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World Bank Document F1RETU1RN TO 11 RFoRrs ET.SK RESTRICTED 1TVEWEE<<t0XeXL WHi"5 Vol. 4 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 The report may not be published nor may it be quoted as representing their views.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.
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