|CERES No. 135 (FAO Ceres, 1992, 50 p.)|
Non-traditional crops have yielded an unlooked-for bonus in
by Frank Long
For decades, developing countries trying to spark economic expansion have pinned their hopes and aspirations on industrial development, especially manufacturing. The "bad old days" of being tied to the bouncing ball of the world market for a single agricultural commodity, like sugar or coffee, were a nightmare. Continuing to depend on farming seemed backward, pan of an economic past that the developing world wanted to escape.
But Belize has turned this conventional wisdom on its head. In the five years from 1984 to 1989, when falling sugar prices threatened to weaken what had been the backbone of the economy, the tiny Central American country's growth was unprecedented - averaging seven per cent per year. It wasn't due to humming factories or production lines, but in large pan to sales of two non-traditional agricultural crops: bananas and citrus fruit.
Others, struggling to escape single-crop dependency, should consider Belize's experience.
Neglect of agriculture
The farm sector's role in development is a favorite focus of debate. While agriculture is admittedly a source not only of food, but also of employment, earned income, foreign exchange and savings for capital accumulation, the emphasis since the Second World War has increasingly been on manufacturing as the engine of growth. Initial efforts at industrialization for import substitution in Latin America, the Caribbean and Africa reflected the trend. The current thrust in export-led growth repeats this bias, since Export Processing Zones in developing countries tend to engage mainly in assembly-oriented manufacturing for world trade.
In both cases, special incentives have been offered to firms to stimulate manufacturing investment and speed the pace of economic growth. As pan of the export processing effort, a number of countries have recently begun to emphasize the importance of services. Agriculture has generally been neglected.
Except in Belize. The former British colony, with a population of less than 200 000, became independent in the early 1980s. Its economy had traditionally been dominated by sugar, but was faced with a setback not long after independence when growth began to lag in the face of worldwide recession. The slowdown accentuated in 1982-83, abated slightly in 1984, but still remained substantially below 1980's economic performance. Not only was the world in recession, but the Mexican debt crisis caused a partial collapse of Belize's exeports - near-neighbor Mexico is an important buyer of Belize's goods.
Simultaneously, beginning in 1981, sugar prices started a downward slide. The sugar export price index dropped from 96 in 1981 to 64 in 1983. A decline in the US sugar quota also forced Belize to sell its sugar on the world market, where prices are substantially lower than the guaranteed prices offered in the United States and Europe. This led to a subsequent drop in sugar output, with the main sugar companies cutting back on production. In 1980, sugar had accounted for nearly 60 per cent of the total value of domestic exports - US$48 million. By 1984, it accounted for only US$33 million, or 45 per cent of total exports.
Where overall exports had grown by nearly 50 per cent in 1980, they plunged to minus 8.7 per cent in 1981, minus 19 per cent in 1982 and rose only to nine per cent in 1983. Re-exports were at minus 30 per cent in 1981, and minus 59 per cent by 1983.
This had negative consequences in terms of growth, as well as jobs. Unemployment averaged 14 per cent, running as high as 24 per cent in some districts (Stann Creek). Average female unemployment was estimated at 20 per cent.
In contrast with this disappointing record, the period between 1985-89 saw economic growth in Belize reach the respectable average of seven per cent per year. A significant part of the credit can be traced to the 1985-89 Development Plan's advocacy of increasing the output of non-traditional crops. With sugar's importance declining, other commodities offered better income prospects. Citrus and bananas were singled out because of what looked like favorable market conditions.
In a small, open economy like that of Belize, world trade must be the engine of growth, since the limited domestic market is unable on its own to provide enough stimulus to make development self-sustaining.
Between 1984-89, sugar exports at constant prices stood at US$33 million. At the same time, however, citrus exports rose from US$9.8 million to US$14 million, and bananas from US$3.1 million to an extraordinary US$ 13 million.
The agricultural production index shows sugar output actually declined from one million long tons in 1984 to 777 000 long tons in 1988. The volume index dropped from 100 to 76. The opposite was true of oranges, whose output in the same period rose from 1.1 to 1.3 million boxes. The volume index jumped from 100 to 265. As for bananas, output rose from 555 000 to 1.4 million boxes, and the volume index from 100 to 251.
An indication that the future of citrus and bananas may continue to be an optimistic one was contained in official projections to 1997. These showed sugar exports barely rising above their 1984 level, with citrus rising to US$51 million and bananas to US$73 million. Clearly sugar will remain an important factor, but non-traditional crops are growing in importance.
It would be a mistake, of course, to attribute Belize's recent success solely to these two crops. Manufactured exports, chiefly garments and tourism were also driving forces behind the economic expansion. Tourist receipts, for instance, rose from US$11 million in 1984 to US$26 million in 1988, while garments accounted for nearly US$30 million in 1988. Further fish exports also rose.
Nevertheless, the most spectacular increase for agriculture was that of citrus and bananas.
The key factors affecting the growth of Belize's non-traditional agriculture can be summarized:
Investment concessions - Between 1985-89, 47 investment concessions were granted to agriculture, most for bananas and citrus. Of the total investment under concessions of B$ 82 million, B$41.8 million went to agriculture. Concessions granted to both local and foreign companies for farm investment included tax relief, duty-free concessions of machinery and equipment and the like. More than half of the 2 100 new jobs created by concessions went to agriculture, and most of these to non-traditional agriculture.
Such concessions are offered largely to private business, and the emphasis on non-traditional crops stemmed from the simple fact that most applicants wanted to raise bananas or citrus. Their preference resulted from their anticipation of a guaranteed world market for these crops, as compared to others, by the mid-1980s. The two commodities commanded higher prices in both the US Caribbean Bassin Initiative (CBI) and UK (Lommarkets.
Belize's 1985-89 Development Plan recognized agro-industrial growth as a priority, noting that industrialization was interpreted as "a method of organization of production applicable to all sectors of the economy and particularly for the viability of export industries". It also recognized the importance of a diversified agricultural base in view of the vulnerability associated with undue reliance on one export crop. A developed marketing infrastructure for exports was already in place for citrus and bananas, but not for other non-traditional crops.
Increased acreage - More land was brought into production by private operators. The planted area for bananas, for example, increased from less than 900 acres in 1984 to 2500 acres by 1987. During this period, land under citrus cultivation increased from 12000 to 16 000 acres. At the same time, yields rose from 150 boxes per acre in 1983 to 275 boxes per acre in 1988. Significant jumps in yield were also recorded for bananas.
These yield increases stemmed from improved husbandry practices, especially in the area of pest control. Private farmers tilled more land because the fruits they were raising offered substantial assured market returns. Since Belize is relatively sparsely populated, bringing idle land under cultivation is a relatively cheap and easy matter, provided adequate infrastructure exists.
Privatization initiatives - The nontraditional sector saw several privatization initiatives in the mid-1980s. The Banana Control Board was divested of its commercial holdings. These were taken over by private enterprise, whose heavy investment in planted area included irrigation. Crop losses were thus reduced. The main UK international buying agent, through the board, also offered local producers higher prices. These resulted from a new pricing formula, partly reflecting buoyancy in the UK market, and helped boost domestic supply.
Duty-free access - CBI provisions allowing for duty-free access of Belize's exports to the United States benefited citrus products. The CBI came into effect in the mid-1980s. However, a major crop failure in Florida opened up the US market, which absorbs most of Belize's citrus exports. This was perhaps the chief reason for the rise in citrus exports during the period.
Compared to other non-traditional products - such as vegetables, other fruits and fish - citrus and bananas offered the greatest attraction to private investors. Apart from attractive prices, most exported citrus is processed by two factories into citrus concentrate. Hence there was a ready and organized market for farmers. Bananas also find a ready market once product quality reaches an acceptable standard. This is probably less true of fruits and vegetables. Fishing may also have ready markets, but requires high initial capital outlays, especially for deepwater activity. Trawlers and freezers are more costly than land, which in Belize is abundant.
The export success of non-traditional agriculture has essentially been a case of independent producers reacting intelligently to new market signals. But every success has its downside, and Belize's story is no exception. Several drawbacks should be noted.
First, citrus and banana production has been concentrated among a few large farms. Nearly 70 per cent of the land under citrus cultivation in Belize is located on 26 farms with total acreages of more than 50 acres. Smaller farmers, who are in the majority in Belize, own only 30 per cent of the land, usually the less fertile areas. This uneven distribution of ownership means that, in fact, agricultural growth has brought only limited gains to most farmers, raising fundamental questions of equity.
Working conditions on some large citrus and banana farms also leave much to be desired, especially in respect to migrant workers from neighboring countries. Poor pay, inadequate housing, poor sanitary and health conditions reportedly characterize conditions for many non-unionized migrant workers, and a shortage of local manpower is leading to their increasing use.
Finally, few links have been promoted between non-traditional agriculture and manufacturing - which suggests that great scope exists for increasing domestic value added from local agriculture. This in turn could boost national wealth and employment, while strengthening the country's overall economic structure.
Such lacunae in the 1985-89 experience indicate that agriculture in Belize would have been better served if equity, basic needs and structural issues were boldly incorporated into programs of agricultural change. That they weren't is attributable to the fact that the programs relied largely on market mechanisms for their momentum. The state took a basically "hands off" stance.
Both bananas and citrus have in the past benefited from preferential access to the European and US markets. If continued growth is to be assured, however, building on preferential market access in future will require non-traditional agriculture to increase its international price competitiveness. A recent review of the sector by this author suggests that considerable opportunity exists for increasing farm efficiency for citrus and bananas, particularly in terms of husbandry practices.
Yet another market opening may result from the recent spectacular growth in tourism. Local food production has barely begun to capitalize on this opportunity.
The full potential of non-traditional crops is yet to be tapped.