resources allocated to agriculturalproductionhave been increasing. Land and labor productivitylosses have mainly resulted from the deteriorationin the quality of the country's capital stock (e.g., soil properties,irrigation systems and roads), reflecting a political and economic environmentin which investmenthas not taken place. Yields, with the exception of rice, show a negative trend and are becoming increasinglylower than those recorded in other countries of the region. The State's failure to supply much needed public goods has been the key factor hampering the development of an institutionalframework conducive to growth. In agriculture,the most blatant failure has been the lack of adequate property rights resulting from lack of titling services and a reliablejudicial system. This has led to alternative,less efficient titling arrangementsthat have constrainedthe developmentof the market for land and the ensuing modernizationof agriculture. Other shortcomingsinclude the State's inability to establish and collect adequate fees to cover the irrigationsystems' operational and maintenance costs, causing their increased deterioration; the absence of publft sector leadershipin technologicalgrowth and transfer, resulting in a series of uncoordinateddonor-drivenefforts with diminishedimpact on productivity;and the lack of prudential regulationsnecessary for the developmentof rural financialmarkets. In spite of the 1986 economic reforms, distortionspersist. Agricultural exports have continued to be implicitlytaxed through protection to import- substitutingcrops and by the implicit 132 export tax arising from the foreign exchange surrenderingrequirement. As a result, resources have not been directed to their area of comparative advantage and Haiti has become a net importer of agricultural commodities. Contrabandactivitieshave flourished in response to the protectionistpolicies and currently encompass 50X of total agricultural imports. However, the uncompetitivenature of the contraband trade--thereis no free entry--has prevented it from annulling the protectionisteffect of import restrictions. The sugar industry has been the sector'smajor beneficiary of Government-induced distortions. Subsidies to the mills comprising tax-free sugar import quotas and an indirectCentral Bank export subsidy amount to US$8-12 million per annum, roughly 42 of total fiscal revenues. SUMOARY AND CONCLUSIONS Backtround 1. Over the past decade, the people of Haiti have suffered a continuing decline in their standard of living as GNP per capita has dropped to US$400, one of the lowest levels recorded in the developingworld. 2. Economic developmentsin Haiti have been affected by chronic political instability. But Haiti's recent democraticallyelected Government provide. a window of opportunityfor the country to move towards sustained social and economicprogress. In many ways, the economy and its economic policy are at a crossroads:important decisions regarding the country's developmentneed to be made with urgency. But some of the factors benefiting Haiti in the past are no longer in place. Coffee and sugar, major sources of past agriculturalgrowth, face unpromisingprospects, and other agricultural exports have stagnated. beanwhile, domestic productioncosts have mounted, adoption of new technologyhas lagged, and Haiti's agriculturalexport potential prospects are clouded by dietortions. At a time when most old problems remain and new constraintsare emerging, economic policies which will contribute to a revitalization of agricultureare much needed. Nevertheless, there are encouraging elements on which to base these new policies: absence of price interventionsin most commoditiesand the positive legacy of import liberalization that has taken place since 1986. 3. The purpose of this report is to review the recent performance of Haiti's agriculturalsector and to analyze issues critical to its growth. The report seeks explanationsfor the sector'shistoric stagnationand inability to abandon traditionaltechnologiesand institutions. Policy recommendations are focused on raising allocative and productive efficiencyand on creating conditions that will encourage investment,technologicalchange, and improve market operations. The first two chapters describe and analyze the economic policies which have, directly or indirectly,influencedthe performance of the sector for the past twenty years. Chapter I provides an overview of the economic policies and the sector's performanceduring the 1970-89 period. Chapter II analyzes the impact of current trade and pricing policies. Chapters III through VI analyze the institutionalframework in which agricultura'developmenthas taken place. Chapter III provides an analysis of the factors and policies that have contributedto the lack of development of rural financial markets. Chapter IV deals with lend tenure issues and explains how its resolutioncould provide stimulus to the modernizationof agriculture. Chapters V and VI review critical issues constraining technologicalchange in agriculture--irrigation, research and extension. Finally, Chapter VII presents a brief analysis of the forestry sector. A policy matrix (Appendix 1) summarizesthe report's issues and policy recommendations. - il - Constraints to Amricultural Growth 4. The bulk of Haiti'sagricultural practices are characterized as traditional.Most farming practices resemble thosepracticed many decadesago and, unlike more developed economies, marketrelations continue to be centered around a family/community structure.The shortcomings of that marketlinstitutional framework have becomeincreasingly evidentas population growth has posed a major stresson Haiti'sresources.The sectorfaces continuing stagnation, sever.environmental degradation, and decreases in productivity and growth. 5. The key factorhampering the development of a market/institutional framework conducive to growthhas been the State'sfailureto supplymuch neededpublicgoods. In agriculture, the most blatantGovernment failure has been the lack of enforcement of property rightsthroughtitlingservices and the absence of a reliable judicial system. This has led to alternative, less efficient titlingarrangements thathave discouraged investment and constrainud the modernization of agriculture by limiting transactions within the traditional community sphere. Other seriousshortcomings includethe absenceof publicsectorleadership in technology generation and transfer, in the maintenance of publicirrigation systems, and of prudential regulations that couldcontribute to the development of ruralfinancial markets. Finally, the sector's efficiency and growthhave also been hampered by some policy- induced distortions, mainlyrestrictions to international tradeand Government interventions in the financial markets. Performance of the Agriculture Sector 6. Between1985and 1989,agriculture's averageannualgrowthratewas a disappointing -0.5Z,continuing the negative trendthat began in 1980. Agricultural value addedhas been decreasing even thoughland and labor resources devotedto the sectorhave been increasing.Land and labor productivity losseshave mainlyresulted from the deterioration in the quality of the country's capitalstock(i.e.,soilproperties, irrigation systemsand roads),reflecting a political and economic environment in which investment has not takenplace. Yields,with the exception of rice, show a negative trendand are becoming increasingly lowerthan thoserecorded in other countries of LatinAmericaand the Caribbean. 7. Despiteprotectionist policies, food importssoaredas a consequence of declining domestic food production.The sector--traditionally the country's most important sourceof foreignexchange--is currently a net importer of agricultural commodities.In 1988,agricultural imports(both legal and illegal) exceeded exports by roughlyUS$65million. The sector's performance has strongimplications on welfare. With an averageannual population growthrate of 1.42,per capitafood availability has been decreasing even thoughfood imports(including contraband) have been increasing.In 1987,almost501 of households consumed less than 752 of the recommended daily calorieintake,and nearly36% consumed less than 752 of recommended proteinlevels. - iii - Strgteaies and Recommendationsfor Promotina Efficiency.TechnologicalChange and Growth 8. Changing the pattern of stagnation in the agriculturalsector will require wide ranging policies. Specific policies are needed to provide improved access to credit, promote the use of improved technologies,improve the use of the irr4gationsystems and curtail the present pace of coil erosion. These policies should form part of an economic framework free of distortions so that resources can be allocated in the most efficientmanner. 9. The newly elected Government of Haiti has designed a strategy setting priorities for Governmentinvolvement in agriculture. The strategy would be implementedwithin a policy framework consistei.t -ith that proposed in this report. The plan foresees an important role of tna State in the areas of: (i) land tenure; (ii) agriculturalresearch and extension; (iii) rural infrastructure(e.g., irrigation);and (iv) soil management. The strategy also calls for Governmentparticipation--albeit not in a leading role--in the development of rural financial markets, provision of informationto assist the marketing of agriculturalproduce, the development of livestock,fisheries and aquaculture,and facilitatingfarmers'access to tools and machinery. 10. The Economic Policy Framework: Following a long period of increased Government intervention, a comprehensive economic reform was introduced in 1986. The reform sought to promote economic growth by eliminating distortions and inproving resource allocation. In the context of commercial and pricing policies, it focused on realigning domestic prices to world prices by liberalizing the international trade regime and local trade monopolies. In the agriculturalsector, the reforms supported these objectivesto the extent that export taxes on agriculturalcommoditieswere eliminated. Major agriculturalcommodities were granted special protection in spite of an overall tariff reform that decreased the country's average tariff level from roughly 40S to 20S. Imports of maize, sorghum, rice, and beans were subject to licensingrequirementsand to a 502 tariff; licenses and a 402 tariff were also introducedfor meat imports while sugar and flour imports continued to be monopolies subjected to 402-502 tariffs. 11. The sector's allocationof resources continues to be distorted in favor of import substitutingcrops. Exportablesare implicitlytaxed through: (a) protection granted to import-substituting crops. In spite of the massive contrabandof rice, flour and sugar (estimatedat US$60 million per aimum, roughly 502 of total agriculturalimports), tariff protectionand import licenses on rice, maize. sorghum. sugar and flour have subsidizeddomestic producers,taxed consumers and expanded these sectors where the country does not have a comparative advantage. In 1990, the nominal protectioncoefficient for these products was roughly: 1.3 for rice, 1.5 for maize, 1.5 for sorghum, 1.5 for flour, and a lower bound of 1.5 for sugar. Although contrabandhas played a role in correctingthese relative price distortionstits impact has been limited because its incidence has not been uniform across products. There are transaction costs involved in bypassing the law, and organized - iv - large-scalecontraband industry behavior has been non-competitive becauseof entry restrictions; and (b) the implicit exporttax leviedby the requirement that 40% of an exporter's foreign exchange proceeds be exchanged into Gourdes at the official exchange rate (G 5/USsi) instead of the market determined rate (G 7.5/US$1). Import transactions (except for petroleum products) take placeat the market determined rate. During1990,this surrendering requirement vas roughlyequivalent to a 13Z tax on exports. 12. Thesepolicies have exacerbated the difficulties facedby the exportable sector. Coffeoproducers face severeproblems becausethe relative price of coffeewith respectto competing crops (i.e., maize and sorghum) has not improved--in spiteof the elimination of the exporttax--because of the fall in the world price of coffee. Thesedifficulties have been compounded by the outbreak of the coffeerust disease. Despitetheirpromising prospects, mango exports have stagnated during the past five years because additional investmentsneeded to increase output have not been undertaken. Investments have been discouragedby uncertainty,a consequenceof an extremely unstable political environment,and by economic policies that have been detrimentalto the export sector. 13. Suaarremainsthe most distorted commodity in the economy. Although nominalprotection is relatively high,the industry allegedly cannot breakeven on its domestic production.To help the industry, the Government transferred the exclusive monopoly on raw sugarimports and over 502 of the refinedsugarimportpermitsto the mills. These licenses includetax exemptions--all the import-monopoly rentsare thus captured by the importers. With international sugarpricesrangingbetweenUS$0.11-0.15/lb and the domestic ex-millpriceat roughly US$0.25/lb, theserentsamountto US$7-11 millionper annum;equivalent to roughly122 of importduty revenues and 42 of total fiscalrevenues. 14. Protectionist policies have been detrimental to: (i) consumers (especially urbanconsumers) who must pay higherprices;(ii)the Government and all the beneficiaries of publicgoods--as the economic rentsgenerated by importconstraints have been appropriated by the contraband industry and the sugar mills; (iii) the agriculturalexport sectors (iv) the environment--since the protected import-substituting commodities are annualcropswhose productiorn in the hillsides hastensthe erosion processt and (v) to the overall economyas resources have not been destined to theirmost efficient use. 15. For the economyto achieve an efficient allocation of resources, tradeand pricingpolicesshouldbe neutraland shouldnot favorany particular sectorat the expenseof others. Moreover, givenHaiti'slackof institutions, the traderegimeshouldcontainas littleadministrative discretionality as possible and the levelof protection shouldbe sufficiently low so as to make contraband unprofitable. Thus,it is recommended that: (i) all ouantitative importrestrictions be eliminated, exceptfor those related to the reasonable application of healthregulations; (ii)agricultural - v - commodities'tariffs be set at a 52 uniform level, and all imports be subject to the consumption (TCA) tax. This uniform tariff should be consistentwith that to be applied to the rest of the economy; (iii) protection to the sugar industry be decreased; and (iv) the foreian exchange surrenderingrequirement be eliminated. 16. Credit Markets: Lack of access to the formal credit markets has limited farmers' production activities. As of June 30, 1988, even though the agriculturalsector accounted for 35Z of GDP, less than 1I of the total credit outstanding from banking institutionshad been channeled to agriculture, most of it from the Government-owned National Bank for Agricultural and Industrial Development (BNDAI). With the closing of BNDAI in 1989, the level of outstanding credit has probably been much lower. Another Government institution--the Bureau de Credit Agricole--channels credit to farmers at subsidized interestrates, however it does not have access to external resources. 17. Commercialbanks have played an extremely limited role in Haiti's agricult.ralsector as a consequence of the country's farm size distribution. Recorded world experiencehas indicated that commercialbanks seldom lend to small farmers because of high transactioncosts, the inability of using untitled land as collateral,and the existence of interest rate caps which promote credit rationing and discrimination vis-a-vis more risky and more costly to service customers. 18. The cooperative system is the only source of formal credit available to farmers. Cooperativesmainly operate in urban areas. Their potential expansion to rural areas will depend on changing existing laws to allow payment of competitive rates on savings deposits and on developing an adequate legal and regulatoryframework. 19. The Governmenthas an importantrole to play in the developmentof financial institutionsrelated to agricultureby providing nrudential reaulations and adeauate supervision. To facilitatefarmers access to institutionalcredit, the Governmentwould need to: (i) eliminate the 22Z cap on commercialbank lendina rates; (ii) eliminate the orohibition that 2recludes the use of land as collateral; (iii) eliminate the fixed 121 interest rate on credit union loans; and (iv) develop a suitable regulatorv and sunervisoryframework for credit unions. 20. Land Tenure: Haiti's land titling system is under severe stress. An official cadastre does not exist and the number of hectares of titled land complyingwith all necessary legal requirementsis exceedinglysmall. Nevertheless,individualproperty rights on land are recognized. Compliance with full legal formalitieshave been replaced by an informal system with partial legal compliance. This system provides some degree of land tenure security. 21. Land titlina and security issues are a contributingfactor to the stagnation in the development of agriculture. The lack of legal titling prevents access to formal financialmarkets, hindering investmentand technologicalchange. Lack of tenure securityalso has a negative impact on - vi - the environment as it discourages on-farm investmentssuch as terracing and tree planting. More importantly,the modernizationof agriculturewill require that traditional family/community based economic relations be extended to market type relations,with well defined/enforced property rights. This will enhance the possibilitythat investors and entrepreneursthat have not been traditionallylinked to the sector will participate in its development. Small farmerswould also benefit from enhanced tenure security arrangements, since it would enable them to undertake profitable land-specificinvestments and, over the medium term, the farmers'access to credit would be enhanced. While the advantages of a formal titling system are enormous, the dangers are great in attempting such a reform without having in place a well functioning land administration/legal process which preserves the rights of those who have traditionallyfarmed the land and to prevent land grabbing. 22. Rather than attempt a compulsorynational titling program,which at Haiti's current stage of developmentwould not be feasible to implement effectively,the Government should establish the legislative and administrativeframeworkwhich would Rermit the issuance of titles at a Race consistentwith their demand. Land titling could be provided by the National Cadastre Office (ONACA) at subsidizedrates--fora limited period--to encourage land registrationonce appropriateproceduresare in place. Steps should be undertaken to facilitatethe process of land registration which at present is controlledby a few notaries. Complementarymeasures should be taken to ensure that acquired titled rights do not carry restrictions regarding land transferability. LegislationPreventing foreignersfrom acquiring land. and legislationpreventingland from beina used as collateral should be abolished. 23. State-owned lands comprisebetween 5% and 111 of total cultivable land. They are generally leased at below market rates, and the leases are not transferableoutside the beneficiary'simmediate family. A high proportion of these lands are subleased at market rates. The State does not know exactly how much land it owns nor who it is leased to. Current leasing arrangements have negative equity considerations arising from the non-transparentsystem of rent transfers to lessees,who benefit from below market fees. Moreover, the non-transferability of the leases has negative efficiencyimplicationson the environment and growth since: (i) access to credit is limited because the land cannot be used as collateral;and (ii) erosion is enhanced since cultivationpractices may be biased towards substitutingannual crops for perennial crops. This is a consequenceof tenancy (i.e., subleasing) arrangementsnot being conducive to the planting of perennial crops. 24. The State should divest most of its land. As a matter of principle there is no reason for the Government to be engaged in the real estate business, much less so when such an activity serves primarily as an unclear and untargeted rent transfer mechanismwith negative efficiencyimplications. Caution should be exercised to prevent land grabbing by wealthy and well connected individualsat prices below real value. 25. Irrigation: Haiti's public irrigationsystems have deteriorated considerablydue to poor maintenance. At the core of this continuingproblem is the fact that user's contributionto cover operation and maintenance (O&M) - vii - costs are miniml. Maintenance problems ars extensive even in the autonomouslyadministeredpublic irrigationproject. for which there is external financing. In the rehabilitatedaravitv svste9s, the absence of users' fees to recover ongoing 0 & M costs stem from the Government's unwillingnessto set and enforce them. Given current yields and cropping intensities,these payments would represent between 1Z and 32 of a farmer's annual income and are within the farmers'payment capacity. Pumoing systems are not economicallyefficient,their 0 & M costs being excessivelyhigh compared to the land's productivityand cannot be fully repaid by users. 26. Despite these difficulties,the rehabilitatedgravitv schemes have experienced important increases in cropping intensity and yields. Average cropping intensitieshave doubled, and yield increaseshave ranged from 602 to 3002. These improvementsstill fall short of the projects' objectives (e.g., generally expected yields of 3.5 ton/ha for maize and sorghum, 4.5 ton/ha for rice and 1.5 ton/ha for beans) because neither the supporting technologyis available,nor is there an effective extension service--particularly relating to water management. 27. A number of rehabilitation projects are currently being carried out vith donor support. Rehabilitationefforts should continueprovided that: (i) the choice of nroiects is conditionedon it beina feasible to Dut in place adequate cost recoverymechanisms to cover 0 & M costs. Priority should be given to gravitv systems where 0 & M costs are within farmers' capacity to pay; (ii) the Governmentputs into effect mechanisms to charge and collect adequatewater fees; (iii) design standards are upgraded to enhance the system's reliability and limit siltation in the canals. This requiresmore complete studies of water availability;and (iv) catchment protectionbecomes a part of all water resource developmentprojects. 28. The severity of institutional weakness in the MARNDR precludes its ability to effectivelyparticipate in irrigationdevelopment. This problem has been perpetuatedby funding agencies'tendency to work *ith local authorities in an effort to achieve results within a very weak institutional environment. The downside effect has been the perpetuationof the Government'sinability to provide supportingservices, including technology development and transfer, and an inadequatefocus on environmentalissues. Greater attention is needed to strengthenthe Ministry of Agriculture,Natural Resources and Rural Develpment'srole in irrigationdevelopment,provision of supporting services and the establishmentof water users associationsto administer irrigation schemes. To date, there has been little progress in the identification or formation of such associations. 29. Research and Extension: Productivityincreases could be quite rapidly achieved in agricultureprovided that properly designed and sustained research and extension programs are implemented. Past research and extension impact has been dismal as evidenced by Haiti's declining food and export crop production. Food grain productiontechnology,except for rice, has largely failed. 30. An examinationof Government institutions, external donors, NGOs and farmers' organizationsreveals serious problems in the direction, - viii - coordinationend cooperationof the numerous agencies involved in technology generation and dissemination. There is no one agency/institution capable of assuming responsibility for research and extension. Collectively,there are more than sufficient human and financial resources available to accelerate technology. 31. A unifietd rogram of research and extension should be centered around several promising crops. In such an approach, the production system should be viewed in its entirety. Crop-specificaction programs should assist in coordinatingresearch, extension,input supplies, and resourcemanagement. It is critical that farmers support this initiative. They should not only participate in transferringtechnologybut should also contribute to sustaining the program without requiring large amounts of external assistance. 32. In the short-term, the most promising improvementscan be achieved in the irrigated rice-arowinRareas. Current annual rice imports of roughly 70,000 ton indicate that domestic productioncan increase significantly without a negative effect on producer prices. In the better irrigated areas of the Artibonite Valley, a program based on improvedwater management techniquescould result in a 602 increase of an average farmer's annual income. Other areas would need prior rehabilitation of their irrigation schemes before significantimprovementsare achieved. However, the benefits of such rehabilitationare enormous. In the areas that do not suffer from drainage problems, the gross annual income per hectare could more than double, from roughly US$3,000 to US$7,000. In the most destitute areas with serious drainage problems, gross annual incomes could increase from US$1,000/ha/year to US$6,000/halyear. Rehabilitation costs per hectare are estimated at roughly US$1,000 and US$3,000, respectively. The improvementof these systems could have a significant payoff. Sorghum,maize and bean yields could increase by 152 in the short term if crop-management extension programs are successfullyimplemented. 33. Forestry: The existing degradation of Haiti's natural resources needs to be curtailed. The Governmentneeds to develop adequate safeguards aimed at: (i) protecting the remaining forests and vital ecosystems from further destruction; (ii) increasingwood productionthrough the management of State forest lands and through the promotion of agro-forestryby farmers; and (iii) reducing the pressure on the country'svegetation through conservation measures and, to the extent possible, by substituting mineral fuels for fuelvood over the medium term. The closing of open access to fuelwood is likely to increase the price of wood, making other sources of energy more competitive. Tree farming may become profitable in this circumstanc.s. Tree farming would also benefit from better defined/enforced private property rights. 34. The Government should: (i) increase forested areas by transferring State land to the Ministry of Agriculture to be rezoned as "public domain" for environmentalprotection; (ii) improve forest manaRement; and (iii) strenathen the legal and institutionalframework that regulates forestrs and environmental issues. I. OVERVIEW OF SECTORAI PERFORMANCE:1970-89 A. Output Structure and Trends 1.1 Agriculture has traditionally been Haiti's key economic activity. Its Importancehad initiallybeen linked to the country's becoming a rich sugar producing colony and following independenceto evolving into an economic and social structure largely based on self-sufficient, owner-operated,small- scale farming. Agriculture accounted for roughly 352 of GDP in 1989, directly effects 75Z of the 6.4 million inhabitantsand employs 652 of the total labor force. Crop production accounts for 852 of the sector'svalue added. In 1985, the last year for which disaggregateinformationon value added per crop is available, agriculture's main crops and their respective share of total crop value added were rice (13.82),coffee (10.92),sweet potetoes (10.02), beens (9.52), bananas (8.22),yam/malanga (7.42),mangoes (4.62), sugarcane (4.62), maize (4.32), oranges/grapefruit (4.32) and sorghum (4.02). Livestock production--destined to the domesticmarket--included beef (36,000 ton), pork (12,000 ton), chicken (9,000 ton) and milk (50,000 ton). 1.2 The country's territory covers roughly 2.7 million ha. In 1987, approximately1 million ha were cultivated,0.5 million were used as pasture and only 100,000 remained as forests. Approximately72 of cultivatedland is irrigated. Most of the country was once covered with natural forests, but relentlesspopulation pressure has contributedto their disappearance, generating serious environmentalproblems. Approxim'ttely one million hectares of land have been eroded and can no longer support any agricultural use. Table 1.1: FARM SIZE AND DISTRIBUTION, 1971 Landholdings Parcels per Holding Farm Land (number) (average) (ha) Less than 1 ha 361,985 1.5 184,843 1 to 3 ha 195,530 2.1 349,299 3 to 5 ha 33,810 3.4 133,552 More than 5 ha 23.385 3.3 193.822 Total 616,710 1.8 863,516 Source: George Anglade, Eagace Haitien, 1974 (based on 1971 Census). 1.3 A distinct feature of the agriculturalsector is the pattern of land distribution,with small landholdings'l under 4 ha accountingfor almost I/ A farm is referred to as a landholding:the sum of different parcels a given farmer owns. -2- 75S of cultivated lend. While smallfarmsare not uncommon in Latin America and the Caribbean, their importance in Haiti is unique. 31 This patternof land distribution to furthercharacterized by farmsbeingsub-divided into several parcels. According to the 1971census,the estimated numberof farms was approximately 616,000, with an averagefarm size of only 1.4 ha. Moreover, since the totalnumberof parcelswas roughly1.18million,the average parcel size was under0.8 ha. Although updatedinformation regarding farm size and distribution is not available, all evidence pointsto a land distribution patternof even smallerfarms. 1.4 Agriculture's importance also stemsfrom its participation in international trade,particularly exports. Until 1980 the sectoraccounted for at least50S of total exports. Since1980,agriculture's contribution to totalexportshas declined sharplyas a consequence of: (i) the drop in the world priceof coffeeand lowervolumeof coffeeexports; (ii)the fall in the value of traditional exportssuchas cocoa,essential oils,sisaland sugar which have eitherbeen affected by declining world demandor by loss of their competitiveness; and (iii)the stagnation of non-traditional exports. Table 1.2: AGRICULTURAL IMPORTSAND EXPORTS, 1970-88 8/ (in US$ million) 1970 1975 1980 1988 Exports Coffee 15.2 18.3 90.4 38.9 Agriculture 23.7 37.8 112.3 55.5 - as Z of all goods 58.5 46.5 50.0 28.9 Imuorts Wheat 2.3 14.7 31.9 18.0 Agriculture 10.4 33.4 100.5 119.6 -as Z of all goods 20.0 23.5 28.4 34.8 "Surplus" b/ Agriculture 13.3 4.4 11.8 (63.7) a/ Include meat, dairyproducts, cereals, and fisheryand forestry products; excludeedibleoil. b/ Definedas the difference betweenthe value of exportsand imports. Source: FAO. 1.5 Traditionally, agriculture has also been a net sourceof foreign exchange earnings. However, this role has been drastically reversed as imports have increased becauseof the sector's stagnation (Table1.2). In 2/ In Jamaica49% of all farmsare under 4 ha, yet they accountfor only 262 of total cultivated land. -3- 1988, imports of wheat and wheat flour from the United States accounted for roughly 402 of the sector's trade deficit. Macroeconomicfactors have also affected the sector's performance. Maintenance of a fixed exchange rate regime in light of rising domestic inflation caused the real exchange rate to fall and reduced the relative price of traded goods with respect to non-traded goods. These developmentsstimulated imports and reduced the incentives to produce tradeables. B. Growth and Sources of Growth 1.6 During 1970-89,agriculture grew at about 0.4% annually, roughly 1.5 percentagepoints below the growth rate of the economy. Its sectoral share in GDP dropped from 47S in 1970 to 352 in 1989, a phenomenonmore closely associated to the sector's stagnationthan with the overall pattern of the country's development.3- While increasingcoffee and rice production contributed to agriculturalgrowth in the 1970s, output of most crops in the 1980s stagnated or decreased. Table 1.3: CONTRIBUTIONOF AGRICULTURE TO GDP, 1960-89 (in percentage) Share in Annual Growth Rates Contributionto GDP GDP Agriculture GDP Growth a/ 1960-70 46.9 0.7 0.8 53.6 1970-75 42.3 4.3 2.1 20.4 1975-80 33.7 5.0 0.8 5.1 1980-85 35.3 -1.9 -1.3 1985-89 34.9 -0.2 -0.5 a/ Percentage of GDP growth explained by the expansion in agriculturalvalue added. Source: Haitian Institute of Statistics (IHSI) and mission estimates. 1.7 Explanationsof growth can be provided inter alla on the basis of changes in conventionalfactors of production:land, labor and capital and their efficient use. Available 1970-88 data shows increases in the use of cultivated land and labor. Data on capital in agricultureis not available; however, data on the evolution of agricultural machinery imports indicate that the capital stock increased during this period (Table A.6 Statistical Appendix). Trends on other input use is mixed: pesticide imports have increased and fertilizer imports have declined. In any event, these inputs' role in production is extremely limited and their current contributionto growth is negligible. 3/ Recorded experiencehas shown that agriculture'sshare of GDP tends to decline as countries reach more advanced stages in development. - 4 - Table 1.4: AGRICULTURE'SSOURCES OF GROWTH (in percentage) Average Annual Growth Rates Apparent ProductivityGains a/ GDP Labor Land Labor Land 1970-88 0.43 0.31 0.69 0.12 -0,26 1980-88 -0.29 0.77 0.27 -1.06 -0.02 a/ Estimated as the differencebetween the growth rates of agriculturalGDP and factors of production in agriculture. Source: Mission estimates. 1.8 A comparisonof the rate of growth of output with that of land and labor shows that since 1970 labor has registeredextremely small productivity gains, all of them attained during the 1970. (Table 1.4). During the 1980s, the productivityof both land and labor fell. The decline in factor productivityreflected the continuous deteriorationin the quality of the country's capital stock arising from: (i) continuingland erosion; and (ii) very low levels of investmentin basic infrastructure(i.e., irrigation systems, roads). Yields, with the exception of rice, show a negative trend and are becoming increasinglylower than those recorded in other countries of Latin America and the Caribbean (Table 1.5). table 1.5, YIELDS IN PRODUCTION,1970-87 (ton/ha) 1970 1975 1980 1987 Rice Haiti 2.11 2.51 2.40 2.94 L. America a/ 1.78 1.91 2.00 2.24 Maize Haiti 1.04 0.92 0.90 0.91 L. America 1.47 1.55 2.05 1.87 Sugarcane Haiti 36.1 37.4 37.5 35.3 L. America 54.7 54.0 56.7 61.3 a/ Weighted average of Latin American and the Caribbean countries. Sources PAO. 1.9 The sector's performancehas strong implications on welfare. With an average annual population growth rate of 1.42, per capita food availability (as measured by available kg calories) has been decreasing even though food imports (includingcontraband) have been increasing. The latest data on the population'snutritional status4/ shows that almost 502 of households consume less than 75Z of the recommended daily calorie intake, and nearly 362 consume less than 752 of recommendedprotein levels. Table 1.6: FOOD PRODUCTIONAND NUTRITION, 1970-89 Food Production Per Capita Food Supply/Capita/day Index Food Production Calories Proteins Index (kg cal) (grs) 1970 86 103 1,910 43.9 1975 95 103 1,916 44.3 1980 100 100 1,888 44.8 1985 111 102 1,907 45.6 1989 106 90 1,788 a/ 45.0 a/ a/ Corresponds to 1987, the last year in which estimates of calorie and protein intake were available. Sources: Nutrition data for 1970-1985,FAO; nutrition data for 1987 from "Nutrition in Haiti", op. cit. Production indexes, FAO. C. Fiscal and Trade Policies, and Relative Prices Fiscal and Trade Policies 1.10 With the exception of the sugar and wheat flour markets, Government interventionin agri