Honduras : quantifying the economic impact of policy reforms in agriculture

The Government began implementing a package of economic measures in 1990 to stabilize the economy and set the stage for economic development. This report quantifies the effect of several additional policy reforms in the agricultural sector. These include efforts to liberalize the foreign exchange regime, eliminate price controls and export taxes, remove interest rate ceilings, allow land rental and titling of parcels smaller than 5 ha, and issue "dominio pleno" titles to land occupants. The selected economic indicators are agricultural value added in 1978 constant lempiras and 1989 U.S. dollars, and the value of exports in U.S. dollars. Each major commodity or group of commodities was analyzed independently, and the results were aggregated. Emphasis was placed on the commodity"s contribution to value added, generation of foreign exchange, and growth potential. The major commodity groups are coffee, bananas, basic grains, livestock, nontraditional exports, and poultry. The study found significant discrepancies in production figures used to estimate national accounts, which shows agriculture contributing less to GDP than it should. On the other hand, agricultural export values are lower than estimates in Central Bank reports due to the Bank"s procedures for estimating bananas, shrimp, sugar, and beef. Estimates for each commodity were based on three growth scenarios, each using a different set of assumptions. Bananas and coffee are expected to continue as the main sources of value added and foreign exchange. While production of other traditional exports is expected to decline or increase only slightly, beef exports could recuperate the position they once held. Nontraditional exports are expected to double, with the major increases occurring in shrimp, palm oil, and other crops. The productivity of coffee and livestock is still very low but could be substantially increased by complementing policy reforms with direct interventions in these areas. The study concludes with some recommendations that will improve agricultural development and the measurement of policy reform impacts. (Author abstract)