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June 25, 2001
Summary
Analysts from the U.S. Department of Agriculture traveled to Honduras and Nicaragua during April 16-29, 2001 to assess field conditions in production areas still recovering from the 1998 devastation left behind by Hurricane Mitch. Honduran travel included a visit to the western mountain states of Santa Barbara and Cortes, which were in the center of Hurricane Mitch’s destructive path across the country, and the ecologically delicate but agriculturally robust Pacific coast state of Choluteca. Nicaraguan travel included visits to the states of Chontales and Boaco in the arid south-central region, which no longer plant the substantial hectares of grain they once did, and the northwestern states of Madriz and Nuevo Segovia.
A key question that dogs both Honduran and Nicaraguan policy makers is how to create an economic environment that will permit small producers to shift away from subsistence agriculture and embrace commercial farming, capable of providing a better livelihood for their families. Attendant to that overall plan should be a strategy to protect and preserve water resources already at a low ebb, as declining annual precipitation totals since Hurricane Mitch have stressed ground water resources to critically low levels in many communities.
The food security outlook for Honduras and Nicaragua in 2001 is a continuation of the year 2000 scenario.
1. It is essential to have sufficient rainfall during 2001 to permit those producers with limited access to water storage facilities to grow enough to feed themselves, or grow enough of any crop that can be exchanged for nutrients missing in their diets. The annual monsoon season traditionally stretches from May into October, but its arrival has been relatively late and its performance erratic in recent years. Precipitation was below normal through April 2001, but increased in late-May.
2. Efforts to improve the infrastructure are frequently seen in the form of road construction projects, and installation of flood abatement mechanisms. Still, it is not a given that the commercial avenues of distribution will permit the timely delivery of foodstuffs to the at-risk populations at a level that matches consumption.
3. Despite relatively generous windows for planting many crops, it may already be too late to have a major impact before autumn of 2001 on national policy concerning the debt shared by the agricultural and banking sectors.
Honduras Overview
Honduras has been rationing water for at least 15 years, and for much of 2001 water levels have been reported below 50 percent of capacity. Due to the continued polluting of Lago de Jojoa (the country’s largest fresh water body), nearly all the water is considered to have originated in the mountains, making deforestation of those mountains a focal point of debate. New environmental laws now in affect mandate immediate imprisonment for anyone caught in the act of starting a fire without prior clearance, those tried and found guilty will serve 3-5 years in prison. It is an aggressive law for a nation whose rural citizens routinely fire their fields in preparation for planting a new crop or trash disposal.
The influx of rural populations into the capital city of Tegucigalpa, even before Hurricane Mitch, has forced it to start its water rationing schedule in January to ensure there is sufficient water to get through March and April, the traditional end of the dry season. A long term water conservation program is difficult to enforce while the national economy is severely stressed, and some sectors could generate more cash inflow (the lumber industry is one such example) if allowed to operate with fewer restrictions. However, Honduran decision makers believe there is little choice but to impose these types of unpopular measures, in view of circumstances such as the Health Ministry’s recent warning that a new round of hepatitis-A has been traced to the public water system.
Tradition may be a barrier to improvement for poorer Honduran producers. Traditional cultivation practices in recent years have resulted in declining income, so excellent conditions must exist for small producers to reap a high yield from the poor-quality seeds that they normally use. In the absence of a good crop track record, financial credit is difficult to obtain, even at very high interest rates. Without credit, small producers lack the resources to obtain what is needed to upgrade their operations (quality seeds, fertilizers, pest inhibitors, tools and other field implements). Furthermore, workshops and seminars teaching new cultivating techniques and organic farming are not always attended by the small producers; some reluctantly acknowledge intimidation at the thought of trusting their survival to strangers and big producers who could be angling to gain control of the small producer’s property.
The Honduran National Congress is discussing how to raise and direct funds to producers while simultaneously freeing banks from the burden of unpaid producer debts. Congress must eventually adopt a plan, but with the April-June planting time for corn, sorghum, beans, and rice already approaching its conclusion, any government assistance for crop inputs would have to begin immediately to benefit those who might have delayed seeding their fields.
One producer in Santa Barbara state said his cooperative would prefer that, rather than simply decreeing the forgiveness of the loans, the Honduran Congress authorize an extension of the loan repayment periods at lower interest rates. The producer points out that the government does not lend to agricultural producers, their debt is with private banks. If the private banks are forced to absorb that outstanding debt, how will the banks have sufficient resources left over to extend fresh credit to the producers - assuming the banks will be willing to issue new loans?
Some producers have charged that ever since Congress began serious discussion on the credit issue, some banks have accelerated repossession activity against small producers, seizing control of valuable land parcels for the purpose of re-selling or renting once economic conditions improve. These producers also claim that whatever arrangement Congress crafts, many small producers will not qualify for government assistance, big producers will then buy out the small producers for a fraction of the true property value, and thus the consolidation of agriculture in the hands of big businesses will continue.
Choluteca
The Honduran melon market is in transition in the Pacific Coast Region, government officials say total area devoted to melons remains a net loss since Hurricane Mitch. The after-affects of low temperatures in January/February 2000 is said to have caused two of the largest cantaloupe producers to declare bankruptcy, and others to reduce the area planted. (November is the normal month for cantaloupe seeding.) Some smaller producers quickly switched to watermelon production in an effort to salvage the year, but that plan fell victim to poor timing. Whereas Honduran producers may have expected their Mexican counterparts to plant watermelon in the March/June time frame, Hondurans claim that Mexico planted early in 2000, drawing potential buyers away from the Honduran products. The world market proved to be so inhospitable for Honduran watermelons that smaller producers had difficulty finding a broker who would bid an acceptable price, and that trend carried over into 2001. Nonetheless, the largest producers in the region indicate they are selling everything they can grow. A similar situation is found with the Pacific shrimp industry, where the overall fishing area is now said to be down (mostly small producers ceasing production) while the biggest producer claims prosperity despite all the problems.
Santa Barbara/Madriz
The state of Santa Barbara was heavily damaged by Hurricane Mitch, and residents do not feel their state received the same media coverage following that hurricane as did the Atlantic coastal states. Coffee producers say since Hurricane Mitch, both the weather and market conditions have forced a decline in area and production of 30 percent. Most of them are medium (3.5 to 7 hectares) to large (7.5 to 28 hectares) producers, employing a significant amount of technology in their practices. They are confident that, if only the prices would go up, they would find buyers for their best coffee even when the market is glutted. Only 20 percent of the small producers employ modern cultivation practices, they have no access to credit, and may soon be forced out of coffee production, if not completely displaced from farming.
Nicaragua Overview
The Nicaraguan banking is system is considered by some in the agricultural sector as not being as strong as that in Honduras. Banks were losing money on their agricultural loans before the current crisis and when many banks were privatized in 1994, they cut back on the extension of credit to the agricultural sector. The standard interest rate for agriculture loans today is 23 percent or more, and banks generally do not grant loans for vegetable production. Smaller producers feel they are at risk of being swallowed up by medium to large producers, who also have debt, yet have enough resources to make adjustments during this period of fiscal instability.
Chontales/Boaco
The lack of affordable credit is evident in the states of Chontales and Boaco. Cotton, coffee, sugar, and meat were the main agricultural products of those states prior to the 1980's. Without funding, irrigating the farms became prohibitively expensive in the naturally dry region, forcing all but the more successful producers to discontinue growing vegetables and some grains for activities which require less water. Crop failures caused by unfavorable weather, bad business practices, price fluctuations in the international markets, and other factors soon led to loan defaults and bank failures. The region finds itself in a cycle where (a) producers have no money to pay off existing debt or to invest in a different crop that is more marketable, (b) bankers lack the liquidity to extend the time for loan repayments or offer new loans at low interest rates, and (c) the national government has insufficient resources to underwrite special projects for the banking and/or farm industry.
Producers in this region typically have farms that are 3.5 hectares or smaller, have limited or no access to water, and are thus restricted to corn and bean crops. Those with some water may diversify by planting tomatoes and raising a few head of cattle. The tendency is to plant the same crops each year, often in back-to-back seasons, incrementally depleting soil productivity. Chickens and pigs are also commonly raised and consumed at home.
The banks are not in favor of re-possession of the Boaco and Chontales farms, as there are few buyers for property situated in this somewhat remote area. The major road into the region transitions from being a paved city street into a dirt road a few miles beyond the Managua city limits. A long term project is underway to extend the pavement, however that will only partly solve the problem of transporting agricultural goods to markets outside the region.
Madriz/Nuevo Segovia
The western region is a complex blend of poverty and plenty. The state of Nueva Segovia is viewed as the frontier of Nicaragua, counting among its population re-located families and land-less people. Except for the large, prosperous farms of Jalapa near the Honduran border, small and subsistence producers in the state depend on corn, chickens, and pigs, as production is unreliable under that climate. Meanwhile, lumber is hauled down from the mountains in a steady stream of 18-wheelers on dirt roads just wide enough to handle two lanes of traffic. Manpower is lacking to monitor the deforestation of the region by companies supplying lumber markets in Managua and neighboring Honduras.
Madriz state was also hard hit by Hurricane Mitch, with some producers experiencing major yield losses and others losing their land completely. Electricity is slowly being introduced beyond the larger villages, a double-edged sword in that it will be another expense to households already stretched beyond their means. Money is in short supply. Non-government organizations are extending credit for the purchase of small equipment and supplies, while bank loans come with an interest rate of 24-50 percent. Only the larger producers can qualify for those loans, so smaller producers must arrange deals with moneylenders at a somewhat lower rate, or accept credit from the companies they sell their products to in exchange for all of their crop.
The World Food Program began to distribute corn, peas, and vegetable oil in the area last year when small coffee producers no longer had money to buy basic provisions. The Association of Agriculture and Cattle Producers, a 1,400 member group whose members holdings range in size from three-quarter hectares to 21 hectares, is providing assistance through a program called Peasants-to-Peasants. Some of training is done in other countries, but most of the instruction on improved farming techniques is done in the communities as learn-by-doing activities.
For more information, contact Ron White with the Production Estimates and Crop Assessment Division on (202) 690-0137.
