FOR AID USE ONLY AGENCY FOR INTERNATIONAL DEVELOPMENT WASHINGTON. D. C. 20523 BIBLIOGRAPHIC INPUT SHEET A. PRIMARY I.SUBJECT Economics CLASSI- B. SECONDARY FICATION Agricultural Economics 2. TITLE AND SUBTITLE Optimal allocation of agricultural resources in the development area of Patacamaya,Boliviaa linear programming approach 3. AUTHOR(S) Pou,Claudio 4. DOCUMENT DATE 5 . NUMBER OF PAGES 1. AlC NUg9ER 1972 479p. ARC L-.2. ,- 2­ 7. REFERENCE ORGANIZATION NAME AND ADDRESS Iowa State University Department of Economics Ames Iowa 8. SUPPLEMENTARY NOTES (Sponnoting Organization, Publiahere, Availability) 9. ABSI RACT Economic questions such as farm sizes and profits are considered. Farm size is defined as the number of persons on the cooperative farm, actual size of the farm, and the degree of mechanization. The farm size providing the highest income per person in the cooperative is about fourteen bectares per person. If a loss of ten percent income is acceptable, the farm size can be reduced to seven hectares per person. It is more advantageous to raise crops thar sheep, because sheep raising yields lower profits and requires a higher use of labor. Partial mechanization is better for smaller farms, while full mechanization is more profitable in larger farms. This pattern evolves because the smaller farms have a higher land-to-land ratio. Recommendations suggest the renting of land, upgrading of managerial and mechanical skills, standardized record­ keeping, and availability of an agricultural economists, 10. CONTROL NUMBER II. PRICE OF DOCUMENT Pi-Aa-/ ________ ___ 12. DESCRIPTORS 13. PROJECT NUMBER Farm sizes, Profits, Mechanization, Crops, Sheep, Labor, 931-11-140-124 Land Rental, Record-Keeping, Management 14. CONTRACT NUMBER CSD-2824 211(d) 15. TYPE OF DOCUMENT Research Study AID 590.1 (4.-74) ... .-.- a .. -. - . ­ Preliminary report Optimal allocation of agricultural resources in the Development Area of Patacamaya, Bolivia. A linear programming approach by Claudio Pou Under the supervision of Professor John F. Timmons This research was supported, in part, by the Agency for International Development grant to Iowa State University under the 211-D Provision of the 1967 Foreign Assistance Act. Department of Economics Account Number 401-01-06 Iowa State University Ames, Iowa 1972 TABLE OF CONTENTS Page CHAPTER I. INTRODUCTION 1 Nature of the Problem and its Setting 1 Objectives of this Research 3 Methods Used in Pursuing the Objectives 5 Organization of the Study 6 CHAPTER II. AREA OF STUDY 8 The Development Area of Patacamaya 8 Developmental Efforts in the Area 24 CHAPTER III. DEVELOPMENT OF MODEL AND DATA NEEDS 40 Basic Considerations 40 A Linear Programming Model 45 Data Needed and Their Collection 48 The Objective Function 50 Procedures to Satisfy the Objectives 56 CHAPTER IV. RESOURCE AVAILABILITIES AND CONSTRAINTS 68 Land 68 Labor 73 Capital 79 Water 83 Machinery 85 CHAPTER V. PROGRAM ACTIVITIES AND THEIR COEFFICIENTS 87 Crop Activities 87 Coefficients for Crops 92 Page Livestock Activity 109 Coefficients for Sheep 112 CHAPTER Vi. PRICES, COSTS AND REVENUES 122 Prices of Inputs 122 Prices of Outputs 132 Fixed Costs 136 Variable Costs 139 Revenues 139 CHAPTER VII. APPLICATION OF THE MODEL 155 The Linear Programming Matrices 155 Degrees of Mechanization 157 Computer Runs 167 CHAPTER VIII. INTERPRETATION OF THE RESULTS 170 Optimal Solutions 170 Optimal Farm Plans 190 Use and Scarcity of Resources 208 Productivity, Costs and Returns 214 Paths for Mechanization 221 Alternative Criteria of Optimality 245 Comparisons with the Present Situation 251 Expanding the Results to the Entire Development Area of Patacamaya 258 CHAPTER IX. CONCLUSIONS AND RECOMMENDATIONS 261 Conclusions Related to the Objectives 261 iv Page Policy Recommendations 266 Suggestions for Further Research 268 CHAPTER X. SUMMARY 273 BIBLIOGRAPHY 282 ACKNOWLEDGMES 291 APPENDIX A. UNITS OF MEASUREM4ENT 293 APPENDIX B. MONTHLY WEATHER DATA FROM METEOROLOGICAL STATIONS IN THE DEVELOPMENT AREA OF PATACAMAYA 296 APPENDIX C. LABOR, WATER AND MACHINE TIME REQUIREMENTS, BY TIME PERIODS 300 APPENDIX D. INFORMATION RELEVANT FOR PLANNING A SHEEP RAISING ACTIVITY IN THE DEVELOPMENT AREA OF PATACAMAYA 306 APPENDIX E. MODEL FOR A SHEEP FLOCK UNIT OF 200 BREEDING EWES, IN THE DEVELOPMENT AREA OF PATACAMAYA 313 APPENDIX F. FIXED COSTS, VARIABLE COSTS, REVENUES 335 APPENDIX G. THE LINEAR PROGRAMMING MODEL 339 APPENDIX H. SHADOW PRICES OF LIMITING RESOURCES IN THE OPTIMAL SOLUTIONS 432 APPENDIX I. UNUSED MACHINERY IN THE OPTIMAL SOLUTIONS 439 APPENDIX J. RESULTS FROM THE OPTIMAL SOLUTIONS 446 APPENDIX K. MISCELLANEOUS TABLES 459 APPENDIX L. THE SHEEP RAISING ACTIVITY 470 APPENDIX M. CHANGES IN THE MODEL 473 1 CHAPTER I. INTRODUCTION Nature of the Problem and its Setting In 1953, when the Land Reform was launched, the Bolivian Government proceeded to transform agriculture from traditional to modern forms and methods. Although initially a change in land tenure arrangements, the Land Reform was intended to have far-reaching effects upon productive aspects of agriculture. Since inception of the reform, increased agricultural production, both to improve farmers' standard of living and to reduce the deficit in the balance of payments, has been one of the main concerns of the National Government in establishing policies for development of agri­ culture. A recent study (Clark 1968) has shown that any decrease in pro­ duction after 1953, especially in the supply reaching the cities, was not a direct result of the changes in land tenure effected by the Land Reform. Some reductions in agricultural supply were inevitable consequences of a popular Revolution (of which Land Reform was only one component) whose major aim was to destroy the minority-based power structure and to create a more broadly based government (Clark 1970, pp. 52-53). Within Government, both before and after the reform, there has existed the conviction that a necessary ingredient of agricultural development is a strong program of research and extension. This conviction stemmed from the realization of very low levels of education and technology within the agricultural sector. Policies were not always enacted in accordance with 2 that conviction mainly because of budgetary constraints. However, in recent years, renewed emphasis has been placed upon research and exten­ sion work revolving around the Experimental Stations. In the high plateau region, known as the Altiplano, the Ministry of Agriculture maintains three experimental stations: Bel6n, by Lake Titi­ kaka; Patacamaya, at the southern edge of the Department of La Paz; and Chinoli, in the Department of Potosi. The Experimental Station of Pataca­ maya, founded in 1958, has received a larger share of support and is viewed by the National Government as a pilot project in testing the role an ex­ perimental station can play in the development of the surrounding area. Although founded as an Experimental Station primarily for the improve­ ment of sheep, Patacamaya has also been quite successful in crop improve­ ments. Research in potato, quinua and forages has already yielded con­ eOdezabla increases in production. Recent informal experiences with gladiola and some vegetables seem to open new possibilities. And, of course, there is continuous work being done in improving sheep through cross-breeding with imported animals and through better feeding and management. Formal extension activities by the Station began in 1963. In 1966, the Development Area of Patacamaya was established and the cooperative firm was chosen as the framework within which extension work would pro­ ceed. Apparently, the activities and results of the Experimental Station are largely responsible for the new drive for progress which is quite noticeable throughout most of the Development Area. 3 Given the experience accumulated so far and the planning being done for the near future in the area, it seemed that economic analysis could make a valuable contribution to the developmental activities. Economic analysis should help answer questions that have been forming for several years in the minds of the personnel working in the Area of Patacamaya. These questions concern productivity potential, optimal farm size, scarcity of resources, employment opportunities, selection of activities and degree of mechanization to be promoted. This research endeavors to provide answers to these questions. Conclusions of this study should shed light on the possibilities of agriculture in the Development Area of Patacamaya. To the extent that the entire Altiplano has common characteristics, the conclusions can also suggest some general directions for the development of the entire region. Objectives of this Research The broad purpose of contributions from economic analysis to the developmental efforts in the Development Area of Patacamaya is specified for this study in terms of the following four objectives: (1) To determine optimal land/person ratios, optimal degree of mechanization and paths for mechanization in the Area. (2) To determine the quantities of land, labor, capital and water required under the optimal conditions established in objective one. (3) To determine the composition of crop and livestock activities and the level of output under the optimal conditions. 4 (4) To estimate changes in per capita income, employment and productivity of the Area to be realized under the optimal conditions as compared with present conditions. Terms included in these objectives, such as optimal, income per capita, factor productivity