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8703577

Lawson, V ictoria Anne

NATIONAL ECONOMIC POLICIES, LOCAL VARIATIONS IN STRUCTURE OF PRODUCTION, AND UNEVEN REGIONAL DEVELOPMENT: THE CASE OF ECUADOR

The Ohio S ta le University Ph.D. 1986

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NATIONAL ECONOMIC POLICIES, LOCAL VARIATIONS IN

STRUCTURE OF PRODUCTION, AND UNEVEN REGONAL

DEVELOPMENT: THE CASE OF ECUADOR

DISSERTATION

Presented in Partial Fulfillment of the Requirements for

the Degree Doctor of Philosophy in the Graduate

School of The Ohio State University

By

Victoria A. Lawson, B.A., M.A.

*****

The Ohio State University

1986

Dissertation Committee: Approved by

Lawrence A. Brown, Ph.D.

Randy W. Smith, Ph.D.

Douglas H. Graham, Ph.D.

Kevin. R. Cox, Ph.D. Lawrence A. Brown, Adviser Department of Geography ACKNOWLEDGEMENTS

Writing a dissertation is a life-consuming endeavour which touches many people; these aknowledgements attempt to recognize parts played by colleages, friends and family. To begin at the beginning, I must first thank my parents, Don and Doreen

Lawson, both for demonstrating the importance of education and of enjoying 'what you do'. Their unfailing support through decisions that took me far away from them is appreciated beyond words.

A central role in my professional and personal development was played by Larry

Brown. As an adviser and friend Larry provided professional guidance and direction, but most importantly, instilled in me that personal confidence and sense of purpose, so essential for continuing — in graduate school, and in life.

Two institutions were particularly helpful in supporting this research, the

National Science Foundation, through doctoral dissertation grant SES-8412867; and the

Ohio State University Graduate School through an Alumni Award and Presidential

Fellowship. That support is appreciated.

Doug Southgate is owed a special thankyou for introducing me to Elena Kohls who made my field work a warm and exciting experience by her openness and mothering. Many Ecuadorian farmers also helped immeasurably in this work — from them I learnt more about development, its complexity, and simplicity, than could ever be conveyed in a classroom. Aly Bradley's patient and always good humored assistance has proved invaluable.

My thanks to her and Barbara Skunza for their tolerance and encouragement.

Several friends also contributed significantly to these graduate student years and the associated learning process. From Jenny Zorn came love, support, cold ones, motown, and memories for a lifetime. Cheryl Rapose provided strength and refuge when I had neither. Sandy Weber and Ed Dorsa, helped keep mind and body together, shared Ecuador, and many dinners. My thanks to Kim England. People writing dissertations are not fun to live with and her tolerance was appreciated.

Finally, my appreciation goes to Peter Witt and the Ecuadorian family. A new force in my life who patiently reminded me that I can do this, on the numerous occassions I doubted it. Peter provided love, humor, patience, and graphics unlimited

— thankyou. VITA

February 19, 1959...... Bom - Nottingham, England

1979...... BA. Social Science, Leicester University, Leicester, England

1980-1981 ...... Teaching Associate, Department of Geography, Ohio State University, Columbus, Ohio

1981-1983 ...... Research Associate, Department of Geography, Ohio State University, Columbus, Ohio

1983-1985 ...... Teaching Associate, Department of Geography, Ohio State University, Columbus, Ohio

1985-1986 ...... Presidential Fellow, Graduate School, Ohio State University, Columbus, Ohio

PUBLICATIONS

'Migration in Third World Settings, Uneven Development, and Conventional Modeling: A Case Study of Costa Rica’, Annals of the Association of American Geographers 1985 75: 29-47

Rural Destined Migration in Third World Settings: A Neglected Phenomenon?, Regional Studies 1985 19: 415-432

Polarization Reversal, Migration Related Shifts in Human Resource Profiles, and Spatial Growth Policies, A Venezuelan Study’, International Regional Science Review Forth­ coming, 1987 FIELDS OF STUDY

Major Field: Geography TABLE OF CONTENTS

Page

ACKNOWLEDGEMENTS ...... ii

VITA ...... iv

LIST OF FIGURES ...... v ii

LIST OF TA BLES...... viii

CHAPTER

I. INTRODUCTION ...... 1

Themes of this S tu d y...... 4 Overview of this Dissertation...... 6

H. REVIEW OF PERTINENT LITERATURE ...... 7

Mainstream Approaches ...... 7 The Centralization Perspective...... 8 The Decentralization School...... 13 The Intermediate City Focus...... 14 Alternative Conceptualizations...... 16 An Internal Critique of Mainstream Approaches...... 16 Dependency: An Alternative Conceptualization of Uneven Development...... 21 Concluding Observations: A Conceptual Framework ...... 24 The Capitalist State and Redistributive Economic Policies...... 24 Variations in Local Structure of Production ...... 27

- vi - m . STUDY AREA AND RESEARCH PROCEEDURES...... 29

Study Area ...... 30 Characteristics of Ecuador ...... 31 Physical Characteristics ...... 31 Characteristics of Agricultural Production...... 33 The Macroeconomic Context of Ecuadorian G ro w th...... 35 D a ta ...... 38 Research Procedures ...... 41 Summary of Chapter ...... 43

IV. MACROECONOMIC CONTEXT OF REGIONAL GROWTH IN ECUADOR...... 45

Exchange Rate Policy ...... 46 Price Policies...... 52 Credit Policies...... 60 Macroeconomic Policies and Local Growth Outcom es...... 64 Summary of Chapter ...... 69

V. ECONOMIC PERFORMANCE OF ECUADOR'S CANTONES DURING THE SEVENTIES . 71

Principle Dimensions of Development ...... 72 An Economic Change Continuum of Ecuadorian Can tones..... 76 Linkages Between Structural Conditions and Canton Development ...... 83 Regional Economic Change and Policy Impacts ...... 88 Summary of Chapter ...... 91

VI. CANTON-SPECIFIC VARIATIONS IN POLICY IM P A C T ...... 93

Field Collected D a t a...... 94 Variations in Economic Structure — Ambato and Riobamba.... 95 Socioeconomic Characteristics of Ambato and Riobamba .... 96 Agricultural Structure of Production — Pinguile and Quimiag ...... 99 Policies in Regional C o n tex...... t 104 Price Policy ...... 105 Credit Policy...... 107 Summary of Chapter ...... 110

VH. SUM M ARY...... I l l

Themes of the Dissertation...... I ll Analytical Steps and Results...... 113

- vii - Nationwide Policy Impacts ...... 113 Policy Impacts and Economic Change ...... 115 Canton-Specific Policy Im pacts...... 116 Contributions and Policy Implications ...... 116

APPENDICES

A. Development Dimension Component Scores For Ecuadorian C a n to n es...... 119

BIBLIOGRAPHY ...... 121

- viii - LIST OF FIGURES

FIGURE PAGE

1. Terrain of Ecuador ...... 32

2. Cantones of Ecuador ...... 39

3. Research Procedures ...... 42

4. Crop Types by Landholding Size for Ecuador...... 53

5. Structural Variables Mediating Local Policy Im pacts...... 66

6. Ecuadorian Cantones Classified by Socioeconomic Change...... 82

- ix - LIST OF TABLES

TABLE PAGE

1. Agricultural Sector Indicators, 1970-1983 ...... 36

2. Data on Food Imports into Ecuador, 1970-1980...... 48

3. Output Indices and Yields for Domestic Food Crops, 1970-1980 50

4. Minimum Producer Prices, Ecuador, 1970-1980 ...... 55

5. Maximum Consumer Prices, Ecuador, 1970-1980 ...... 58

6. Area Harvested and Production of Potatoes, Barley, and B e a...... n s 59

7. Volume of Total Bank Credit, 1970-1980 ...... 61

8. Inflation Rates, Ecuador, 1970-1980 ...... 63

9. Percent of Agricultural Production Credit Disbursed by Region...... 65

10. Principal Components Analysis of Socioeconomic Change, 1974-1982 ...... 74

11. Ecuadorian Cantones Grouped by Scores on Socioeconomic Change.... 77

12. Mean Component Scores by Canton Group on Socioeconomic C h an g e...... 80

13. Means and Standard Deviations of Structural Variables by Groups . . . 85

14. Discriminant Analysis of Growth Groups by Structural Variables .... 87

15. Predictive Ability of Discriminant F unction...... 90

16. Proportion of Economically Active Population by Economic Sector .... 98

17. Land Distribution by Farm Size Classes ...... 101

18. Agricultural Structure of Production, Pinguile and Q uim iag...... 103

- x - CHAPTER I

INTRODUCTION

Uneven regional growth in less developed countries has long been of concern to academics and policymakers, due in part to the visibility of disparities in access to resources and their political implications (Meier and Seers, 1984; Smith, 1984; Gore,

1984). Extremes of urban primacy, uneven income distributions, and the juxtaposition of commercial versus subsistence agriculture exemplify these social and regional imba­ lances. Governments have responded to such inequities with regional development policies intended to maximize growth, improve overall access to resources and so defuse potentially volatile political situations.

Such policies emerged from mainstream regional development theory which posits

models aimed at maximizing economic growth and minimizing regional inequalities in

its distribution. This work initially regarded industry as the engine of growth

which would transform primarily agrarian economies by productively employing their

burgeoning populations.

(depressed areas) were seen to suffer from a lack of industrial devel­ opment, which was driving the growing population into rural and urban occupations of very low productivity.

(Meier and Seers, 1984: 4)

Early work advocated a centralization approach concentrating investments, policy

initiatives, and administrative energies in primate cities (Hirschman, 1958; Friedmann,

- 1 - 1966). Disappointing performance of centralization policies led to the emergence of rural oriented approaches. These emphasise bottom-up development strategies, stressing dispersal of policy efforts to counteract previous urban (primate city) biases (Lipton,

1976; Rondinelli and Ruddle, 1978). Policies based on this approach, however, have

foundered as a result of deficiencies in local resources, economic base, and infrastruc­

ture such that these areas cannot compete with agglomeration economies in large cit­

ies. This outcome directed attention towards intermediate cities as agents of change in

regional economies, through provision of services and by more fully integrating local

marketing and supply networks (Rondinelli and Ruddle, 1978; Rondinelli, 1983).

Given the recency of intermediate city approaches, however, it is impossible to deter­

mine how successful such policy prescriptions will be.

The disappointing performance of the first two policy approaches in achieving

stated objectives can be related to fundamental problems underlying mainstream con­

ceptualizations. These are elaborated below.

First, neo-classical assumptions of mainstiouif regional development work argue

that autonomous economic forces will equilibrate regional incomes during the course of

development. Although a useful conceptual tool, this assumption is not an adequate

description of reality. This is illustrated by considering the distinction between

macroeconomic forces and policies.

Macroeconomic forces such as shifts in commodity supply/demand, inflationary

pressures, changes in relative currency values, and the like, operate in the interna­

tional economy, such that nations are presented with production and consumption

opportunities which change over time. However, whilst all people and places are

faced with macroeconomic forces, actual growth outcomes in any national context depend upon a set of policies which states employ to ameliorate growth inhibiting effects of such forces. These macroeconomic policies represent state intervention in national and local economies and aTe inevitably channelled according to resource scarcities, institutional rigidities, and competing political constituencies.*

Accordingly, compensatory macroeconomic policies (in contrast to macroeconomic forces) have differentiated intended and unintended impacts upon various groups of producers throughout the space-economy, and themselves contribute to uneven growth.

In order, then, for mainstream theory to adequately explain uneven growth, models must take account not only of autonomous forces, but also state intervention and control of growth processes.

A second conceptual problem in mainstream approaches is overemphasis on cities, urban systems, and more generally spatial form as causally responsible for specific development outcomes. For example, these theories tend to oversimplify objects of analysis and discuss simply 'city' as opposed to the complex set of social and economic processes represented by that entity. This leads to problems such as taking equilibra­ tion of regional incomes as a policy goal and implying that ’place prosperity' equates

with 'people prosperity' (Richardson, 1978; Gore, 1984). Such assumptions misguide

policy applications and pereptuate disparities created by previous policy initiatives.

In making these assumptions, mainstream theories are insensitive to historical and

geographical settings, arguing that people and cities can be rearranged in space to

produce consistent development outcomes across cultural contexts. Such an assertion assumes that space is an independent variable which can be manipulated and is cau-

1 This distinction between macroeconomic forces and policies was suggested by Prof. D. H. Graham of the Agricultural Economic Department, Ohio State University. His assistance is appreciated. sally responsible for change. In reality, however, properties assigned to particular spatial forms (such as distributions of cities) are actually properties of objects consti­ tuting space (Sayer, 1984; England, Jonas, Mair, 1986). This is illustrated by consid­ ering contemporary First and Third world cities.

In the United States and Western Europe urban centers are almost entirely char­ acterized by capitalist forms of production. Their spatial forms, including suburbs and industrial districts, are produced by mechanisms peculiar to capitalism such as commodification of land, and separation of home from workplace. By contrast, Latin

American cities exhibit a combination of capitalist and pre-capitalist production and are characterized by very different spatial forms such as shanty towns and artisnal production in the home, in addition to modem industrial developments. The larger point here is that spatial forms which emerge on the landscape cannot be divorced from the social, economic, and political system which produced them (Gregory and

Piche, 1981).2

THEMES OF THIS STUDY

The conceptual framework adopted here grows out of these two concerns, arguing that theory, rather than focusing on the distribution and form of urban centers, should ask questions about the spatiality of processes they represent. In doing so, explanations of uneven regional growth cannot rest solely upon the operation of autonomous economic forces in the space-economy. Actual national and regional growth outcomes, it is contended here, depend upon the state's ability to control

A similar point can be made taking an historical example. Consider that the jux­ taposition of markets, infrastructure, and population in pre-capitalist cities of the middle ages produced marketing and supply centers; whereas a similar combination of factors produced industrial expansion under a capitalist system (Gordon, 1977; Johnston, 1982). external influences through policies which ameliorate their growth inhibiting impacts.

Furthermore, idiosyncratic structural conditions in local economies determine the extent to which places are favored or penalized by policy initiatives and thus exhibit uneven growth.

This dissertation elaborates these themes by investigating the redistributive impacts of state intervention, and their different impacts across economic sectors, social groups, and regions in Ecuador. State intervention, in many Latin American nations, is biased in favor of the urban/industrial elite in response to their power and political influ­ ence. This is exemplified by broad based policies such as industrial subsidies, trade policies favoring domestic industry, and cheap urban food programs. More specifically, domestic industry is protected from foreign competition by tariff barriers of up to

200% over imports of finished manufactures, and domestic fuel prices have been maintained well below world market prices, thus subsidizing those producers employ­ ing mechanization (Economic Perspectives, 1985). Further, the selectivity of these impacts is shown to have a distinct spatial expression depending upon local variations in structure of production. For example, producers not fully incorporated into the capitalist system, not producing for commercial markets, paying taxes, or contributing significantly to government revenues, tend not to be major beneficiaries of 'market intervention' government policies Griffin, 1977; Watts, 1984).

In summary, it is contended here that the relations of the state to local produc­ ers, as expressed through policies have not been considered in regional development theory. More importantly, interactions between economic growth processes, policy intervention, and specific aspects of local production have been neglected, and should be central to investigations of uneven regional growth. OVERVIEW OF THIS DISSERTATION

Having outlined the conceptual framework and broad themes of this dissertation,

Chapter II reviews mainstream regional development theory, critiques this work, and then elaborates the conceptual framework adopted here. Chapterin introduces the study area, discusses research procedures, and provides an overview of Ecuador's geo­ graphic, social, and economic characteristics. Chapter IV elaborates three macroeco­ nomic policies employed in Ecuador and illustrates their spatially varied impact upon different groups of producers. Chapter V deals with the interrelationships between structure of production, policy impacts, and actual growth performance across Ecuado-

•J rian cantones during the seventies. Chapter VI supplements and elaborates these national level findings through comparison of field research sites, relating variations in their structure of production to the performance of specific policies in these locales.

Chapter VII provides a summary of findings and implications for future research.

Attention now turns to a review of mainstream regional development literature.

9 The canton is a local political unit in Ecuador; such divisions are elaborated in Chapter III. CHAPTER H

REVIEW OF PERTINENT LITERATURE

Elaborating themes introduced above, this chapter reviews and critiques main­ stream regional development research which has guided theoretical debate and policy making over recent decades. It is argued here that this conceptual and applied research has not sufficently emphasized the State's role in shaping development through macroeconomic policies, or considered the way in which such policies have spatially differentiated impacts depending upon local structure of production.

A first task is to review mainstream regional development theory which gener­ ated policies currently employed to correct uneven regional growth in less developed coutries (LDCs). Second, recent critiques of mainstream work are drawn together and extended to illustrate internal logical inconsistencies in mainstream theoretical assump­ tions and, hence, anticipated outcomes of resultant policies. Third, the dependency perspective is presented as an alternative analysis based on the importance of interna­ tional macroeconomic, political, and social forces in shaping development. A final section elaborates the conceptual framework adopted in this study.

MAINSTREAM APPROACHES

This section reviews mainstream regional development work which posits growth models and policies aimed at maximizing economic growth andminimizing regional inequalities. Such work is grounded in neo-classical economics, adopting assumptions

- 7 - of a uniform distribution of factors of production, existance of an urban system through which growth is transmitted, perfect divisibility and mobility of resources, perfect knowledge, and rational human behaviour. Although these assumptions are

relaxed in specific models, in general development is seen as produced by autonomous economic forces which operate similarly in all cultural and development contexts.

Accordingly, growth experiences and spatial forms in the West, such as rank size

urban systems, are assumed to be replicable and effective in acheiving efficiency and

equity goals in less developed countries.

A further point must preface this section. Regional development theory in less

developed settings addresses sluggish growth and increasing regional inequalities, with

the primary objective of better understanding and ameliorating these problems through

policy intervention.

Development economics did not arise as a formal theoretical discipline, but was fashioned as a practical subject in response to the needs of policymakers to advise governments on what could and should be done to allow their countries to emerge from chronic poverty.

(Meier and Seers, 1984: 4)

In reviewing this work, then, the performance of such policies is taken as indicative

of the extent to which mainstream theories adequately explain growth processes.

Three major directions in mainstream work are reviewed, centralization, rural oriented,

and intermediate city approaches.

The Centralization Perspective

Early regional development work regarded industry as the engine of growth which

would transform primarily agrarian economies. Spatially, manufacturing investments

were seen as being concentrated in order to maximise economic efficiency and hence

growth (Alonso, 1968; Hirschman, 1958; Friedmann, 1966). More generally, a concen- 9 tration of investments, administrative energies, and policy initiatives in large, often primate cities was advocated, reflecting the initial importance of agglomeration econo­ mies (Berry, 1969; Richardson, 1978; Gaile, 1980)/*

in order to acheive the sustained and cumulative growth of a predom­ inantly rural region, creation of an urban industrial matrix appears,at least in historical perspective, to be essential.

(Friedmann, 1966: 11-12)

Hirschman (1958), a major contributor to the regional growth debate, regarded the development process as a 'chain of disequilibria' wherein investments in basic and intermediate industries would generate backward and forward linkages and thus pro­ mote further investments throughout the economy. Thus, both academics and policy makers hypothesised that primate cities would spark development impulses which

'trickle down' the urban hierarchy, spreading growth throughout the national territory, and ultimately leading to spatial equilibrium.

This assumption is modified by Myrdal’s argument that growth is circular and cumulative and that regional growth rates are, and will remain, unequal (Myrdal,

1957; Richardson, 1978). This work gave rise to the core-periphery conceptualization of urban and regional growth wherein the core is viewed as the centre of innovative change, innovations being material, technical, spiritual, and institutional. The core is closely tied to the periphery by processes of innovation diffusion, migration, invest­ ment, and political control, which operate to spatially organize the economy.

Primate cities are significantly larger (often six times or more) than any other center in the urban system. In developing nations, the majority of industrial, educational, cultural, political, and administrative activities are concentrated in pri­ mate cities (Dickenson, Clarke, Gould, Prothero, Siddle, Smith, Thomas-Hope, and Hodgkiss, 1983). 10

Critical to the core-periphery conceptualization, and distinct from Myrdal (1957), is that development occurs through growth impulses of two sorts; 'polarization' or

'backwash' effects which build up core areas, and ’trickle down* or 'spread' effects benefiting periphery locales (Gaile, 1980; Richardson, 1978). Initially polarization effects dominate, leading to agglomeration economies and increasing primacy in the core; trickle down then increases, generating ’modem' activities in the periphery.^ The shifting balance between these forces, as development progresses, ultimately leads to a breakdown of core dominance and the convergence of regional socio-economic condi­

tions.

The sluggish occurrence of 'trickle-down’ and convergence of regional incomes has led governments to employ growth pole strategies to hasten the event (Richardson and

Richardson, 1975; Richardson, 1978). Such strategies concentrate industry, infrastruc­

ture, and administrative entities in one locale to produce a countermagnet to primate

city dominance, thus promoting city growth and distributing productive resources more

evenly throughout the national territory. Examples include Ciudad Guyana in Vene­

zuela and Brasilia in Brazil (Friedmann, 1966; Brown and Lawson, 1985). In effect,

such strategies employ core-periphery mechanisms but at a more local scale.

Core-periphery assertions are substantiated through empirical work by Williamson

(1965) which concluded that after a period of increasing regional income disparities,

inequalities will diminish during the course of development, a finding substantiated

by Berry and Kasarda (1977), Mera (1978), and Vining (1982). Berry (1969) also

tested the 'trickle down' hypothesis by examining the interrelationships between urban

systems and regional economic growth in Chile. His conclusions support concentration

^ Recent empirical accounts of such decentralization include Vining (1982), Vining and Kontuly (1978), Townroe (1984), and Townroe and Keen (1984). 11 of economic activity in the primate city, and its generation of top-down growth growth impulses, but only if 'trickle-down' is engineered by policy. Several more

recent studies provide general support for 'natural' and policy induced centralization

and subsequent 'trickle down' (Mera, 1978; Pederson, 1975; Renaud, 1977; Faissol,

1976). More recently the notion of trickle down has been elaborated and refined.

Initially viewed as a continuous progression of growth from larger to smaller centres,

the process is now regarded as a cumulative response to rising costs from agglomera­

tion and diseconomies of scale, which manifests itself in an apparently sudden decon­

centration or polarization reversal (Richardson, 1980).

A related body of research argues that 'normal' economic development generates a

rank size distribution of urban places (Berry, 1961; 1969; Pederson, 1975; Carrol,

1982). Accordingly primacy, the UTban expression of economic polarization, is regard­

ed as a temporary deviation from normal city size patterns, correctable by policies

which lead to a rank size distribution of cities and hence an integrated space econo­

my (Smith, Huh, and Demko, 1983; Abumere, 1981; Gore, 1984).

Assumptions of the centralization perspective regarding the spatial spread of

growth impulses are challenged on a number of fronts; Sheppard (1982) contends that

place-specific economic forces and urban interdependencies are critical factors not

addressed in rank size thinking. Pred (1976) in examining urban systems in advanced

economies emphasizes neglect of corporate decision-making processes which explain pre­

dominantly lateral as opposed to top-down movements of growth impulses within

urban systems. More generally, there are sparse theoretical grounds for asserting that

a rank size distribution of cities promotes regional development; a conclusion based

primarily upon correlations of rank size city distributions with levels of development 12 across nations (Berry, 1961), and not upon analyses of processes which generate growth and specific distributions of places.

A comprehensive empirical assessment and broad critique of the centralization perspective is Scott's (1982) study of Mexican urbanization between 1940 and 1980.

This observes that specific policies promoting concentration generate extremes of over­ crowding and congestion, high costs for effective servicing of urban agglomerations, and a primate city bias in transportation, communications, political and policy decision-making. Such centres are economically inefficient, both because of the rising social and economic costs of agglomeration, and untapped resources in the periphery.

Scott (1982) concludes that the negative impacts of centralization offset the economic efficiency rationale presented by other research.

A more general criticism of centralization and rank size perspectives is that its

preoccupation with city size is misplaced, and that processes producing such agglomer­ ations should be the focus of investigation. As observed by Richardson (1973: 8);

City size may in at least some cases be an intervening variable that forms a statistical link between one variable and another and may stand as a surrogate for them but it is not the real independent vari­ able itself.

To elaborate, consider the preponderance of (un)underemployed in primate cities, living

on the fringes of the urban economy. Largeness of the workforce is not the problem

(as is implied by mainstream theory), rather causes are rooted in organization of the

formal employment market, where unionization and closed shop practices elevate

wages and limit hiring; and overcapitalization of industry, wherein artificially cheap capital encourages purchase of labor saving technologies as opposed to hiring abundant

labor. Accordingly, redirection of migrants to smaller centres in the urban hierarchy

w ill not solve the problem, merely relocate it (Gore, 1984). 13

The Decentralization School

Decentralization approaches emerged in reaction to the slow pace, or absence, of polar­ ization reversal and increasing urban/rural disparities in income and welfare levels.

Lipton (1976) elaborates a theory of urban bias wherein circular and cumulative cau­ sation of primacy results from specific policies, devised and implemented in urban areas; a redirection of such biases towards the rural sector is his solution. Such 're­ directed' policies emphasise bottom-up development strategies, stressing dispersion of policy efforts to counteract previous urban biases (Lipton, 1976; Rondinelli and Rud­ dle, 1978). Provision of basic needs to rural areas, including health care, adequate nutrition, water supplies, sanitation, and education, are prioritised as a development

goal. This strategy would enhance productivity by improving human capital reserves

in the periphery (Hyami and Ruttan, 1970; Isenman, 1978; Hicks, 1979; Hicks and

Streeton, 1979).

Policies based on this approach, however, have foundered as a result of inade­

quate local markets, infrastructure, and services such that rural areas could not com­

pete w ith agglomeration economies in large cities. Futher, lack of consumer demand,

skilled labor, and management led to poor profitablity foT decentralized industries

which consequently did not create the anticipated regional multipliers and improve

regional growth performances (Rondinelli, 1983; Renaud, 1981). It is also evident that

strategies promulgating rural non-farm and small scale enterprises involve urban as

well as rural development. Accordingly, it has been argued, wholesale rejection of

urban/rural alliances is counterproductive for generating spatially equitable growth.

Richardson (1978; 134) supports this conclusion;

only (development) strategies based on the complementarity between urban and rural development have any prospect of success. 14

Disappointing performance of decentralization strategies, however, is more complex than merely a rejection of 'urban' (Rondinelli, 1983; Gore, 1984). This perspective adopts illogical divisions of the objects of study; for example viewing unequal resource allocations as a rural/urban dichotomy when in reality there are many 'ur­ ban functions' which aTe located in rural areas such as rural non-farm activities, small scale industry and the like. Rather than emphasising locations, the focus should be on unequal allocations between social groups, with disproportionate amount going to industrial capitalists, large landowners, urban bureaucrats and professionals, and not to small farmers, tenants, landless agricultural workers, and members of the urban informal sector (Lipton, 1976; Griffin, 1977). Hence, decentralization theorists have overemphasized certain types of locations (rural villages, primate cities) whilst paying insufficient attention to the socio-economic processes by which growth benefits are distributed.

The Intermediate City Focus

In the face of continued economic polarization rank size city hierarchies regained favor as the optimal urban matrix within which to acheive spatially balanced devel­ opment (Rondinelli, 1983; Pederson, 1975). Several empirical studies, investigating the distribution of urban functions across city size classes, noted that urban systems in developing nations are incomplete, lacking the middle tier of market centres which are essential for enhancing spatially balanced development (Johnson, 1970, Hackenberg,

1980, Lentnek, 1980; Rivkin, 1976; Kim, 1978; Hansen, 1981). This emphasis upon a rank size urban system is summarized by Roberts (1977: 177);

In the literature on regional planning, there is a stress on the need for a well integrated urban hierarchy that effectively organises the social and economic space of a region and articulates it with the national economy. 15

Given that intermediate cities remained underdeveloped by the 'natural' operation of economic forces, this perspective focuses on stimulating their growth through policy intervention. Two major directions can be identified.

First, specific place attributes and functions deemed essential for regional centers to promote regional development were identified/* In addition, and similar to earlier growth pole strategies, such places received inputs of capital, infrastructure, and industrial activities to employ labor, retain and expand the human resource base, pro­ mote local investments and so generate regional economic multipliers (Rondinelli, 1983;

Lentnek, 1980; Richardson, 1981).^

Second, integrated rural development (IRD) projects focus upon complete regional

urban systems from largest city to rural village, attempting to integrate the entire

production and consumption network. To this end, improved marketing, transporta­

tion, and communication links are stressed. Rural non-farm employment and access to

financial, commercial, and personal services also are enhanced in order to retain pro­

ductive population in rural areas (Rondinelli and Evans, 1983; Rondinelli, 1979;

Karaska, Wilkie, Belsky, and Calkins, 1985).

Implicit in these policy prescriptions is the assumption that

These attributes include transportation and communications facilities, social, com­ mercial, and personal services. In addition, specific functions to be performed include; decentralizing public services, providing regional marketing, agroprocessing, and supplies; and promoting commercialization of agriculture. n Growth pole strategies, as discussed above, emerged in the sixties as a policy solu­ tion to polarized growth in primate cities (Richardson, 1981). Early versions, however, typically concentrated growth incentives in one location, as with Ciudad Guyana in Venezuela, and Brazilia in Brazil (Brown and Lawson, 1985). By con­ trast, the intermediate city strategy discussed here directs incentives to several regional centers simultaneously. 16

by increasing the accessibility of the rural population to the regional hierarchy of urban centres, greater social equity will ensue

(Gore, 1984: 156)

This strategy falls short, however, because acheiving growth with equity is not soley a function of spatial system integration. More critical are unequal exchanges of resources within such systems, for example, taxing agriculture and subsidizing industry through cheap urban food policies. Given this, efforts to more fully link rural vil­ lages into the national economy may promote even greater rural/urban inequalities.

ALTERNATIVE CONCEPTUALIZATIONS

A central theme in this review is that policies emanating from mainstream regional development theory have not acheived stated objectives of spatially balanced develop­ ment and reduced regional inequalities. This section elaborates two critiques of mainstream approaches. First, an internal critique identifies logical inconsistencies in assumptions and theory. Second, an external critique, dependency theory, argues for a fundamentally different analysis focusing on competing interests and different power relations between groups involved in development, including both nation states and local producers.

An Internal Critique of Mainstream Approaches

Mainstream work advocates acheivement of regional equilibrium through manipulation of national urban systems. As summarized by Lentnek (1980: 104);

All spatial strategies for development have the common objective of creating a hierarchy of urban centres which would mobilize the human and natural resources of an entire nation.

The basic assumptions of this literature, however, lead to misspecification of causal processes, underemphasizing social and political factors and overemphasizing spatial form as these influence uneven growth. The argument is outlined as follows. 17

First, a common theme underpinning this literature is 'spatial equilibrium’ as an attainable policy goal (Rondinelli and Ruddle, 1978; Rondinelli, 1983; Gore, 1984), an expectation resulting from the neo-classical conception that autonomous economic forces will equilibrate regional incomes in the course of development. Specifically, assump­ tions of perfect competition entail perfect divisibility and mobility of resources, per­ fect knowledge, and rational human behaviour, all of which do not hold for real world settings (Myint, 1971; Richardson, 1978; Yotopoulos and Nugent, 1976).® Fur­ ther, in less developed settings, international monopolies and local political patronage are strong distorting factors which further confuse real world applications of main­ stream thinking. Even more problematic is translation of these aspatial assumptions into a spatial-economic frame of reference.

To elaborate, agglomeration economies illustrate that location decisions are interde­ pendent, not independent as assumed. Firms benefit from a set of externalities asso­ ciated with large clusters of economic activity and extensive markets, labor supplies, infrastructure, transportation linkages, and the like. Hence, present decisions by necessity are affected by past ones and the possibilities for a spatial equilibrium of Q economic activity are thus countermanded/

o While it is acknowledged that within contemporary economic theory the simplifi­ cations of perfect competition, alluded to here, have been superceded by more rig­ orous and sophisticated concepts, mainstream regional development theory has not followed suit. Indeed, even these assumptions of perfect competition remain implicit in many models, not being drawn out or critically evaluated. o Polarization reversal literature argues that ultimately agglomeration economies break down due to diseconomies of scale, pollution costs, and the like, thus equilibrating the space-economy (Richardson, 1980). However, even if growth spreads to new locales, similar interdependencies will prevail in more local areas and new disequi- libria will emerge. 18

Locational interdependence also influences attempts of individual entrepreneurs to maximize their market share. Spatially defined markets of other vendors provide a continual incentive to shift location in order to poach on neighboring markets. Yet

each of these individual decisions transforms the space-economy and prompts a com­

plex of reciprocal adjustments. Accordingly, space-economies are not equilibrating, but

rather are inherently unstable and continually changing (Myrdal, 1957; Koopmans and

Beckmann, 1957; Gore, 1984). It is then, logically impossible to achieve a spatial

equilibrium which is optimal in efficiency and equity terms. Hence, spatial balance

is not a realistic or useful goal for regional development policy (Gore, 1984; Myrdal,

1957).10

Second, another problem is that of satisfactorily defining units of analysis (ie.

region or city). Mainstream theoretical work tends to oversimplify the objects of

analysis, discussing simply 'city' rather than the complex set of social and economic

processes represented by that entity. To illustrate, theory has dichotomized 'rural' and

'urban' on an agriculture/non-agriculture basis (Lipton, 1976; Rondinelli, 1983; Kim,

1978), and devised policy prescriptions accordingly. In reality industrial activities,

both modem and traditional agricultural practices are found in rural areas, such that

policies directed at agriculture do not have uniform impacts within that sector as

implied. By contrast, specific attributes of producers such as access to capital,

knowledge, and transportation, determine the extent to which they benefit from spe­

cific programs.

Although polarization reversal literature appears to contradict this conclusion, actual outcomes of this process remains in debate (Richardson, 1981; Friedmann and Wulf, 1976). For example, current concern in the United States regarding rural turnaround and snowbelt-sunbelt population shifts indicate the continually changing nature of spatial configurations, and conventional wisdom remains unconvincing regarding whether regional income convergence, or new centres of polarization, will be the outcome of current transfers (Bourne and Simmons, 1978; Morrill, 1979; Clark, 1980; Simmons and Bourne, 1981). 19

A related issue of misspecification is misuse of the regional concept in asserting that equity is acheived by balancing regional incomes. This assumes that 'place pros­ perity’ is equivalent to 'people prosperity' and thus committs an ecological fallacy, inferring that average conditions in a region apply to all individuals located there

(Richardson, 1978; Gore, 1984).

Thiid, the more general problem here is how mainstream research has conceptu­ alized the role of space in development, and consequently diverted attention from key processes of change. Space is viewed as a container in which cities and people can be rearranged to produce consistent development outcomes in different historical and geographic settings.** For example, specific spatial arrangements of cities that were congruent with economic development in one setting, the United States, should produce similar results in other contexts. This assumption confuses processes and their spatial manifestations, for example, preoccupation with concepts such as 'urban', 'rural', and

‘urban system' are bad abstractions, as defined by Sayer (1984: 127);

A bad abstraction arbitrarily divides the indivisible and/or lumps together the unrelated and the inessential, thereby 'carving up' the the object of study with little or no regard for its structure or form.

Such abstractions, when constructing theory, obfuscate actual mechanisms occurring in cities which may promote/retard economic growth. For example, intermediate cities in less developed settings may contain both capitalist and non-capitalist producers, owners

Mainstream conceptualizations have viewed space as a container, that can be empty, and so exists independently of the objects within it; hence, rearranging objects (cities, people) will produce expected development outcomes. HoweveT, in geography, and in regional development theory, we are concerned with the spatial configuration of specific objects, such as roads, factories, laborers, and the like, and hence view space as bringing together (or separating), objects with relation­ ships to one another which, when realized, lead to development. Distance, urban hierarchies, and space in general, are important in that they activate processes by bringing together the social objects, consumers, markets, laborers, capital, and the like, such that development can occur (Sayer, 1984). 20 and renters of land, formal and informal sectoT activities, all of which react very differently to national policies concerning credit availability, prices, and the like

(Sayer, 1984; England, Jonas, Mair, 1986).

Regional development theory, whilst considering space as necessary to the opera­ tion of growth processes, must view actual spatial forms (eg. distributions of cities) as context-specific not predetermined for different real world settings. Properties assigned to particular spatial forms are actually the properties of objects constituting space, at particular points in time. This is illustrated as follows. Consider contemporary First and Third world cities. In the United States and Western Europe urban areas are almost entirely characterized by capitalist forms of production. Their particular spa­ tial form including suburbs and industrial districts are produced by mechanisms peculiar to capitalism such as commodification of land and separation of home from workplace. By contrast, Latin American cities exhibit a combination of capitalist and pre-capitalist production and feature very different spatial forms, such as shanty towns and artisnal production in the home, in addition to modern industrial enter­ prises.^^ As Massey (1979: 243) concludes;

the implication of this analysis is that intervention in spatial distibu- tions cannot be divorced from intervention at the level of production. To see regional policy and regional problems simply as questions of spatial distribution is completely inadequate.

In summary, space is important in understanding development because it brings together/separates social objects (laborers, factories, roads, and the like) and thus facil­ itates the operation of processes which result in economic growth. In order to

12 A similar point can be made employing an historical example. Consider that the juxtaposition of markets, infrastructure and population in pre-capitalist cities of - the middle ages produced marketing and supply centers; whereas a similar combi­ nation of factors produced industrial expansion under a capitalist economic system (Gordon, 1977; Johnston, 1982). 21 understand urban and regional growth, however, space must be viewed as a necessary condition of growth variations, rather than the central cause. As argued in this dis­ sertation, theory, rather than focusing on the distribution and form of urban centres, should ask questions about the spatiality of processes they represent.

Dependency: An Alternative Conceptualization of Uneven Development

Dependency theory is presented here as a critique of mainstream development ortho­ doxy. This literature is important in that it emphasizes the centrality of macroeco­ nomic, political, and social forces in shaping development — a focus lacking in main­ stream theory. This discussion, however, is presented not as a comprehensive review, but rather as an example of work which acknowledges, at a general level, the importance of international market forces, national governments, and local producers in shaping development. A theme explored in greater detail by this dissertation.

Early work viewed dependent development as resulting from unequal commercial exchange in the international economy (Frank, 1967; Cardoso and Faletto, 1979; Santos,

1974). The global capitalist system was seen as a series of metropolis-satellite rela­ tionships at a number of scales, from the United States as a major metropole and

Latin American nations as satellites, down to provincial metropoli and regional satel­ lites (Frank, 1967). The entire system has a monopolistic structure, wherein each metropole exerts control over its satellite such that its economic surplus is appropriat­ ed upwards in the system leading to progressive underdevelopment of satellite nations or regions (Frank, 1967; Gore, 1984). For example, many developing nations have small, open economies and export led growth strategies;hence, international market forces and national policies alter local production possibilities and strongly influence regional growth performance.1 ^

1 % An open economy has few foreign exchange restrictions such as tariffs, import/ 22

From this initial spatial conceptualization in which metropoli exploited satellites, more recent analyses have emphasized interactions between international capitalist expansion, local states, and dominant classes (Amin, 1976; Edelstein, 1981). In this scenario an economy is dependent when;

the accumulation and expansion of capital cannot find its essential dynamic component inside the system.

(Cardoso and Faletto, 1979: xx)

This interplay of international capital with national economies is expressed through expansion of multinational corporations, diffusion of foreign technology, and interna­ tional financial systems which condition the economic setting and performance of less developed countries. Countervailing forces may include national and regional govern­ ments, local political constituencies such as the middle and working classes, and peas­ ant organizations (Amin, 1976; Edelstein, 1981).

Within dependency, increasing attention is also being directed to the shifting bal­ ance of power between LDC governments and former colonizing nations (Amin, 1976;

Slater, 1977). During the colonial era LDC growth was tightly controlled by the

'mother' country, a situation which changed with political independence. Although still influenced by international forces, LDC governments now protect interests of local dominant classes (frequently the urban/industrial elite) and promote growth in particular sectors of the economy. This is exemplified by import substitution indus­ trialization policies and promotion of urban/industrial growth at the expense of the agricultural sector (Meier, 1976; Cardoso and Faletto, 1979; Slater, 1974). Accordingly, recent analyses consider three sets of actors as influencing growth outcomes — inter­

export licenses, and taxes, thus facilitating an export led growth strategy — one of increasing exports in order to earn foreign exchange for imports necessary for national growth. Such economies, however, are extremely vulnerable to fluctua­ tions in world demand, supply, and prices (Meier, 1976). 23 national economic interests, national governments, and local producers.

In similar vein, but drawing attention to sub-national growth variations, Slater

(1977) examines the impact of peripheral capitalism upon urbanization in LDCs.*4

He argues that uneven growth in dependent nations is linked to incomplete capitalist transformation of peripheral economies. To elaborate, partial penetration of agrarian capitalism took place in the colonial era as foreign capital began producing for export markets. Along with this, however, pre-capitalist subsistence forms also persisted to supplement low wages in the urban/industrial sector, and to provide alternative employment during periodic economic downswings (Forbes, 1981; Peek and Antolinez,

1980). These variations in forms of production give rise to increasing labor surplus in areas dominated by capitalist production, leading to migration and burgeoning urban concentration.

Dependency work thus draws attention to competition between foreign and local capitals and national governments as key elements shaping uneven growth. In addi­ tion, the state's mediating role between international and domestic interests is drawn out; althougk specific strategies, such as favoring expansion of the urban/industrial sector through macroceonomic policies, are not addressed. Finally, Slater (1977) exam­

ines some sub-national growth implications of dependency relations but focuses on

generalized structures o f capitalism and does not address mechanisms generating

^ Peripheral capitalism refers to social and economic mechanisms emerging in dependent nations. It is distinguished by several features such as colonial pene­ tration which blocked indigenous development of capitalist production through extracting and exporting local surplus product and thus siphoning off resources which might have inititiated national capital accumulation; participation in world trade which led to a loss of surplus product through unequal exchange; and an alliance between industrial capital and the powerful pre-capitalist social classes in rural areas which blocked emergence of a home market for manufactures by retaining labor in semi-feudal forms of production and thus reinforced the domi­ nance of merchant capital (Slater, 1977; Dos Santos, 1973). 24 uneven growth at the local level.

»

CONCLUDING OBSERVATIONS: A CONCEPTUAL FRAMEWORK

This review of regional development theory leads to the following conclusions. First, that national and regional growth cannot be adequately explained solely in terms of autonomous economic forces operating in the space economy. Rather additional pro­ cesses, as they influence the spatial expression of growth, must be considered. Second, dependency theory, presented as a critique of mainstream work, draws attention to macroeconomic, political, and social processes which shape development. However, whilst this literature acknowledges, for example, the role of state intervention in protecting the interests of local dominant classes, it does not elaborate on resultant selective impacts within the national economy.

This dissertation, by contrast, examines the role of macroeconomic, political, and social forces in shaping sub-national growth from a spatial perspective. Specifically, state intervention is argued to have highly selective impacts for specific economic sec­ tors and groups of producers. These impacts are further demonstrated to have a dis­ tinct spatial expression related to the distribution of different structures of production across the space-economy. The basis for these assertions is elaborated below.

The Capitalist State and Redistributive Economic Policies

The redistributive effects of state intervention amongst social groups are only under­ stood through investigating the state's role in capitalist society. Offe (1975) provides an account of the ’abstract state' with four key characteristics. First, production takes place as free enterprise, and since the state is not a producer, it should remain inde­ pendent of specific producer's interests. Second, the state must create and sustain 25 conditions suitable for capital accumulation and economic growth. Third, sustaining such growth is essential for the state's existance and power, since revenues which finance its operation are extracted from private producers. Fourth, the state must acknowledge interests of all social groups, allowing access to power, and responding to justified demands.

Of these abstract notions, most important here is that state power depends upon revenues collected, which in turn affects the form, magnitude, and objectives of resultant redistributive policies. The state, in order to perpetuate its own existance, has a strong incentive to promote the interests of economically dynamic classes which provide the majority of revenues (Blair, 1984; Kane, 1984). This scenario is, however, more complex than the state unilaterally patronizing favored groups. Military might, unrest amongst a dissatisfied and numerous peasantry, and ideological conflicts all threaten the state's existance.

maintaining support means dealing with the military, the industrial sector, workers, students/intellectuals, urban consumers, and the bureaucracy itself-™ The military must be given large and increasing budgets; industry its subsidies and import and tax concessions; and urban consumers cheap food.

(Blair, 1984: 185-186)

Of these groups, however, the most immediate and continual pressure is from the economically dominant classes who contribute most to government income (Roberts,

1978). Influential social groups become actively involved in government in order to channel resources to their needs. This is exemplified by Robert's (1978) account of the alliance between landowners and government officials in Argentina during nine­ teenth century industrialization. Expansion of livestock production depended on recruiting and stabilizing the labor force. Livestock producers used their considerable 26 economic power to become involved in central government, become local magistrates, and use legislation to control and discipline their workers (Roberts, 1978).

The policy bias towards powerful social groups and economic sectors is evident from events in recent decades. Unfavorable terms of trade for primary goods, and the need for economic diversification to continue capital accumulation, has led eco­

nomically powerful elites to transfer capital from agricultural to industrial invest­

ments. This transfer has been mirrored by a similar sectoral shift in the focus of

redistributive policies. Examples of broad based policies biased towards urban/

industrial activities and powerful social groups include; import taxes/licenses on man­

ufactures competing with domestic production; industrial subsidies; credit rationed to

favored supporters; and cheap urban food policies (Roberts, 1978; Adams, Graham, and

Von Pischke, 1984; Griffin, 1977). More specifically, domestic industry is protected

from foreign competition by tariff barriers of up to 200% on finished manufactures.

In addition, domestic fuel prices have been maintained well below world market

prices, thus subsidizing producers using machinery (Economic Perspectives, 1985).

The mechanisms by which resources are transferred to the industrial sector by

policies are illustrated as follows. Urban food policies establish ceiling prices on pur­

chases from domestic agricultural producers in order to provide cheap food for indus­

trial workers in urban areas. This permits the continuation of low wages, which in

turn maintains high levels of capital accumulation in urban/industrial enterprises

(Meier, 1976). Accordingly, this food policy constitutes a form of implicit taxation

whereby the industrial sector is favored at the expense of agriculture, causing stagna­

tion in the latter. In addition, overvalued exchange rates and protectionist foreign

trade policies turn the terms of trade against agricultural exporters and domestic food

producers competing with subsidized food imports. 27

Variations in Local Structure of Production

Although sectoral biases in policy impacts have been researched previously, little has been done on their spatial variations and role in generating uneven regional growth.

Addressed in this section is the way in which variations in structure of production across regional economies interact with macroeconomic policies. Important is that forms of production are highly context-specific and, hence, understanding uneven growth in empirical reality requires examining place-specific combinations of conditions and structures of production. In Latin America, colonial influence upon economic structure, continuance of pre-colonial types of production, and the distribution of environmental and other resource endowments have produced distinct regional varia­ tions both between, and within, individual countries. Understanding uneven growth, then, requires considering such variations in addition to more general social, political, and economic mechanisms addressed in previous work.

The agricultural sector in Latin America is taken here to illustrate the variety of productive forms which exist; many remaining from colonial times (Slater, 1977;

Laclau, 1971; Commander and Peek, 1983). These include the hacienda system of large estates run by sharecroppers or tenant farmers for an absentee landlord; com­ mercial plantations producing export crops, often financed by foreign capital; and minifundios (small farms) providing subsistence for peasant households (Odell and

Preston, 1978; Brea, 1986).

Each of these landholding types is differently impacted by macroeconomic policies

because of their varied degrees of articulation into the capitalist economy, as evident

from differing access to direct means of production and various labor forms (Wolpe,

1980, Corrigan, 1980). To illustrate, subsistence producers have direct access to pro­ 28 duction for their survival and are not dependent upon wages or other producers for their livelihood. Accordingly policies altering wages or commercial food prices will not favor or penalize this social group. Further, subsistence farmers and sharecroppers do not produce for commercial markets and so are unaffected by price and marketing policies designed to equilibrate regional incomes. Similarly, sharecroppers and other tenant farmers cannot benefit from attempts to spread production credit into the small farm sector since they must prove ownership of land to qualify for a loan

(Adams, Graham, and Von Pischke, 1984). By contrast, commerical plantations pro­ ducing export crops benefit directly from price and credit policies which encourage

production by transfering capital to this sector.

To summarise, those forms of production more fully articulated into the modern

sector benefit from state intervention since resource flows via policy are more acces­

sible to modern sector producers, whilst those not engaged in capitalist enterprises

benefit minimally, as noted by Griffin (1977: 217) for Ecuador;^

the resource flows that the policies entail are largely tranfers within the modern sector, specifically from state petroleum incomes to the class of large landowners and their allies.

In conclusion, the purpose of this dissertation is to illustrate that uneven region­

al growth is shaped, in part, by state intervention. Further, the impact of state

intervention is not uniform across the space-economy, but rather is conditioned by the

structure of local production. To this end, two tasks are undertaken. First, the

highly selective nature of state intervention (represented by national redistributive

policies) upon economic sectors and groups of producers, is demonstrated. Second, the

way in which differences in local production structures mediate regional impacts of

policy are elaborated.

^ These relationships are discussed in detail in Chapter IV. CHAPTER m

STUDY AREA AND RESEARCH PROCEEDURES

The previous chapter reviewed literature pertaining to uneven development. Three points emerge from this review. First, understanding uneven regional growth requires consideration of the state's role, as expressed through macroeconomic policies, in spreading benefits/disbenefits of development. Second, although uniform policy impacts across national territories have been assumed by development theorists, in reality positive and negative regional growth outcomes emerge. Third, spatial varia­ tion in policy impact is related to differing production conditions in local economies.

The focus of this dissertation is upon macroeconomic policies and agriculture in

Ecuador. Although it would be preferable to consider all economic sectors, time con­ straints led to singling out agriculture. It is the largest employment sector (48% of the labor force); contributes up to 76% of total exports in the seventies; provides cheap food for urban/industrial development; and is spatially more dispersed than other economic activities (World Bank, 1984). Further, different forms of production are readily identifiable and landholding types and labor systems take on distinctive

spatial expressions (Griffin, 1977; Commander and Peek, 1983).

This chapter first introduces the study area, elaborating key features of Ecuador's environment, structure of agricultural production, and Import Substitution Industriali­

zation development strategy. Following this, data, and research steps to be undertak­

en, are discussed.

- 29 - 30

STUDY AREA

Ecuador was selected as the study area for a number of reasons. First, state rev­ enues, and concomitant capacity to expand Import Substitution Industrialization (ISI), were increased dramatically during the seventies due to increasing oil exports and quadrupling prices.

Second, the small size and relative simplicity of Ecuador's economy is advanta­ geous. Economic growth is driven by oil and a few agricultural exports (coffee, cocoa, bananas). Consequently, effects of, for example, exchange rate policy upon domestic versus export producers can readily be traced. Further, production may be readily dichotomized into traditonal and modem practices; as recently noted by the

World Bank (1979: i);

the structure of the economy points to a pronounced, maybe even increasing in some sectors, economic dualism. A large part of agricul­ tural land and a substantial number of enterprises in the manufactur­ ing industry, construction, and commerce continue to subsist outside the realm of modem production and organization methods.

This dualism permits different policy impacts to be clearly identified.

Third, agriculture is clearly regionalized. Export crop production occurs predomi­ nantly in the Costa, whereas domestic food crops are produced in altiplano valleys of the Sierra (Blakemore and Smith, 1983; James and Minkel, 1986). Accordingly, regional growth effects of policies benefiting either market are readily discernible within the space-economy.

Fourth, few, if any, less developed nations offer a data base as rich as Ecuador's.

This is discussed in the following subsection. 31

CHARACTERISTICS OF ECUADOR

To elaborate key aspects of the study area, attention first turns to physical features.

Second, varied forms of production in agriculture are detailed. Third, policies adopted under Ecuador's Import Substitution Industrialization strategy are discussed. Finally, data employed for this study are elaborated.

Physical Characteristics

Ecuador is a small South American nation of 108,627 square miles straddling the equator. Based on topographic and climatic features the country is divided into three regions — the Andes and intermontaine basins,Sierra, or the coastal hills and plains, or Costa, and the Amazon basin, orOriente (Figure l).

The Costa has been the major economic growth area in recent decades (BlakemoTe and Smith, 1971; 1983). Its Northern coastal plateaus have sufficient precipitation to support dense tropical rainforest and produce coffee, bananas, cotton, and oil palm.

Rainfall declines sharply southward where, from the Santa Elena peninsula to the

Peruvian border, arid desert conditions prevail and fishing is dominant (Brea, 1986;

James and Minkel, 1986). Further inland are a series of alluvial plains comprising

Ecuador's most productive agricultural region. The Guayas basin, for example, where soils are fertile and rainfall abundant, leads in banana, cacao, and rice production

(James and Minkel, 1986).

The Sierra, traditionally Ecuador's most populous area, now shares that distinction with the Costa due to recent out-migration. Comprised of two major Cordilleras, sep­ arated by a series of intermontaine basins, the region is elevated to approximately

9,000 feet on average, with maximum altitudes of 19,347 feet at Cotopaxi and 20,577 at Chimborazo, the nation's highest peak. Population and economic activity are con- TERRAIN of ECUADOR

COLOMBIA

I V - I - A . i ' * « / ' v ^ ' ’* '! Y *• ; . / i COSTA W /

100 »00

KIIOMCTCRS

PERU

Figure 1: Terrain of Ecuador 33 centrated in the intermontaine basins where fertile soils, a temperate climate, and regularly distributed annual precipitation are found. Agricultural activities range from producing beef and dairy cattle to wheat, barley, beans, and potatoes (Brea,

1986; Blakemore and Smith, 1971).

The Oriente, the last major region, is vast, comprising 50% of Ecuadorian territo­

ry, but thinly populated, containing only 3% of total population. Consisting of east­ ern slopes of the Andes and part of the Amazon basin, this area is topographically

diverse, yet infertile due to leached soils and a fragile tropical rainforest ecosystem

(Blakemore and Smith, 1983). The area was economically unimportant, being popu­

lated primarily by indigenous indians, engaged in subsistence agriculture. However,

the 1967 discovery of oil in Lago Agrio, Napo province, led to employment in con­

struction of roads and a pipeline from Lago Agrio to Quito and Esmeraldas. This

prompted some permanent settlement and agricultural colonization. Aside from oil

exploitation, however, the region currently contributes relatively little to the economy

(Blakemore and Smith, 1983).

Characteristics of Agricultural Production

Three major land tenure forms exist in Ecuador — estates, industrial plantations, and

small farms (Odell and Preston, 1978; Brea, 1986). Each is distinguished by a par­

ticular labor system and specific market to which produce is directed. These are dis­

cussed below.

The estates or haciendas are very large farms, primarily located in the Sierra,

which produce for local and national markets. Tenancy forms characterizing this

system include aparceria, a sharecropping arrangement wherein theaparcero works

several days per week for the landlord in return for use of a small plot; and 34 arrendamiento, renting for cash (Brea, 1986).^ Under thehacienda system, wide­ spread tenancy and use of traditional farming practices are perpetuated. This has

relevance for policy impacts since farmers not owning land are ineligible for pro­

grams disbursing cheap credit. Further, farmers engaged in sharecropping or subsis­

tence production are not involved in the cash economy and do not benefit from sub­

sidized agricultural inputs or price support programs.

The industrial plantations, located predominantly in the Costa, differ from

haciendas in several ways. Characterized by a wage-labor system, modern production

practices, and, frequently, foreign investment; such plantations produce bananas, coffee,

or cacao for export markets (Blakemore and Smith, 1983). Involvement in export

cash crop production has meant that these farmers are principal beneficiaries of poli­

cies directed towards agriculture. For example, fertilizers and improved seeds are

imported, and due to the heavily overvalued sucre, are artificially cheapened.17 Fur­

ther, domestic fuel prices are maintained well below world market prices, again sub­

sidizing users of agricultural machinery.

Small farms, or minifundios, are the third landholding form. Located primarily

in the Sierra, these farms produce subsistence crops for home consumption. Ranging

from one eighth to five hectares in size, production is often not sufficient to support

a family, and supplementary income must be sought. Various forms of tenancy exist

including sharecropping, renting with cash, and ownership with or without title.

Aparcero is a more recent form of huasipunguero, the traditional sharecropping system under colonial domination. All family members worked for the landlord in some capacity, essentially as slaves. In return, peasants were assisted in times of hardship such as a poor harvest, illness, or death. Although a fewhuasi- pungueros still existed in the seventies, this system had officially been abolished during the 1964 land reform (Griffin, 1977; Commander and Peek, 1983). 17 The sucre is Ecuador's currency. Its value was fixed at 18 S/. per U.S. dollar throughout the seventies. 35

Farmers often do not possess official title since traditional inheritance practices trans­ fer land by word of mouth. Further, some minifundistas rent land and, hence, also are excluded from policies requiring proof of ownership such as credit disbursement.

The Macroeconomic Context of Ecuadorian Growth

Economic growth in Ecuador was based on agricultural exports until the seventies, when oil increased in importance from 18.6% of total exports in 1972 to 46.5 % in

1977 (World Bank, 1979). Quadrupling oil prices in 1973 provided massive increases in government revenues, which were chanelled into a development strategy transfer­ ring resources from agricultural to industrial sectors.

Table 1 documents the resultant decline in relative importance of agriculture xo

Ecuador's economy. Agricultural as a percent of total exports fell from a peak of

76.2% in 1971, to 24% in 1983. Further, imports of agricultural inputs declined from 23.8% to 13.2%. Also relevant is a reduction of government expenditures on agriculture, falling from 12.4% in 1974 to 4.9% in 1983. Given this sector's impor­ tance, employing 48% of the labor force; accounting for 73.8% of total exports in

1970; and providing cheap food to urban areas; its relative decline is clearly traceable in regional growth performances across Ecuador.

By contrast, industry grew rapidly, through an Import Substitution Industrializa­ tion strategy, prioritizing industrial growth by substituting imports of manufactured goods with domestic production (Meier, 1976; Zuvekas, 1975; Gibson, 1971). This involves a complex set of macroeconomic policies affecting exchange rates, import/ export volume and composition, prices, interest rates, credit availability, and the like

(Gibson, 1971; World Bank, 1979; 1984). Table 1: A gricultural Sector Indicators, 1970-1983

Agricultural Agricultural Agricultural Agricultural as percent of Imports as Exports as as percent GDP (1975 percent of percent of of fiscal sucres) total imports* total exports** budget

1970 25.0 23.8 73.8 -- 1971 24.7 17.0 76.2 -- 1972 22.4 15.5 75.3 -- 1973 18.1 17.1 36.5 6.0 1974 18.5 18.8 30.7 12.4 1975 17.9 18.3 33.2 10.0 1976 16.9 17.3 34.6 -- 1977 16.2 14.4 46.3 8.4 1978 14.6 13.6 49.4 6 .6 1979 14.3 12.2 37.4 6 .9 1980 14.4 13.7 30.4 5.9 1981 14.8 11.5 26.5 6.8 1982 14.8 13.2 32.6 6 .0 1983 13.3 -- 24.0 4 .9

Sources: World Bank. Ecuador: An Ac lenda for Recovery and Sustained Growth 1984; Central Bank of Ecuador. Annual B u lle tin 1985. No.8. * CIF imports of raw m aterials, imports for food and nonfood production, capital goods imports. * * FOB values of bananas, coffee, cocoa, processed cocoa, sugar, shrimp & fis h , and food. 37

To elaborate, throughout the seventies Ecuador maintained high tariff barriers against finished manufactures in order to reduce imports, save foreign exchange, and generate government revenues. Import licenses and prior deposits levied taxes and set quotas on commodities classified on Lists I and1 ft II. List I contains non-locally pro­ duced essentials such as raw materials and medicines. List D is subdivided into four categories depending upon the importance of an item for economic development. For example, semi-processed manufactures are on Lists Ha and Hb, whereas locally pro­ duced items and 'luxury' goods such as refrigerators and automobiles are List lie and lid commodities (Gibson, 1971; World Bank, 1979).

Tariff barriers further protect domestic industry by permitting imports of raw materials and intermediate goods at low nominal tariff levels and levying high tar­ iffs on finished goods, thus affording considerable effective protection.1^ This allows domestic industry to purchase cheap inputs, manufacture within Ecuador, and sell at artificially high prices, unchallenged by foreign competitors (Meier, 1976; Gibson,

1971). An overvalued exchange rate further benefited domestic manufacturers by cheapening inputs of raw materials and intermediate goods below world market prices, whilst tariffs and quotas excluded competing finished goods.7ft

1 ft These Lists', compiled by the government, refer to all commodities imported by Ecuador. Those items deemed essential are subject to minimal tariffs and unlim­ ited quantities. By contrast, commodities competing directly with domestic man­ ufactures may be subject to very high tariffs and small quotas (Gibson, 1971).

IQ Nominal tariffs are levels at which import taxes are legislated. Effective protec­ tion occurs when manufacturing inputs have minimal, and finished goods very high, tariffs imposed. Thus value added by the domestic manufacturing process is essentially subsidized, since domestic producers can manufacture with cheap inputs and sell domestically well above world prices without competition (Meier, 1976; Gibson, 1971).

7 ft This mechanism is elaborated in Chapter IV. 38

Such a structure of protection sustains a net flow of resources to industrialists from consumers at large, whilst also earning government revenues from tariffs.

Other policies controlling internal, as opposed to foreign trade, mechanisms generate a similar urban/industrial bias. These include redistributive policies dealing with pric­ ing, credit disbursement, interest rates, and subsidies to specific enterprises. Two examples of these, price and credit policies, and the way they channel resources to particular groups of producers, are discussed in detail in Chapter IV.

Data

Aggregate, individual, and field collected data are employed in this research. Pub­ lished volumes of the 1974 and 1982 Population Censuses provide aggregate data for

Ecuador's twenty provinces and one hundred and fifteen cantones (Figure 2). These are used to describe regional changes in economic growth throughout the seventies.

Individual level data consist of 923,852 and 834,790 records, sampled by Centro

Latinoamericano de Demografia (CELADE), from the 1974 and 1982 Population Cen­ suses respectively. These provide human resource characteristics of canton populations and information regarding net gains or losses of such attributes through migration.

Field collected data consist of unpublished statistics from the Ministry of Agri­ culture, Census Bureau, Central Bank, and National Development Bank. In addition, the author carried out protocol guided interviews in market places and local agricul­ tural communities of Ambato and Riobamba. These provide information on policy impacts not available from government sources. 3 9

CANTONES ECUADOR

COLOMBIA

53 54

55 56

100 68 9 8 60 59 9 9 97 66 58 6 3 57 95 9 6 64 67

69 20. 34 65 79 106 101 33 86 77 103 37 82 108 36

7 7 . 38

42 4 3

104 94 90 92 in

50 44 109 300 45 KUOMITEKS 110 PERU

KEY ON FOLLOWING PAGE

Figure 2: Cantones of Ecuador F ig u re 2 (continued)

CARCHI CANAR

1. TulcAn 35. Azogues 73. Quevedo 2. Espejo 36. Blbllan 74. Urdaneta 3. MontOfar 37. Canar 75. Ventanas 76. Vinces IMBABURA AZUAY CUAYAS 4, Ib arra 38. Cuenca 5. Antonio Ante 39. Gir6n 77. Guayaquil 6. Cotacachi 40. Cualaceo 76. B alzar 7. Otavalo 41. Puate 79. Daule 42. Santa Isabel 80. El Empalme PICHINCHA 43. Slgsig 81. M llagro 82. N aranjal 8. Quito LOJA 83. N aran jlto 9. Cayambe 84. S alin as 10. Mejia 44. Loja 65. Samborondbn 11. Pedro Moncayo 45. Calvas 86. Santa Elena 12. Ruminnhui 46. C611ca 87. Urbina Jado 13. Santo Domingo de los 47. Esplndola 88. Yaguachi Colorados 48. GonzananA 49. MacarA EL ORO COTOPAXI 50. Paltas 51. Puyango 89. Kachala 14. Latacunga 52. Saraguro 90. A re n illa s IS. Pangua 91. Pasaje 16. P u jili' ESMERALDAS Pinas 17. Salcedo 93. Santa Rosa 18. S a q u is ill' 53. Esmeraldas 94. Zaruroa 54. Eloy Alfaro TUNCURAHUA 55. Muisne NAP0 56. QuinindA 19. Ambato 95. Tena 20. Ba os MANABI 96. Aguarico 21. P atate 97. O rellana 22. Pelileo 57. Portoviejo 98. Putumayo 23. Pillaro 58. Bolivar 99. Quijos 24. Quero 59. Chone 100. Sucumbios 60. El Carmen BOLIVAR 61. Jipijapa PASTAZA 62. Junln 25. Guaranda 63. Manta 101. Pastaza 26. C hlllanes 64. Montecrlsti 102. Mera 27. Chimbo 65. PajAn 28. San Miguel 66. Rocafuerte MORONA SANTIAGO 67. Santa Ana CHIMBORAZO 68. Sucre 103. Morona 69. 24 de Mayo 104. G ualaquiza 29. Riobamba 105. Llmdn Indar 30. Alausi' LOS RIOS 106. Palora 31. Colta 107. Santiago 32. Chunchi 70. Babahoyo 108. Sucifa 33. Guamote 71. Baba 34. Guano 72. Puebloviejo ZAMORA CHINCHIPE

109. Zamora 110. Chinchipe 111. Yacuambl 41

RESEARCH PROCEDURES

The interrelationships between macroeconomic policies, local structural conditions, and

uneven regional growth are investigated through five research steps.211 The first,

reported in Chapter IV, describes impacts of exchange rate, price, and credit policies

upon different groups of producers. This qualitative analysis argues that differences

in structure of production across cantones alters policy impacts and resultant growth

outcomes. In doing this, a set of structural variables, such as landholding types, size

of farms and levels of literacy, are identified as indicators of whether policies will

be growth enhancing/inhibiting in different locales (Figure 3, Step l). These variables

are later employed to differentiate between more-growth/less-growth cantones in

research step four.

The second step, reported in Chapter V, documents actual growth performance of

Ecuadorian cantones during the seventies. Such growth is measured with a second set

of variables, drawn from the 1974 and 1982 Population Censuses, reflecting economic

diversification, human resource attributes of canton populations, and net gains or losses

of human capital through migration (Figure 3, Step 2). These variables are subject to

principal components analysis and component scores are derived. In the third step

these scores are grouped employing a discriminant iterations grouping proceedure to

produce a continuum of more-dynamic/less-dynamic cantones (Casetti, 1964; 1965).

21 Earlier research addressing policy impacts over space has been limited primarily to the U.S. setting. Work has examined spatial variations in eligibility and partici­ pation rates for federal policies concerning housing, welfare, transportation, and the like. Accordingly, emphasis has been on quantitative models, inventorying levels of policy usage, rather than seeking to understand the political framework in which policies are constructed (Bryant, 1972; Jones, 1984; Holmer, 1980; Glickman, 1980). 1. Describe impacts of exchange rate, price, and credit polices upon groups of agricultural producers.

Method: Qualitative analysis of structure of production (including size of farms, forms of tenancy, crops produced) and its interrelationship with policy mechanisms.

Chapter IV

2. Describe economic growth performances of Ecuadorian cantones during the seventies.

Method: Factor analysis of aggregate canton level data.

3. Classify cantones along a growth continuum.

Method: Casetti's (1964; 1965) discriminant iterations grouping procedure on factor scores from step 2.

4. Determine which structure of production variables distinguish canton groups.

Method: Stepwise discriminant analysis using structure of production variables from step 1 to distinguish between groups identified in step 3.

Chapter V

5. Examine performance of price and credit polices in Ambato and Riobamba.

Method: Descriptive analysis of differences in structure of production as these relate to policy impacts, employing summary statistics.

Chapter VI

Figure 3: Research Procedures 43

The fourth research step, also in Chapter V, employs discriminant analysis to distinguish between more-growth/less-growth canton groups using structure of produc­ tion variables from step 1 (Figure 3: Step 4). This analysis supplements research step

1 by determining empirically which aspects of structure of production are present in more-growth/less-growth canton groups.

The fifth step, reported in Chapter VI, supplements and elaborates national find­ ings through comparison of two field research sites, Ambato and Riobamba (Figure 3:

Step 5). Their growth performance is evaluated with individual level data from the

CELADE sample and unpublished government statistics. Variables examining educa­ tion, age, and occupational status of these canton populations, human resource gains/ losses from migration, and component scores from step two are employed for this task. Interview data collected in Ecuador in fall 1985 are then employed to evaluate how variations in local structure of production actually influence performance of price and credit policies in these locales and, hence, relate to actual growth outcomes.

SUMMARY OF CHAPTER

This chapter discussed the study area, data, and research procedures. Ecuador is pre­ sented as an excellent setting for examining the state's role in generating uneven growth through macroeconomic policies. Increased state revenues have expanded redis­ tributive policies making impacts clearly traceable throughout the seventies. Further, simplicity of the Ecuadorian economy and clear regionalization of agricultural produc­ tion, facilitate identification of different policy impacts within the space-economy.

Next, characteristics of Ecuador pertinent to this study are elaborated. Physical aspects are first discussed, followed by an account of varied forms of agricultural production, finally, the macroeconomic context of growth in Ecuador is described. The extensive data available for Ecuador were also discussed. Several sources are employed, including the 1974 and 1982 published census volumes, individual Popula­ tion Census records for 1974 and 1982, and field collected data. Accordingly, a broad range of variables, for concurrent time periods are available, facilitating a dynamic study of regional change.

Research procedures entail five steps. The first, reported in Chapter IV, details exchange rate, price, and credit policies and argues that differences in structure of production across Ecuadorian cantones influence policy impacts. The second step, reported in Chapter V, describes growth performance of cantones during the seventies employing principal components analysis. The third uses component scores to group cantones along a more-growth/less-growth continuum. The fourth step, also in Chap­ ter V, distinguishes between these groups on the basis of structure of production variables identified in step one. The final task supplements these national level findings through comparison of two field research sites, explaining actual variations in policy impacts by reference to idiosyncratic differences in local production systems. CHAPTER IV

MACROECONOMIC CONTEXT OF REGIONAL GROWTH IN

ECUADOR

As detailed in Chapter III, interrelationships between macroeconomic policies, local structural conditions, and uneven regional growth are investigated through three research phases. Recalling the research design, spatially varied policy impacts are first elaborated qualitatively and related to local agricultural structure of production. Sec­ ond, a nationwide quantitative analysis groups cantones along a growth continuum and differentiates between them on the basis of local variations in structure of pro­ duction. Third, greater regional specificity is provided, to supplement national level findings, by comparison of two field research sites.

This chapter undertakes the first task, describing differential impacts of exchange rate, price, and credit policies upon various groups of producers. Exchange rate policy is selected to illustrate how macroeconomic policies, ostensibly dealing with foreign trade, have diverse social and spatial impacts within Ecuador's economy. Price and credit policies, representing redistributive state intervention in the domestic economy, illustrate similar social and spatial biases and distortions. It must be noted, howrever, that these policies do not operate in isolation. Their impacts are distorted by a com­ plex set of interrelated ISI policies such as import licenses, prior deposits, quotas, and tariffs such that policy effects are product and place specific.

- 45 - 46

Four sections comprise this chapter. The first three describe objectives, biases, and distortions associated with each policy. Data are drawn from unpublished reports prepared by the Ministries of Agriculture, Agrarian Reform and Colonization, the

Central Bank, National Development Bank, and Ecuadorian USAID mission. The final section describes local aspects of economic structure which mediate policy impacts and identifies variables to represent these aspects in subsequent empirical analyses.

EXCHANGE RATE POLICY

Ecuador pursued a fixed exchange rate policy throughout the sixties and seventies, maintaining the sucre's value higher than its free market rate. Specifically, the sucre was overvalued at 18 sucres/dollar during the sixties and 25 sucres/dollar throughout the seventies (IMF, 1970; 1980; Sigma One, 1985). The extent of overvaluation is evidenced by a 63% devaluation to 95 sucres/dollar in 1983 when Ecuador indexed the sucre's value to other major currencies (Sigma One, 1985).

This policy has adverse effects upon Ecuadorian producers in two ways. First by artificially cheapening imports for Ecuadorian consumers and thus 'out-competing' domestic producers of similar commodities. Second, by making Ecuadorian exports more expensive on world markets and, hence, less competitive with other nations.

This is illustrated by considering the following ceteris paribus examples. Assuming a free market exchange rate of 100 sucres/$1.00, imports of wheat valued at $10.OO/kilo on world markets would cost Ecuadorian consumers 1000 sucres.9 9 However, a 25 sucre/$1.00 overvaluation reduces actual costs for Ecuadorian consumers to 250 sucres.

Hence, imported wheat is artificially cheapened relative to domestically produced wheat and so enjoys a price advantage which strangles domestic production.

All dollar equivalents given in U.S. dollars. 47

By contrast, Ecuadorian exporters are disadvantaged by the overvaluation, earning less sucres per dollar value of exports (Gibson, 1971; Meier, 1976). Assume 800 sucres of production costs for a quantity of bananas which sell on world markets for

$10.00. At free market currency values (assumed at 100 sucres/$1.00) Ecuadorian producers would receive 1000 sucres, thus yielding a profit. If, however, the sucre is overvalued at 25 sucres per $1.00, only 250 sucres are earned for this $10.00 value in world markets. Again this constitutes a loss to Ecuadorian producers which reduces incentives to produce and contributes to agricultural stagnation.

Advantages of overvaluation to Ecuador are twofold. First, Ecuador's comparative advantage in oil production and competitive world price, coupled with oil's high elas­ ticity of demand, encouraged sizeable sales during the seventies. As a result the

Central Bank received large quantities of oil dollars which were exchanged to pro­ ducers for fewer sucres than at free market rates. Such a strategy, then, earned revenues for the government, whilst not penalizing producers severely, due to their ability to sell large quantities of oil and so recoup losses from overvaluation. Second, imports necessary for IS1, such as raw materials and intermediate goods, are artificial­ ly cheapened. This reduction in costs for industry, whilst simultaneously excluding competing products, facilitates capital accumulation for industrial expansion, a primary development goal for Ecuador.

Turning to impacts on domestic agriculturalists, two points are relevant. First, demand for domestic foodstuffs declined precipitously. This occurred because the abundance of foreign exchange and relative cheapness of imports caused by overvalua­ tion, created a shift towards increased food imports. Specifically, food imports grew between 20% and 54% during the seventies (Table 2), surpassing all other imports Table 2: Data on Food Imports into Ecuador, 1970-1980* 1000$

Average 1 Imports 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 Rate i

Heat A0 -- 15 99 4 -- 3 51 45 50 130 29.84

Dairy Products 534 882 1412 1999 856 2933 2929 4332 6350 7842 11056 51.14 and Eggs

Cereals 6503 4615 10426 18167 35508 56061 30016 26855 36725 68909 84711 38.05 F ru it and 533 382 370 391 799 967 2779 2778 5481 4823 7940 54.71 Vegetables

Miscellaneous 1040 800 848 1347 1657 1700 2279 3225 3964 4000 4200 19.07 Food

* Source: Food and Agricultural Organization Trade Yearbooks 1976, 1981 49 except capital goods for industry (World Bank, 1979).^ As a result domestic food producers, already penalized by cheap urban food policies and direct government sub­ sidies to industry, became less able to compete with imports and local production stagnated."^

Evidence of this stagnation is provided by Table 3. Output indices indicate dra­ matic declines in three principal domestic food crops, potatoes, barley, and kidney beans, during the seventies. Further, yields for these crops did not increase during this period, indicating that declines in acreage planted, reflected in decreasing output

(and documented in Table 6), were not compensated by increased productivity. These yield statistics also suggest that the domestic food sector did not progress in terms of technological sophistication, possibly indicating that capital was not directed to this sector — more evidence of its stagnation.

Second, capitalist (modern) and pre-capitalist (traditional) agriculturalists are dif­ ferentially affected by exchange rate policyOvervaluation artificially cheapens

^ This shift was further exacerbated by high domestic inflation rates throughout the seventies which caused food prices to rise rapidly wage or family labor; pro­ duction for subsistence or commericial markets; all indicate involvement in the modern/traditional sectors, compared to imports (Zuvekas, 1975).

^ As detailed in Chapter HI, several mechanisms associated with Import Substitution Industrialization disadvantage agriculturalists relative to industrialists. Cheap credit, tax breaks, and direct subsidies reduce costs for the manufacturing sector. Further, price mechanisms operate to turn the domestic terms of trade against agriculture. The domestic terms of trade refers to a ratio of agricultural to manufacturing prices. Under ISI, manufacturing prices increase more rapidly than agricultural, resulting in a net transfer of value to the industrial sector (Yoto- poulos and Nugent, 1976).

^ The modem/traditional dichotomy referred to here summarizes different structures of production found in Ecuadorian agriculture. In the present context, modern/ traditional refers to degree of articulation into Ecuador's capitalist sector. Condi­ tions of production including forms of tenancy, such as owning or renting by by cash or sharecropping; use of wage or family labor; production for home con­ sumption or commercial mamrkets; all indicate degree of involvement in tradi­ tional or modern sectors respectively. Table 3: Output Indices and Yields for Domestic Food Crops, 1970-1980

Potatoes Kidney Beans Year Output* Yield Output* Yield Output* Yield (MT7fiect) (MY/hect) (MY/hect) 1970 100 11.47 100 0.59 100 0.51 1971 126 12.73 87 0.57 73 0.45 1972 87 12.54 93 0.62 63 0.42 1973 99 12.37 100 0.85 77 0.48 1974 93 12.86 71 0.92 68 0.42 1975 92 12.64 79 0.88 63 0.42 1976 92 12.10 79 0.88 77 0.47 1977 77 11.58 52 0.68 63 0.44 1978 63 11.50 28 0.68 45 0.48 1979 47 9.46 26 0.67 56 0.52 1980 60 10.64 31 0.93 64 0.55

* 1970 = 100 for output in Metric Tons MT indicates Metric Tons 51 imports of raw materials, machinery, agricultural chemicals, fertilizers, and other inputs employed in capital intensive enterprises. In addition, cheap imported food reduces subsistence wage levels, again cheapening production costs for those employing wage-labor. Traditional producers, on the other hand, without economic access to these inputs and employing family labor do not benefit from this cheapening effect.

Accordingly, most widespread benfits accrue to those engaged in capitalist production including many urban/industrial enterprises and export crop producers (Economic Per­ spectives, 1985).

Export crop producers also suffer from overvaluation, however, becoming less competitive on foreign markets. A combination of export taxes, inflation, and over­ valuation reduce incentives to producers who receive less sucres per dollar value of exports (Cleaver, 1985; World Bank, 1984). For example, coffee exports grew only sluggishly during this period and banana exports fell by 3.6%, a greater market share loss than for any other export (World Bank, 1984). Such impacts are, however, somewhat ameliorated for export producers engaged in capitalist forms of production.

Specifically, they employ imported fertilizers, machinery, and improved seeds which are implicitly subsidized, thus lowering production costs (Thirsk, 1976; Economic Per­ spectives, 1985). Accordingly, within agriculture, negative impacts of exchange rate policy are buffered for .modern sector export producers with access to land, capital, and credit whilst lower income, traditional producers bear only negative consequences.

Spatial outcomes of this policy include economic expansion in urban areas distrib­ uted throughout Ecuador, mixed impacts for export farmers of the Costa, and decline in domestic food producing regions, concentrated in the Sierra. Regional growth implications are particularly severe given the volume of producers negatively affected 52 by this policy. Specifically, agriculture employs 48% of the Ecuadorian labor force, the majority of whom produce domestic food crops on small farms (>5 hectares)

(Figure 4). Given that 77% of small farms are located in the Sierra, negative impacts of this policy both affect many producers, and are clearly regionalized.

PRICE POLICIES

Guaranteed minimum prices for agricultural commodities and guaranteed maximum food prices for consumers also have contributed significantly to distortions in Ecuador's economy. These are discussed below.

Minimum producer prices are enforced through Empresa Nacional de Almaceni- miento y Commercializacion (ENAC) which buys crops at official prices and sells at levels covering storage and handling.^ During the seventies, ENAC intervention was

limited primarily to domestic food crops including rice, hard com, sugar, and occas-

sionally wheat and soybeans.

ENACs guaranteed prices on domestically produced food crops are intended to

stabilize farmer’s incomes and provide incentives to increase production (Tolley, Thom­

as, Wong, 1982). In reality, however, these objectives have not been acheived. To

elaborate, ENAC official (nominal) prices often have not matched production costs

(real prices) and so have not provided adequate incentives to stimulate production

(Economic Perspectives, 1985; Cleaver, 1985).^ This occurred because official prices

^ Official price setting in Ecuador differs for domestic and export crops. Export crop prices are based on international prices adjusted by local costs and export margins, domestic crop prices are set according to production costs estimated solely by the Ecuadorian government (World Bank, 1984). Accordingly, official domestic prices, not linked to an independent benchmark, are more suceptible to political patronage and cronyism (Economic Perspectives, 1985).

^ Real prices reflect the costs of wages, rent, and profit employed in producing a commodity. Nominal prices, on the other hand, are those appearing in the mar- 2 5 -

Food Crops

15-

0.1 10 100 1000 2500 Farm Size (Hectares)

♦Source: Ecuador, Censo Agropecuario, Resumen Nacional, 1974

Figure 4: Crop Types by Landholding Size for Ecuador* 54 were seldom reviewed or adjusted and did not account for supply/demand shifts or seasonal factors (World Bank, 1984). Table 4 illustrates differentials between real and official prices for rice, soybeans and hard corn. At best, increases in official prices were only sufficient to keep pace with inflation, matching, not improving real prices by the eighties.

ENAC also had a destabilizing effect upon agricultural production due to inade­ quate planning and storage facilities. This is illustrated by the com sector. Ecuador is almost self sufficient in corn which is used as livestock and poultry feed. In

1981, a record harvest, ENAC purchased 57 thousand tons of corn, far more than could be resold within a year without severely lowering the market price. When the 1982 harvest proved even larger than the preceeding year, ENAC had no avail­ able storage facilities and could not absorb the surplus to maintain price levels. This situation caused a com glut and prices plummeted, well below official minimum prices. During 1982, ENAC sold abroad large quantities of the surplus at a loss and was left with insufficient stocks to cover the devastation of corn supplies by the El

Nino floods in 1983.

This series of events, although exceptional, signals a broader problem;

The problems caused by ENACs resale policy were not limited to iso­ lated instances in 1982. Over the entire period 1974-1984, the vari­ ability of annual corn supplies was amplified by ENAC intervention.

(Economic Perspectives, 1985: 60)

ket place, due to forces of supply and demand, or official price setting. The difference between them measures the extent to which official (nominal) prices actually represent costs of producing specific commodities which rise with infla­ tion over time. 55

Table 4: Minimun Producer Prices, Ecuador, 1970-1980

Year Rice(S/oq) , , Hard Corn($/aa1 Sovbeans($/aa) Nomina I* Real** Nominal Real Nominal Real 1970 75 245 ------1971 75 227 ------1972 81 227 70 196 -- -- 1973 93 231 90 223 ---- 1974 110 221 120 241 280 563 1975 150 261 120 209 420 731 1976 160 251 195 306 420 659 1977 170 236 203 282 420 584 1978 180 225 203 254 420 525 1979 200 226 203 229 420 475 1980 240 240 240 240 460 460

Source: Economic Perspectives, 1985. * Nominal prices are legislated by the Government of Ecuador. * * Real prices re fle c t the cost o f uages, rents, and p ro fits accrued in producing a specific commodity, in 1980 sucres. 56

Accordingly, regions producing corn were negatively affected by price policy, since planting decisions were made on the basis of prices that were not maintained in the market place. Given that 60% of com is produced in Manabi, Los Rios, and Guayas, negative effects are regionally concentrated in the Costa.

De-stabilizing impacts of ENAC intervention were further compounded by selec­

tive purchasing practices, with a clear modem/traditional sector bias. Official support

prices were not effectively enforced for traditional farmers due to problems of pro­

viding information regarding official prices, and effectively purchasing from numerous,

spatially dispersed, small farmers, many of whom use informal market outlets. By

contrast, modern sector farmers, with a greater volume to sell, superior information

regarding support price levels and ENAC outlets, and better transportation to those

locales, had access to ENAC supported prices.

For rice, ENAC has not participated enough to actually enforce the announced price. It buys the great majority of its rice from farmers with large rice operations and almost none from small producers.

(Franklin and Penn, 1985: 2)

This inability to effectively support prices also has crop specific and, hence, spatial

expression. Crops produced predominantly on small farms throughout the Sierra, such

as potatoes and kidney beans are not effectively served by this policy. By contrast,

production of soybeans is concentrated geographically in Los Rios province, produced in

large volumes by modern sector farmers, sold to few processors, and has been sucess-

fully price supported (Economic Perspectives, 1985).

Maximum consumer prices are set by Empresa Nacional de Productos Vitales

(ENPROVIT), ensuring cheap food for low income consumers. During the seventies

ENPROVIT retail outlets carried up to 800 product lines, many of which had con­ 57 trolled consumer prices.^ Table 5 documents official and real maximum prices on staple foodstuffs, indicating clearly that consumers recieved considerable subsidies, pay­ ing well below market prices for ENPROVIT products.

Whilst of obvious benefit to consumers, this policy has deleterious impacts upon domestic food producers, particularly in the face of ineffective ENAC producer price protection. In providing cheap urban food, continuation of low urban wages is facil­ itated, which in turn permits high levels of capital accumulation in urban/industrial enterprises (Meier, 1976; Thirsk, 1976). Accordingly, ENPROVIT food policies consti­ tuted an implicit taxation whereby the urban/industrial sector is favored at the expense of the agricultural causing stagnation in the latter.

Evidence of this stagnation is provided by potato production, a staple food crop throughout the Sierra, for which output has diminished drastically during the seven­ ties. The total area planted declined from 47,220 hectares in 1970 to 30,380 in

1980, a 37.1% decline, whilst total output decreased from 541,749 to 323,222 metric tons, a 45.7% decline over the same period (Table 6). This downturn of a price controlled product has distinct geographical impacts, since 99.6% of potato production

occurs in the Sierra and fully 24.0% of that in Chimborazo province (Simmons and

Ramos, 1985). Similar declines are evident for both barley and kidney beans, also

produced widely throughout the Sierra (Table 6). Concomitant with these declines in

production of principal foodstuffs, Ecuador experienced 11.9% growth in population

and, hence, increased demand for food. As noted in the exchange rate policydiscus­

sion above, this demand was met by increased food imports (Table 2).

These included rice, meat, legumes, bread, flour, butter, com, potatoes, sugar, milk, coffee, soybeans, cotton lint, and cotton seed. Table 5: Maximum Consumer Prices, Ecuador, 1970 - 1980

Year Rice(s/k

1970 4.8 15.7 1.8 5.9 ------1971 5.0 15.2 2.1 6.4 ------

1972 5.6 15.7 2.3 6.4 ------

1973 6 .8 16.9 2.6 6.5 ------1974 8.6 17.3 3.6 7.2 ------1975 10.4 18.1 4.0 7.0 31.0 54.0 -- --

1976 10.3 16.2 5.2 8.2 31.0 48.7 -- -- 1977 9.6 13.3 5.4 7.5 31.0 43.1 12.2 17.0 1978 12.1 15.1 6.0 7.5 31.0 38.8 12.2 15.3 1979 13.8 15.6 7.4 8.4 31.0 35.0 12.2 13.8 1980 13.8 13.8 7.8 7.8 38.2 38.2 12.2 12.2

Source: Grain Pricing Policy in Ecuador, Economic Perspectives, 1985. * s refers to sucres * * O ffic ia l (nominal) prices are those leg is late d by the Goverment of Ecuador. * * * Real Prices re fle c t the costs of wages, rents, and p ro fits employed in pro­ ducing a specific commodity, in 1980 sucres. Table 6: Estimated Area Harvested, Production, and Growth Rate of Potatoes, Barley, and Kidney Beans, Ecuador, 1970-1980.

Potatoes Barley Kidney Beans Year Harvested Production Harvested Production Harvested Production (hectares) (M.T.) (hectares) (M.T.) (hectares) (H.T.) 1970 47,220 541,794 133,920 79,087 81,635 41,331 1971 53,452 680,740 119,971 68,691 67,140 30,148 1972 37,729 473,348 118,957 73,387 62,139 26,038 1973 43,576 539,198 93,178 79,383 66,339 31,961 1974 39,138 503,340 60,844 56,148 66,181 28,001 1975 39,499 499,371 71,558 62,801 62,553 26,103 1976 41,223 499,000 71,600 62,872 67,924 32,000 1977 36,000 417,000 60,000 40,776 59,000 26,000 1978 29,843 343,195 32,000 21,760 39,118 18,760 1979 26,894 254,507 30,774 20,718 44,386 23,196 1980 30,380 323,222 26,244 24,350 48,156 26,275 X Growth 1970-1980* -37.1 -45.7 -76.2 -69.8 -37.6 -30.1

* % growth of each crop, area harvested and production, was calculated from an average of the first and last three years in the series. Source: Ministerio de Agriculture y Ganaderia, HAG. 60

CREDIT POLICIES

Credit disbursement in Ecuador also reflects urban/industrial biases associated with

Import Substitution Industrialization. The proportion of total credit directed to agri­ culture is not representative of its relative contribution to Ecuador's economy. During the seventies, agriculture employed approximately 48% of the labor force; contributed

up to 76% of exports; averaged 18.5% of Gross Domestic Product; and yet recieved only 14.7% of total credit on average (Ramos, 1984; Table 7).

Within agriculture, one institution, Banco National de Fomento (BNF), disbursed

70-90% of agricultural production credit during the seventies. Although, as mandated

in the BNF constitution, it must prioritize credit to small fanners (> 5 hect), the

actual distribution presents a different picture.^ While 77% of agricultural producers

are small farmers they received, on average, 28% of production credit, whilst the

majority went to medium and large scale agriculturalists (Ramos, 1984).

Interest rate policies in rural financial markets have contributed to this anti

small farm bias in credit disbursement. Low nominal interest rates, coupled with

*50 rapid inflation have combined to reduce real rates of interest to negative levels.

Inflation rates between 8% and 23% during the seventies, coupled with a legal ceiling

on lending rates of 12%, reduced incentives to savers whilst artificially cheapening

credit for borrowers (Table 8). This has implications for credit disbursement, since

less is saved, thus shrinking credit supplies, and leading to credit rationing. The lat-

29 BNFs constitution determines the bank's objectives, functional structures, types of credits, and, in general, beneficiaries of them. Any constitutional change must be approved by congress, indicating close linkages between the state and credit recip­ ients (Ramos, 1984).

The nominal interest rate is that specified on the loan contract, whereas the real rate is the nominal rate adjusted for changes in prices over the loan period. Inflation rates exceeding the nominal interest rate result in zero, or negative, real rates of interest (Adams, Graham, and Von Pischke, 1984). Table 7: Volume of Total Bank Credit 1970-1980* Millions of Sucres Year Total Commercial Industrial Agricultural Other Total 8 /. S /. XTotal S /. %Total 8 /. /4Total 8/ %Total

1970 11,309 6,396 56.55 2,143 18.94 1. 599 14.13 1, 171 10..35 100 1971 12,205 7,285 59.68 2,363 19.36 1. 501 12.29 1. 056 8..65 100 1972 13,895 8,322 59.89 2,570 18.49 1, 731 12.45 1, 272 9..15 100 1973 16,624 9,864 59.33 3,063 18.42 2, 363 14.21 1, 334 8..02 100

1974 22,621 11,856 52.41 4,506 19.91 3. 987 17.62 2.,272 10..04 100 1975 28,046 14,141 50.42 5,471 19.50 4, 652 16.58 3,,782 13..48 100 1976 35,517 18,017 50.72 7,610 21.42 5, 740 16.16 4,,100 11..54 100 1977 43,186 20,766 48.08 9,909 22.94 6, 663 15.42 5, ,848 13..54 100 1978 48,929 22,460 45.90 12,757 26.07 7,,708 15.75 6, ,004 12,.27 100 1979 63,858 30,225 47.33 16,756 26.23 9,,164 14.35 7,,713 12,.07 100 1980 88,431 39,479 44.64 23,669 26.76 11,,556 13.06 13,,727 15,.52 100

Source: B oletin Anuario 1985 No. 8 Banco Central del Ecuador * Includes Banco Central, BNF, and Private Banks. 62 ter then encourages political patronage with a disproportionate amount going to larger farmers. As Ramos (1984: 47) observes;

Interest rates kept low by government policy have tended to have effects that discriminate against small farmers. Due to a lack of large amounts of resources, cheap credit must be rationed. The procedures usually are politically determined and provide opportunity for corrup­ tion, cronyism, and favoritism.

(Ramos, 1984: 47)

Poor access to credit for small farmers is also related to complex and costly bor­ rowing procedures within BNF. Extensive documentation is required to obtain a loan, including an identification card, voting certificate, proof of income tax payment, pro­ duction report for the loan period, and legal title to the land. Distrustful of these written procedures, which have little meaning in their culture, illiterate small farmers avoid formal credit channels.

Banking operations respond to a written culture while small fanners, many illiterate, undertake actions and committments honoring only their word.

(Ramos, 1984: l)

Amongst these regulations, the greatest impediment to obtaining credit is proof of land ownership. Renters, and those without title, are automatically excluded from obtaining credit, and are overwhelmingly small farmers.

Land ownership as a requisite, or rather as collateral, seems to be a very important impediment to credit delivery to a very large group of farmers, especially small ones.

(Ramos, 1984: l)

These biases in credit disbursement have a clear spatial expression given the con­ centration of small farms and traditional production practices in the Sierra. Specifi­ cally, whilst 62% of all farm units are located in the Sierra, the region only Table 8: In flatio n Rates, Ecuador, 1970-1980* Average In' Year Rate 1970 -- 1971 -• 1972 7.7 1973 12.0 1974 22.8 1975 14.4 1976 10.2 1977 12.9 1978 13.1 1979 10.1 1980 12.8

* Source: Estudio Economico-Finaneiero, 1984. 64 received 30% of BNF credit, on average. By contrast, the Costa, representing only

33.1% of all farm units, received 60% of available credit (Table 9).

MACROECONOMIC POLICIES AND LOCAL GROWTH OUTCOMES

This section summarizes findings of these qualitative analyses of exchange rate, price, and credit policies and identifies structural characteristics which mediate spatially varied policy impacts. Further, canton specific structural variables are drawn from

Ecuador's 1974 published Agricultural Census to represent these characteristics in subsequent empirical analyses.

With regard to overall economic structure, policy impacts are mediated by major sector of employment across cantones. Specifically, all three policies benefit the urban/industrial sector at the expense of agriculture. For example, exchange rate pol­

icy cheapens raw materials and capital goods imports for industry and food for urban consumers, whilst destroying domestic food production which cannot compete. In addition, price policy has distorted domestic terms of trade in favor of industry and away from domestic food producers by altering relative prices. This penalization of

domestic food production has a clear spatial expression in Ecuador since it is concen­

trated on small farms in the Sierra. These aspects of local employment profiles are

represented by the variables major sector o f employment and proportion employed as

farmers (Figure 5: Boxes 1 and 2).

Within agriculture, the primary focus of this analysis, a number of structural

characteristics mediate local policy effects. One important feature is whether produc­

tion is directed to domestic or export markets. Capital intensive export crop produc­

tion employs agricultural inputs such as fertilizers, herbicides, improved seeds, and Table 9: Percent of A gricultural Production Credit Disbursed by Region, 1970-1980

X Total * Total Farm Farm Region 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 Units Acreage Sierra 30.8 38.4 42.6 35.7 30.8 29.7 30.1 32.8 35.8 33.7 34.8 62.1 38.7 Costa 65.5 56.2 51.7 59.1 64.4 65.2 64.7 59.5 55.3 61.2 59.6 33.1 47.3 Oriente 3.6 5.4 5.7 5.1 4.6 5.0 5.1 7.6 8.7 5.1 5.4 4.8 13.8

Source: BNF Gerencia Tecnica, Boletin Estadistico 1970-1984 STRUCTURAL VARIABLES 66

1. MAJOR SECTOR OF EMPLOYMENT

Urban Activities/Agriculture

EXCHANGE RATE POLICY IMPACTS

2. PROPORTION EMPLOYED AS FARMERS______

3. PROPORTION O F FARM AREA UNDER EXPORT CROPS

4 . PROPORTION OF FARM AREA UNDER DOMESTIC FOODSTUFFS

PRICE POLICY IMPACTS

5. PROPORTION OF FARMS IN VARIOUS SIZE CLASSES

6 . FORM OF LANDHOLDING

Owner/Tenant

7. PROPORTION OWNING LAND WITH/WITHOUT TITLE CREDIT POLICY IMPACTS

8 . PROPORTION OF AGRICULTURAL PRODUCERS LITERATE______

Figure 5: Structural Variables Mediating Local Policy Impacts 67 machinery, all of which are imported and so cheapened by overvaluation. Domestic food producers, on the other hand, have been penalized by cheap food imports, maxi­ mum consumer prices on food, ineffective ENAC producer price protection on potatoes, rice, and beans, and an export crop bias in credit disbursement. Given that export and domestic production are concentrated geographically in Costa and Sierra respec­ tively, clear spatial outcomes of these effects can be identified. To this end, the variables proportion o f area under export and crops proportion o f area under domestic crops are included in subsequent empirical analyses (Figure 5: Boxes 3 and

4).

Various forms of agricultural tenancy also determine local policy impacts.

Recalling the credit policy discussion, proof of land ownership is a prerequisite to obtaining production credit. Accordingly, those farmers not holding an official title document, or renting land, are automatically excluded from benefits of credit. Fur­ ther, producers renting land by sharecropping do not produce for commercial markets and thus are unaffected by price support programs designed to raise farmers incomes.

These aspects of production are captured by the variables form o f landholding and proportion owning land without (Figure title 5: Boxes 6 and 7).

The proportion of illiterate producers in a region also influences policy impacts, particularly for price and credit. Demanding loan application procedures screen out illiterate producers unable to complete necessary forms. In addition, illiterate farmers have limited access to information on interest rates, guarantees, and refinancing proce­ dures which make credit appear less risky. Similarly, timely disbursement of infor­ mation on price supports, which influence production decisions, is hindered by wide­ spread illiteracy. Accordingly, the small farm sector, where illiteracy is most 68 widespraed, is excluded from both price and credit policies designed to raise incomes in this sector. This is represented by the variable proportion o f agricultural pro­ ducers literate (Figure 5: Box 8).

A recurrent theme throughout this chapter is that degree of articulation into the modern, capitalist sector is central to determining regional growth impacts of policy.

Macroeconomic policies are conceived by, and designed to operate in, a capitalist eco­ nomic system with effective operation of price incentives, a literate and informed productive population, factor mobility through efficient marketing and communications channels, and ready access to land, capital, labor, and technology. Accordingly, dif­ ferential impacts of these policies within agriculture, and across space, can be related to the presence of modern (capitalist) versus traditional (non-capitalist) production practices.

Export crop producers on medium and large farms comprise the modern sector, employing capital intensive inputs, machinery, and wage labor. Policies directed towards agriculture, such as subsidized agricultural inputs; low wages due to cheap consumer food programs; and access to production credit due to widespread land own­ ership; all benefit these producers. By contrast, the traditional sector is characterized by small farms, low incomes, subsistence production, high tenancy, and illiteracy.

Producing the bulk of domestic food, this sector has been penalized by ineffective

ENAC price protection, loan application procedures which screen out illiterate appli­ cants, and cheap imported food which has led to stagnation of domestic production.

Although difficult to measure directly, these aspects of production are captured in the variables already identified, and also inproportion o f farm s in various size classes

(Figure 5: Box 5). 69

SUMMARY OF CHAPTER

This chapter examines differential impacts of exchange rate, price and credit policies upon various groups of producers. Each policy is demonstrated to have spatially varied impacts related to the distribution of particular characteristics of production.

First, details and implications of Ecuador's overvalued exchange rate are elaborated.

This overvaluation increased government revenues from oil exports whilst cheapening food and raw materials imports for the urban/industrial sector. The inability of domestic food producers to compete with cheap food imports led to decline in this sector with wide reaching implications for regional development.

Next, guaranteed minimum producer and maximum consumer prices are described and their sectoral/spatial biases and distortions elaborated. These policies attempted to stabilize prices whilst providing incentives to farmers and subsidies to consumers. In reality, however, these were overly consumer oriented, producing serious distortions and agricultural decline.

Third, credit disbursement and its implications for uneven regional growth are discussed. Agricultural production credit is directed disproportionately to capitalist export crop producers of the Costa, and biased away from traditional domestic food production in the Sierra.

A final section relates these biases and distortions to structural attributes of regional economies which mediate local growth outcomes of specific policies. Recalling the conceptual framework, this analysis supports arguments that degree of articulation into capitalist forms of production is central to determining regional growth impacts of policy. Modern sector export crop producers, employing capital intensive inputs, machinery, and wage labor benefit from policies such as subsidized agricultural inputs, low wages due to cheap consumer food programs, and access to production credit due to widespread land ownership. By contrast, the traditional sector, characterized by small farms, low incomes, subsistence production, high tenancy, and illiteracy are

bypassed by these policies. Producing the bulk of domestic foodstuffs, this sector has

been penalized by ineffective ENAC producer price protection, loan application proce­ dures which screen out illiterate applicants, and cheap imported food which has led

to stagnation of domestic production. CHAPTER V

ECONOMIC PERFORMANCE OF ECUADOR'S CANTONES DURING

THE SEVENTIES

The previous chapter argued that redistributive policies have socially and spatially selective growth impacts. To investigate this assertion, three tasks are undertaken in this chapter. First, growth performance across the Ecuadorian space economy is described empirically. Second, cantones are grouped along an economic change contin­ uum to summarize development performance and facilitate statistical comparison.

Third, local growth impacts of macroeconomic policies, represented by structural vari­ ables identified in Chapter IV, are employed to differentiate between canton groups.

Data employed here include canton specific variables for Ecuador's 115 cantones, drawn from its 1974 and 1982 published Population Census. These variables are jointly subject to principal components analysis. This proceedure summarizes informa­ tion contained in individual variables, chracterizes development performance in terms of distinct dimensions, and yields new composite variables — component scores. These scores are then used to group cantones along a growth continuum employing a dis­ criminant iterations grouping proceedure (Casetti, 1964; 1965). Additional canton spe­ cific structural variables are then drawn from Ecuador's 1974 Agricultural Census, to

Ol The 115 cantones in Ecuador in 1974 increased to 126 by 1984. For the pur­ poses of comparing growth during this period, 'new' cantones, created in the intercensal period, were collapsed back into the 'originals'. In addition, the three cantones of Galapagos province were excluded from these analyses, because geo­ graphically, environmentally, economically, and socially these are distinct from mainland Ecuador.

- 71 - 72 differentiate between canton groups employing discriminant analysis.

PRINCIPLE DIMENSIONS OF DEVELOPMENT

In order to capture the multifaceted nature of development, following Pederson

(1975), Todaro (1985), and Mabogunje (1981), 27 variables were selected to represent absolute and relative change in;

— Levels of economic diversification,

— Human resource attributes of canton populations,

— Human resource gains/losses from migration.XI

Viewed as engendering improvements in economic and social welfare through time, development is characterized here as increasing economic diversification, from primary to secondary and tertiary activities. In addition, development is viewed as enhancing individual's welfare, as represented here by improved human resource attributes such as level of educational attainment and occupational status. Finally, dynamic cantones,

with employment opportunities and potentially higher incomes, are regarded as likely

to attract and retain valuable human resources by migration.

The rationale for selecting specific variables is as follows. Percent change vari­

ables represent relative growth in employment across economic sectors, thus identifying

cantones which underwent structural change during the seventies. By contrast, abso­

lute change variables capture the size dimension of that growth. Mean occupational

status, measuring job prestige, is employed to measure human resource potential (Trei-

man, 1 9 7 7 ) .Percent of in- minus out-migrants addresses gains/losses of human

XI These variables were winnowed from a larger set, in order to reduce redundancy and clarify component loading patterns.

Occupational status is measured on a scale which places unskilled labor and pro­ fessionals at poles of a continuum from zero to one hundred. This scale was calibrated on data drawn from sixty countries and over five hundred occupations 73 resource potential by places, represented by migrant's gender and membership in the labor force. Overall, this variable set provides an initial description of growth dynamics across Ecuadorian cantones. Table 10 presents variable names, their means, and standard deviations.

Ecuador's economy expanded and diversified throughout the seventies, with large

absolute and relative increases in persons employed in commerce (38.06%), services

(109.57%), and transportation (141.56%). Large standard deviations, however, especially

for commerce (54.85%), services (76.28%), transportation (132.08%), and manufacturing

(54.45%), indicate considerable spatial diversity in this sectoral expansion. Only agri­

culture lost population during this period, indicating shifts to a greater urban/

industrial focus through time.

In-migrants were on averagebetter educated and of a higher occupational status

than out-migrants during the study period, such that cantones attracting and retaining

migrants improved their human resource base."*4 In-migrants also are more likely to

be economically active and male than out-migrants. Overall, the human resource base

of cantones improved, with the percent having no education declining (-8.54%), and

more being college educated (1.30%).

Subjecting these variables to a principal components analysis yields four dimen­

sions, accounting for 66.3% of total variance. The first principal component, showing

only positive loadings, representslarge absolute employment changes. Loading on this

are absolute change in persons employed in manufacturing, commerce, and services,

(Treiman, 1977).

Migration between Ecuadorian cantones is not a closed system as is evident from different means for in- and out-migrants. This occurs because international in- migrants add to the in-migrant pool. In addition, missing data for several 1982 destinations, which were reported as origins, further contributes to this imbalance! Table 10: Principal Components Analysis of Socio-Economic Variables Characterizing Growth Across Ecuadorian Cantones, 1974-1982, Varimax R otation Standard Component Component Component Component Variable Marne Mean Deviation 1 2 3 4 CommunaI

Percent change in: total population 17.66 31.05 0.121 0.871 0.060 -0.023 0.777 persons employed in agriculture -5.77 26.69 -0.080 0.830 0.303 -0.280 0.866 persons employed in manufacturing 19.08 54.45 0.169 0.640 -0.328 0.211 0.590 persons employed in commerce 38.06 54.85 0.052 0.854 -0.162 0.057 0.761 persons employed in transportation 141.56 132.08 -0.143 0.439 -0.268 0.061 0.289 persons employed in services 109.57 76.28 -0.100 0.323 -0.655 -0.086 0.550 persons seeking f ir s t work 193.18 174.45 0.035 0.093 -0.693 -0.051 0.492 in number of vendors & clerks 34.65 63.49 0.038 0.888 -0.023 0.047 0.793 in number of farmers -6.13 26.75 -0.081 0.799 0.362 -0.306 0.869

Absolute change in: persons employed in agriculture -917.45 1782.09 -0.085 0.537 0.579 -0.268 0.703 persons employed in manufacturing 549.89 3509.45 0.948 0.057 0.013 -0.078 0.908 persons employed in comaerce 764.13 3534.00 0.962 0.048 0.006 -0.115 0.941 persons employed in services 2051.94 6078.89 0.980 0.030 -0.009 -0.058 0.964 in number of professionals 882.70 2891.45 0.961 0.081 0.057 -0.087 0.940 in number of vendors 8 clerks 526.16 2259.47 0.970 0.056 0.014 -0.100 0.953 in numbers of farmers -957.99 1858.86 -0.073 0.468 0.675 -0.309 0.776

Dependency ratio ((population <14+population >65)/ 1.00 0.11 -0.375 -0.356 -0.314 -0.203 0.408 population between 15 and 65)

Total population in 1974 58701.01 114836.57 0.973 -0.035 -0.034 -0.077 0.956 Percent of canton population urban in 1974 21.77 18.34 0.679 -0.067 0.115 0.408 0.646

Mean years of education for out-migrants 1.92 0.37 0.096 -0.016 0.644 0.144 0.445 Mean years of education for in-migrants 1.93 0.56 0.079 0.023 0.492 0.090 0.257 Mean occupational status of out-migrants 34.68 2.34 0.056 0.111 0.454 0.260 0.573 Mean occupational status of in-migrants 37.81 4.26 -0.141 -0.387 0.304 -0.166 0.289 Percent of in-migrants minus percent of out-migrants 3.11 16.13 -0.176 0.059 0.111 0.681 0.511 economically active

Percent of in-migrants minus percent of out-migrants 0.33 12.52 -0.168 0.060 -0.005 0.790 0.657 who are male

Change in percent of persons who are college educated 1.30 1.05 0.663 -0.106 0.092 0.455 0.667 Change in percent of persons with no education -8.54 3.59 0.283 -0.140 0.111 0.445 0.310

% of Variance Explained - by each factor 27.1 19.7 11.4 8.0 - cumulative 27.1 46.8 58.2 66.3 n = 109 75 numbers of vendors, clerks, and professionals. In addition, percenv urban, total popu­ lation in 1974, and change in college educated persons load positively. Populous can­ tones containing the largest cities exhibit high positive principal component scores on this dimension, for example, Quito (+6.12, population=l,113,035) and Guayaquil (+7.39,

population=l,328,005), the nation's capitol, and largest port, respectively. Rural can­

tones, experiencing little absolute change in employment profiles through the seventies,

score negatively. These include Sierran cantones Celica (-0.65, population=26,258) and

Paute (-0.76, population=36,178).

Principal component two is again uni-dimensional, depictingeconomic structure

change. Loading positively are relative change in persons employed in agriculture,

manufacturing, commerce, total population, number of vendors, clerks, and farmers.

This principal component represents cantones which underwent considerable structural

changes in agricultural, secondary, and/or tertiary activities. Actual places scoring

highly include Oriente cantones such as Orellana (+5.10) and Putumayo (+6.27) in

Napo province, a region of recent oil exploitation; and Morona (+2.28) and Gualaquiza

(+1.19) in Morona Santiago province, an area of considerable agricultural colonization

(Appendix A). Higher negative principal component scores are found for cantones

experiencing little structural change, located in less dynamic provinces of the Sierra,

for example, Alausi (-2.76'1 in Chimborazo province and Macara (-1.48) in Loja prov­

ince.

The third principal component represents stagnant a rural/dynamic urban dicho­

tomy in social and economic structure. Rural characteristics are indicated by positive

loadings on absolute change in number of persons employed in agriculture, number of

farmers, and mean years of education for out-migrants. Urban tendencies are reflect­ 76 ed in negative loadings on relative change in persons employed in services and num­ ber seeking first work. High positive scores are distributed widely throughout Sierran cantones which are characterized by high levels of agricultural employment (76.86% on average). Examples include Antonio Ante (+1.56) of Imbabura in the North to

Azogues (+1.47) and Biblian (+1.35) of Canar province to the South. High negative scores are found for Costa cantones, with recent rapid urban expansion, exemplified by 24 de Mayo (+2.48) and Santo Domingo de los Colorados (-1,15) one of the fastest growing Ecuadorian cities (Appendix A).

Principal component four, showing only positive loadings, depictshuman resource base changes. Such changes are represented by percent of population urban, with no education, college education, and net in-migration of economically active persons. No clear pattern emerges on this dimension with cantones scoring both positively and negatively being spread throughout Costa and Sierra (Appendix A).

AN ECONOMIC CHANGE CONTINUUM OF ECUADORIAN CANTONES

This principal components analysis served to capture the multifaceted nature of development in four dimensions. In order to summarize economic change and facili­ tate statistical comparison, cantones are grouped along an economic change continuum.

This is done on the basis of principal component scores on these four dimensions employing Casetti's (1964; 1965) discriminant iterations grouping proceedure. This program allocates items (cantones) to groups such that within group variance is mini­ mized and between group variance maximized. A considerable advantage of this algorithm over other grouping routines is that observations are not ’locked' into a group on initial assignment, but in a later iteration may be reassigned to another group if appropriate. Table 11: Grouping of Ecuadorian Cantones on Component Scores of Socio-Economic Change, 1974-1982, Employing Discriminant Itera tio n s Grouping Procedure

Canton Name GrouD* Place Characteristics in 1982 Population X Urban Region General Comments

Qui to 1 1,116,035 77.64 Sierra Capital City Guayaquil 1 1,328,005 90.31 Costa Major port and commercial center for Ecuador as a whole.

Ibarra 2 125,876 45.64 Sierra Province capital Cuenca 2 275,070 55.41 S ierra 3rd largest city in Ecuador, province cap ital, dynamic c ity . Hilagro 2 107,188 71.85 Sierra High percent urban. Manta 2 106,364 94.33 Costa High percent urban. Zaruma 2 36,594 27.83 Costa Portoviejo 2 167,085 61.42 Costa Latacunga 2 125,381 22.94 S ierra Province capital, commer­ c ia l and local government center. Ambato 2 220,477 45.56 S ierra Province capital, dynamic artis n al production, shoes, foodstuffs, dynamic com­ mercial centre. Aguarico 2 3,241 8.79 Oriente Low urban population. Tulcan 2 59,474 52.10 S ierra Province c a p ita l, border town with Colombia. Celica 2 26,258 16.27 Sierra Hacara 2 17,753 59.20 S ierra Chinchipe 2 8,733 21.65 Oriente Ruminahui 2 32,537 46.37 S ierra Banos 2 14,575 57.22 Sierra Tourist centre, middle- sized town. Patate 2 9,605 16.73 Sierra Riobamba 2 151,623 49.76 Sierra Province capital. Paute 2 36,178 6.46 Sierra Low urban population. Loia 2 121,317 59.06 Sierra Province capital. Calvas 2 34,886 29.06 Sierra Gonzanama 2 35,620 18.48 S ierra Naranj i to 2 17,764 59.24 Costa Salinas 2 67,941 26.12 Costa Tourist industry from Guayas. Machala 2 126,492 86.49 Costa AreniI las 2 42,502 68.97 Costa Pasaje 2 46,774 56.07 Costa A ll Province El Oro, high percent urban. Pinas 2 40,249 30.12 Costa Santa Rosa 2 42,262 63.22 Costa Ore11ana 2 29,189 13.69 Oriente Putumayo 2 26,969 29.58 Oriente Qui jos 2 9,175 3.80 Oriente Low urban population Pastaza 2 27,679 35.25 Oriente Province capital. Mera 2 4,100 13.88 Oriente Gualaquiza 2 10,482 25.80 O riente Santiago 2 7,612 16.70 Oriente

Ordaneta 3 21,186 15.83 Costa Santo Domingo 3 138,065 50.15 Costa Sierra province, but town is in tne costa, very dynamic commercial town, with rapid growth in last two decades. Esmereldas 3 140,513 64.31 Costa Dynamic province capital, port and oil processing. Bolivar 3 58,371 16.33 Costa Chone 3 138,862 24.37 Costa J i j i pa 3 72,940 37.22 Costa Montecristi 3 31,793 25.57 Costa Pajan 3 41,521 11.82 Costa A ll from Province Manabi Rocafuerte 3 51,003 10.77 Costa Santa Ana 3 58,917 10.22 Costa Sucre 3 87,568 14.11 Costa 24 de Mayo 3 36,271 11.16 Costa Babahoyo 3 106,628 39.64 Costa Quevedo 3 164,920 40.64 Costa Ventanas 3 50,779 31.25 Costa Balzar 3 58,616 30.07 Costa Table 11 (continued) Canton Name Group* Place Characteristics in 1982 Population X Urban Region Daule 3 141,993 13.33 Costa El Empalme 3 52,619 32.34 Costa Naranjal 3 35,583 26.93 Costa Province of Guayas Samborodon 3 25,430 28.06 Costa Santa Elena 3 72,490 17.74 Costa Yaguachi 3 90,192 7.62 Costa Low urban population Alausi 4 27,456 ND Sierra Antonio Ante 4 26,339 46.49 Sierra Me] ia 4 39,016 16.73 Sierra Espejo 4 26,030 22.98 Sierra Cotacachi 4 31,912 16.23 Sierra Dynaim - artisnal/commer- cial trading center for leather & textiles. Otavalo 4 63,160 27.66 Sierra Dynamic artisnal/commer- cial trading center in te x tile s . S a q u is ili 4 14,844 19.62 Sierra Pi Ila ro 4 31,565 13.49 Sierra Guano 4 42,433 14.46 Sierra Azogues 4 68,273 21.31 Sierra Zamora 4 21,602 24.39 Oriente Cayambe 4 41,740 34.36 Sierra Small a g ric u ltu ra l conmun i t i es. San Miguel 4 28,912 13.36 Sierra B ib lia n 4 20,955 15.35 Sierra Montufar 4 42,275 26.52 Sierra Pedro Moncayo 4 14,732 12.48 Sierra Pui i I i 4 76,868 4.97 Sierra Low urban population Salcedo 4 42,004 14.03 Sierra Guaranda 4 72,917 18.77 Sierra Province capital Chi I lanes 4 20,129 9.82 Sierra Low urban population Chimbo 4 23,991 13.48 Sierra C olta 4 55,428 3.91 Sierra Low urban population Chunchi 4 14,646 21.81 Sierra Gi ron 4 35,306 7.59 Sierra Low urban population Gualaceo 4 40,460 16.23 Sierra Santa Isabel 4 30,939 7.21 Sierra Low urban population Sigsig 4 24,066 12.20 Sierra Espindola 4 18,176 7.78 Sierra Low urban population P altas 4 59,246 17.78 Sierra Puyango 4 21,859 15.85 Sierra Saraguro 4 25,653 8.13 Sierra Low urban population, active artisnal textile production. Elay Alfaro 4 46,003 30.18 Costa Muisne 4 16,746 21.86 Costa Increasingly important, tourist-area, with second homes development. Quininde 4 45,746 23.30 Costa Junin 4 17,903 19.75 Costa Vinces 4 66,128 22.09 Costa Urbina Jado 4 40,633 12.13 Costa Tena 4 41,071 17.46 Oriente Province capital, commer­ cial town. Limon Indanza 4 10,734 21.53 Oriente Guamote 4 25,362 8.87 Sierra Low urban population Baba 4 27,299 51.24 Costa Puebloviejo 4 18,929 20.39 Costa Quero 4 14,177 8.90 Sierra Low urban population Sucumbios 4 5,465 4.26 Oriente Low urban population Yacuambi 4 16,356 20.84 Oriente Pangua 4 18,581 6.75 Sierra Low urban population Sucua 4 12,299 30.50 Oriente Morona 4 23,730 21.13 Oriente Province capital Group 1 = The two primate cities, Ouito (the capital) and Guayaquil. Dynamic, d iv e rs ifie d economies, a ttra c tin g valuable human resources during the seventies. Group 2 = Cantones containing interm ediate c itie s which are a ttra c tin g hunan resources. Many places also have relatively slow-growing agricultural sectors. Oriente cantones with rapid increases in ag ric u ltu ral coloni­ zation are also in this group. Group 3 = Dynamic, urbanizing cantones, dominated by export a g ric u ltu ra l pro­ duction and economic diversification during the seventies. Group 4 = Predominantly agricultural cantones, dominated by domestic food pro­ duction; stow growing economies which lost valuable human resources during the seventies. 79

Attention now turns to discussion of the four canton groups generated by this routine. Group meberships and pertinent place characteristics are presented in Table

11, and mean scores on the four development dimensions, by group, aTe summarized in Table 12.

Group One. Ecuador's two primate cities, Quito and Guayaquil, comprise group one. These cantones are characterized by predominantly urban populations, large absolute increases in secondary and tertiary employment, and improvement in average educational levels (mean score of +6.758 on dimension one, Table 12). These places also experienced net losses of valuable human resources, evidenced by a mean score of

-1.276 on dimension four, possibly reflecting large influxes of low-income, illiterate migrants to these cities. Rapid urban growth, as represented by group one, reflects impacts of ISI and exchange rate policy biases in favor of urban/industrial expansion, which has, in turn, encouraged in-migration. A similar effect is created by price distortions which turn domestic terms of trade in favor of urban activities and establish a net outflow of productive resources from rural areas.

Group Two includes Cuenca (Ecuador's third largest city) and the majority of intermediate size cities (Table 12). These places attract economically active and more male in-migrants, indicating dynamic urban economies (mean score of 1.035 on dimension four). In addition, this group contains stagnant rural economies, evidenced by a mean score of 0.433 on the rural/urban continuum component. This stagnant rural/dynamic urban sector dichotomy reflects policy impacts upon these Sierran and

Oriente cantones (Figure 6). Redistributive, urban biased policies have contributed to intermediate city growth, prompting some economic decentralization. However, at the same time, exchange rate and price policies have led to stagnation in domestic food 80

Table 12: Average Principal Component Score fo r Each Canton Group on Analysis of Socio-Economic Change, 1974-1982

Average Component Score Component Component Component Component Canton Group 1______2______3______4 1 6.758 0.260 0.349 -1.276 2 0.026 0.326 0.433 1.035 3 0.014 -0.295 -1.560 0.029 4 -0.321 -0.117 0.368 -0.722 81 production located predominantly in the Sierra. Specifically, cheap consumer food prices coupled with subsidized food imports have lowered living costs in urban areas whilst severely reducing incentives and incomes for domestic food producers. Even more regionally specific have been inadequate support prices on corn and potatoes produced almost exclusively in the Sierra.

Group Three cantones have dynamic economies as evidenced by a mean score of

-1.56 on the rural-urban continuum dimension, meaning large relative growth in ser­ vice employment and persons seeking first work (Table 12). Such places, located entirely in the Costa, are dominated by capital intensive export agriculture employing wage-labor and modern production practices (Figure 6). Accordingly, Costa growth has benefited from exchange rate policy which artificially cheapened food and agri­ cultural inputs, thus permitting lowered wages and production costs for this group of producers. In addition, group three contains dynamic cities such as Esmeraldas and

Santo Domingo which have been targeted by government expenditure of oil revenues.

For example, construction of an oil refinery and port facilities in Esmeraldas; and improved road links between Costa and Sierra through Santo Domingo, now a major trading center.

Group Four places exhibit least dynamic growth with stagnating, traditional agriculture, small farms, high tenancy, and net out-migration of human resources

(mean score of -0.722 on dimension four, Table 12). These predominantly agricultural cantones (22% of group members are less than 10% urban) are spread throughout the

Sierra and Oriente (Figure 6). Many places have large indigenous populations engaged in artisnal production of leather goods and textiles, such as Otavalo and Cotacachi

(Table 12). Their relative stagnation relates to penalization of domestic food produc- 82

1 nJ"

^

5

4. Traditional agriculture and domestic (ood production

3. Export agricultural production, diversifying economies

— 2. Intermediate cities gaining human resources, with sto g n an t agriculture

\ t . Primate cities with diversified econom ies

Figure 6: Ecuadorian Cantones Classified by Socioeconomic Change, 1974-19 82 83 tion by exchange rate and price policies previously discussed. In addition, an anti­

small farm bias in price support and credit disbursement programs has further dis­

couraged growth for this group.

In summary, this section situated cantones along an economic change continuum

in order to describe their growth performances and facilitate statistical comparison of

local structures of production. Several general observations are prompted by these

findings. Cantones are clearly dichotomized into economically diversified, urban/

industrial economies (groups 1 and 2) versus those primarily agricultural in orienta­

tion (groups 3 and 4). Urban/industrial biases associated with exchange rate, price,

and credit policies have taxed agriculture and channelled resources into cities, thus

contributing to this polarization of growth. Further, within agriculture, economic

change differences cluster places according to modern, export and traditional, domestic

production. This distinction supports assertions made in Chapter IV that macroeco­

nomic policy growth effects vary according to form of production. Particular aspects

of production most central to influencing growth outcomes of policies are investigated

in the final section of this chapter.

LINKAGES BETWEEN STRUCTURAL CONDITIONS AND CANTON

DEVELOPMENT

Having identified both dimensions of growth and groups of cantones according to

growth performance, attention turns to local production structures. Recalling argu­

ments of Chapter IV, variations in policy impact are hypothesized to relate to partic­

ular structural characteristics of local economies. This section investigates such rela­

tionships by distinguishing between stagnant and dynamic agricultural economies on

the basis of structure of production variables identified in Chapter IV. As a result, 84 empirical interrelationships between policy impacts, growth outcomes, and local struc­ ture of production are identified.

As noted in Chapter HI, this analysis focuses on impacts of policies upon agri­ culture, as opposed to all economic sectors, due to time constraints. Accordingly, groups two, three, and four, representing dynamic (group three) and stagnant (groups two and four) agricultural economies are subject to discriminant analysis.^ This statistical proceedure identifies an optimal set of independent variables which discrim­ inate between groups. Employed here are agricultural structure of production vari­ ables, drawn from the 1974 published Agricultural Census, in order to identify key aspects of local production which differentiate these canton groups.

Table 13 presents independent variable names, their means and standard devia­ tions, providing an initial description of structures of production across canton groups.

Clear differences in sophistication of agricultural production are evident between groups two, three, and four. Costa cantones (group three) exhibit most advanced agriculture containing the largest proportion of medium size farms (42.84%), area under perennials (export crops, 21.7%), farms rented by cash (4.94%), and working force who are farmers (73.17%) or in other agricultural occupations (72.41%).^ By contrast, Sierra and Oriente cantones of groups two and four, are characterized by more traditional agriculture. Specifically, they contain a large proportion of small farms (group 2=53.43%, group 4=64.71%) producing annual crops (domestic foods). In

Group one, the two primate cities, are excluded from this analysis since their economies are almost entirely iurban in orientation.

Although more usual applications of this technique determine whether groups are statistically distinct, in this case the major concern is to identify those indepen­ dent variables differentiating more and less dynamic groups.

Percentages quoted here are averages across all cantones. Table 13: Means and Standard Deviations of Structural Variables For Canton Groups*

Structural Variables Group 1 Group 2 Group 3 Group 4

small farms (> 5 hect) 66.37 53.43 48.39 64.71 (6.70) (27.40) (18.77) (30.79) medium farms (5-50 hect) 24.71 31.31 42.84 27.64 (5.29) (18.66) (13.54) (17.13) large farms (51-500 hect) 7.57 14.92 8.26 7.40 (0.41) (12.49) (6.53) (20.76) very large farms (501+ hect) 1.35 0.34 0.50 0.26 (1.46) (0 .2 6 ) (0.62) (0.37 ) farm area under annuals 8.47 12.37 9.97 20.87 (3.40) (15.35) (8.16) (9.90 ) farm area under perrennials 5.06 8.03 21.17 5.98 (2.41) (8 .3 6 ) (15.93) (11.66) farm area under grass 28.15 37.01 32.80 41.46 (4.88) (15.09) (10.02) (16.90) farms owned with t i t l e 53.06 50.82 52.00 56.61 (9.46) (22.64) (19.70) (24.84) farms rented with cash 3.66 2.54 4.94 2.27 (2.83) (4 .8 2 ) (5.78) (3.08) farms rented by sharecropping 4.01 2.17 2.48 5.38 (4.49) (5 .4 5 ) (3.13) (3.12) farms held without t i t l e 4.86 17.12 12.22 10.48 (2.61) (19.17) (12.91) (25.57) working force lite ra te 77.28 74.71 73.94 71.83 (0.10) (2 .0 9 ) (1.43) (2.93) working force who are farmers 8.30 54.80 73.17 70 .'26 (3.47) (16.59) (12.76) (19.01) working force in agriculture 8.33 54.37 72.41 70.56 (3.47) (16.61) (15.31) (18.47) working force in urban 67.54 33.11 17.16 21.76 activities* (2.30) (14.56) (9.22) (13.45) working force in mining 0.43 0.84 0.23 0.21 (0.31) (0.4 3) (0.81) (1.96) n = 2 n = 49 n = 22 n = 36

ivities include manufacturing. commerce, servicesand finance. Group 1 = The two primate cities, Quito (the capital) and Guayaquil. Dynamic d iv e rs ifie d economies, attractin g valuable human resources during the seventies. Group 2 = Canton;, containing intermediate cities which are attract­ ing human resources. Many places also have re la tiv e ly slow- growing ag ricu ltu ra l sectors. Oriente cantons with rapid increases in agricultural colonization are also in this group. Group 3 = Dynamic, urbanizing cantons, dominated by export agricultural production, and economic diversification during the seventies. Group 4 = Predominantly agricultural cantons, dominated by domestic food production; slow growing economies which lost valuable human resources during the seventies. 86 addition, they exhibit pre-capitalist landholding patterns with the largest proportion of farms sharecropped ( group 4=5.38%) and farms held without title (group 2=17.12%)

(Table 12). These contrasts substantiate the modern/traditional economy distinction suggested earlier between Costa and Sierra, supporting arguments relating different growth performances of these canton groups to variations in sophistication of produc­ tion.

Attention now turns to results of the stepwise discriminant analysis (Table 14).

Taken by themselves, eight independent variables, describing local employment profiles and agricultural production are strongly significant. These include, percent of work force literate (F= 17.86), in urban activities (10.35), in agriculture (F= 10.26), employed as farmers (F= 10.17), of farm area under perennials (F= 13.60), under annuals (F= 7.87), medium farms (F= 7.17), and farms rented by sharecropping (F=

6.12). These variables support arguments presented in Chapter IV regarding the importance of modern versus traditional production systems in determining local growth impacts of macroeconomic policies. Other significant variables include percent of large farms, of very large farms, of small farms, and of the work force in min­ ing.

When all sixteen independent variables are taken together, forms of tenancy, sec­ tor of employment, and production of export crops emerge as important discriminators.

Specifically, percent working force literate (F= 7.23), farms held without title (F=

4.35), farms rented by sharecropping (F= 2.82), work force in urban activities (F=

2.81), who are farmers (F= 2.74), and area under perennials (F= 2.50) are significant

(Table 14). Table 14: Stepwise Discriminant Analysis of Canton Groups 2, 3, and 4 by Structural Variables, 1974 Canton Data-Groups *

Discriminant Function Coefficients Structural Variables Simple F Statistic Final F Statistic 1______2______

Percent of: small farms (>5 hect) 3.517** 0.102 medium farms (5-50 hect) 7.168*** 1.33 -0.124 -0.484 large farms (51-500 hect) 2.827* 0.106 very large farms (501+ hect) 2.699* 0.586 farm area under annuals 7.872*** 1.464 0.346 -0.140 farm area under perennials 13.600*** 2.500* -0.094 -0.487

farm area under grass 2.124 0.432

farms owned with t i t l e 0.596 0.615

farms rented with cash 2.519* 1.132 -0.250 -0.115

farms rented by sharecropping 6.618*** 2.823* 0.389 0.136

farms held without t i t l e 1.255 4.350** 0.626 0.226

working force lite r a te 17.857*** 7.233*** -0.720 0.346

working force who are farmers 10.174*** 2.743* 1.058 0.709

working force in agriculture 10.259*** 0.137

working force in urban a c tiv itie s 10.348*** 2.812* 0.671 1.160

working force in mining 2.929* 0.133

• U ilk 's Lambda 0.419 0.717

Overall F Statistic 5.561*** 88

To interpret resultant linear discriminant functions (LDF) standardized discrimi­ nant function coefficients are employed depicting traditional/modern a agriculture dichotomy (Table 14).^® Traditional agriculture is characterized by LDF one with strong coefficients for percent of working force farmers (1.06), work force literate

(-0.72), farms held without title (0.63), and farms rented by sharecropping in declin­ ing order of importance. Modern agriculture is indicated by LDF two with strong coefficients for percent of work force in urban activities (1.16), percent of medium size farms (-0.74), area under perennials (-0.49) respectively.^ Significance of the

LDF is supported by correct classification of 72.9% of cantones into actual member­ ship groups (Table 15). Finally, mean discriminant scores on these functions indicate that stagnant Sierran agriculture (group four) is strongest on LDF one, and dynamic

Costa agriculture (group three) is strongest on LDF two, whilst intermediate city/ stagnant agriculture cantones (group two) are split between functions, being marginal­ ly stronger on LDF one.

REGIONAL ECONOMIC CHANGE AND POLICY IMPACTS

Findings of this analysis support arguments presented in Chapter IV regarding interrelationships between spatially varied production structures and growth impacts of policy. Initially Costa and Sierra were dichotomized as having more and less dynamic agricultural sector*, respectively, by groupings based on principal components scores describing economic change differences during the seventies. Subsequently, the

20 Standardized discriminant function coefficients denote the relative importance of individual independent variables to the LDF and thus permit substantive inter­ pretation of differences between canton groups.

2Q It should be noted that, given the complexity of regional economies, both percent in urban activities and percent farmers are strong on both functions. For con­ ceptual clarity, however, they are included only on the function for which they are strongest. 89 descriptive statistics and discriminant functions suggested a modern/traditional dichoto­

my in production structures between these Costa (group three) and Sierra cantones

(groups two and four). Specific variables dicriminating between more and less

dynamic cantones pertain to articulation into the capitalist sector, such as farm size,

market to which crops are directed, and forms of tenancy.

Differing growth performances amongst cantones can be related to varied policy

effects across these structural contexts. Macroeconomic policies are conceived by, and

designed to operate in, a capitalist economic system with effective operation of price

incentives, a literate and informed productive population, factor mobility through

efficient marketing and communications channels, and ready access to land, capital,

labor, and technology. Accordingly, stagnation of Sierran agriculture may be related

to structural conditions inhibiting growth by policy such as numerous spatially dis­

persed small farms, without title, or being sharecropped, and production of domestic

foodstuffs which are being penalized in the market place by exchange rate and price

policies. By contrast, relative dynamism of Costa agriculture may be related to the

availability of subidized agricultural inputs, wage-labor, fuel costs for machinery, and

a more literate population with better knowledge and economic access to policy assis­

tance. Table 15: Predictive A bility of Discriminant Function for Canton Groups 2,3 and 4*

Predicted Classification Number Actual Classification of Cases GrouD 2 Group 3 Group 4 Group 2 36 4 5 40 (8.2%) (10.2%) (81.6% ) Group 3 22 4 15 3 (18.2%) (68.2%) (13.6%) Group 4 49 23 4 9 (63.9%) (11.1%) (25.0% ) Percent of cases co rrec tly classified = 72.9%

Group 2 = Cantones, containing larger interm ediate c itie s which a re a ttr a c t­ ing valuable human resources. Many places also have relatively slow growing agricultural sectors. O riente cantones with rapid increases in agricultural colonization are also in this group. Group 3 = Dynamic, urbanizing cantones, dominated by export a g ric u ltu ra l pro­ duction and economic d iversifica tio n during the seventies. • Group 4 = Predominantly agricultural cantones. dominated by domestic food production; slow growing economies losing valuable human re ­ sources during the seventies. SUMMARY OF CHAPTER

This chapter identifies empirical interrelationships between growth impacts of policy and spatially varied structures of production. To this end, economic change across

Ecuadorian cantones during the seventies is first described, leading to construction of an economic change continuum of places. More and less dynamic cantones are then distinguished on the basis of agricultural structure of production variables identified in Chapter IV.

Variables capturing the multifaceted nature of development between 1974 and

1982, pertaining to changing levels of economic diversification, human resource attri­ butes of canton populations, and their migration related shifts in human resource base, are subject to principal components analysis. Four development dimensions — absolute employment change, economic structure change, a stagnant rural/dynamic urban dicho­ tomy, and human resource base changes — summarized economic growth across can­ tones.

Principal components scores are then employed to group cantones by type of eco­ nomic change. Casetti's (1964; 1965) discriminant iterations grouping proceedure gen­ erates four groups, with cantones clearly dichotomized into economcally diversified, urban/industrial economies (groups 1 and 2) versus those primarily agricultural in orientation (groups 3 and .4). Spatially, agricultural dynamism, represented by group three is entirely located in the Costa, whereas more stagnant agriculture is found throughout the Sierra and Oriente (groups 2 and 4).

The last section of this chapter assesses interrelationships between economic change and local production structures, by differentiating canton groups on the basis of canton-specific structural variables. A principal finding is that structural characteris­ tics differentiating more and less dynamic cantones pertain to degree of local producer articulation into capitalist production. These findings, coupled with evidence of dif­ ferential policy impacts for various groups of producers (from Chapter IV), support the argument that growth impacts of policy do indeed differ for capitalist versus non-capitalist producers. CHAPTER VI

CANTON-SPECIFIC VARIATIONS IN POLICY IMPACT

The previous chapter undertook a nationwide empirical analysis which grouped can­ tones according to growth performance and distinguished between groups on the basis of local variations in production structures. In distinguishing between dynamic and stagnant agricultural economies, a set of empirical generalizations regarding interrela­ tionships between policy impacts, growth outcomes, and local production structures were identified. These resultant empirical generalizations, however, provide under­ standing only at a general level.

In contrast, this chapter examines in greater detail the failure of price and credit policies to promote growth for one group of producers; small, traditional farmers/*®

By employing detailed field collected data (not available through Census sources), it is possible to determine which economic and social structures of traditional production limit potential benefits from these policies. This is done by examining how particu­ lar conditions of production such as access to resources, knowledge, mobility, and the like, determine policy outcomes.

This field work also underscores the importance of place specificity in under­ standing uneven development processes. Specifically, it is argued that the local expression of general associations between form of production and policy outcomes,

4® Exchange rate policy is not investigated at the local level since its impacts are not readily traceable to individual producers, but rather are diffused more gener­ ally across economic sectors.

- 93 - 94 identified in Chapter V, depends upon regional context. Particular combinations of resource endowments, infrastructure, producers, administrators, their accessibility and interactions, all determine the extent to which potential growth outcomes are actually attained.

To investigate this assertion, the field work focuses upon two Sierran cantones with apparently similar structures of production and growth performances (both are group two places), Ambato and Riobamba. In identifying local differences in policy operation, the intention is to illustrate that limits on growth are placed not only by the nature of traditional production systemsper se, but also by the contingent cir­ cumstances in which that system operates.

Three sections comprise this chapter. First, a brief description of the field work is presented. Second, two field research sites, Ambato and Riobamba, are compared and contrasted, both in terms of overall economic profile and specific aspect^ of tra­ ditional agricultural structure of production. The final section then identifies ways in which variations in these traditional production systems mediate the potential for price and credit policies to enhance regional growth.

FIELD COLLECTED DATA

Three months of field wiwk were carried out in Ecuador in Fall 1985 to identify how variations in agricultural structure of production influence the operation of price and credit policy mechanisms. This investigation took place in two Sierran cantones

— Ambato in Tungurahua Province and Riobamba in Chimborazo Province (Figure 2).

Collected were data pertaining to overall economic profiles, marketing channels, infrastructure provision, institutional structure, and resource endowments. Data were 95 also collected on agricultural structure of production for one parroquia in each canton

— Pinguile in Ambato and Quimiag in Riobamba/^

Three data sources were employed. First, unpublished reports were obtained from the Ministries of Agriculture, Agrarian Reform and Colonization; the Central and

National Development Banks; and Ecuadorian USAID mission. These provided infor­

mation on aspects of local economies such as marketing networks, landholding forms,

and specific policy instruments like price support levels and interest rates on agricul­

tural production credit. A second data source were informal, protocol guided inter­

views with farmers in each parroquia and vendors in city markets of Ambato and

Riobamba. These provided information on particular barriers to effective policy oper­

ation such as non-eligibility, ignorance, and/or distrust on the part of farmers. Third,

data pertaining to environmental conditions, natural resource endowments, infrastruc­

tural provision, and idiosyncratic aspects of local production systems were collected by

the author.

VARIATIONS IN ECONOMIC STRUCTURE - AMBATO AND RIOBAMBA

This section examines in detail economic and social aspects of the field work sites.

This draws on several sources; aggregate data from Ecuador's 1974 and 1982 Popula­

tion Censuses; individual level data sampled by CELADE from the Population Cen­

suses; and unpublished statistics and field collected data as described in the previous

section. The first subsection familarizes the reader with the economic structures of

Ambato and Riobamba; then identifies differences in their growth performance during

the seventies. The second subsection describes in detail agricultural structure of pro-

^ Parroquias are a political subdivision of the canton and were employed both as a convenient demarcation unit for field work, and because, within these, production structures were relatively uniform. 96 duction for Pinguile and Quimiag, to identify differences which might affect local impacts of price and credit policies.

Socioeconomic Characteristics of Ambato and Riobamba

Ambato and Riobamba share a number of similar socioeconomic characteristics. Both contain intermediate size, province capital cities (Ambato, population=220,477, % urban=45.S6; Riobamba, population=151,623, 9b urban=49.76); are located at comparable elevations in intermontaine basins of the Sierra, thus sharing broadly similar environ­ ments; have Pan American highway and railroad links with Quito, the nation's capi­ tal; and had similar growth experiences during the seventies, evidenced by their clas­ sification as group two places in the nationwide analysis (Chapter V).

Despite these aggregate level similarities, certain differences in geographical and environmental context influence the economic dynamism of each canton. With regard to environmental attributes, although both cantones are situated in intermontaine basins, Ambato is located in the well watered Pastaza drainage basin, is relatively fertile, topographically and climatically diverse, and supports a wide range of inten­ sive farming activities. Riobamba, on the other hand, is dryer with less fertile soils, such that cultivation is less diverse and less productive.

With regard to commercial dynamism, Ambato has become a major wholesaling center for Costa and Sierra economies by virtue of its location. Specifically, although Ambato and Riobamba are separated by only 100 kms of the Pan American highway, Ambato is located at a major junction of the Quito-Guayaquil transportation corridor (Carroll, Lentnek, and Wilkie, 1984). As a result, Ambato has developed a highly differentiated commercial structure with five wholesale markets, each devoted to a different product, and a host of retail markets scattered throughout the city. 97

By contrast, Riobamba has one central marketing area, housing the majority of who­ lesaling and retailing activities, and handling a much smaller volume of produce.

Overall employment profiles of these cantones, constructed from aggregate census data, provide further evidence of broadly similar growth growth patterns and some important differences (Table 16). First examining economic structure in 1974, fewer are employed in agriculture in Ambato (39.3%) than in Riobamba (42.3'. and more in commerce (9.5% versus 6.7%) and manufacturing (15.6% versus 14.5%). By contrast,

Riobamba employs more in construction (4.8% versus 3.5%), and similar proportions in utilities, transportation, and services. This picture changes somewhat by 1982, with

Ambato remaining significantly ahead in manufacturing and commerce, but Riobamba experiencing considerable growth in services (Table 16).

These aggregate statistics suggest greater economic diversification in Ambato, evi­ denced by growth in manufacturing and commercial activities. Greater detail on these changes, and economic structure overall, is provided by CELADE individual level data which reports the proportion of individuals employed in specific occupations.^

Ambato exhibits a far more diversified and dynamic artisnal sector than Riobamba, with considerably larger proportions engaged in tailoring, shoe making and repairs

(14.3% in 1982 in Ambato versus 4.3% in Riobamba), an observation substantiated by

field visits. In addition, .proportion of vendors in Ambato is 9.0% in 1982 versus

7.4% in Riobamba, supporting earlier arguments of greater commercial dynamism in

Ambato. Riobamba, by contrast is dominated by administrative actitivies with 15.1%

in professional and technical occupations versus 11.3 % in Ambato, and also a larger

^ The CELADE samples are used here in a purely supplementary fashion since sampling procedures were not consistent across places or time periods. Neverthe­ less, even accounting for sampling errors, the proportion of individuals employed in each occupational category gives a broad indication of the relative importance of various occupations in each canton. Table 16: Proportion of Economically Active Population Employed in Different Branches of Economic Activity *

Seeking Agricul­ Mining Manufac­ U t ilit ie s Construc­ Commerce Transpor­ F i nance Services Unspec­ F irs t TOTAt.% Place/Year ture turing tion tatio n ifie d Uork

Ambato 1974 39.3 0.1 15.6 0.6 3.5 9.5 3.2 0.8 20.9 5.4 1.2 100 Ambato 1982 30.5 0.2 22.1 0.6 5.5 10.8 4.3 0.1 21.7 2.2 2.0 100

Riobamba 1974 42.3 0.1 14.5 0.5 4.8 6 .7 3.8 0.1 20.9 5.0 1.3 100 Riobamba 1982 31.9 0.2 11.7 0.8 6.9 8.9 4.9 0.2 30.1 2.0 2.4 100

* Measured as the percent of economically active population for each city and each year. Source: Censo de Poblacion, 1974, 1982

vo oo 99 service sector (9.3% versus 6.8%).

In summary, findings reported here indicate that Ambato is a dynamic commer­ cial center with considerable economic diversification in manufacturing and artisnal activities. By contrast, Riobamba is an administrative and service center, exhibiting less economic diversification. Accordingly, policy impacts will vary across these locales, for example, price supports for agricultural commodities may enhance regional incomes in Ambato more than Riobamba due to its far greater commercial dynamism.

Accordingly, moving this investigation from a nationwide to canton scale exposes var­ iations in economic structure which should improve our understanding of local varia­ tions in policy impact. The importance of place-specific investigation in understanding actual policy effects is explored further by comparing agricultural structure of pro­ duction in parroquias within each canton.

Agricultural Structure of Production — Pinguile and Ouimiag

This subsection undertakes two tasks. First, major features of traditional, small farm production in Pinguile and Quimiag are summarized, emphasizing those aspects which may limit policy effectiveness. Second, place-specific variations in structure of pro­ duction which influence local expressions of policy impact are identified. The next section then links these differences to actual policy operation for individual producers in these empirical settings.

With regard to environmental attributes a number of differences emerge. Pin­ guile is characterized by regular precipitation and deep fertile topsoils which retain moisture and nutrients. Overall, temperatures are warm in the Ambato valley, sel­ dom freezing at night. As a result, potatoes, corn, beans, vegetables, and a variety of fruits are cultivated year round. The greatest environmental limitation is frost in 100 higher areas, which devastated potato production in Fall 1985. Quimiag contrasts this picture, with a much dryer climate, steep hillside fields which drain rapidly, thin topsoils that do not retain moisture, and generally higher elevations. As a result, production is often limited both by drought and frost. These limitations are reflected in a smaller range of crops produced — primarily potatoes, beans, and corn - and lower levels of productivity.

Pinguile and Quimiag, are dominated bysmall farm production reflecting agri­ cultural characteristics of Ambato and Riobamba overall. Specifically, 96.4% of farmers in Ambato farm holdings of smaller than five hectares, comprising 25.4% of agricultural land. Similarly, Riobamba has 93.6% of farmers with farms under five hectares, on 29.1% of land (Table 17).

This small farm sector is characterized by traditional (non-capitalist) forms o f production. Specifically, 3.9% of farmers in Pinguile and 4.9% in Quimiag- are ren­ ters; many who own land do not posess official title documents; the majority of labor employed are family members, 98.8% in Pinguile and 96.9% in Quimiag; and over 60% of production is for home consumption (Table 18). Mechanization is mini­ mal such that hand planting and harvesting employing ox-drawn ploughs and wooden tools are common practices. Accordingly, productivity is very low, with most farm­ ers producing subsistence., but little for commercial sale. Hence, price supports intended to raise incentives and regional incomes have little effect.

Although both parroquias are broadly similar and clearly dominated by non­ capitalist forms of production, differences are also evident. Specifically, Riobamba has

more farmers on holdings larger than five hectares (6.2% versus 3.5% in Ambato) and Table 17: Land Distribution by Farm Size Classes, Ambato and Riobamba

Farm Size Ambato Riobamba Classes (Hectares) XFarmers % Area XFarmers X Area 0 ■ 1.0 57.5 5.9 37.9 3.3 1.1- 5.0 3a.9 19.5 55.7 26.6 5.1- 100 3.3 11.5 5.7 16.4 100.1- 2500+ 0.2 63.0 0.5 53.7

Source: Distribucion de la T ie rra , 1977 102 a higher proportion of wage labor (3.1% versus 1.2% in Ambato) (Table 18).4^

Hence, although the large farm sector, producing for commerical markets, may benefit from price and credit programs, the majority of small farmers remain unaffected such that regional multiplier effects are minimal.

The ethnic mix in each parroquia also differs. Quimiag, and Riobamba overall, has a large indigenous indian population speaking only Quechua, their native language

(up to 50% in many areas; Durston and Crivelli, 1984). Given that schools teach in

Spanish, this has excluded Indians from education. By contrast, in Pinguile, the pop- ulaton is mestizo (mixed indian and european descent), Spanish speaking, and almost entirely literate.

Levels of infrastructure provision which indicate articulation into the capitalist economy also differ. With regard to irrigation, the majority of landholdings in Pin­ guile have irrigation channels and regular water service, such that drought is rarely a problem. In Quimiag, on the other hand, no central irrigation system exists and drought remains a barrier to production. Regular provision of transportation, however, is provided for Quimiag, but not Pinguile. Quimiag is served by four buses each day into Riobamba, their marketing and service center. By contrast, Pinguile has one bus, each Monday, and otherwise, the nearest service entails a two mile walk. On market days revendones bring trucks to transport farmers and their produce to market in

^ This difference in landholding structure reflects the historical strength of the hacienda system in Chimborazo province and its resistance to agrarian reform. Prior to 1960, twenty families in Riobamba owned 80% of agricultural land (Ministerio de Agricultura, 1979). In addition, the large indigenous, non-spanish speaking population was not politically organized and so did not benefit greatly form agrarian reform. By contrast, Ambato is characterized by numerous pri­ vately owned smallholdings. The local farming population is predominantly mestizo, better educated, and wealthier than in Riobamba. These farmers became involved in commercial production, saved, and purchased land during the agrarian reform. Table 18: Agricultural Structure of Production, Pinguile and Quimiag

Structural Variables Pinguile Quimiag

Percent of: total farms owned privately 96.1 95.1 to ta l farms rented with cash 3.1 4.2 to ta l farms sharecropped 0 .8 0.7 family labor 98.8 96.9 wage labor 1.2 3.1 production fo r home consumption 63.4 67.6 production for commerical sale 36.6 32.4

Source: Censo Agropecuario, 1974, Unpublished Volumes 104

Ambato.44 In doing so, however, they serve themselves, having first access to farm­ ers' produce, often purchasing prior to the beginning of market transacting, and at a lower price.

POLICIES IN REGIONAL CONTEXT

This section elaborates two themes pertaining to the operation of price and credit policies in Ambato and Riobamba, drawing primarily on subjective field observations and informal interview with market vendors andcampesines (peasant farmers).4^

The first identifies limits upon the operation of price and credit policies related to the nature of traditional production systems. Second, differences in local agricultural production structures, leading to varied policy impacts across field work sites, are elaborated - illustrating the importance of place-specificity in understanding actual growth outcomes.

Before discussing specific details of price and credit policies, several general obser­ vations are relevant. As noted in previous chapters, macroeconomic policies are con­ ceived by, and designed to operate in, the Ecuadorian capitalist state. These policies incorporate assumptions regarding attributes of the productive population and, hence, their potential to benefit from policies. Specifically, farmers are assumed to produce for commercial sale and profit; to have access to land, labor, capital, and information regarding policy mechanisms; to be capable of transporting produce to commercial

44 The revendone is part of Ecuador's complex intermediary system which intervenes between producer and consumer. Revendones purchase produce directly from fanners in markets of Ambato and Riobamba, and then resell to wholesalers, or less frequently, retailers (Hanssen-Bauer, 1982).

4^ It should be emphasized at the outset of this section that statements reported here are based primarily on subjective field observation. Although unpublished data substantiates these assertions, only a few interviews were conducted, and conclu­ sions remain tentative and place-specific. 105 markets; and to be sufficently educated to understand, and comply with, bureaucratic regulations.

In reality, traditional farmers of Pinguile and Quimiag do not conform to these assumptions and, hence, policies perform dissappointingly. Two dimensions of these limits are relevant here. First, traditional productive structures are characterized by low productivity and primarily subsistence production; an absence of communications and transportation infrastructure to facilitate marketing decisions and, subsequently, accessibility to market; low literacy levels which prevent understanding of, and oper­ ation in, bureaucratic structures; and limited access to capital and land (many are

renters, or own very small plots). Second, and less tangible, are limits placed by

ethnicity and poverty. Campesinos of the Sierra invariably are the poorest strata of

Ecuadorian society, and many are native indians who may have limited Spanish.

Issues such as prejudice on the part of policy makers; intimidation of campesinos by

institutional edifices — large, opulent bank buildings; and ignorance and distrust of

policies due to illiteracy and unfamiliarity with the 'written culture' of government

administration; are considerable barriers to policy effectiveness.

Price Policy

Attention now turns to actual operation of price policy in Ambato and Riobamba.

This discussion first examines problems in policy operation for the small farm sector

in general, and then differences in these across field sites. Observations here are

restricted to producer price supports for domestic food crops.

Disbursement o f information to the small farm sector regarding price support

levels was ineffective in bo;:h field sites. Evidence from interviews suggests that

illiterate or poor traditional farmers, without access to radio, television, or newspapers 106 are not informed of which crops are price supported, or specific support levels. This

lack of educational or media provision to the campesinos, and, hence, the inappropri­

ateness of price policy for raising their incomes, reflects the weakness of this political

constituency. As argued in Chapter II, the state biases policies towards economically

dynamic classes, which provide the majority of revenues. Within agriculture, this is

towards larger, capitalist farmers, and clearly not campesinos of the Sierra.

Perhaps because of this, no government officials were present overseeing market

transactions, and no official price levels were posted to guide trading. Accordingly,

enforcement o f price supports in market places was non-existant. Rather, prices

were set by the revendones, intermediaries who purchased from the farmers. Inter­

views with these revendones indicated that prices depend primarily upon supply,

demand, and quality of specific commodities, and consequently are extremely variable

even within each market day. Major factors causing price fluctuations were climatic

anomalies, such as frost, which limited supply; or illegal imports from Peru and

Colombia, attracted by presumed price supports, which increased supply and reduced

prices.

Even if price supports operated as intended, price incentives are not a primary

consideration in planting decisions, and are not effective in raising farmers' incomes.

This occurs because subsistence production, coupled with low productivity, has led

farmers to produce low-risk crops which will not fail given available technology and

climatic limitations.

In addition to such sectorwide limits upon the operation of price policy, Pinguile

and Quimiag are differentially affected due place-specific to variations in production

structures. Greater commerical dynamism observed in Ambato apparently has encour­ 107 aged more market oriented production in the small farm sector, due to diverse and

numerous market outlets and considerable demand for a wide variety of commodities.

Further, the revendones of Ambato markets live in surrounding farming communities,

and so spread information regarding prices and demand. Finally, the warmer and

wetter climate of Ambato facilitates reliable production of a wide variety of crops

such that campesinos can frequently produce a surplus over subsistence. Accordingly,

to the extent that price supports do operate, they have a more positive impact upon

campesinos of Ambato than Riobamba.

Credit Policy

As discussed in Chapter IV, production credit disbursement is biased towards the

export sector. Thus, domestic food producers, and particularly small traditional farm­

ers, face a number of barriers to obtaining credit from Banco Nacional de Fomento

(BNF). Complex and costly borrowing procedures exclude campesinos who are illit­

erate, or who cannot afford costs of transport, lodging, and lost productive days to

complete loan applications. However, the greatest impediment to obtaining credit is

proof of land ownership. Whilst a relatively small proportion of campesinos rent

land (3.9% in Pinguile and 4.9% in Quimiag), a large proportion are unable to prove

ownership with an official title d

Widespread poverty in the small farm sector also limits campesinos' potential to

obtain credit. The need fo r loan collateral is often not satisfied by small plots, and

in any case, many would not risk losing their land by defaulting on a loan.

Accordingly, campesinos, the most needy group of producers, are too poor to obtain

^ Although no specific data are available to assess this, widespread ownership without title was both observed at field sites and discussed with government officials and peace corps volunteers. Visits to agrarian reform offices in Ambato and Riobamba, however, yielded no statistics on the extent of untitled land. 108 credit, an obvious paradox. One response to this situation has been establishment of peasant cooperatives or assocations, wherein a group applies for official registration through the Ministry of Agriculture and thus becomes a 'better risk'. This strategy, evident in both Pinguile and Quimiag, both underscores the difficulties faced by small farmers, and illustrates the additional effort needed for them to obtain BNF credit.

Another important barrier to production credit disbursement ethnicity is o f tra­ ditional producers. A considerable proportion of campesinos are indigenous indians, some of whom speak only Quechua. Given that policy administration is undertaken solely in Spanish, these indians are inhibited from obtaining loans. Further, both indians, and poor mestizo campesinos, are intimidated by, and distrustful of, the gran­ deur of the bank, and mysteries of its 'written culture' of documentation and appli­ cation procedures. An additional, and more subtle concern is that banking officials are middle class mestizos with little exposure to, or tolerance of, the indian culture, thus exacerbating these problems.

These considerations were both observed, watching campesinos in the bank, and expressed by them in informal interviews. This issue of ethnic insensitivity differ­ entiates field work sites, being more relevant in Riobamba where approximately 50% of campesinos are Quechua speaking indians. By contrast, in Pinguile, and Ambato overall, campesinos are predominantly mestizo, better educated, and less intimidated by government institutions.

Variability in quality o f policy administration also differed markedly between places and may have contributed to different policy impacts. This is best illustrated by the land titling project, administered by Institute Ecuatoriana de Reforma Agraria y Colonizacion (IERAC) the agrarian reform ministry, to provide documenation neces­ 109 sary for campesinos to obtain credit. Visits to local IERAC branches indicated several problems. Administration of this policy was unsatisfactory, being plagued by insuffi­ cient resources and the intolerances discussed above. In Ambato, this office was small, chaotic, and understaffed, campesinos waited hours for attention and were often told to return another day. In Riobamba, the office and administrators were calmer and more accomodating of individual concerns, but even there, information regarding numbers of campesinos without title was unavailable. Indeed, campesinos in need were not being sought out, but rather, only those requesting service were dealt with.

Accordingly, the titling project is of limited usefulness in improving credit disburse­ ment, since those most needy are those most unaware, and they are once again passed over.

In summary, a recurrent theme throughout these field investigations is that those producers most in need of policy assistance, the poor, illiterate, traditional producers do not receive it. This may be related to the weakness of this political constituency, who, although large in number, have little influence over state policies. The small farm sector is not provided with basic infrastructure such as education, transport, and communications, such that they cannot benefit from macroeconomic policies which assume ready access to all of these. Further, given their lack of social and political organization, they are unlikely to exert necessary pressure upon the state to gain these resources. This being the case, policies intended to improve agricultural output, and so raise incomes, are unlikely to be effective for campesinos of the Sierra. 110

SUMMARY OF CHAPTER

This chapter compares and contrasts two field research sites to determine how eco­ nomic and social structures of campesino production limit potential price and credit policy benefits. Further, field work underscores the importance of place-specificity in understanding uneven development processes, in arguing that local expression of gen­ eral associations between form of production and policy outcomes depend upon region­ al context.

To this end, economic structures of Ambato and Riobamba are first compared, and differences in economic change during the seventies identified. This is followed by a detailed examination of agricultural production structures in Pinguile in Ambato and

Quimiag in Riobamba. The final section identifies limits upon the operation of price and credit policies Telated to the nature of campesino production. In addition, the way in which differences in local production structures mediate local operation of these policies is explored.

These findings prompt two observations. First, that clear interrelationships between local production structures and policy impacts exist, and in the case of cam­ pesino production, limit potential growth impacts of policy. Second, that in order to fully understand actual growth outcomes of policy, place-specific analyses are essential.

The latter point holds both because such studies expose mechanisms not captured by aggregate data (such as ethnic prejudice), and because development is complex and intrinsically linked to the environmental and human gestault of any particular regional setting. CHAPTER VII

SUMMARY

This chapter summarizes main points of the dissertation. First, the research problem and conceptual framework are recalled. Following this is a summary of methodolo­ gical approaches and results from different analytical steps. The chapter concludes with a discussion of the study's implications for theory and policy, its limitations, and future research directions.

THEMES OF THE DISSERTATION

A central theme in this dissertation is that mainstream regional development theory has explained uneven regional growth almost exclusively in terms of unmediated eco­ nomic forces operating in the space-economy. By contrast, it is argued here that macroeconomic, political, and social forces play a critical role in shaping sub-national growth. Specifically,state intervention is argued to have highly selective impacts for specific economic sectors and groups of producers. These impacts are further demon­ strated to have distinct spatial expressions, related to the distribution of different structures of production across the space-economy.

To explore these themes this study undertook two research tasks. First, the highly selective nature of state intervention (represented by redistributive national policies) upon economic sectors and groups of producers was demonstrated. Second, the way in which local production structures mediate regional impacts of policy were investigated.

- I ll - 112

A basic argument of this study is that redistributive effects of state intervention, represented by macroeconomic policies, are understood by considering the state's role in

Ecuador's capitalist economic system. The state's existance depends upon revenues col­ lected, which in turn affect the form, magnitude, and objectives of resultant policies.

In order, then to perpetuate its own existance, the state has a strong incentive to promote interests of economically dynamic classes which provide the majority of rev­ enues. Indeed, a clear policy bias towards powerful social groups and economic sectors is evident in Latin America. Recent decades have witnessed increasing capital invest­ ment in industrial activities which has been mirrored by a similar focus in redistri­ butive policies. Examples include import taxes and quotas upon manufactures that compete with domestic production; industrial subsidies; credit rationed to industrialists who support the government; and the like.

Given that macroeconomic policies discussed here are conceived by, and" designed to operate in, Ecuador's capitalist economic system, they incoporate a set of assump­ tions regarding attributes of the productive population. Specifically, the potential of various social groups to benefit from these policies depends upon their access to land, labor, capital, technology, and information regarding policy mechanisms; capacity to produce commercially and effectively transport commodities to market; and ability to understand, and comply \\*th, bureaucratic regulations.

It follows, then, that regional growth impacts of policies depend upon character­ istics of local producers — particularly their degree of incoporation into the capitalist system. For example, in the agricultural sector, subsistence agricultural producers have direct access to the means of production for their survival and are not dependent upon wages or consumers. Accordingly, policies altering wages or commercial food 113 prices will not benefit this social group or enhance local development. By contrast, commercial farmers who produce for profit and employ wage labor benefit from state interventions which lower wages or support producer prices.

Spatial expressions of these differential policy impacts, and hence uneven growth, are argued to depend upon the distribution of different structures of production across the landscape. Further, these general associations between policies and forms of pro­ duction should vary according to local context. Specifically, actual growth outcomes will depend upon particular combinations of producers, administrators, resource endowments, infrastructure, their mutual accessibility, and interactions.

ANALYTICAL STEPS AND RESULTS

These interrelationships between economic growth processes, policy intervention,and place-specific structures of production were investigated through three research phases

(Figure 3). These are summarized below.

Nationwide Policy Impacts

The first analytical step was a qualitative nationwide analysis of differential impacts of exchange rate, price, and credit policies upon various groups of producers (Chapter

IV). Each policy was demonstrated to have spatially varied impacts related to distri­ butions of particular characteristics of production.

All three policies benefited the urban/industrial sector at the expense of agricul­ ture. For example, exchange rate policy cheapened raw materials and capital goods for industry and food for urban consumers, whilst destroying domestic food produc­ tion which could not compete. Price policy distorted domestic terms of trade in favor of industry and away from domestic food producers by altering relative prices. 114

Accordingly, proportions employed in industrial versus agricultural production, and particularly domestic food farming across the space-economy, determined regional growth outcomes of these policies.

Within agriculture, several characteristics of production further mediated policy impacts. One important feature was whether production was directed to domestic or export markets. Capital intensive export crop production employs imported inputs, such as fertilizers, improved seeds, and machinery, which were cheapened by overval­ uation. Domestic food producers, on the other hand, have been penalized by cheap food imports; maximum consumer prices on food; ineffective ENAC price protection on staple crops; and an expert crop bias in credit disbursement.

Forms of agricultural tenancy also determined local impacts of policies. Proof of land ownership was required to obtain agricultural production credit and so those

farmers renting land, or without an official title, were excluded. In addition, share­ croppers do not produce for commercial markets and thus cannot benefit from price support programs. The proportion of agricultural producers literate also influenced

policy impacts, particularly for price and credit. Illiterate producers were inhibited

by demanding loan application procedures, and also had limited access to information

on interest rates, guarantees, and refinancing procedures which made credit appear less

risky.

Recalling the conceptual framework, this analysis supports arguments that degree

of articulation into capitalist forms of production is central to determining regional

growth impacts of policy. Modern sector export crop producers, employing capital

intensive inputs, machinery, and wage labor benefit from policies such as subsidized

agricultural inputs, low wages due to cheap consumer food programs, and access to 115 production credit due to widespread land ownership. By contrast, the traditional sec­ tor, characterized by small farms, low incomes, subsistence production, high tenancy, and illiteracy are bypassed by these policies. Producing the bulk of domestic food­ stuffs, this sector has been penalized by ineffective ENAC price protection, loan application procedures which screen out illiterate applicants, and cheap imported food which has led to stagnation of domestic production.

Policy Impacts and Economic Change

Chapter V investigated empirically these interrelationships between growth impacts of policy and spatially varied structures of production. First, economic change across

Ecuadorian cantones during the seventies was described, employing principal compo­ nents analysis. These economic performances were then summarized by grouping can­ tones along an economic change continuum. Cantones were clearly dichotomized into diversified urban/industrial economies and places primarily agricultural in orientation.

Amongst the latter, cantones clustered into more dynamic export crop producers and relatively stagnant places dominated by domestic food production.

To assess interrelationships between economic change and local production struc­ tures, these canton groups were differentiated on the basis of canton-specific structural variables. A principal finding was that structural characteristics differentiating more and less dynamic places pertained to degree of local producer articulation into capital­ ist production. Specifically, more dynamic, Costa economies were characterized by medium size farms and commercial export crop production which benefits from poli­ cies subsidizing agricultural inputs, wage-labor, and fuel costs for machinery. On the other hand, stagnation of Sierran agriculture is linked to structural characteristics inhibiting growth by policy. These include numerous, spatially dispersed small farms, 1 1 6 without title, rented, or sharecropped, and production of domestic foodstuffs which are penalized by exchange rate, price and credit policies.

Canton-Specific Policy Impacts

Greater empirical detail on interrelationships between policies and local production structures identified above, was provided by field work- Chapter VI described the operation of price and credit policies and theiT failure to promote growth for one

group of producers; campesinos of the Sierra.

Two sets of findings emerged. First, specific attributes of campesino production

which limit potential policy benefits were identified. These included widespread sub­

sistence production and/or sharecropping; limited access to capital and land; inadequate

disbursement of information on policy mechanisms; low literacy levels; intimidation

by, and distrust of, government institutions; and a lack of social organization and

political influence. Second, operation of policy mechanisms was found to be highly

place-specific, depnding upon local combinations of resource endowments, infrastructure

provision, ethnic composition of the population, and variations in the efficiency of

policy administration.

CONTRIBUTIONS AND POLICY IMPLICATIONS

Major conclusions of the empirical portion of this research are as follows. First, that

state intervention contributes to uneven growth due to its highly selective social and

spatial impacts. Second, that those producers benefiting most from national policies

are those most fully articulated into the capitalist system- Third, that actual growth

outcomes, even within a particular group of producers or regional setting, are condi­

tioned by place-specific structures of production. 117

More generally, this study adds to existing knowledge on regional development processes in LDCs and related policies. An important aspect of this work is its cri­ tique of spatially oriented mainstream development theory. Spatial policy initiatives, emanating from this perspective, are demonstrated here to have different impacts depending upon forms of production embraced by that spatial entity.

Further, the role of state intervention in generating uneven growth has not been a focus of mainstream work. While previous research has demonstrated sectoral bias­ es in national policy impacts, little has been done on their spatial variations. This study, by contrast, identifies specific production structures within which policies oper­ ate to generate growth. In addition, particular spatial distributions and combinations of these structures are demonstrated to mediate uneven growth outcomes.

More specifically, national policies, conceived by, and operating in, a capitalist system, incorporate a set of assumptions regarding attributes of the productive popula­ tion. Those most fully articulated into the capitalist system, and economically dynamic, benefit more from such policies. By contrast, and exemplified by the field work, producers not fully incorporated into capitalist forms of production, such as campesinos of the Sierra, are bypassed by policies as currently formulated.

An important theoretical contribution of this study, then, is to direct attention towards interactions between the state, local producers, and place-specific conditions of production in order to understand growth impacts of policy.

With regard to policy; although this research evaluated regional policy impacts, its findings do not generate simple prescriptions for eradicating uneven growth. Two points, however, are pertinent. First, the effectiveness of redistributive national poli­ 118 cies would be considerably enhanced by providing all producers with those attributes implicitly assumed in current policy formulations. This would require, in the empir­ ical example taken here, improving access to land, capital, education, transport and communications infrastructure, and agricultural technology for Sierran campesinos.

This, however, is an unrealistic agenda because of limited resources, campesino resis­ tance to change, and philosophical orientation of the Ecuadorian state. Second, and because of these constraints, existing policies, ostensibly redistributing growth benefits to non-capitalist producers, could, and should, be reformulated to operate within the limits of non-capitalist production systems. Appendix A: Development Dimension Component Scores fo r Ecuadorian Cantons, 119 1974-1982

Component Component Component Component Canton Score I Score II Score I I I Score IV Tulcan •0.00770 -0.41849 1.17953 1.16162 Espejo -0.17311 •0.29344 0.80750 -0.39429 Montufar -0.12531 -0.86695 0.80601 -0.05288 Ibarra 0.40300 -0.34333 0.66558 0.42335 Antonio Ante 0.18019 -0.31237 1.56369 -0.54869 Otavalo -0.04753 -0.07617 1.20372 -1.42495 Quito 6.12141 0.50904 1.06020 -1.26725 Cavambe -0.11602 0.06679 0.29874 -0.88810 Mej ia -0.01465 0.14455 0.73733 0.05180 Pedro Honcayo -0.33628 -0.53796 0.84751 •0.99296 Ruminahui 0.31016 0.34410 0.61553 2.06123 Santo Domingo 0.30270 0.26011 -1.15041 0.33187 Latacunga 0.13886 -0.43617 0.65531 0.35414 Pangua -0.32684 0.38617 -0.16082 0.07336 P u iili •0.14386 0.17412 0.14704 -0.53906 Salcedo -0.17925 -0.09304 0.68372 -1.12470 Saquisili -0.06552 -0.38742 0.91976 -1.13350 Ambato 0.99844 0.15387 1.04263 0.98614 Banos -0.04303 -0.20568 0.73819 1.55740 Pelileo -0.30349 0.00049 0.64176 0.16690 P ii laro -0.25300 -0.27729 1.06549 -0.86148 Patate -0.33927 0.64825 0.93264 0.14001 Quero -0.34199 0.97262 -0.40087 -0.66812 Guaranda -0.09488 -0.31835 0.28265 •0.19583 Chi I lanes -0.51298 -0.39446 0.30066 -1.05151 Chimbo -0.29997 -0.94879 1.07240 -0.67141 San Miguel -0.26501 -0.56882 1.12382 -1.25041 Riobamba 0.55936 -0.19956 0.66984 1.79073 Alausi •0.13125 -2.75635 0.64521 0.65407 Cotta -0.24319 -0.50058 -0.38404 -1.93336 Chunchi -0.39489 -0.81536 0.68282 -0.74033 Guamote -0.25953 -0.08998 -0.69854 -1.67048 Guano -0.26031 -0.54641 1.35760 -1.16444 Azogues -0.39134 -0.17158 1.47002 -1.10084 Biblian -0.42445 -0.35419 1.35029 -1.60568 Canar Cuenca 1.15648 0.16332 0.98508 0.93296 Giron -0.31815 -0.21359 -0.12299 -0.87410 Gualaceo -0.33017 0.18329 0.27363 -0.96476 Paute -0.75839 0.47876 0.88396 0.57982 Santa Isabel -0.53547 -0.17001 0.29072 -0.17046 Sigsig -0.53525 -0.45367 0.18127 -1.30596 Loia 0.57262 -0.72332 0.10301 2.46392 Calvas -0.55793 -0.23613 0.81235 1.65069 Celica -0.65096 -0.76228 0.63393 1.22630 Espindola -0.54169 -0.09200 -0.03437 -0.86038 Gonzanama -0.56848 0.51571 0.21727 0.55145 Macara -0.40873 -1.48228 -0.16745 2.23904 Paltas -0.21030 0.12345 -0.05864 -0.14844 Puyango -0.48053 -0.88920 0.25017 -0.37748 Saraguro -0.47661 0.07853 0.60547 •0.96295 Esmeraldas 0.54734 0.14606 -0.73611 0.59388 Eloy Alfaro -0.54434 0.12778 -0.47948 -1.15518 Muisne -0.60306 -0.40906 -0.38119 -1.16598 Quininde -0.33447 -0.24649 -0.31714 -0.45938 Portoviejo 0.87261 -0.27210 -0.88106 1.41272 Bolivar -0.16375 -0.81261 -1.63123 -0.79346 Chone 0.07554 -0.28908 -1.31562 -0.31982 El Carmen Jipi japa 0.05891 1.33156 -3.59412 1.24919 Junin -0.33365 -0.62496 -0.02077 -0.64339 Manta 0.70251 -0.67303 0.34368 1.12201 Montecristi -0.05712 -0.60078 -1.29747 -0.67397 Pajan -0.42732 -0.30699 -2.40808 0.15223 Rocafuerte -0.11926 -0.09325 -1.32763 -0.82437 Santa Ana -0.12500 -1.00616 -2.23311 -0.73868 Sucre -0.06480 -1.26269 -1.75828 0.24464 24 de Mayo -0.33636 -1.22251 -2.48375 -0.06164 Babahoyo 0.41276 -0.45108 -1.06612 0.67941 Baba -0.39801 0.16808 -0.65627 -0.99914 Puebloviejo -0.22072 0.60950 -0.62413 -1.04744 Quevedo 0.32734 -0.12225 -0.83964 0.05600 Urdaneta -0.26469 -0.39121 -0.57961 0.00622 Appendix A (continued) 120 Component Component Component Component Canton Score I Score II Score I I I Score IV Vencanas •0.03814 -0.06399 -1.18656 -0.27038 Vinces •0.16605 -0.16676 -0.01719 -1.15405 GuayaquiI 7.39359 0.01151 -0.36278 -1.28513 Be tzar -0.09433 -0.25429 -1.29220 -0.42001 Daule 0.26395 -0.15366 -2.46584 ■ -0.13428 El Empalme •0.04343 -0.50482 -2.29042 -0.34593 Milagro 0.68673 -0.28496 -0.15056 0.28088 Naranjal -0.15671 0.07449 -0.68448 0.57260 Naranji to -0.16386 0.33821 -0.07317 1.47043 Salinas 0.25451 0.66198 1.28976 0.97916 Samborondon 0.07724 0.41353 -1.87499 0.06756 Santa Elena 0.16950 -0.74128 -0.49132 0.05338 Urbina Jado -0.29701 0.25160 -0.12257 -0.96835 Yaguachi -0.03187 -0.44717 -1.60563 1.21205 Machala 0.91534 -0.22601 -0.23690 2.11520 Arenillas -0.05213 0.89299 -0.56813 1.62047 Pasaje 0.03793 0.09950 0.71990 2.18247 Pinas -0.19581 0.69723 0.10124 0.61982 Santa Rosa 0. .3257 0.31111 0.60690 2.23062 Zaruma -0.14540 -0.87890 0.99538 0.42695 Tena -0.30811 0.30706 -0.18506 -0.99142 Aguarico -0.53579 -0.46020 0.97470 0.44238 Orellana -0.42134 5.10049 0.50045 -0.78287 Putumayo -0.25494 6.27150 -0.50828 0.37739 Quijos -0.27556 0.70158 0.82216 0.96357 Sucumbios -0.45869 0.77631 0.39109 -0.36261 Pastaza -0.07803 0.52135 -0.10684 0.13868 Mera -0.07937 -0.23993 0.39487 1.49758 Morona -0.36360 2.28487 0.33494 -0.72551 Guataquiza -0.28620 1.18864 -0.07809 0.37443 Limon Indanza -0.39056 -0.12697 0.80205 -0.05374 Palora -0.32311 0.57874 0.48333 0.52906 Santiago -0.40075 -0.02527 0.73479 0.65000 Sucua -0.40617 0.59822 0.10502 -0.07816 Zamora -0.18637 0.31867 0.55041 0.02970 Chinchipe -0.27752 -0.07556 0.26904 0.50172 Yacuambi -0.44817 0.74418 -0.28029 -0.31504 BIBLIOGRAPHY

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