F1RETU1RN TO 11 RFoRrs ET.SK RESTRICTED 1TVEWEE< This report was prepared for use within the Bank and its affiliated organizations. Public Disclosure Authorized They do not ciccept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized CUR:RENT ECONOMIC POSITION AND PROSPECTS OF CHILE (i '.our volurrae s) Public Disclosure Authorized VOLUME IV ANNEX II AGDTrIUTTT .TURE August 2Z, 1966 Public Disclosure Authorized Western HemisDhere Department CURRENCY EQUIVALENTS Effa±±Cective . EL.xc1hange RLates ae of T- !5, 196 CURRENCY: ESCUDO (E ) Banking Market Spot Rate: 1 U. S. Dollar = 3. 97 escudos 1 escudo = 0. 5 U. S. Dollar Futures Rate: 1 U. S. Dollar = 4. OZ escudos 1 escudo = 0 25 U. S. Dollar …-., _ .- . iDrolcer:s iNlarKtet 1 U. S. Dollar = 4. 65 escudos 1 escudo = 0.21 U.S. Dollar The* spot rate applies prart sicall-y onl-y +t forei--- sale b,ay the larged forign mining companies to the Central Bank of Chile; and the brokers' rate to a minor portion of private capital transactions and private invisibles, mainly tourism. The futures rate applies to most trade and capital transactions and is therefore the rate used throughout this report. For conversion of all figures in constant 1965 prices into U.S. dollars, the average 1965 rate of E° 35 to 1 U. S. dollar has- been used. For conversion of 1966 data expressed in current 1966 prices into U.S. dollars, an average rate of E° 3. 9 to 1 U. S. dollar has been used. TABLE OF CONTENTS Page CHAPTER I - THIE PRESENT AGRICULTULAL SITUATIONI General Setting 1 Past Performance 1 Land Use 2 Land Tenure 3 Farm Sizes and Productivity 4 Water Utilization 5 LAND CAPABILITY - MAP 7 CHAPTER I: - ORGANIZATION OF AGRICULTURAL PROGRAIMS Administrative Set-Up 8 Research 8 Extension 8 Education 9 Reorganization 9 Credit 10 CHAPTER III - THE FRAMEWORK FOR COMM1E:RCIAL AGRICULTURE Objectives of Agricultural Policy 12 Price Policy 12 Recent Price and Cost Trends 14 MIark et in g 16 Inputs 17 Cre it 18 Taxation 19 CHAPTER IV - AGRARIAN REFORI Provisions of the New Law 20 Expropriations 22 Water Rights 23 Settlei.en-t 233 CrUA MLmD V - MUT AGICT)Trn1TAT Th%1t1LtIT T.TT\Tr IT)nPGAt.T G1rowtuh Target-s 27 Public Investments 29 Drainage 30 Soil Conservation and Reforestation 30 Fruit and Wine 31 Seedus31 Other Crops 31 Livestock 32 Conclusion 32 STATE OF IRRIGATION - CHART 33 TABLE OF CONTENTS (Continued) Page APPENDIX A - LIVESTOCK MARKETING 34 Table A Agricultural Production Statistics 37 Table B Malor Agricultural Imports 39 Table C Main Agricultural Azencies (1965) 4° Table D Main Price Indices 41 Table E Wholesple Pricen of' Main Agricultural Commodities 42 Table F Projection of Agricultural Trade (1970) 43 CHAPTER I. THE PRESEMIT AGRICULTIJRAL SITUATION General Setting 1. Agriculture in Chile faces widely variable natural conditions. Climate ranges from sub-tropical desert in the north to very humid and polar in the south. It is temperate over a long stretch of the central zone. In the four northernmost provinces, agriculture is heavily dependent on the supply of irrigation water. On the other hand, the southern provinces of the Central Valley (and the archipelago) are well-watered by rainfall, and only supplementary irrigation is required in the central zone (see map on page 7). Soils are rich in the north, although salinity is often a problem north of Coquimbo. They are chemically poor south of Bio Bio, requiring heavy applications of fertilizers (particularly phosphates). Topography makes cropping difficult, except in the Central Valley where flat and gently sloping lands provide a perfect setting for intensive irrigated agriculture, in many ways similar to California. By contrast, Chilean rolling pastures in the south are often compared to New Zealand dairy country. On the whole, land resources are not as plentiful as in some other Latin American countries: arable land amounts to about 0.60 hectare per capita, one ninth the figure for Argentina and slightly more than one third that for Brazil. However, a relatively high proportion of the land is irrigated, and infrastructure is, by and large, adequate, particularly in the Central Valley. Past Perform.ance 2. Crop yields in Chile are on the hirrh side, if compared to yields in many other developing countries, e.g. average wheat output per ha. is of the same order of magnitude as in the United States. Yet. in Chile. perhaps one third of the wheat is grown on irrigated land, whereas U.S. wheat is sown and harvested mainly in eytensive dry farming areas. When compared to yields in developed countries having similar land endowment per capita, average Chilean yields are low indeed, no more than 50-60 rer cent of those obtained in Denmark or France. But in Chile average yields are made up of wideljy varying productivity levels. Improvements in pro- ductivity have been slow and uneven. In the past 10-15 years, substantial increases in production have only obtained for a few. crops (maize, sugarbeet and oilseeds) as a result of well coordinated government and cooperative efforts in marketing, credit, technical assistance and pricing. Livestock production has, by a-nd large, remained stagnant, except for poultry and pig production which are beginning to feel the impetus of new intensive methods and are actively assisted by government credit (Table A on page 37). On the whole, agricultural production has increased at about 2-2.5 per cent per annum over the past 10-15 years, while the economy as a whole has grown at around 3-4 per cent and population at around 2.5 per cent per annum Agriculture now accounts for only about 10 per cent of GDP. Over the past decade the agricultural labor force has apparently remained stagnant (around 750,000). This has meant a progressive decline in the proportion of the total labor force working in agriculture: 39 per cent in 1930, 34 per cent in 1950 and 26 per cent in 1960. 3. Thus past growth performance represents a net increase in labor productivity. Yet, it cannot be considered satisfactory. The income elasticity of Chile's food and fiber demand is re'latively high (around 0.5). As a result, the agricultural balance of trade has deteriorated (see Arnex I). Moreover, the diet of the majority of Chilean people is deficient in fats, proteins, fruits and vegetables. Chile now imports about US$130-140 m-l- lion worth of agricultural and livestock products and exports only US$;25-30 million of such products (mainly wool, fruits and vegetables). About two thirds of Chile's food and fiber imports could be produced locally. There is a growing domestic market for what are now the main products of Chilean agriculture: cereals, meat and milk. Furthermore, Chile's privileged nosition south of the eauator gives it a competitive advantage in the international trade of fruits. Land Use 4. Of Chile's total area of 74 million ha., deserts and mountains with neitne tre-r nor grarnc twwov±othirdsi Roughlv 21 million ha.. are usable for crops, pastures and forest. Out of these, 5.5 million ha. can~~~~~~~conldre be arbl acrir. to then+11955 r Iess IrrigatedP rlandnr isq estimated to take up about 1.4 million ha. 1/ However, recent surveys show that an additional 500,000 ha. may be uinder "contirgent. irriationn i .e. under canal design area, but receiving little or no water because of unfavor- able micro-relief; or receivng water less than 85 per cent of t1ie tir,pe or less than 70 per cent of normal supply in dry years 2/. This goes some way i.la-Tir mucii,l v' +-fth ivr'riga tinn water is used on ,niminvropd TInsture Poor planning of irrigation and wasteful water utilization practices go hand in hand with thle low intensity of 1land usechrte-icoCil'ag- culture. The high proportion of arable land devoted to unimproved pastures 1/ Considerable uncertainty surrounds statistics of land and water use in I A _t 1-_ ,,_{,,X_ _ _ _ I..,A & l.t t'. * It U-W cenLIUb halUI sJ 1e t-UL'ycr U7iI tUILL' UUU UUU no rsltso . are yet available. Partial findings of the aerophotogrammetric survey suggest that the total amount of land in classes I-IV (a good measure of arable area) may be slightly below 5 million ha. 2/ Nathaniel Wollman - Water Resources of Chile: An Economic Model, Washinaton. 1965. and the small fraction used for high-value crops such as fruits clearly indicate that there is scope for substantial production gains. It would, however, be mistaken to assume that the bulk of farming areas now lyin; fallow in natural grasses could be cropped profitably over the long run without additional land improvements or special precautions against erosion or overgrazing. Table II.1: LAND USE PATTERN (1955) Total Irrigated '000 ha. '000 ha. Annual crops 1,301 23.5 553 39.8 Vineyards 97 1.7 48 3.5 Fruits 83 1.5 58 4.2 Improved pastures 487 8.8 328 2'3.6 Natural pastures 2,910 52.5 403 28.9 Fallow 665 12.0 - _- Total 5,543 100.0 1,390 100.0 Land Tenure 5. The present land tenure pattern in the north and in the Central Valley results from the early days of Spanisn colonization when large itracts of land, together with the indigenous population settled on the land, were distributed to prominent colonists, in recognition of the-r services to the Crown. The large size of farms, the feudal relationship between landlord and farm labor and a system of farming heavily based on wheat and extensive cattle raising are traditions well-anchored in Chile's countryside. Examples of such anachronistic estates can still be seen in the Central Valley, side by side with progressive commercial farms, comparing well with their miodern European counterparts. Low wages, partly in kind, are not conducive to introduction of machinery, equipment and other labor-saving devices. A rigid social structure, giving farm laborers little hope for economic ad- vancement, provides no incentive for increasing skills or improving labor performance. The operation of very large farm units, following modern methods of farm management, requires considerable inputs of capital and know-how which relatively few owners have been willing or able to provide, given an economic environment consistently biased in favor of urban life and industrial activity. 6. The distribution of Chile's land and water resources is concen- trated in relatively few hands. On the basis of the 1955 census, it i, estimated that about 4 per cent of agricultural properties (6,300 in num- ber) covered some 51 per cent of the arable land and 53 per cent of the irrigated. area. At the other end of the scale, half of the farm units (76,000 in number) benefited from only 2.8 per cent of the arable land - 4 - and 4 per cent of the irrigated area. About a fourth of these were estimated to possess too little Jand to utilize the available family labor throughout the year, even at low levels of productivity. Table II.2: LAND DISTRIBUTION Size of Holding Number Average Area (ha.) (ha.) (000) Agricultural Land Arable Land Irrigated Land 0 - 1 28.2 0.2 0.2 0.1 1 - 10 47.4 3.9 3.0 0.9 10 - 1(0 53.8 30.8 18.7 2.6 100 - 5(0 15.2 195.8 101.7 21.8 500 - 1000 3.1 624.8 250.6 58.5 1000 - 5000 2.6 1,771.2 539.7 105.1 Over 5(00 0.7 114,884.0 982.0 191.4 151.0 1143.2 36.7 7.3 7 .±.It has been est±imated that,L 7l per cent o 1i.Lle's farm population receives one third of the total agricultural income, whereas 37 per cent of the income goes to the wealthiest 3 per cernt. When one considers that the rural sector receives approximate'y 10 per cent of the national income, the plight of the low-incomie farmers mentioned above appears in an even worse light: they constitute 21 per cent of the population, but receive only 3 per cent of the gross product. There is ample social justification ior improvemen.t of the income distribution pattern of the rural sector. Farm Sizes and Productivity 8. flot all large farm holdings in Chile enjoy favorable climate and topography. Many are in the far south where natural conditions dictate extensive livestock raising. Some are north of Santiago where moisture is so low that considerable expanses of hilly terrain can be used only for seasonal pastures, with a portion of the irrigated valley devoted to pasture and forage crops. Such farm units cannot be easily split into family hold- ings. Similarly, large fruit orchards and vineyards are more readily inte- grated with industrial fruit or wine processing installations than small and scattered peasant farms. Thus, there are definite economic advantages to large-scale farming in many areas of Chile. Although statistical evidence reproduced below suggests that output per irrigated ha. in Chile is inversely correlated with farm size, output per farm worker tends to be higher on large farms. While labor is relatively abundant, management know-how is in very short suoply. Thus, diffusion of land holdings does not neces-- sarily imply more economic land use. Table II.3: FARM; SIZE AID PRODUCTIVITY (1955) (in constant 1965 Escudos) Output Output per irrigated ha. per farm worker Sub-family 2,994 1,105 Family 1,507 1,683 Medium multi-family 1,125 2,582 Very large 782 3,826 Average 942 2,778 Water Utilization 9. Chile's agriculture depends upon irrlgation for 65 per cent of its production. A najority of canals and ditches now existing (accounting for roughly 1 million ha. of irrigated land) were built by private land-- owners. Some of them date back to Colonial times. However, an increas ng proportion of new irrigation developed during the last fifty years has been *der t+a±,en-thle Direccion de RiJego, a governm,lent agencyL- WI±L i is u J. the Ministry of Public Works. Good soils, excellent agricultural climate (often suitable for double cropping) and irrigation water have been com-- bined under good management in some parts of Chile to produce hi,h returns per hectare and per agricultural worker. Yet the irrigation water, as valuable as it is potentially, is badly used. First, a large amount of water is used for low-value production on unimproved pastures. Second, the water is applied in a wasteful manner. Recent studies disclose that; current water use is 20-50 per cent in excess of optimum application levels for the existing cropping pattern. This is due to antiquated and poorly maintained irrigation works, the rudimentary irrigation technique commonly used (inundation) and the absence of land leveling,: high-and-dry spots alternating with flooded low areas may reduce production as much as 50 per cent. Night irrigation or storing of water during the night is practiced only on a few farms; water arriving in the canals at night is mostly al- lowed to go to waste. Improvement of existing irrigation systems would afford a rapid increase in production at relatively low cost, and augment the area irrigable by at least 20 per cent. 10. Another major problem is that irrigation systems are built by one department of the Government (Public lWorks) before another department (Agriculture) has made plans to utilize the water on farms. After major works are completed, the farmland sometimes is discovered to be inaccessible to water by gravity-flow, or the area and the quality of lands which can be irrigated are found not to justify investments already made. There has been little incentive to use water properly because payment for water has been low and unrelated to amounts of water applied. - 6 - 11. Underground water resources are largely unexplored. Particularly in the northern part of the country, where agriculture depends mainly on irrigation and where there are serious teclhnical and economic limitations to irrigation from reservoirs, development of wells may offer good possi- bilities. 12. Production could be increased in many areas by proper drainage. In the dry regions, drainage can control salinity; in the wet southern part of the country, it could open large areas to cropping and pastures. Farmers should be encouraged to improve their lands with mole-drains and small open ditches. Technical knowledge on these subjects is limited in Chile; it might be worth while to make more use of foreign consultants. 0~~~~~~~~~~~4 ~~~~A~ GE LES _ UJ 20- - - i 3 0 MONTT - UP1g 1H EN I5 -.. ANTOFAGASTA 1 ) - i 0 VAA I BR AR A O | . IA 1111NA~ ~ ~ a111 W ,r.r( 30 z~~~~~~~~~~~~~~0u 500CZ LU 35' t< GROUPI Tl LLABLELANDGROUP 2 LAN FOR PA1TURE ONL |IAETG3 OOE 1 LNDUP OR~~~~~~~~~~~~LIIAIN sLGH/M I~T OCSOA RLIIE ATR 55, __ GROUPI TILLABLE LAND GROUP2 LAND FOR PASTURE ONLY TILL,ABLE WITHOUT LIMITATIONS TMEAR ROUND PASTURE C H I L E OR WNITH SLIGHT LIMITATIONS ,/ii, OCCASIONAL OR LIMITED PASTURE I TILL ABLE WITH SLIGHT GROUP 3 WOODED LANDS "LAND CAPABILITY OR mODFRATE L IMITATIONS M-7 WOOD USABLE ONdLY IN PART 1 IAA ATC cr(ThrDAD-1411/ 7(nNIrC TILLABLE WITH MODERATE GROUP 4 NON AGRICULTURAL LANDS & IRRIGATION N ECESIY | Li!TATIONS OR ONLY ITnlOUT PRESENT OCCASIONALLY TILLABLE AGRICULTURAL VALUE KILOMETERS JUNE 1966 IBRD 1O8 CHAPTER II. ORGANIZATION OF AGRICULTURAL PROGRAMS Administrative Set-Up 13. The organization of Chile's agricultural programs is complex and diffuse. No less than 21 agencies, responsible to various lMinistries (Agriculture, Lands and Settlement, Economy, Finance, Public Works and Education) are involved in the agricultural development effort. Iviost are multipurpose and many enjoy considerable autonomy. The allocation of administrative and financial resources among the various agencies appears in Table C. A brief review of the organization of research, extension, credit and education follows. Research 14. Agricultural research establishments in Chile can draw on a considerable body of local experience, gathered over almost a century. Help has 'been received from abroad, particularly the United States (Ford and Rockefeller Foundations). Until now, the emphasis of research has been on crop and animal production. Remarkable results have been achieved on new plant varieties. On the other hand, fruticulture, irrigation and agricultural economics received less attention, and more work needs to -De done in the field of fertilizer research. Because of considerable vari- ations in natural conditions from North to South, research projects must be fitted to specific regions, requiring substantial decentralization of research onerations. The Institute of Agricultural Research operates three major experiment stations - La Platina (Santiago), Chillan and Temuco - and seven minor ones. The Institute was set up in 1964 to con- duct applied research and to coordinate all research efforts irn the country. Closer cooperation than in the past is evident with the research division of the Department of Agriculture, the farmers' associations, marketing agencies Rnd the universities. The Institute employs 138 professionals, most of them agronomists. In addition, the Department of Agriculture employv 40 nrofessional and technical employees for research. Research staff is generally competent and hard-working, but has often operated in relative isolation. As a result, some research prolects have been of academic interest only, and valuable research results have been slow in reaching the farmers. Closer relations should be instituted between re- search and extension personnel. Extension 15. The extension service is perhaps the weakest link of Chile's agricultural awdUlin±istration. TheC extension divlsi- - 9 - of Agriculture employs a staff of only 125, less than half of whom have university education. There is excessive concentration of staff at head- quarters, transportation facilities are inadequate, and salaries so low that many extensionists often look for side occupations to supplement their income. There are examples of successful extension programs in Chile, but they are outside the department. The most spectacular are those associated with sugarbeet and oilseeds cultivation. These rela- tively new crops have been promoted through contractual arrangements between processing plants and farmers combining technical advice, price assurances, marketing services and credit. In the absence of an effi- cient multipurpose extension organization, commercial farmers have had to hire their own agronomists or purchase the services of private manage- ment consulting firms. Agroservicio, a private organization which has received official support, is now experimenting with the organization of extension throug.h cooperatives and plans to expand its services. Education 16. The Universities of Chile, Concepcion and Valdivia together with the Catholic University (and in the future also Valparaiso) train agronomists and foresters. The annual graduate output runs between 100 and 120. In addition, 40 veterinarians are trained at the Universities of Chile and Valdivia. Coordination between these two programs is poor. There is no specialized training in livestock husbandry and pasture manage- ment. It is the mission's impression that Chile has placed more emphasis on quantity than quality in higher agricultural education. The training of mid-level agricult" ral techrnicians also leaves muich to be desired. This is because the agricultural vocational education system is restricted and outmoded. The mission feels that the !on--term. agricu-1tural developD- ment of Chile would be well-served by expansion and modernization of LranLng facllUities for mi-levell technIcians. In any case, this sub- ject deserves detailed expert investigation. Reorganization 17. Inadequate administrative machinery is widely regarded as a major impediment to agricultural progress in Chile, and there is little doubt that scarce manpower resources have indeed been wasted in the past through duplication of funrction and lack of coordination among government agencies. The Goveriment is now working on a reorganization plan designed to streamline the agricultural admuinistration and to strengthen the co- ordinating role of the finistry of Agriculture. A planning unit has already been set up in the Ministry to translate 0DEDAI IToverall .uidelines into a development program for the agricultural sector. Inter-ministerial committees have also started to operate, on an informual basis, to coordi- nate policy with respect to prices, inputs, credit, marketing and water use. However, major issues of the reorganization are still unresolved, and implementation will require special legislation. Hence, it will be some time before the effects of the administratlve reform are felt. - 10 - Credit 18. The Banco del Estado is the main source of institutional credit for agriculture. The Bank operates in all sectors of the economy, but about half of its funds are estimated to go to farmers, most of whom are in the commercial farming sector. Although wholly owned by the Govern- ment. the Bank enjoys considerable autonomv and has onerated on the basis of strict banking criteria. Loans to farmers have been handled by the commercial] lending department tnfthe RBank and +.the agricultural credit d.e- partment. The bulk of lending has been short-term, often in connection with saleps of fert1i7lizr and o-her inplts. Ovner the years, the bank has managed to knit close contacts with the commercial farming comn- mTnit 3n T+ opeat e an e+ensive r,etwork ofoirreial o+'ffces (160 7rr has gained valuable knowledge of local conditions by handling storage a-d sales of sp es 4gi,-U lts Ao-department Despite technical staff liritations (the Bank has only 22 agronomists on traditional lending pattern, with primary emphasis on security, to lending tailored to specific farm plans. A supevised credit sc-heme initiated in 1959, in the Nuble province, with U.S. aid support, has been extended to Santiago and Bio Bio prI-vinces, bvut the aggregate amo-Iut of the Banrk's lending under the program has been small (E°1.5 million in 1965). 19. CORFO is mainly concerned with medium-term development lending both to individual commercial farmers and to the cooperatives and agri- cultural industries serving them. Virtually all the agricultural machinery sold in the country is financed oy CORFO, using suppliers' credits obtained abroad. CORFO also offers credit in connection with the credit programs and projects is prepares: dairy and livestock production and marketing (with World Bank help) and, more recently, orchard and vineyard development, poultry production and pig production. Technical assistance is provided together with credit for livestock development loans. The professional staff includes 72 agronomists. Yet, disbursement of loans by CORFO has been slow and credit supervision has been poor, mainly because of inade- quate administrative machinery. The Government is now considering recrgan- ization of the institutional credit structure. The mission believes that an effective arrangement for expanded development lending to the commercial farming sector could be designed, combining CORFO's technical and economic know-how with the Banco del Estado's financial experience and administra- tive infrastructure. 20. Government credit assistance to small-scale farmers is relatively new. It started around 1960, with pilot scale operations, but has now been extended to most agricultural areas of Chile. The main organization in charge of channeling technical advice and credit to small-scale farmers is the Instituto del Desarrollo Agropecuario (IFDAP). It operates 102 branch - 11 - offices throughout Chile and has more than 100 agronomists and veterinar- ians on its staff. Most of its loans have been of 12-18 months' duration, for purchase of seeds and fertilizers. With assistance from the Inter- American Development Bank, INDAP now hopes to allocate more resources to medium-term loans for livestock, equipment and pasture improvement. In order to cut on administrative expenses (which now account for about a third of amounts effectively lent), INDAP hopes to make more and bigger loans to farmers' cooperatives. INDAP's loan recovery record has been good, given the social character of much of its lending. This, and the very high cost of non-institutional lending to small-scale farmers, indi- cates scope for further exDansion of INDAP's operations. In 1965, INDAP gave credi.t assistance and distributed supplies to 46,ooo farm families. - 12 - CHAPTER III. THE FRAMEWORK FOR CO1IZEPRCIAL AGRICULTURE Objectives of Agricultural Policy 21. The Government has yet to formulate long-term objectives and policy guidelines for agricultural development in Chile- It is aware that a continuation of past trends in agriculture will be inconsistent with a satisfactorymoverall growth rate. And it feels a deep sense of urgency for social reform in rural areas. To some extent, the economic and social objectives of the Govern-ment coincide, since a sizeable proportion of the large estates, particularly in the Central Valley, are poorly managed and unrespons4ive to econom4c incentives. On the ot'ner hand, land reform ana investments in the subsistence and near-subsistence farming sectors of Ch.l.ean agriculture are bUoundu tLo be slow-leIl d ing . If the agricultural' development effort is to succeed over the next few years, it will have to be based mainly on the progressive commercial farming sector which alrAdy contributes over half of agricultural and livestock production. The criti- cal question for Chile will be to strike a responsible balance between policies and programs encouraging the development of commercial agricul.- ture, and those mainly directed at improvements in the rural social structure. Price Policy 22. Because of its widespread use in economic decisions throughouut Chile, the cost-of-living index published monthly by the Bureau of Statistics and Census has become something of a national fetish, weighing heavily on the formulatlon and conduct of agricultural price policy. Foodstuffs az- count for almost half of the basket of goods and services making up the index. The formula on which the index is based is related to dietary habits prevalent in 1957. It does not reflect recent increases in poultry and pork consumption and has been criticized for being restricted to Santiago and including luxury consumption items such as choice beef cuts and pate de foie. Finally, doubts have been expressed as to the reliability of surveys undertaken by a handful of inspectors in a small sample of designated stores. - 13 - 23. Three government agencies are involved in the formulation of price policy: the planning section of the Ministry of Agriculture, the Bureau of Industry and Commerce (DIRINCO) under the Ministry of Economy and the agricultural marketing corporation (ECA). Complicated statistical procedures have been designed to guide pricing decisions, even though the poor quality of the data rarely warrants sophisticated mathematical treat- ment. The combined effect of month--to-month price variations (weighted as in the cost-of-living index) is not allowed to exceed a guideline fixed by the Government for the entire sector. Account is sometimes taken of input cost variations, but the emphasis is on past years' averages (unfavorable to farmers), and major weight is accorded to the stabilization objectives of the Government. Because producers are rarely organized, the restrictive effect of price controls at the retail level is often reflected, in full, at the farmgate. 24. The predominant purpose behind price policy has been the protec- tion of the urban consumer against increases in food prices. To this end, the Government has gradually extended price controls over the bulk of Chile's farm products. Government decrees now fix prices for wheat, rice, sugar, wine, milk and their derivatives (except cheese) at all levels of the marketing process from the farmgate to the retail store. Maximum re- tail prices are also in force for beans, edible oils, vegetables, beef, chicken, lamb, pork and fish. Furthermore, the Government enjoys monopDoly of import for wheat, maize, potatoes, milk and dairy products, while import and export controls- administered by the Central Bank, are used to regulate foreign trade of other agricultural commodities. The Government employs insneetors to control nrices in retail food stores; and intensive prona- ganda is periodically directed at housewives to denounce black market onPrato-rs 25.; Tn nn eff-rt +to dfcr,aease +hel,rti-t- - asocai+at wlth infla- tion, the Government is planning to establish forward pricing, i.e. minimum support prlnnc f- r ma,or crops in advance of the ping+- season. Base prices readjusted in accordance with changes in input costs and the cost of living would be used. In order to decreasennother cause of price in- stability, the Government has recently announced its intention of broadening t the systaP. of agricultural "warra-nts" f an^ng to hel p promaote o storage by individual farmers and cooperatives. In this way, it is hoped 4 1 th the4 shrp sasc.naol A-A 4 - - A1 An4_+fyt-.rml i br, + Pv r_n4 Y wsscw~~~ c>clinvcz~ ac des;W^| sA; novw pX e v alew s . A v Fo* }v 65vv s potatoes and other storable products will be moderated. More far-reaching measures~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~involvng not on'ly add-it-oal1 refrigeraged storage, but also- me su e inLvo JV.LL&r i.LldV bb.L..LJ U V WL1Ji4,J ~.L.L E4.± 063_' U1_DV'C , LIULA %I .L.L0 J 6 ~ pasture improvement and use of stored feed for winter fattening would be necessary to da-MpUen. the sesoa-cattle---.-_ flcuain asoiae____-A-4 wit lI~~d.L5 y L UdJ1~JCiluii CUD.U1itt-L ±iL_LUUdLUc.,LUl11Z M.bZ>LJ±.UCLU% W.Lu LU UdL ULC raising. 26. Highly-placed government officials have stated that the country should evolve to-ards a predominantly market-oriented agricultural economy over the long run. However, given the current rate of inflation, they argue that no siTbstantial relaxation of controls is possible in the near futu:re. Over the next few years, prices of agricultural products would apparentjly be allowed to rise faster than other prices. TLLe Government's price model for 1966 aims at an 18 per cent increase in agricultural prices compared. to an overall inflation rate of 15 per cent. Furthermore, minimum support prices would be established for maize, barley, rye, beans, potatoes, onions, broilers and pork, products for which Cnile has achieved, or wi1ll soon achieve, self-sufficiency. While long-term assurance of remunerative prices can go a long way in stimulating production, it appears that Chile has not faced up to the considerable difficulties standing in the way of efficient public management of agricultural markets. The staff of ECA is competeint and devoted. Yet, no single marketing agency should be expected to control effectively the market behavior of a wide variety of agricultural products, particularly perishables such as milk or beef. For such products, consi'der- able skill needs to be applied in determining the size and timing of imDorts. In the past, imperfect timing of imports and sales by ECA has ternded to induce rapid price drops and to distort the seasonal pattern. It is likely to have discouraged much investment, particularly in livestock. For the short run, the Government should therefore develop a consistent trade policy fully cognizant of the impact of imports on producers' incentives. As inflation is brought under control and food prices can be allowed to rise, it would be desirable to move towards a comprehensive system of private trading for agricultural and livestock products. 27. ECA is in process of reorganizion. The accounting department is being strenathened. By the spring of 1966, no financial statements for 1964 and 1965 were yet available. Despite financing by the Central Banki 0 at low interest rates, losses estimated at E0 15 million and E 25 million were incurred in 1964 and 1965. ECA management hopes to break even on its 1966 operating account, by balancing expected losses on its meat trans- actions with profits on wheat, maize and dairy products. Investments under the 1966 capital budget include Ei° o.6 million for purchase of shares in a dairy plant taken over by the Government after private liquidation. Given the increasing administrative burdens iposed on EC.A; the dairv plant should be turned over to the private sector as soon as possible. Recent Price and Cost Trends 28. During the 'fifties, prices of farm products declined relative to other prices. The trernd was revrersed in the erly 'st1es, and the agricultural price index rose relative to the wholesale price index, partvicularly from 1963 to 1965 (Table D). From 1958 to 1963, crop prices (led by cereals) tended to decline in relation to the general level of prices, while livestock prices (led by beef) exhibited no sig.if ict trend. Crop prices have recovered since 1963, and livestock prices have risen substantially in real terms, reflecting with some lag sharp increases in the price of imported beef. On the whole, 1965 saw a crop price index 3 per cent, and a livestock price index almost 18 per cent, above the 1958 levels in real terms. Yet, these price gains have been more than offset by rises in input costs, mainly as a result of substantial' readjustmentt. in rural wages during 1964 and 1965. - 15 - Table II.4: MINIICUU AGRICULTURAL WAGES 1959 1960 1961 1962 1963 1964 1965 Minimum agricultural wage 0 (E /month) 19 21 27 28 40 61 98 Mlinimum agricultural wage index 100 110 140 150 213 323 515 Cost of ].iving index 100 112 120 137 197 288 371 29. A review of current price trends for important agricultural commodities follows (Table E): (a) Wheat. Wheat Drices declined in real terms in the late 'fifties and early 'sixties. By 1964, real wheat prices were 19 per cent below, the 1957 level. In 9Q65, the priee rose 8 per cent and a 15 per cent increase in real terms is expected for 1966. The 1965 price is 15-20 per cent above the landed cost for imported wheat, quite reasonable given the overva'ua-on of the escudo at the official rate. (b) MzIaize. Maize prices in Chile have traditionally been higher than wheat pri ces, although the margin has narrowced down WTorld m arket prices for maize range 10 per cent below wheat prices. Through import re- strictions, there has therefore been protection of domestic prod-actio i. Farmers did respond to this stimulus, viz. the spectacular increase in areas planted and yields throughout the country. More liberal access to maize iaports would favor the intensification of livestock production.. (c) tMilk. The price for milk deteriorated substantially in the 'fifties and early 'sixties as a result of price controls. The 1964 price was 32 per cent below the 1957 price, in real terms. As a result, the stock of dairy cows decreased, and increases in yields, while substantial, were insufficient to keep production. in line with the growth of local de- mand. Dairy imports (mainly powder milk and butter oil) rose from 150 mil- lion liters in 1960 to 310 million liters in 1965. Since cheese prices were Lree from control and yielded some 50 per cent more profit per liter processed, an increasing amount of milk was devoted to cheese product:ion. The official prices recently announced by the Government mark a hopeful departure from past policies. In most producing areas, the price has been set at E° 0.45 per liter (for milk with 33.7 g. fat content). In Nuble, Bic Bio and Concegcion, the price for milk destined for industrial use has been set at E 0.35 per liter. These producer prices represent a. advance of about 35 per cent in real terms over 1965 levels. A dual price system at the consumer level is at the same time introduced, with pri2es for milk with high fat-content at E0 0.53 per liter, i.e. well above the price for low-fat milk designed for popular use and included in the cost of living (E° 0.38 per liter), yet still about one-half the cost of soft drinks. - 16 - (d) Beef. Prices for beef have been rising since the mid-fifties, both in real terms and relative to other farm products. The 1965 whole- sale price for carcass beef was 2.27 E° per Kg., which in real terms was 20 per cent above the price that prevailed in the late 'fifties. But the prices at that time were depressed, and recent price gains did not keep up with world market trends. Currently, the landed cost for imported beef is some 15-20 per cent above the average domestic price. In view of the recent decisions concerning milk, the beef/milk price ratio has deteriorated, so that alignment of beef prices with the world market level would be war- ranted, if only to avoid too abrupt a change in the economic framework within whichi livestock farmers operate. On the consumption side, higher beef prices would help induce further expansion of the local markets for nork. lamb and noultrv. while also making possible the relaxa.tion of quanti- tative controls on beef sales ("beefless" days). A dual price system at the retail level, with prire controls on popular cuts and free prices for the more valuable cuts, would help conciliate the economic and social ob- iprc±ivrps OfC t.he C.rvpi.ent. Mwarketing 30. The current pattern of marketing is a hindrance to agricultural development. The physical structure of storage and distribution is badly in need of modernization. The main city market in Santiago (La Vega) has become inadequate both in terms of size and of installations for storage and handling of perishable products. Truck,ing is well developed; yet, handling is careless, particularly for fruits and vegetables. Competition among wholesalers is ofte,n restricted, so that farmers are at a disadvantage when negotiating prices. The Government is attempting to promote new co- operatives in fruit , vegetables, wool and livestock marketing, through a special department of ECA. Proposals for establishing a fruit export marketing board are well advanced. Details on livestock marketing appear in Appendix A. 31. Marketing and processing margins in Chile are relatively high, e.g. in terms of the final product aro-und 60 per cent for wheat, 60 per cent for beef, 35 per cent for milk and 50 per cent for fruits. Wide marketing margins are partly due to the absence of arn adequate system cf grades and standards. In periods of scarcity, prices tend to rise to the maximum level allowed - whatever the quality. This dulls incentives for producing high quality products, and without adequate grading diffusion of market news cannot be a significant factor in making markets comapetitive. ECA should give high priority to the development of an adequate system of grades andL standards and to the diffusion of market news among farmers. Some work in this field has been started for fruits with assistance frcm the Chile--California program. The scope of the effort should be rapidly extended to cereals, potatoes, onions, wool and meat products. Attention should also be paid to improving the efficiency of cereal, meat and milk processing through appropriate investments and resolute action against monopolies (Appendix A). - 17 - Inputs 32. Chile's progressive farming sector constitutes a small but profitable market for commercial inputs. This market is served by a variety of private concerns and public agencies. The Banco del Estado is active in the storage and distribution of certified seeds, fertilizers, pesticides and small agricultural equipment. Tractors and implements are imported, sold and serviced by private dealers with branches in the maJor agricldturnal areas. Feed concentrates are produced by an increasing number of private firms. Imports of seeds and fertilizers are handled by the Banco del Estado, and nestieides are imported by local representa- tives of major international agrochemical concerns. The Banco del Estado has realized handsom.e profitf from the sale of agricultural inputs, which have been used for covering losses incurred on agricultural and non- 5--icut-ral lending. 33.* Fertilizer consmption in Chille is hiDh by Latin Ameriran standards: in terms of nutrients, about 4 Kgs. of N, 9 Kgs. of P205 and 2 Kgs. of K20 are appliedL annually per ha fagrq'ultJ'--al land, There is nevertheless scope for more fertilizer use. Current applications oi' nitrogen and phosphorus are estimated to be respectively no more than 25 per cent and 50 per cent of optimal application rates on existing crops. Nitrogenous fertilizer imports are prohibited. The only important sour-ce of nitrogen available to farmers is sodium nitrate derived from Chile's saltpeter deposits and distributed by a semti-governmental monopoly. There is evidence that certain crops (such as rice) are more responsive to am- moniacal fertilizers than to sodium nitrate. Since 1960, a government subsidy of about E0 30 per ton of commercial sodium nitrate, deducted at the point of sale, has been in force. This subsidy currenti-y represents about 15 per cent of fertilizer costs, compared to about 33 per cent when it was originally introduced. A different subsidy procedure, involving, direct payment to the farmer (after the sale), had been applied in the case of phosphates, but the Government failed to honor the bulk of its obligations under the system. Subsidy at the point of sale has recent:Ly been reintroduced (April 1966) amounting to about 20 per cent of phos- phatic fertilizer cost. A commission has been set up to investigate further means to decrease phosphates fertilizer costs through cheaper and more effective procurement, more efficient storage and handling methods at the port of disembarkation. There are also plans to manufac- ture more phosphatic fertilizers locally, using imported phosphate roci. For nitrogenous fertilizers, the Government hopes that a new fertilizer project based on natural gas will produce cheaper nitrogen for local use and export. Relaxation of the embargo on nitrogenous fertilizer imports seems justified to build up the local markets upon which the new plant will depend. 34. There has been no net increase in the number of tractors and implements available to Chilean farmers over the past several years. Domestic manufacture is restricted to small implements. Recent imports of tractors have been at an annual rate of 1,600 - 1,700, which is below - 18 - the normal replacement rate for Chile's estirated stock of 20,000 tractors. Machinery prices in Chile are on the high side. This is because of the small size of the market, of the high costs of transport both into and within the country and, finally, of relatively high marketing margins. Imports of spare parts are subject to 40-70 per cent duty, and to time- consuming import procedures. In an effort to reduce non-labor input costs, the Govermnent has entered into negotiations with machinery importers anid has achievesd substantial price drops in real terms. Ilaximum official marketing margins are now in force for most types of machinery. Difficull- ties in securing suppliers' credits on terms satisfactory to the Central Bank (i.e., repayment terms above five years) has been a major impediment to imports of machinery for the last several months. By the spring of 1966, the stocks of most machinery importers were severely depleted. 35. Research in improved seed varieties is relatively well-advanced, and an effective workinog arrangement exists between research organizations which develop new varieties. the farmers and cooperatives which multiply them, the Ilinistry of Agriculture which certifies them, and the Banco del Estado which distribuites them and offers eredit in connection with their purchase. Arrangements for development, production and distribution of hig,h yrielding forage sees anrl fruit. trees are not a-, well advanced. 36. Chile's + p t imate is relatively favorable to plant and animal health, and natural barriers coinciding with its borders constitute 4 4 re 1-.v rie -r,,- e. rpaa+c ,ori cri- nr 4n n v,oh orrb -4 n-n, r1+ries protet-vrn'rtan barriers against pests orgn+n in neigrhboring countries. Yet plant health problems have affected the volume of agricultural pro- duction in recent years, particularly with respect to potatoes, fruits and wine. Chile consumes annually about 8,000 tons of pesticides, the UuIK 01 W.Lch11 1s importUed. NaCLU.ional productioni is .IM.L e (to4 so me in- secticides and fungicides, mostly based on sulphur or copper derivative.s. Credit 37. As already noted, agricultural credit policy has long been dispersed amriong several goverriient agencies, without effective coordina-- tion. This has resulted in complicated regulations and considerable variation in lending terms from agency to agency. Inflation has been a major deterrent to efficient credit allocation. Interest rates have not been allowed to rise sufficiently to offset monetary depreciation. This has meant a negative, or very low, real interest rate, resulting in a demand for credit constantly outrunning supply, and shlifting the burden of credit distribution to administrative decision, generally ineffective and slow. It has become necessary to streamline the credit organizatiorn, to institute consistent and sound lending terms and to cut administrative delays in :Loan processing. The mission supports the estawlishment of adjustable" loans for all long-term agricultural lending. - 19 - 38. Over the past several years, there has been no increase in lend- ing to the commercial farming sector, in real terms. More remunerative agricultural prices and less uncertainty in relation to the government's agrarian reform plans should induce a higher demand for development credLit among progressive large and medium-sized farmers. It is therefore urgent that the proposed reorganization of CORFO and Banco del Estado agricultural lending be put into operation as soon as possible. Table II.5: GRICULTUJRAL CREDIT (in constant 1965 Escudos) 1962 1963 1964 1965 1966 (est.) Amount % Amount % Amount % Amount % Amount 'Rinio del Rtado 189eO '79 156.o 77 133.1 66 184.3 73 181.2 6C C.ORFO 33-7 14 28.3 14 45.8 23 38.5 15 58.3 19 INDAP 3.5 2 12.1 6 14,6 7 23.4 9 27.5 ]1 CORA 10.6 5 6.1 6.9 IL 2 3 -0 10 Total 237.0 100 202.4 100 200.5 100 251.4 100 300.0 100 Taxation 39. Since 1965, Chilean farmers are paying more taxes. Real estate taxes are now based on potential land productivity according to the results of an aerophotogramnetric and soil survey., completed for the major agricul- tural production areas. Average valuation of agricultural properties have gone up 270 per cent and total agricultural real estate tax assessment 100 per cent. Taxable income for farmers is estimated at 10 per cent oi' the land valuation except where detailed farm accounting is available, a rare occurrence. This means that income tax assessment of farmers has risen sharply in real terms. Finally, a new tax on presumptive income i'rom property has affected the farm and non-farm sectors alike and accounts f'or a substantial part of increased government income during 1965. The new methods of tax assessment should induce more intensive land use by com- mercial farmers. - 20 - CHAPTER IV. AGRARIAN REFOR'M Provisions of the New Law 4o. Agrarian reform became part of Chile's national policy and law in 1962. For a variety of reasons, some stemming from defects in the law, progress toward more efficient land use and more eauitable land dis- tribution had been slow between 1962 and 1965. Implementation of agrarian reform became a ma.or issue in the presidential election off 1964. After the election, the President named a drafting committee which worked more than one year, with international technical assistance, preparing a new project of law and constitutional amendments, whlich were submitted to the Chilean Congress at the end of 1965. Passage of the law is expected by the fall of 1966. The significant changes proposed from the 1962 law are: (i) expropriation, instead of requiring immediate payment, could be made for a small payment in cash (usually 10 per cent) plus long-term bonds,; ( ii) land to be expropriated lander the law could be taken by the Government without delay, leavinr for later court settlement any disputes regarding price or terms of expropri ation and (l i) wa-ter rights, 4thelr re-allotment and efficient utilization would become a governmental responsibility . )41. It is interesting to note that these cha,ges are faundamentally changes in procedure - the basic right of expropriation, in the public interest, even of well-operated agricultural properties, was established by the 1962 law. Under the new law, the Government may expropriate all land's that are badly utilized, lands belonging to juridical persons and land in dry areas where the State intends to establish irrigation projects. Furthermore, lands above a specified minimum area can be expropriated, even those in relatively efficient use. However, the owner of such lands can keep for himself the specified minimum if the land is reasonably well utilized and four times this minimum if the enterprise is "exceptionally" well developed, meeting both economic and social criteria. 42. Distribution of the land in family-sized units is the basic purpose of the law, and the workers of expropriated land have first prior- ity to receive a parcel of that land. The distribution is made after the workers aspiring to ownership have proved themselves in a testing period of one to three years. During this period (called llasentamientoli) they - 21 - continue to work the farm under the direction of the agrarian reform agency (CORA), wlhile the future pattern of productioni is being planned and individual farms are laid out. Ileanwhile, they have organized them-- selves into obligatory 'cooperative" associations for supply, marketing and administration of the projects, with technical assistance from the Government. This transition period is designed to avoid the production sag which sometimes takes place in agrarian reform programs when the discipline and management ability which the former landowner exercised are terminated, and unprepared individual owners take over the land. 43. An excention to the family-farm pattern is allowed by the Government in the case of land which cannot effectively be divided - such as mountainous grazing lands, established vineyards and the like. Such undivided lands will be transferred after the testing period to the farnier associations, to be operated cooperatively. CORA is apparently approach- ing the matter in a pragmatic way, in the existing asentamientos, allowing the farmer-members ample latitude for deci-sinn regardina community and individual ownership in the future. However, given the pattern of produc- tion that is expected to emerge from the asentamientorpernlo it can be predicted that family-sized units will be the predominant form, particularly in the production of fruits, vegetables, nuts, row crops, pork, poulltry and dairy products. 44. The new landowners are permitted to pay for their property over a long term (up to 30 years), for a low interest rate (3 per cent) and with a period of grace during the first years of installation. The deblt is "adjustable"; that is, it is increased along with inflationary price rises, as measured by the wholesale price index. The readjustment of the agrarian reform debt is only partlal - 70 per cent of the inflationary rise is applied to the debt. 45. As mentioned above, the Government will expropriate from any owner land in amounts larger than a 'basic farm", defined as the equiva.- lent of 80 irrigated hectares in the Central Valley. Inasmuch as dry lands, or lands in other locations, have widely differing values aIn production, the law establishes a table of 'equivalent" areas, ranging in some areas up to severai thousand hectares. Analysis is being made by the Government of potentially expropriable lands, and the extent of their utilization, but the results of these studies will not be available for some time. However, it is obvious that the limit of 80 hectares of Central Valley irrigated land (or "'equivalents" in other areas) is larger than a family-sized farm. Furthermore, the financial investment involved in large farms which are left by the new reform law in private hands is fax beyond the reach of typical family-farmers. 46. In the case of land which is characterized as "exceptionally well-utilized" the law allows the owner to retain four times the basic minimum. Owners, to qualify umder the "four-times" provision, in addition - 22 - to exceptionally efficient land use, must also fulfill various social requirements, such as paying 2-1/2 times the minimum agricultural wage (which is less than $1.00 per day), permitting the workers a partial share in the profits, supplying decent housing and so forth. Expropriations 47. UJnder the 1962 law, expropriations have been feasible only in cases where the owners of the land were agreeable to terms and prices offered by CORA. After the 1964 elections, however, there were enough of these "voluntary" expropriations to give CORA possession of considerable quantities of land during the past year. Some of CORA's land came through transfers from other agencies of government, such as the Ministry of Health, which has for many years operated lands acquired by the Government through bequest or other means. Lands were also expropriated in 1965 by mutual agreement with landlords Wilo "saw the handwriting on the wall" and so'd for better nrices and terms than they might have gotten later. Scme of these farms were so patently ill-managed or abandoned that the owners were certain to fall u]naer tho terms of the new law which will allow expropri- ation of such land on payment of five or even one per cent of the price in cash. (Furthermore, owne knew that under the new law the price would be based cn lower assessed value.) 48. The Government has a "backlog" of land available or shortly to become available on whiich it has started its agrarian reform CORA had put into motion more than 130 expropriations since the elections and by March 10, 1966, was able to get possession of about 70 farms with an area of more than 34,000 hectares irrigated and 192,000 hectares of dry land., For the remaining 60 in process (about 270,000 hectares) the owners, although willing to be expropriated, did not agree with some of the termas offered biy CORA; chey were 'Lherefore abOle -Ito delay transfer Or the, rlad CORA will be able to take possession of these farms within thirty days of passage of the new law, leaving the dis-puted matters for later decis:on by the land courts. Wlith the law's passage, CORA officials, armed with the material they ha-ve already been able to gather from tax nd land records, can soon make decisions on additional farms to be expropriated. ConsiderEole preliminary work on this has already been done in the various CORA local offices. CORA should give high priority to ascertaining the amount and quality of expropriable land, so that reai stic plans can be made as soon as possible for the next 5 years. 49. Until the Government can secure improved information on the lands which can be expropriated, there exists a question as to whether enough land is available to permit the settlement of 100,000 farm families in zom- pliance with the Governmentis promises. If it were assumed that most of the irrigated land presently in crops would fall within the 80 basic hec- tares permitted to the present owners, then only the unimproved irrigated pasture would be available for the reform. However, this assumption would not be accurate. For example, large owners whose holdings consist of irri- gated cropland, irrigated natural pasture and dry land are subject to ex- propriation of a "proportional share" of all of these categories of land. - 23 - CORA officials expect that at least some improved irrigated land, as we:Ll as most of Chile's unimproved irrigated pasture, will be subject to expro- priation. Much of the dry land to be irrigated by new projects of the Government will become available to CORA. 50. A guess can be made at this juncture that the Government could secure, from expropriation and new projects, about 500,000 hectares of irrigated land and 1-1/2 million hectares of dry land during the next few years. Settlement of 100,000 farm families in family-sized units which can develop into viable enterprises would therefore be theoretically pos- sible. However, considerable progress will have to be made in water utili- zation on the lower-grade irrigated land and pasture improvement on the dry land, if this average of 5 irrigated and 15 dry hectares per family is to result in efficient combination of land and the labor of the farm families. Water Rights 51. The power of large landowqners in Chile has been expressed not only in their -ontrol over land, but even more importantly in some area3 in their control over the local water associations and use of irrigation water. The new agrarian reform law will vest all rights to water in th,e Government, and readjustment will presumably be made along with redistribu- tion of land. Some compensation wi- be paid to former owner-s of the rights and for the value of private works built after November 1964. A new water aUdinistration will be created. owever, water policies are even less -ell planned than land policies, and basic data for proper planning of water utilization are not yet available. Chlle woUld probably be well advised to utilize external technical assistance or consulting advice in several of its agrarian reform project areas to ascertain the obstacles to effi= cient water utilization and plan administrative methods to overcome these obstacies. Settlement 52. There are about 250,000 farm families -who presently are land- less or subsist on sub-marginal farms. CORA and its predecessor agencies settled 1,100 families on small farms in the i96i-6 4 period. CORA ir 1965 delivered land-titles to 587 farm families in 9 colonies where preliminary settlement work had been started previously. The average land distributed per family on those projects was 18 irrigated and 80 dry hectares. In addition, CORA began to operate 35 "asentamientos"! or cooperative type colonies, on land which had come into their hands in 1965 and prior years, establishing 2,100 families who had previously been agricultural workers on the same land. The average available per family on these asentamnientos is 8 irrigated and 140 dry hectares per family. However, CORA believes that, as productivity is increased during the test- ing period, and considerable dry land is brought under irrigation through more efficient water use, additional families can be brought into the asentamientos. For example, one large project anticipates distribution, after the asentamiento period, of viable economic units comprising from 4 to 9 hectares of irrigated land per family, plus cooperative access to dry land for livestock grazing. - 24 - 53. II'IPROA, the agrarian reform program of the Catholic Church, operating during the last four years on a small scale, has found that the total investment necessary to establish family-farms has been about E' 20,000 per family. On the basis of its own experience, CORA plans to provide long and medium-term loans to the farm families of approxi- mately the same amount during the first three or four years, plus an "overhead" cost totalling about 25 per cent of the investments. CORA's figures indicate that 33 per cent of the total investment of E' 25,000 would be disbursed the first year, 33 per cent the second, 16 per cent the third, 8 per cent the fourth, 6 per cent the fifth and the remaining 4 per cent in subseouent years. In addition to the settlement costs se.- out in Table 6 below, provision must be made for the cost of land and improvements made bv former owners. This is estimated at an average of E 20,000 per family. For purposes of rough calculation, an average cash payment by CORA of ahout 5 per cent is assummed, the remainder being paid over 25 years. Table II.6: SETTLEMENT COSTS PER FAMILY Range of Planned Investmen-t Long-term (20 years) investment (far-m improvements) E 0 6,000 = 12,000 Miedium-term (5-10 years) investment (animals, equipment) 5,000 - 6,500 Working capital (1-year loans) 4,000 - 6,500 Overhead 4,ooo - 6,ooo Total E0 19,000 - 31,000 54. By May of 1966, the Government had not yet planned the pace of the agrarian reform or estimated its financial and land requirements. CORA officials informally set a target for settlement of some 80,000 - 85,000 families over a five-year period, requiring approximately E0 2 bil- lion, of which E0 1.3 billion would be spent during the first five years. This target seems much too high in the light of the mission's tentative estimate of the resources that might be made available for financing public investment, as set out in Tables A and B of the main report. The pro- vision made there for public investment in agriculture is E° 2.13 billion over five years-.1 Sue- an allocation would mean an increase in the share of agriculture in the program from 11 per cent in 1965 to 23 per cent in 1970. In order not to upnet the balance between the various items of the 1/ This compares with ODEPLAi's highest estimate of E0 1.96 billion. - 25 - agriculture program (Table II.8), no more than one third of public invest- ment in agriculture can reasonably be allocated to COMA. Therefore, either the investment cost per family or the target number of settled families, or both, should be lowered. The mission feels that a realistic target might be to bring the investment per family from an average of E 25,000 to E 17,500. On the basis of the above disbursement assumptions, the fol:Low- ing targets for settlement of 50,000 families would be possible. Table II.7: SETTLEMEI]T TARGETS 1966 1967 1968 1969 1970 Number of families organized in "asentanientos" 6,ooo 8,000 10,000 12,000 14,)00 Investment in million E0 71 95 135 180 230 55. Within the first year, the family will benefit from an improved diet of fruits, vegetables, poultry, dairy products and meat. CORA expects that by the third or fourth year, when the asentamiento period is finished, the farm families will be established on their own individual farm plots, utilizing in some nroiects eooperatively-owned arazing land or vineyards which cannot be effectively broken up into family units. At this time, CORA expects that a minimuzm net income of E° 6,000 will be achieved by -the families. Some of the 6 to 8 hectare parcels, with fruits, nuts and other high-value crops, are planned to podure net incomes of ° 159000 in the tenth year. These targets might still be reached with the reduced expendi- tures proposed in this report provided prober emphasis is put on produc-tive outlays. 56. CORA had 750 on its staff early in 1966, and intends to increase personnel to tlle 1,000 mark during th,is year. The 750 figure included only 207 "professionals"; the rest were clerical and service personnel. NinEty- an,d middlle=l'evel1 "p-aticos"', most of v., m. preslLwmably twotwqo wereweearnmss agronomis d - ...T will work directly with the farmers in the asentamientos. The remainder of the professionals were laryers, surveyors, c4vil engineers, designer-, and so forth. If half of the 250 to be added in 1966 are to be field workers in agriculture and home economics, CORA would have 217 technicians. CORA would then appear to be sufficiently well staffed to do an effective joD in 1967. The outlook for administrative talent in later years of thLe program is not so optimistic. On the basis of experience in other countries, a reasonable estimate for supervisory persornnel needed for farm famailies of low educational level is one technician, who lives and works fulltime in the field, for each 75 to 100 families. - 26 - 57. Only about half of Chile's annual output of trained agronomis-s are expected to go into service with the Government. INDAP and CORFO and the Ministry of Agriculture are competing with CORA for their services. Neither agronomists nor home economists are being trained in numbers suf- ficient for the years beyond 1967. The United Nlations Special Fund Ins,i- tute in Santiago (ICIRA) is at present giving intensive short-course training to CORA and INDAP personnel - classroom work, plus field demon.- strations in project operation. The Government should bend every effort to increase the output from existing institutions training agronomists, veterinarians, animal husbandry specialists and home economists; middle- level "practicos" should be trained in rapidly increasing numbers. - 27 - CHAPTER V. THE AGRICULTURAL DEVELOPIMET PROGRAM Growth Targets 58. On the basis of a macro-economical model, the government planning office (ODEPLAN) has set a preliminary growth rate of about 6 per cent for agricultural output aiming progressively to reduce Chile's trade deficit in foodstuiffs. Self-sufficiency in rice and oilseeds, majior decreases in wheat and sugar imports and stepped-up exports of wines, fruits and selected seeds are among the targets to be achieved by 1970. These planning aims seem ambitious in the light of past performance. They are being reviewed by the sector planning group of the Ministry of Agriculture. 59. An overall growth for the agricultural sector of around 4 per cent a year would seem to represent a maximum development target for the medium run. Over the next few years, this would require an annual expan- sion in cultivated area of around 30,000 ha. till 1970 aid annual gains in crop yieluds ofL arounr. 2 per cent per yea These aims comparew historical growth rate of agricultural production of around 2.2 per cent and recent addltions to cultivated area of about 15,000 ha. per year. The conversion of irrigated natural pasture into cropland implied by the pro- jected growth 3iplies considerable increases in the average carrying capac- ity of Chilean pastures, i.e. a rapid expansion of high-yielding artificial pastures and the use of more stored feed. Yet, even if the obJectives of CORFOS's "Plan Ganadero" are vigorously pursued, it is unlikely that domes- tic beef production can expand faster than 1.8 per cent per year till 1970. Rapid progress towards self-sufficiency in meat can therefore be achieved only through increasing substitution of poultry, pork and fish for beef in the Chilean diet. This in turn requires a change in price relationships between various kinds of meats. To achieve thiis objectilve, more liberal imports of maize and feed concentrates and relaxation of price controls on beef will be necessary. Furthermore, credit and marketing assistance to poultry and hog producers will have to be stepped up. In any case, it would be unrealistic and, given the proximity of Argentina, probably uneconomic to aim at self-sufficiency in meat by 1970. Given the high income elasticity of demand for meat, the mission sees Chile importing beef to the tune of somewhere between 30,000 and 45,000 tons a year around 1970, depending on how successful the Government is in encouraging substitution of chicken and pork for beef in the national diet.l/ Favor- able milk prices should allow a 3-1/2 per cent gro-wth in dairy product-4n, roughly balancing probable consunption increases and setting a base for more rapid expansion in the ;seventies. 60. Scope exists for greatly expanding cereal yields through in- creased fertilizer use, better land preparation and more timely planting. Yet self-sufficiency in cereals should also be looked upon only as a long- term objective. By 1970, Chile may not be able to cut its wheat imports more than 15 per cent below the high 1964-66 average. Because of good organization in marketing, credit and extension, it might be possible to expand oilseeds production by 8-9 per cent annually and sugarbeet produc- tion and refining by about 15 per cent annually. Both crops fit well in lay farming rotations in many areas of Chile. Sugar prices ex-factory in 1965 were about E 307 per ton, i.e. US$0.04 a lb. at the official exchange rate, quite reasonable compared to production costs in many countries - although much higher than current world market prices. By 1970, Chile would import negligible amounts of edible oils and only about 25 - 30 per cent of projected sugar consumption. 61. Import substitution should not be viewed as the exclusive aim of agricultural development policy. Chile should take full advantage of its international competitive advantage in orchard and vineyard develop- ment. Exports of improved seeds to neighboring countries should also be expanded. Promotion and control of quality throughout the production and distribution process is the key to success in these three fields. This imrplies more sophisticated research and extension than has so far been forthcoming, the development of appropriate grades and standards, the set- ting up of foreign market intellIgence and sales promotion organizations, improved storage, handling and distribution facilities and an expanded credit program to farmers Pnd cooperatives to promote production and, in the case of wine, to help finance aging of the product. The current world market situation for grapes and wine is one of surplus. Yet, there should be room for doubling wine exports over a five-year period, up to 15 million liters, if emphasis is placed on the promotion of a high-aualit2r product. This is because Chile takes up a small share of the world market, has excel- lent growing conditions and should be able to prodLuce the product at rela- tively low cost. Net fruit exports could similarly rise up to 15,000 tons and woo-l exports to 6,o0o00tnbr 1070. rThe missions tentative projection of agricultural trade appears in Table F. 1/ A very large amount of such s-ubstitution has been assumed in the projections given in Table F on page 43, where beef imports in 1970 are shown as 30,000 tons. In preparing its balance of paymenits projections, however, the mission has made a less optimistic assump- tion and has allowed for beef imports of 43,000 tons in 1970. - 29 - Public Investments 62. The Government is in the process of formulating a comprehensive agricultural development program covering not only public investments but also land reform; credit, extension, research, taxation and pricing pol:icies. Only general government intentions were known when the mission was in the field. The description which follows is therefore hiahly tentative. The scope of the different projects and their relative priorities, however, are not yet decided. The public investment nrogram (1966-70) is exnected to be completed in the fall of 1966. 63. A table showing the mission's tentative program for public in- vestment in the agriculture sector follows. Tn most cases, the funds -ro- vided fall short of preliminary projections of needs made by individual agencies. Yet, for every agency the rate of expenditure assumed im4plies a considerable strain on administrative and staff resources. The inves:;- menst pattern reflects increased emphasis on assistance to small-scale farm- ing and land reform legislation. It also implies expanded support of commercial farming activities. Table II.8: INVESTiI'IENT ALLOCATION (in millions of constant 1965 Escudos) Tot alL 1966 1967 1968 1969 1970 1966-70 INDAP 72 75 80 90 100 417 CORA 71 95 135 180 230 711 Irrigation: Total 65 80 90 100 130 4463 (basic works) (50) (40) (4o) (40) (60) (230D) (on-farm irrig.) (15) (4o) (50) (60) (70) (235) CORFO 52 70 77 85 95 379 Other 25 25 30 35 45 160 Total 285 345 412 490 600 2,132 Irrigation 64. A tentative list of irrigation projects for the five-year period has been set by the Ministry of' Pbhlic Works, resnonsihle for the maior works, and the Ministry of Agriculture, responsible for on-farm irrigation. Taking account of projects under construction, the proposed pace of new construction would imply that, by 1970, the Ministry of Public W1orks would equproughlyJ 250,000 addition.al ha. *qithbaic tro aned improv irriga- tion over about 330,000 additional ha. 1/ At present, the administrative capacity of the Direccion de Riego stands roughly at 30,000-35,000 ha. of 1/ The list makes no provision for the possible construction of a vast multipurpose dam at Colbun lwhich might irrigate 180,000 ha. - 30 - new irrigation per year (basic works only). Doubt must therefore be raised about the Government's physical ability to achieve the proposed construction rate. Furthermore, quite apart from financial considerations, there is no economic justification for investments in basic works without rapid follow- up of on-farm irrigation. The present administrative capacity of the depart- ment of soil and water conservation (Hinistry of Agriculture) is around 10,000 ha. of on-farm irrigation planning and equipment per year. There is already a backlog of around 140,000 ha. for which basic works have been completed, but no on-farm irrigation executed. The department's own tenta- tive five-year program provides for execution of on-farm irrigation on 195,000 ha. and studies for another 390,000 ha. 65. The mission's program provides for a considerable shift of re- sources from basic works to on-farm irrigation planning and execution (see on nage 3? on the assumption that the proposed new organization for cn- farm irrigation will proceed rapidly, and that consulting firms specialized in the agricultu1ral aspects of irrigation will be contracted to help bridge the gap between basic works construction and on-farm irrigation planning and -xecution..But iintil the gQ -p i_5losed; the Direccion de Riego shculd slow down the rate of new construction and proceed with execution of projects under way only after carefl-n agriculturallg a-nd economie Pviluation. For new projects, full feasibility studies, providing for agricultural development on - -`, should be prepared, a construction should be started only if priority for doing so is established and availability of resources for design and execution of on=farm irrigation ensured. In principle, a re- vised five-year program for irrigation should give priority to the consoli- dation of the presently irrigated area, completiing on-farm works in areas where the basic works are finished and improving existing systems. Drainage 66. As land is used more intensively, the need for drainage works becomes more urgent. In the north, drainage is required to check salinity. In some areas of the south, where soils are impervious, it is often re- quired for flood control. The Department of Soil and Water Conservatiocn is conducting studies for a 35,000 ha. drainage project in the north (Batuco). CORFO is preparing the first stage of a 200,000 ha. project in the south (Madis, near Osorno) and building a small pilot scheme in the Arauco province. Soil Conservation and Reforestation 67. The division of soil and water conservation gives advice to farmers and performs technical appraisals of soil conservation projects financed by Banco del Estado. Under this program, it is hoped that 10,000 ha. of forests will be planted in 1966. In the future, emphasis will shift from financing of individual farmers' plans to the organization and finan- cing of soil and water conservation programs by districts of 30,000 to - 31 - 150,000 ha. each. In addition, an ambitious reforestation program involving 450,000 ha. of land for the next five years is being worked out by the Forestry Institute. Fruit and Wine 68. As noted above, Chile has favorable conditions for growing and exporting fruit. At present, no more than 60,000 ha. are planted with orchards, and Chile exports barely 15 per cent of its production (mainly apples, grapes and plums). Programs for the increase of fruit production and wine are under preparation by CORFO and ECA. These programs cover organizational, credit and marketing aspects as well as the construction of 5 cold storage plants, 4 fruit processing, packing and storage centers and 11 wine processing and storage plants (including pisco distilleries). Legislation is reouired to abolish the nresent acreage restriction on vine planting. Relaxation of price controls on wine is also needed. Present nffir;inl pri np' (h ri an alrohol content.) cnn-titntP F malor disincentive to quality production. Seeds 69. A National Seed Corporation, organized as a subsidiary of CORFO, will s+art operations soon. Its creation results from the Government's desire to promote seed production and exports and to assure improved seed "I1rr1lrat re-sonable cost t o R -ar-mersntation of 4-he Bono del Estado, ECA and other agricultural agencies on the Board of the new cor:po- ra1t-i iasured.±n At theZ beg-innin, theI------ortion wlll.. concentr ate1o forage crops, potato, rice, beans and vegetables, where good research results are available. One seed production center and 3 seed cleaning centers will be built and operated by the new corporation. Private repre- sentation on tlhe Board of the corporationi is required to ensure that the- corporation will complement rather than compete with private activity. Other Crops 70. Projects are under study for 16 grain elevators and 6 potato storage rooms combined with the establishment oI producer's cooperatives and the improvement of marketing organizations. CERECOOP, a marketing cooperative, is planning to diversify its operations and has a consultant making a study for establishment of a poultry feed factory. COMARSA, a cooperative organization operating six edible oil factories, plans to expand its operations for rapeseed production and refining, with the objec- tive of making Chile self-supporting in oils by 1970. Sugarbeet production and refining capacity will be expanded by IANSA. The capacity of the three existing factories will be increased, a new sugar factory near Chillan is expected to come into production in 1967, and two other factories at Valdivia and Curico are planned for 1969/1970. Sugar production in 1970 would be about 200,000 tons. IALSA is also planning some smaller proje:ts adding value to refinery sub-products (calcium carbonate, dry-ice and alcohol). - 32 - Livestock 71. The ten-year program (1961-1970) of CORFO will be continued for livestock development, including improvement of pastures, breeds and animal health, and construction of milk processing factories and slaughterhouses. The World Bank has provided two loans for this program, one of $19 million for livestock development and one of $5 million for dairy processing plants and slaughterhouses. Funds are available for disbursement under both loans. The loan funds are intended, together with a matching amount of Chilean money, mainly for on-farm improvements, such as fences, fertilizer use, better pastures, water facilities and new farm machinery. Most of the money so far spent has been used to buy imported breeding cattle, but im- ports of livestock are to be discontinued. In addition to assistance for cattle production, beef and milk marketing, CORFO has initiated credit programs to help diversify Chile's livestock production (noultrv and pni,). Conclusion 72. The suceess of Chilets developrment efforts depends to a ver_yr large extent on increased agricultural and livestock production. Natural conditions are favorable for such expansion, and there exists asmall but progressive commercial farming community setting the example for broader develol ent. An increasing flow 4 rJn 4cie-a' and Than resources n-t be channelled into the agricultural sector. Suitable government policies and ;lAQ+ AAr;tsa1In -1 ; tive_;s fo S+ ------A+- --- o a s wEl 4 A A 4 -4 -,I I .;vswv- l-l->Q;,;vQs>WwX wa|X1[W>CUu cz U L LLII rU~ FUW s | investment will be required. Better and more stable product prices, reduced costs fLor k1-ey inpurts , more efficient m,a rkIRetin'g arrangementsluz ar.d w=v4=lUoP..a1nt credit on adequate terms must be provided. At the same time, steps must be taken to improve the quality of life in rural areas and to remedy the in- equities of the social structure through land reform and assistance to small-scale farming. If Chile succeeds in striking the right balance between these claims, it should be able to aim at an average growth rate Of about 4 per cent in the agricultural sectcr in the next five years. CHILE: STATE OF IRRIGATION (MILLIONS OF HECTARES) I _ I I m I -- I - 2.5h-v -ESTIMATED IRRIGABLE SURFACE 2.0 - /BASIC WORKS } ] _.~~ . t -.: 4 X~~. NEW IRRIGATION B0,ASC, ,WR,K:S,. :P.R'..FO I_5~U -_____> _.-__- -__ -- - , 4 PROGRAMFORIMPROEMENT IPROGAMS FOR OFlRRfGATION~ EXISTING 9 EW IERMINATEDN 15 UTFRMINATED 6 t -FARM0 ON l EZ 22 f ~~~~~~~~~~~~~TERMAINATED .5 -I IRRIGATED 1966 1967 1968 1969 1970 1971 1972 1973 1974 - 34 - ANE,X II Appendix A LIVESTOCK MARKETING 1. Cattle raising in Chile is dual purpose. Female stock is kept for milk while all dairy animals and male stock are sold for meat. Sim:larly, lamb and mutton production is in large part a by-product of wool production. The maJor sources of animal feed is natural pastures. This means not enough feed in the winter and much walking for relatively poor nutrition and hence low calvinig rates, hiah death rates, etc-. Year-to-year weather variations influence the carrying capacity of pastures, eventually leading to over-- grazing. Steers are often held too long (4-5 years) so that much feed s wasted on mere body maintenance. Pasture improvement using New Zealand techniques is apparently feasible over wide areas of the south. There is also much scope for profitable investment in the framework of existing iarm- ing techni-ues, using more supplementary feed during the winter, improving crop rotation, applying more fertilizer, etc. Existing herds can be improved through cross-bDreedding , imports of selected lulls arid artif"cial 'nsem-lna-ion, but there iS no need for large imports of breeding stock. Rapid gains in milk, beef, sheep and wool production are technically feasible throughout Chile. 2. Chile's production of milk is highly seasonal. During winter months supply falls to about 65 per cent of average supply in the remaining months of the year. There is no assurance that more advanced productiorL techniq-ues will lead to a more even milk supply, since low cost techniques of seasonal pasture management originating in New Zealand may find increas- ing application in the south. Hence, the need to produce dry, condensec or evaporated milk is likely to remain high. Most dairy plants south of N-uble produce and will continue to produce powder milk, butter and cheese. The growth of recorded milk production in the face of deteriorating milk prices is probably due to the remarkable development of private and cooper- ative activity in milk marketing, facilitated by a government sponsored dairy plant construction program assisted by external financial assistance (including the World Bank). Government subsidized nutrition programs have sustained clemand for dry milk. 3. Chile's ideal livestock and dairy production region is located in the southern portion of the Central Valley, from Temuco to Puerto Mlortt. However, surplus livestock also exists firther north, from Temuco to Talca, even though the region has opportunities for more intensive land use. I'he major sheep production area is south of Aysen in the southernmost tip of the country. On the average, it may be said that cattle and sheep must -- 36 - ANNEX II Appendix A no more than 10-15 carcasses a month. Effective pricing is hampered by lack of official grading standards. Meat is often priced without desig-- nating precise weights. Refrigerated storage in butcher shops is an od(dity, so that meat must be sold within two days of the slaughter. The fragmenta- tion of the retail structure has meant that government price controls and quantitative controls have not been uniformly applied. Black markets for beef have developed. 8. Successive governments have recognized the need to improve the efficiency of cattle and sheep slaughtering, processing and marketing and to eliminate restrictive nractices in meat trade. Producers now get no more than 35-40 per cent of the price paid by consumers for their meat (with the balance shared about equially by wholesalers and retailers), and part of the recent price gains in livestock may be captured by intermediaries. To break the monopoly of slaulhterhouse facilities new facilities of adenuate size to allow efficient processing of by-products and refrigerated storage will be required. The Government should relax the quantitative controls on __eef sales as soon as possible since reasonably efficient meat-packing opera'lion requires working to, or ne-ar, capacity. Official standards of hygiene on slaughterhouses should be enforced. CORFO is currently engaged to provide for the establishment of modern slaughterhouses, adjacent to producing areas, as provided in the Government's "Plan Ganadero'". The wholesale meat distri- butiorn system in Santiago should be modernized by closing dovmn small u-= economic units. Retail marketing margins should be reduced by inducing increased efficiency through larger volumaes handled, better displays and more refrigerated storage and integration of meat marketing in multi- purpose food distribution centers. Finall-y, the Governmen,t sho>uld inst.- tute grading standards and help disseminate market news for cattle and meat. There is no lack of studies to get such actlon under way. - 37 - AUHJ.ATable AlA AORICUiLAUAL PRODUCTION STATISTICS AvereAeq Average191-5 1956-O0 1961 1962 1963 6 Ar1961ag5 CROII Wtst Area /(m0h ) 769.0 828.9 838.0 849.3 863.7 851.8 8b9.6 846.9 Tield iqq ha ) 12.3 13.3 13.4 12.6 15.1 15.5 15.U A4, Voles (000 tone) 948.2 1,10b.6 1,123.0 1,071.0 1,274.0 1,310.3 1,27.1h 1,213.0 Area (coo ha s 5 6.8 72.6 74.? T. Me.8 75.2 72.9 74.0 Yield W ' i.. fl 20 .95 c 1.h 20.9 27.6 30.2 23.9 Volum l(o00tons 82.1 117. 0 165.7 159.1 151.9 106.0 2t0.9 177.0 Rine Area (0O Ia ) 28.2 33.9 39.9 29.3 32.7 32.6 29.8 32.9 Yield (qqAba ) 26.9 25.1 17.3 18.3 35.7 16.3 29.8 27.5 Voles (000 tons) 76.8 35.4 108.6 83.0 86.0 85.9 88.7 90.8 Barle. Oats end 1W Are (000 ba 155.4 177.3 183.2 190S. 1n.6 196.2 197.8 191.9 Yield (qqfka ) U.6 12.8 13.4 11.3 13.8 U.' i;.o ;1.6 Vole (000 tons) 181.8 228.2 145.6 235.7 366.4 188.1 269.3 262.0 p_ . Ares (0o0 h ) 78.4 Mo.b 9S.5 91b.8 93.4 89.6 86.8 91.8 Yield (qq/h ) 9.7 9.0 9.7 9.9 9.1 1C.7 8.6 9.6 Volu (0oo tow-) L et5 . M8D 91 ? 9jo9 87.6 95 1 7h.h 88. 0 Lentils Are 000 ha ) 21. 30.7 34.6 30.6 31.7 33.5 33.7 32.8 Yield Cqq/ha ) 7.1 5.7 5.6 5.3 5.0 6.2 4.0 5.2 Volume (030 too,) 15.5 '7..2 I.8 16.1 15.9 20.7 13.5 17.0 Potatoes Ares (O00 he ) 73.4 84.7 93.0 87.7 8h.6 80.1 85.9 86.3 Yield (qq/ha ) 92.5 87.3 87.6 53.7 95.4 %6.6 84.9 89.6 Volum (000 tons) 680.7 738.5 815.3 734.6 807.5 77M.1 729.4 775.0 Sugar Bet Axer (000 be ) - 9.8 7.8 13.3 17.2 17.3 18.b lt.8 i)ld t . ) _ 219.6 310.0 303.o b07.0 353.0 385.5 351.5 Volum (oo0 ton) 277.3 242.0 4o3.0 700.0 609.0 109.7 520.0 Sun Flower Area (000 ha ) 5.7 ULi.7 25.6 31.1 30.3 42.2 4l.2 3L.i Ield (q'a 12.9 10.0 12.4 10.3 10.5 10.7 11.2 11.0 ¶J,ta_ {nnn + 1 CR, an1 o ,37 e Men I.C1 1., 3. Area (000 ha ) - 15.8 29.5 29.6 42.1 49.9 81.6 46.5 Yield (qqm) ) - 9.2 12.2 9.7 11.1 11.3 9.6 10.9 Volum (000 tons) _ 14.1 35.8 28.6 49.4 56.2 75.2 50.9 Onions Are. (ODDh )! 2n,.6o h..6 52 L+7 aild (qq/7 ) 319.b 278.2 251.2 247.0 286.0 226.3 270.0 256.1 Volum (O0 tons) 83.9 109.7 123.1 101. 3 140.1 104.1 11 0.4 121.0 Fruitg Vola (000 tons) 331.4 3hO.2 349.0 358.3 367.5 378.1 390.4 368.7 Wine Area (000 he 88.9 97.0 111.2 o.a sto n ire i. Yield (lit/h )- 3,679.4 3,82?.1 4,364.0 5,653.0 4,657.2 4 677.0 3.366.0 4,540.0 Volume (million lit) 328.1 371.0 485.3 552.9 460.6 483.7 366.8 469.4 Cr Production Imdex 87.5 100.0 110.0 108.3 116.3 121.1 113.9 113.9 Tsble A (contd.) (pge7) Average Average Alverage 1951-55 19565 - 60 L961 1962 L963 L964 1.965 19614l5 LIVESTOCK Beef Stock (000 heads) 2,882 2,583 2,874 2,901 2,873 2:,801 2,8554 2,861 Slaughters (000 heaLds ) 454 565 523 574 612 675 1451 527 Carcass (030 tons ) 106 133 122 134 1k3 111 106 123 'Weight Pork Stoc:k (030 heads) 825.0 959.4 958.0 949.7 1,006.9 1,103.0 193.5 Slaughters (DDO heads) 540.8 550.4 612.2 575.5 1560,0 550.0 635.0 586..6 Carcass (000 tolls ) 43.0 43.8 145.9 43.2 42.0 41.4 47.7 441.0 ,weight Lamb and Mutton Stock (O0O heads) 6,190 5,878 5,940 4,905 6,079 6,183 6,584 6,138 Slaughters (O0 heiads) 1,745 1,866 1,935 1,716 1,1342 1,577 1,915 1,777 Carcass (000 tons ) 31 33 34 30 33 28 32 31 weight Poultry volume (030 tols ) 14.1 15.8 21L.0 25.5 28.0 31.8 32.3 28.3 Milk Volume (million lit) n.a. 726 775 739 796 831 810 790 Eggs No (000 ) n.a. 433 917 976 1,040 1,108 1,170 1,042 Wool Volume (000 tols ) 23.0 23.8 26.8 26.,2 25.5 214.9 24.9 25.7 LIVESIOCK PRODUCTION INDEX 93.8 100.0 107.5 108.3 111.6 107.2 110.0 109.3 OVERALL PRODUCTION INDEX 90.0 100.0 109.0 106.3 114.4 116.3 112.3 112.1 Siourcer Ministry ol' Agriculture llotet Accuracy olf the data varies froms product to product. Some statistics are particular2LY open to question, being based on theoretical models and census data for only one or two years. Table B MAJOR AGRICtLTURAL IIPORTS Voltme (000 tons) Value (US$ 000") Non-Tropical Products 1964 1965 1964 1965 Wheat 226.7 251.9 14,736 16,374 Maize 4h5 17.0 360 1,135 Rice 34.2 13.7 3,589 1,555 Potatoes - 7.1 - 418 Edible oils 14.8 15.4 4,240 6,o66 Sugar 139.2 180.0 28,425 18,306 Beef 49.3 35.0 34,875 27,688 Milk 183.2 123.2 6,370 4,287 Butter 2.9 5.0 2,361 4,617 Sub-~otal 95,956 80,446 Tropical Products Cotton 26.4 25.8 19,079 20,555 Othpr fibhrs 1.1 1.2 397 430 Tobacco 1.3 1.3 3,048 3,086 Coffee 6.4 6.2 5,692 5,926 Tea 5.7 7.0 5,420 6,101 Yerba Mate 9=4 9.5 2251 2,3)48 Bananas 28.5 20.0 3,249 2,053 Pineapple .6 .5 1)n _ '10 Sub1-total 39.280 40,559 GRAND TOTAL 135,236 121,005 - 40 - AMEX -II' Table C .f-AIN AGRICULTURAL AGENCIES (l965) Current Budget Technical Personnel \iE lI±±±ULon rruiessi±uiails ±oUd± Dept. of Agriculture 24.0 366 671 Irrigation Dept. n.a. 62 243 CORFK - Agriculture 6.6 83 102 IUDAY 37.1 il5 523 CORA 9.2 88 329 ECA 2.7 47 116 Banco del Estado 11.5 22 28 cEniul - 4 24 IAidSA _ 5711'7 Tnstitute of Agr. Research 3.7 138 196 Institute of lNatural Resources .5 5 25 Hinistry of Ed.- Agriculture 3.7 )4 1)2 ICII'LA n.a. u 17 Institute of Rural Education 2.6 10 305 Forestry Institute .7 24 73 Fisheries Institute .6 4 72 1,037 2,983 Source: Estructura del Sector Agropecuario, 1iinistry oI Agricultura, Consejo Superior de Fomento Agropecuario (CONS.FA),Santiago, ].965. 18 A------S n1JS- veeini3ns, arcnhitnn+. cs enr-+n eri TrcyeTrs anrl Pconomicrtn . 2/ Including olCY\PFA Annex II Tab:Le D MAIN PRICE INDICES (1958 - 10o) 19,59 1960 1961 1962 ]L963 1964 1965 'iRmUltural Irices 1. Crops 138.4 172.9 167.0 188.4 262.4 387.1 530.6 2. Livestock ilo.8 i56.1 165.6 187.,7 281.2 h4o.2 6,05.9 3. Total 139.4 165.4 166.4 188.1 270.6 410.3 5163.5 Input Prices Inex 4. Seeds 14.3.2 196.9 225.3 260.,i 359.6 665.1 750.0 5. Fertilizers ail other ChemiCals 128.6 120.4 118.1 118.,5 199.4 295.1 h051. 6. Fuel and lubricants 13:2.3 132.9 132.0 137.7 217.1 302.2 360.9 7. HMachinery and equipment 11t9.6 .1L2.1 160.5 173.9 308.2 489.7 5151.3 8. Buildings 144.8 153.9 165.1 183.5 27P3.2 419.3 5B3.1 9. Labor 135.9 156.6 177.0 204.,9 288.3 43h.0 682.6 10. All inpuits 138.5 LI48.9 165.7 185.2 276.7 521.5 587.0 General Price Indices 11. Wholesale 129.9 136.8 137.8 1h9..2 229.3 315.2 429.1 12. Retail 138.6 154.7 166.6 189.7 273.7 399.5 514.7 13. US; value-official barking rate 132.0 132.5 132.5 144.,,O 236.h4 299.2 382.2 Vt. USS value-b4okers rate 105.5 :105.1 105.1 175.,1 3()1l1 320d4 373.9 Indices deflated b thLe Retail. Price Index 15. Crops 99.8 111.7 100.3 9903 95.9 96.9 103.1 16. Livestock lOL.6 100.9 99.4 98.19 102e? 110.2 117.7 17. Total 100.6o 107.0 99.9 99.2 98.8 102.7 109.5 118. All inputs 99.9 96.3 99.5 97.6 1C1.1 130.5 114.0 Source: Bureau of StaLtist,ics and Cersus - CORFO Annex II Table E WHOLESALE PRIC,ES OF MAIN AGRICULTURAL COMIODITIES keonstant 19-l Escudos) 1957 195'8 1959 1960 19561 1962 1963 1964 1965 Cereals Wiheat (1 ton) 292.86 312. 06 262.38 255.931 240.06 244.20 229.89 232.38 258.75 Maize (1 ton) 318.77 327,73 231.90 ,270.86 297.22 243.-47 249.,89 296.77 261.31 Rice, (1 ton) 273.05 303,55 270.00 271 t.58 268.52 253.11 187,97 253.78 24'1.38 Barle.y(1 ton) 263.77 253.,76 215.57 248.37 24r6.65 229.32 258,12 255.75 257.50 Oats (1 ton) 201.69 174.,8 193.)12 273. 12 223.70 217.80 188,78 203.98 262.19 LegEles Beans (100 kig) 82.99 38,50 48.14 90.03 90.83 61.27 55.36 56.74 89.039 Lenti-ls(100 kg,) 68.31 96,,39 120.78 88.67 61.11 74.8B 95.13 55.30 )IM1 Roo-t CropsE Potatoes (80 kg) 24.4 14.02 18.10 24.92 18.18 18.97 23.35 21.22 19.19 Sugar (ton) 562.79 579.17 412.38 378.StL 351.85 308.95 580.08 637.96 307.27 Onions ('000) 115.42 26.75 51.34 30.13 29.01 79.84 70.49 82.04 35.,65 Oilseeds Sunflower (tonI) 386.75 400.10 352.12 356.51 352.62 379.55 366.25 38.07 451.6o Fruits Wine (100 Lit) 53.90 45.36 52.01 51.83 55.68 35.77 27.01 52.65 54.50 Liviestock Products Beef (kg) 1.88 1.91 1.90 1.99 IL.94 1.87 1.99 2.26 2.27 Pork (kg) 2.01 1.75 1.90 1.'99 2.04 2.01 1.95 1.98 2.06 Lamb (kg) 2.15 1.91 2.01 2.06 1.98 2.09 1.86 2.20 2.25 Milk (100 lit) 33.12 33.50 27.51 25.5 8 217.78 27.65 25.00 22.68 27.70 C:neese (100 kc) 5Io5 19 128.30 320.56 3:7.8) 37.13 304u.51 377.35 380.76 595.65 Elggs (100) 15.87 12.37 13.72 13.32 11.64 11.98 10.61 10.73 12.30 Wool (100 kg,) 367.73 3h0.62 303.20 276.51 256.91 290.7) 391.52 3(95.7 3"1.25 Source : Bureau of Statistics and Census N.. Deflator uEed is cost-of-living index ANNEXIT Table T FROJECTIONIF ARIRITuLTURALTRLADE (1970) i961. i965 1966(a) Current Annoal Projected Remarks (Est.) A-sr.ge Growth no. ______~Rats 1970 ______Wheat =&I1 sapply (0O0tons) 1,320 1.2 72 1,rc00 -- 1,l97 4.0% 1,1.61 Area (000ha.) 85.2 85.9 79.5 82.8 1.1.1 88.5 Yielsd(qq/ha.) 15.5 15.0 12.7 11..) 2.6% 16.5 Coca,mption(000 tons) 1,4,90 1,582 1,6c1. 1.559 2.8% 1,779 here-ne1-s city 0.2 lIports (0CC toos) 227 252 623 362 318 Maine MWa1 supply (000tons) 206 221 211 222 5.28 290 Arsa (000ha.) 75.2 73.0 78.5 75.5 3.1% 88.0 Yield )oqAoa.) o7.1 30.2 30.7 29.4 2.1% 33.0 Consum.ptionCOW tone) 211 238 278 1. 3.11 282 incom el.s icIty n,.h Imports(000 ions) 5 17 37 20 -8 Rice Tc-! ..,.pmT ((091 t..n) 86 97 88l 88 371 ill Area (000 ha.) 32.6 31.0 32.6 32.0 1.5% 35.5 Yield (qo./ha.. 26.3 29.6 27.1 27.6 1.8% 30,2 Consumn,ttos(000 tons 320 106 118 115 2.7% 131 Incom etollcitly 0.1 Potatoes =caTsupply(000 tons) 763 729 720 737 3.3% 870 Area (D00ha.) 8o.0 85.9 76.6 80.7 2.3% go 6 Consumption (000tone) 763 736 7107. .%867 loc-- elmsticlty i 3. Imports(000 tone) 7 28 U2 -3 Otilsede rOO- supply - SUIb flo-r (000 tons) 1.5 46 n..a. 16 7.5% 66 Area (000 ha.) 4.2.2 4.1.2 n.a. 4.1.2 5.5% 53.6 Yield (qq/ha.) 10.7 11.2 n.e. 11.2 2.0% i17.3 Local supply- Rapeseed (000 tons) 56 75 n.a. 72 9.1.1 113 Area (000 ha.) 4.9.9 81.6 n.a. 75.0 5.6% 95.2 Yield (qqNb.) 11.3 9.6 n.a. 9.6 3.8% 11.5 Total supply(000 tone) 101 121 132 118 9.96 179 Oleqlnalent (000 tons) lao 47 50 1.6 8.78 70 Consumptinn(000 tons) 55 62 61 59 3.11 69 Incom.eelartoity ,0.1, Imports8(000 tons) 15 15 11 13 -1 e~_faupply (007tons beets) 659 679 71.0 692 17.2% 1530 Area (O000he.) 15.7 18.3 20.9 19.3 13.3% 36.3 Yield (qq/ha.) 352.0 372.0 354..0 358.0 3.9% 1.2.5 Sugarcontent (000 tons) 100 95 ill 102 1h5.% 202 Consoption (010 tome) 239 275 269 261 3.1% 301. Income e1ooticit3' 0.1. Imports(000 tons) 138 18o 158 159 102 Beef =tcai supply(000 tons) 119 119 125 118 1.8% 129 Consmption (000 tons) 169 151. 151. 159 - 159 Income lelaticity of 1.3, ror -ct Thet(non tms) tO 35 29 47 30 le.assmed anmi s,O.tcL,,- n bew~- Lomb differsntkinds of -otis tahen *Tcal supply(300 tons) 316 36 4.0 37 2.0% 1.1 into account. Conoumption (000 tons) 36 36 4.0 37 2.0% 41. Timports (flftons)m5- foltry s2lupply (OD0 tons) 20 21. 30 25 15.0% 50 Consuemption(00C tons) 20 25 30 25 15.0% 50 Pork Consoeptioc(000O tons) Li 4.8 55 4.8 12.1% 55 Milk =c.I supply (million Ltres) 831 800 800 810 3.5% 962 Litres) 1011. 923 1015 983 3.4% 1162 Income )sbct Im-orts(million litres) 183 123 215 173 - 200 II. ZXPIPT5 1960-65 Annual ProJected Averege Orsath to Rate 1970 Beans lEbn eupply (000 tone) 83 2.0% 101 Area (000 km.) 91.8 97.0 Yield (qq/ha.) 9.6 Io.1 Consumption (000 tom) 69 2.5% 82 tcpor te (000 towm 19 - 19 Fruit MMZT supply (000 torn) 369 3..% 1.66 Cornsusption(000 term) 360 3.2% 1.51 MaEx-fs (0M toss eIt Wine W ei1 auPPlY(sillion litres) 1.69 2.1. 553 Consumpt no(million litres) 163 2.3% 51.1 tZ-al supply (003 tons) 26 2.5% 31 Consumption (000 torw 21 2.5% 2%5 with data obtainedsubsequently to miassion'o visit, the latterbare been used in prepaing the balanceof parnontsprojections in Anexn I an,temolT repurt.
World Bank Document
