Impact on employment and income of investments in export-oriented, non-traditional agribusinesses : an examination of six investments financed by the Latin American Agribusiness Development Corporation de Centroamerica (LAAD-CA)

External evaluation consists mainly of case studies of the employment and income impacts of six loans made by LAAD-CA between 1986 and 1989. Loans to four of the firms for initial, pre-production activities had a significant impact on short-term employment, creating 371-425 person-years of work for 245 individuals. (1) The addition of infrastructure to land (e.g., irrigation systems, trellises) created more jobs than did the construction of new processing facilities; likewise, labor-intensive land clearing and cropping activities led to more jobs than did investment in equipment or imported goods. LAAD-CA investments also increased long-term, direct employment (except for one loan that provided working capital for raw materials purchases, but did not support expanded production). By the time the companies reach full production, more than 604 permanent and 374 seasonal jobs will have been added. Women have benefitted substantially, filling 25%-75% of the new jobs. This may be attributed to employers' preference for women workers for activities (e.g., pruning, sorting) related to quality control, because women tend to be more careful and productive than men. The principal reason for the project's success in creating jobs is that the activities assisted involved a shift in land use from low labor-intensity activities (e.g., cattle, sugar cane, or coffee) to labor-intensive activities (e.g., growing flowers and vegetables). Moreover, since these products are intended for export, large labor resources are required to maintain quality standards. The number of jobs created was not directly related to the size of the investments, since large investments tended to involve capital-intensive construction or sophisticated equipment. Furthermore, investments in marketing projects and loans for working capital generated relatively little direct employment. The project's overall impact on local communities was difficult to determine, but significant positive changes were observed in a few cases. In Costa Rica, local farmers increased planting of fruits that would be purchased by a project-assisted tropical juice plant. In Guatemala, agricultural wages have risen as the result of the development of an essential oils farm and processing plant. And two project-financed activities in east central Guatemala have stimulated growth in small business and markets in a number of small remote towns. To maximize employment and income impacts, LAAD-CA should in future support: (1) business start up or significant expansion rather than marginal expansion, (2) firms that combine both agricultural and processing activities, and (3) activities that bring land into production. It should refrain, to the extent possible, from making working capital loans, especially for the purchase of agricultural raw materials.