Case Study 4 Organic Agriculture in El Salvador: The Case of Fresh Vegetables in Las Pilas

By Octavio Damiani Consultant, Office of Evaluation and Studies

Report prepared for the Office of Evaluation and Studies of the International Fund for Agricultural Development

Rome, August 2001

Table of Contents I. II. III. IV. V. Introduction The General Characteristics of Organic Agriculture The Case of Organic Vegetables in Las Pilas Effects on Small Farmers of the Introduction of Organic Vegetables in Las Pilas Explaining the Adoption of Organic Crops A. The Characteristics of the Natural Resources in Las Pilas B. The Role of the Public Sector C. The Availability of Specialists in Organic Agriculture D. The Role of NGOs E. The Support of the Prochalate Project Constraints, Bottlenecks and Main Forms of Support A. Technology and Marketing Problems B. Financing Organic Production Conclusions and Potential Lessons for Project Design A. Conclusions B. Potential Lessons

VI. VII.

References Annex 1. List of persons interviewed

Acronyms CENTA CLUSA GDP NGO Ucraprobex USAID National Centre of Agricultural Technology, Ministry of Agriculture and Livestock Cooperative League of the United States of America Gross Domestic Product Non-Governmental Organization Union of Agrarian Reform Cooperatives of Producers, Processors and Exporters United States Agency for International Development

I. INTRODUCTION 1. This report is based on fieldwork carried out in El Salvador between 12 and 24 May 2001 as part of the thematic study on organic agriculture that is being realized by the IFAD Office of Evaluation and Studies. During the fieldwork, visits were made to the municipalities of San Ignacio and La Palma in the highlands of the department of Chalatenango, which concentrates a high proportion of El Salvador’s vegetable production and almost all the organic production of vegetables. Interviews were also conducted in San Salvador, San Ignacio and La Palma with officials and professionals at government agencies, non-governmental organizations (NGOs), the University of El Salvador and Prochalate, a rural-development project funded by IFAD. 2. The fieldwork involved an analysis of the attractions of organic crops for small farmers, the problems that these farmers face in the cultivation and sale of organic products and the ways they have been able to solve the problems. The hypothesis of the research project is that the adoption of organic crops and animal products may lead to positive effects on the incomes of small farmers. First, farmers usually receive premium prices for organic products, that is, prices that are higher than those for the same products produced using conventional technologies. Second, organic technologies may lower production costs because of the reduction in the need to purchase chemical inputs. Third, organic technologies may help reduce soil erosion and other processes of natural-resource degradation that frequently affect small farmers in developing countries, thereby helping to promote more sustainable models of production. 3. As in other developing countries, organic agricultural products in El Salvador are used mostly for export and have emerged as a result of the growing demand among consumers, mainly in industrialized countries. Indeed, several studies have shown that the demand for organic products in industrialized countries has been increasing rapidly, in contrast to the sales of foods in general, which have been stagnant or have risen only slowly. The sales of organic foods in the most important markets (the US, Germany, Japan, Denmark, France, Netherlands, Sweden, Austria, Italy and Switzerland) have been estimated at USD 11 billion in 1997 and USD 13 billion in 1998. Estimates of the annual growth rates in demand have varied between 5% and 40%, depending on the country. The growth in the demand for organic products relates partly to the increasing concern of consumers about the effects of different types of food on health and about the potential risks of exposure to pesticide residues in foods. In addition, consumers frequently perceive that organically produced products have a better taste and more nutrition value. Finally, consumers usually associate organic production with fewer potential negative effects on the natural environment relative to conventional agricultural production. 4. Many analysts have been critical of efforts in developing countries to promote organic agricultural production and, in general, non-traditional export crops. Some critics argue that the demand for organic products is still relatively low and is likely to increase at a slow pace. Other authors have criticized non-traditional export crops by using arguments that might also apply to organic crops. In particular, they have argued that the crops may generate negative distributional effects by frequently excluding small-scale producers and contributing to land concentration. 1 Some of these critics have stressed that organic crops require a certification process that is too expensive for small producers. 5. In contrast, some analysts have offered more mixed or positive views and provide evidence of a decline in rural poverty due to the adoption of new export crops. Others have found that the effects of agricultural export booms on rural poverty may depend on specific characteristics of the crops or on the government policies that affect the microeconomics of the specific crops. 2 Evidence from recent
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See Barham et al. (1992), Barham, Carter and Sigelko (1994), Carter and Mesbah (1993), Conroy, Murray and Rosset (1994), De Janvry (1981), Schurman (1993), Stanley (1994), Twomey and Helwege (1991), Williams (1986). 2 For example, see Carter and Mesbah (1993), Carter, Barham and Mesbah (1996), Damiani (1999), (2000), Jaffee (1993).

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studies that have looked at organic crops among small producers have suggested that small farmers in Latin America and other developing regions may have competitive advantages over larger producers in the cultivation of organic crops because organic technologies usually rely on labour – the most available and least costly factor of production among small farmers – in place of chemical inputs.3 In addition, research on some organic crops, notably coffee, has shown that large and more well capitalized farmers, who usually apply an input-intensive technology, have suffered significant falls in yields during the first few years after shifting from a conventional to an organic technology of production. In contrast, small farmers shifting to organic agriculture have usually shown a rapid increase in yields because they already used few or no chemical inputs, and the organic technologies have improved the effect of the labour-intensive technologies that they apply. 6. Although small farmers might find new income opportunities in organic production, they could face problems that jeopardize their possibilities of success. Shifting to organic production may involve investments and the application of new methods of production that require credit and specialized technical assistance often unavailable to small farmers. In addition, selling organic products may require negotiating with new buyers – often from foreign countries – and planning the production process in order to meet the more substantial demand of the buyers at certain times of the year. These tasks typically involve marketing and managerial skills that small farmers usually do not have. 7. Thus, the fieldwork has involved an analysis of the organic production of vegetables in the Las Pilas region that addresses the following questions: (a) What have been the positive and negative effects of organic production on the outputs and incomes of small farmers? (b) What have been the main constraints that small farmers have faced when they start to grow organic crops? (c) What interventions have government and private organizations implemented to help small farmers successfully cultivate organic crops? 8. Interviews have been conducted with a total of 13 organic farmers in Las Pilas. This represents close to one third of the farmers cultivating organic vegetables in the region. The interviews were open-ended and lasted about one hour each. They focused on the history of the farmers as producers, their motivations for starting to grow organic crops, the way in which they had learned to apply organic methods of production, the benefits and costs of adopting organic crops, the problems they faced when cultivating and selling the crops and the support they received from government and private agencies in solving the problems. Interviews were also carried out with 26 professionals in government agencies, NGOs, universities and the Prochalate project and supermarket staff in charge of purchasing fresh vegetables. These interviews were also open-ended, but somewhat longer (about two hours), focusing on issues related to the work carried out by the interviewees and the institutions in which they worked. For example, the interviews with professionals at agricultural research and extension agencies focused on the research policies and projects of the institutions, as well as on the past training of the professionals, the approaches and methodologies they applied in their work and their views on organic agricultural production. 9. The report is organized as follows. The second section offers a brief description of the main characteristics of organic production. The third section describes organic agricultural production in El Salvador and provides details about the case of Las Pilas. The fourth section focuses on the effects of the introduction of organic vegetables on the output and incomes of farmers. The fifth section analyses the forces that led to the emergence of organic products in El Salvador and the influence of macroeconomic and agricultural policies and of government institutions, especially agricultural
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Damiani (2000).

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research, extension and university training. The sixth section analyses the actions that NGOs and other agencies have implemented to help small farmers in Las Pilas start growing organic vegetables successfully. The last section offers some conclusions and preliminary lessons based on the experience in Las Pilas. II. THE GENERAL CHARACTERISTICS OF ORGANIC AGRICULTURE 10. Organic agriculture originated mainly because of the concerns of consumers, especially in Australia, Japan, North America and Western Europe and more recently in developing nations about two issues: (a) the potential negative effects on health of the use of chemical inputs in food production and (b) the deterioration of natural resources frequently associated with conventional agricultural technologies. Organic agriculture involves the use of organic inputs in place of chemical ones and attempts to achieve a more sustainable use of natural resources. The major principles applied in organic agriculture are the following: (a) The use of chemical and synthetic fertilizers, pesticides, fungicides and parasiticides is prohibited. (b) The use of growth hormones is prohibited. (c) Organic products are employed to protect plants from pests and disease. (d) Soil-conservation measures are applied. (e) Organic materials are used to maintain and improve soil fertility. (f) Monocultivation relying on a diversity of plant types and varieties is avoided. (g) The consumption of non-renewable sources of energy and raw materials is kept to a minimum. (h) The natural landscape and the natural biodiversity are conserved. 11. One of the key differences between organic agriculture and other types of sustainable agriculture is the existence of production norms and procedures of certification. Norms were first created by private associations at national or regional levels, and they served to give their members the right to sell their products with the organic brands and the warranty of the respective associations. Later on, several countries created laws and regulations on the production and processing of organic products. In most of them, the certification of products became one of the main issues. Certification focuses on the materials and processes that producers have used in the production of specific crops or animals and provide a proof to consumers that organic standards have been met. Also, it attempts to set some standards about what organic production means so as to avoid the coexistence of diverse criteria and damage to the credibility of the producers and the associations. 12. The certification process starts with the application by a producer or a group of producers to a certification agency. The certification agency usually sends an inspector to visit the production sites and evaluate if the production process meets the organic standards. The inspector accomplishes this based on interviews with producers, field visits to the croplands involved, a review of the organic fertilizers and other inputs used and laboratory tests of samples of soils, water and agricultural products. Some of the main requirements that must be met in order to obtain an organic certification are the following: (a) Over the previous three years, the land under organic production must not have been used for conventional agriculture involving the application of chemical or synthetic inputs. (b) Conventionally grown crops cannot be closer than 15 to 20 m, and there must be a forested area as a barrier between the organic and conventionally grown crops. 3

(c) The inputs used must be organic. Chemical or synthetic inputs are prohibited. (d) Soil-conservation measures must be applied. (e) Small farmer cooperatives and other associations must demonstrate that they are able to organize their own monitoring systems in order to ensure that organic standards are met by all members. 13. Once the organic certification has been approved, it is valid for one year, during which time inspectors usually visit the site twice a year without notice. 14. The cost of certification varies, mainly depending on the agency carrying out the certification and its location and the location of the farm or farms to be evaluated. Certification agencies usually charge a daily service fee, plus the travel and subsistence expenses of the inspectors. Thus, costs are substantially lower if the certification agencies are located in the country and if the farm or farms are not remote. In the case of farmer associations, costs will depend on several factors, among them the following: (a) the distance of the farms one from another, as the inspectors need more time to visit farms if they are widely dispersed, or if the roads are in poor condition and (b) the capacity of the association to establish its own monitoring system; if an association is efficient and able to establish a credible system to monitor the compliance of its members with the organic standards of production, the certification process can be based on a sample of producers: the smaller the sample, the better the monitoring system must be. In any case, the cost of certification per farmer is lower for a farmer association than for an individual producer. 15. Organic agriculture is not the only alternative to a conventional production system, which is based on the intensive use of chemical inputs. Other production systems are also more ‘respectful’ of the natural environment, though they are different from the organic production system. An example is a sustainable agriculture which does not eliminate chemical inputs completely, but relies on small quantities of these inputs and applies techniques such as integrated pest management, integrated nutrients management and integrated herbs management. Such a system offers a compromise between conventional and organic agriculture, and the resulting products may one day become significant competitors of organic products. III. THE CASE OF ORGANIC VEGETABLES IN LAS PILAS 16. The cultivation of organic crops in El Salvador started in the early nineties. It was promoted by non-governmental organizations (NGOs) that were funded by the United States Agency for International Development (USAID). As explained later, these NGOs were working on the implementation of a USAID project that been undertaken in 1988 and that aimed at encouraging the production and marketing of non-traditional export crops. While the project focused on conventionally grown crops, these NGOs identified the great opportunities offered by organic crops and helped farmer groups to change their methods of production, obtain the organic certification and sell their products. 17. By early 2001, the estimated total area under organic cultivation in El Salvador was close to 3 800 ha, about 0.5% of the cultivated area in the country (see Table 1). Coffee was by far the most important crop, with 2 100 ha (55% of the organic area). It was cultivated mainly in the highlands of the central region, including the departments of Santa Ana, La Libertad, Ahuachapán and Uzulután.4 Most organic coffee is exported through the Union of Agrarian Reform Cooperatives of Producers, Processors and Exporters (Ucraprobex), a second-tier organization comprising 57 farmer cooperatives – of which seven grow organic coffee – that was created in 1988 to market coffee. Other important
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The total organic area has been estimated based on data provided by the Cooperative League of the United States of America (CLUSA), which provides technical assistance to a large share of the organic producers, and the Union of Agrarian Reform Cooperatives of Producers, Processors and Exporters (Ucraprobex), which represents most of the certified areas of coffee.

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crops were cashews (840 ha) and sesame (700 ha), though the significance of the latter has been falling rapidly due to decreasing international prices. These crops were cultivated mainly in the departments of La Unión, San Miguel and La Libertad and were also sold mostly through Ucraprobex. The area accounted for by organic vegetables was about 40 ha, half of which was certified, while the other half was expected to be certified soon, and it was all being grown in Las Pilas. Table 1: Estimated areas of organic crops, 2001 (ha)
Coffee Cashews Sesame Bananas Soybeans Peanuts Vegetables Total Source: Based on data of CLUSA and Ucraprobex. 2 100 840 700 56 50 22 40 3 808

18. The Las Pilas region – defined here as the municipalities of San Ignacio and La Palma in the highlands of the department of Chalatenango – is the most important producer of fresh vegetables in El Salvador (see map 1). By 2001, the total area cultivated with vegetables in Las Pilas had reached about 1 400 ha, which represented 36% of the total area of 3 900 ha cultivated with vegetables in the country (see Table 2). The main crops were cabbages, potatoes and tomatoes, which have traditionally been grown with conventional technologies that rely on large amounts of chemical inputs. Map 1. Location of organic vegetable production in Las Pilas region, El Salvador

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19. Las Pilas also accounts for almost all the areas cultivated with organic vegetables of El Salvador. The certified areas reached close to 18 ha in 2001, with an additional 18 ha in the process towards certification. While these areas are small compared to those of organic coffee, cashews and sesame, they are important for several reasons: (a) As in other Latin American countries, the production of fresh vegetables with conventional technologies has been characterized in El Salvador by the significant use of chemical pesticides, fungicides and other inputs. The use is much more significant for fresh vegetables than it is for coffee, cashews, sesame, or other crops. The use of chemical inputs has led to serious problems in El Salvador, including health problems among farmers and increasing production costs. (b) While organic coffee, cashews and sesame are all exported, there has been no substantial change in the marketing, as farmers have relied more or less on the same marketing channels that they used for the conventional products. In contrast, new market channels have been established for organic fresh vegetables, including supermarkets, restaurants and hotels, to which farmer groups sold their output directly, in contrast to the situation in conventionally grown cabbages and tomatoes, which are sold on the food market (La Tiendona) in San Salvador, mostly through middlemen. Thus, the marketing of organic vegetables have benefited from a reduction in the costs of the intermediaries. Table 2: General characteristics of Las Pilas region
Population (inhabitants) 23 400 –Urban 5 300 (12.6%) –Rural 18 100 (77.4%) Population density (inhabitants/km2) 81 Economically active population (%) –Agriculture 63.3 –Industry 11.6 –Services 5.7 –Unemployment 19.3 Area of main crops (ha) –Cabbages 840 –Potatoes 630 –Tomatoes 214 –Sweet peppers 87 –Other vegetables 105 Source: Vice-Ministry of Housing and Urban Development (2000), CENTA (2000).

(c) The organic production and marketing of vegetables in Las Pilas involved the collective coordination of tasks among small producers. Because the buyers were demanding substantial volumes of vegetables that were impossible for individual small farmers to obtain, the farmers needed to sell their products collectively. Collective action led to new challenges for these small producers. First, all producers had to meet the same quality standards and to apply properly the organic methods of production. If one or more producers did not comply, all the farmers might lose their organic certification and their access to the market. Second, because buyers required a constant supply of specific amounts of products, farmers needed to plan the cultivation and harvest of the various crops in order not to concentrate the supply correctly at specific times of the year. Third, the buyers of organic vegetables required a constant supply of products of good quality. Because many vegetables are highly perishable, they cannot be stocked without losing quality and value, so they need to be sent to the market immediately after the harvest, as any delay involves losses in quality and thus the rejection of the product. In order to avoid delays, the farmers in Las Pilas needed to have labour available for the harvesting and packing of their output, and they had to contract trucks to bring the products by road from the fields to the supermarkets, hotels and restaurants, a trip of 125 km from Las

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Pilas to San Salvador that takes about four hours. All these tasks demanded great effort, including negotiations, the signing of agreements and planning. (d) Farmers who grow organic coffee, cashews and sesame in El Salvador all used to grow the same crops employing conventional technologies. In contrast, farmers who grow organic vegetables in Las Pilas have undergone a more complex process involving the introduction of new crops, technologies and systems of production. In fact, most farmers in Las Pilas used to grow small areas of cabbages and tomatoes with conventional technologies. They shifted to the cultivation of a large number of vegetables with organic inputs under a system of production based on a sequencing of crops that allowed the fertility of the soil to be maintained. (e) In contrast to other organic crops such as coffee which have traditionally been exported, fresh vegetables were sold on the domestic market and faced harsh competition during the nineties from imports from neighbouring countries. Indeed, the domestic production of fresh vegetables in El Salvador only supplied an estimated 20% of the total consumption in the country, while 80% was imported, mostly from Guatemala and Honduras. Thus, the organic production in Las Pilas represents a successful case of competition against imports mainly through a focus on product quality and differentiation. 20. The organic vegetables in Las Pilas are grown by three farmer groups that include a total of 52 farmers: (a) the Los Planes Cooperative of Organic Producers, which includes 32 small farmers and is the only organization that has obtained its organic certification from the Organic Crop Improvement Association, a US-based certification agency and (b) two farmer groups in Las Pilas and Los Planes (named Las Alturas and El Pital) with a total of 30 members. Although these last two groups are using organic production technologies, they have not obtained certification yet, as they are going through the three-year transitional period from conventional agriculture. During this three-year period, farmers cannot use chemical inputs or they will not become certified. IV. EFFECTS ON SMALL FARMERS OF THE INTRODUCTION OF ORGANIC VEGETABLES IN LAS PILAS 21. The introduction of organic vegetables in Las Pilas has generated several positive changes in the production and incomes of small farmers. Some of these changes relate to characteristics of the new crops without consideration of whether they are organic or conventional, while others are effects associated with the organic production of the crops. The most important effects have been the following: 22. (a) Crop diversification. The adoption of organic crops has led to the diversification of production and incomes, as all the farmers who have adopted organic vegetables have continued to grow the crops that they used to grow, cabbages, tomatoes and potatoes, but in smaller areas and in addition to several new crops. 23. (b) A reduction in the area cultivated. Organic crops require substantial amounts of labour in order to perform all the tasks needed to produce a good-quality product all year round. These tasks include soil-conservation measures, planting, harvesting, weeding and the preparation and application of numerous kinds of organic inputs. Because they have not had access to credit, most farmers do not hire extra wage labour, but rely only on the labour available in their households. Thus, labour has become the main constraint on expanding the cultivated area among the farmers. As a result, most farmers who have started to grow organic vegetables have had to reduce their total area under cultivation. Most of them used to cultivate a yearly average of 2 ha each: 0.7 ha of cabbages, 0.7 ha of tomatoes and 0.6 ha of potatoes. After the introduction of organic vegetables, the total average cultivated area fell slightly to 1.9 ha, including about 0.5 ha of organic vegetables and 1.4 ha of cabbages, tomatoes and potatoes.

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24. (c) A reduction in production costs. All producers of organic vegetables in El Salvador adopted organic technologies at the same time that they introduced new crops, so it is impossible to compare current production costs for organic crops and the previous costs for the conventional production of the same crops and by the same farmers. However, a comparison can be made between the organic producers and other conventional producers of the same crops in the region. This comparison shows that the production costs for all organic crops are lower than the production costs for the same crops cultivated using conventional technologies (see Table 3). Table 3: Production costs for selected organic and conventional crops, Las Pilas
Crop Organic* Conventional* Broccoli 5.5 5.7 Coriander 12.6 14.0 Lettuce 11.5 12.7 Sweet onions 14.9 15.7 Green beans 2.2 11.7 Source: Based on Prochalate (1998), CENTA (1999) and information from Technoserve. * USD per 10 m2.

25. (d) A decrease in marketing costs. In contrast to conventionally grown crops, organic vegetables are sold directly to supermarkets, restaurants and hotels. Most farmers in Las Pilas sold their conventionally grown cabbages, tomatoes and potatoes through middlemen who purchased the products on their farms and brought them to La Tiendona – the most important central market for fruits and vegetables in the country – in San Salvador. The Cooperative League of the United States of America (CLUSA) and Technoserve, a non-profit organization of US origin, both of which played an active role in the marketing of organic vegetables in Las Pilas, initiated contract negotiations with supermarkets, signed stable agreements with them and provided trucks to the farmer groups so that they could sell their output directly. In this way, farmers had been able to reduce the costs of intermediaries. 26. (e) An increase in incomes and income diversification. The introduction of organic vegetables in Las Pilas generated a substantial diversification in incomes. The organic farmers used to produce cabbages, tomatoes, or potatoes during the dry season and corn in the rainy season. Thus, the income of the farmers depended on two crops, that is, corn and cabbages, tomatoes, or potatoes. In contrast, the farmers who subsequently introduced organic vegetables produced an average of six organic crops. Because most of the farmers also continued to grow corn and cabbages or tomatoes, their income relied on an average of eight crops rather than on only two. In addition, the organic vegetables were produced all year round, in contrast to the conventional cabbages, tomatoes, potatoes and corn, which were highly seasonal. Thus, the production of organic vegetables resulted in more constant sources of income throughout the year. 27. (f) Employment creation. The organic production of vegetables in Las Pilas led to an increase in the demand for on-farm labour. However, there was little creation of wage labour, as farmers relied basically on family labour. Post-harvest activities – mainly packing and transportation – also led to the creation of a limited number of jobs, principally among women. The three packing facilities for organic products in Las Pilas employed about 45 workers, most of whom were women (in total 40 women, or 89% of all the wage workers in the facilities). 28. (g) A reduction in soil degradation. The adoption of organic crops has had a positive effect on the natural resources available to small farmers since it implied the implementation of soil-conservation technologies. First, all farmers who adopted organic crops have had to eliminate completely the slashand-burn method of cultivation that was common in the region. Second, the use of terraces and level curves has replaced crop cultivation in the direction of the slope, thus reducing soil erosion and the loss of nutrients and water. Third, in contrast to the most common crops in Las Pilas (cabbages, tomatoes and potatoes), which are grown as monocultures (that is, always planting on the same plots

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of land), organic vegetables are being grown following a rotation plan, which facilitates the maintenance of soil structure and fertility. The application of these technologies has been very important considering the steep slopes – slightly above 50 degrees on average – and thus the risk of erosion characteristic of Las Pilas. 29. (h) Potential benefits for the environment and human health. Because they have replaced chemical inputs with organic ones, there are other potential benefits over the medium and long term: (i) On the spread of pests and diseases that affect crops. Agricultural research has long demonstrated that the continuous use of chemical pesticides and fungicides is likely to lead to pest resistance and thus to the increasing use of the inputs to maintain crop yields. Organic methods of production may lead to a better control of pests and diseases without a rising amount of inputs. (ii) On the health of farmers and rural wage workers and their families. The excessive use of chemical inputs in agriculture has been frequently associated with health problems among farmers and wage workers. In the case of El Salvador, this issue has been receiving increasing attention. Newspapers have presented reports on the health problems caused by pesticides, and the Ministry of Health has carried out relevant research. A study that was awarded the National Medicine Prize in 2000 indicated that a high proportion of patients with kidney problems had been exposed to pesticides. The study analysed 202 patients who had been accepted at the National Rosales Hospital with renal insufficiency between November 1999 and March 2000. It found that, while 67 of these patients showed recognized risk factors for their health problems, such as high blood pressure or diabetes, 135 did not exhibit any apparent risk factor. About 73% of the members of this latter group had been exposed to pesticides at their workplace, and most of them came from areas where cultivation was characterized by the intensive use of pesticides, including La Paz, San Salvador, Sonsonate and other coastal zones where cotton was being grown.5 30. Their concern over the possible health problems associated with the use of chemical inputs was one of the most important reasons organic farmers mentioned when responding to a question about why they had adopted organic methods of production. One of the farmers said that, “I am the father of six children, and I was worried that my children and myself could become sick because of the use of pesticides.” Similar opinions emerged in most of the interviews carried out with organic farmers in Las Pilas. 31. Finally, interesting issues revolve around the potential bias against women in organic farming and whether organic crops provide job opportunities for women. Most farmers who cultivate organic vegetables in Las Pilas are men, and the share of women is lower than their corresponding share in the rural population in general and in the farmer population. This is due to several factors: (a) The cultivation of organic vegetables in Las Pilas involves investments mainly in soil-conservation measures that require stable forms of land tenure. In addition, they require irrigation systems in order to be able to produce vegetables all year round. Thus, one possible reason for the relatively low share of women might be the lower share of women who benefit from stable forms of land tenure and who have access to irrigation systems. Unfortunately, information on these factors are not available. This represents an area of research that should be addressed in the future. (b) The technologies applied in the organic cultivation of vegetables in Las Pilas do not require special abilities in which men or women are especially skillful, or in which their participation could be affected by cultural factors. However, some of the most important technologies – notably the implementation of soil-conservation measures – require a substantial amount of physical effort, making it more difficult for women to participate. While it might be possible to hire workers to carry out these tasks, most farmers do not have the resources to hire wage labour, and no credit is available for paying for labour.

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See La Prensa Gráfica (20 May 2001), pages 4C and 5C.

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V. EXPLAINING THE ADOPTION OF ORGANIC CROPS A. The Characteristics of the Natural Resources in Las Pilas

32. While El Salvador is relatively poor in natural resources compared to neighbouring countries, it does possess areas with a high potential for agriculture. In the case of organic vegetables, some of the characteristics of Las Pilas provide competitive advantages for the production of vegetables: 33. (a) Las Pilas is located between 1 800 and 2 000 m above sea level, so the average temperature is significantly lower than in the rest of the country. The average temperature is 15.2 degrees Celsius, with average highs of 21.4 degrees and lows of 12.2 degrees. Annual precipitation is 1 600 mm, with the rains concentrated between May and October. These climate conditions are very appropriate for the production of vegetables. Pests and diseases affect crops significantly less in the highlands than in the lowlands, where temperature and humidity are greater. However, Las Pilas is characterized by fragile soils and steep slopes, with crops usually grown on lands that slope between 30 and 40%. 34. (b) The availability of a large number of sources of good-quality water in the highlands makes it possible for farmers to irrigate their crops at low cost. A recent study has identified 76 sources of water in the highlands of the municipalities of San Ignacio and La Palma, of which 45 (59%) had not yet been used. Because water is located in the highlands, farmers do not need to invest in pumps and to spend money on fuel or electricity to bring the water to their plots. Water is channeled to the farms by tube wells, stored in water reservoirs at the farms and used for irrigation systems which usually rely on aspersion technology. Although the water is quite plentiful, not all small farmers have access to the irrigation systems. Investments are needed for off-farm (tube wells) and on-farm infrastructure (land preparation and aspersion devices). 35. Although the Las Pilas region has good potential for the production of fresh vegetables, other important variables make it difficult for farmers to compete even on the domestic market. First, neighbouring countries – especially Guatemala, but also Honduras – have more extensive areas and a greater variety of ecosystems than El Salvador and thus a larger supply of a wide variety of agricultural products. Second, the labour costs in Honduras and Guatemala are lower than they are in El Salvador, contributing to lower production costs. Third, although Las Pilas is located closer to San Salvador, which concentrates a high proportion of the domestic demand, the roads are in poor condition, and this leads to higher transport costs and negatively affects the quality of products. B. The Role of the Public Sector

36. This section argues that the public sector has had a marginal role in the development of organic agricultural production in El Salvador. Indeed, the emergence and growth of organic production have taken place in the context of economic policies that are generally unfavourable to agriculture. In addition, the main institutions involved in rural development – in particular, agricultural research and extension – are not supportive of organic agriculture. 1. Economic and agricultural policies 37. The emergence and growth of organic production have occurred in the wake of policies that were in general unfavourable to agriculture. During the nineties, the Government implemented economic reform policies that had a significant influence on the agricultural sector and on the institutions involved in agricultural and rural development. The most important economic policies related to trade liberalization, the reduction of fiscal deficits, financial reform, the reduction of the role of the state in the marketing of inputs and products and the reform of the government agencies in agriculture. El Salvador is in the Central American Common Market, which also includes Costa Rica, Guatemala, Honduras and Nicaragua, and, like other Latin American and Caribbean countries, it joined the World Trade Organization during the nineties. As a part of the commitments implied in these agreements, El Salvador lowered dramatically the levels of protection during the nineties. In addition, the exchange 10

rate remained almost unchanged during the entire decade, and a new Monetary Integration Law was approved in late 2000. 38. Partly as a result of these policies, the economy of El Salvador performed well during the nineties. Inflation was at an average 7% between 1993 and 2000 and showed a declining trend. The gross domestic product (GDP) grew rapidly, at an average rate of 4.8% between 1990 and 2000, and the per-capita GDP growth rate was 1.9%. The high growth rates were linked to a dramatic increase in exports and a substantial change in the relative product share. The value of exports jumped from USD 662 million in 1990 to almost USD 3 billion in 2000, and the share of manufactured goods in total exports rose from 12.2% to 54.5% over the same period. 39. Meanwhile, the structure of the economy was substantially transformed. The relative share of manufacturing increased from an average 21.7% of GDP between 1992-94 to 22.7% in 1997-99, but the share of the agricultural sector dropped from an average 15.1% to 12.6% of GDP. The annual growth in manufacturing reached 6.6% between 1990 and 1999, while that in agriculture was only 1.9%. 40. Agriculture was negatively affected by the reduction in tariffs and non-tariff protection measures. In the case of fresh vegetables, El Salvador lowered the tariffs on imports from Guatemala, Honduras and Nicaragua to 0% and on imports from other countries to 15%. While the Government was pursuing an open trade policy, the appreciation in the real exchange rate led to a loss in the competitiveness of agriculture. The competition from imported agricultural products, especially from neighbouring countries (Guatemala and Honduras), increased dramatically, and most subsectors were unable to attain productivity gains sufficient to offset their loss in competitiveness. As a result, the agricultural sector became unstable. There was great variation in the impact on products. Basic grains (corn and beans) remained stagnant, with substantial annual differences due solely to climate factors, while livestock and poultry grew, respectively, 3.6% and 4.6% annually in the period 1994-99. Imports increased for almost all agricultural products. The value of the imports of fresh vegetables rose 32%, from USD 5.3 million in 1990 to USD 7 million in 1999 (see Table 4). 41. Moreover, the Government decided in May 2000 to impose a value-added tax of 13% on all agricultural products sold on the domestic market. Such a tax is paid on most industrial goods, but agricultural products had been exempt. Because of the significant tax evasion that occurs in the marketing of agricultural products in La Tiendona relative to the products sold in supermarkets and to hotel chains, this measure affected more negatively the producers of organic products. Table 4: Value of imports of fresh vegetables (USD ‘000s)
1990 1991 1992 1993 Tomatoes 1 482.8 1 525.1 1 520.7 1 379.5 Papa 916.9 1 318.3 1 226.2 907.9 Onions 624.2 626.0 623.9 480.0 Cabbages 650.3 613.7 825.7 999.3 Garlic 34.1 50.2 55.7 59.9 Green peppers 7.6 10.9 25.2 9.3 Carrots 338.1 427.9 389.1 385.3 Lettuce 174.5 236.4 203.1 233.5 Cauliflower 149.6 211.3 202.7 163.9 Broccoli 590.2 259.4 80.6 31.8 Other 327.4 586.8 904.6 665.9 Total 5 295.8 5 866.0 6 057.6 5 316.4 Source: Ministry of Agriculture and Livestock. 1994 1995 1996 1 405.7 2 205.2 2 625.1 1 198.8 1 969.9 1 854.5 555.2 841.3 964.8 961.3 1 082.5 1 211.7 61.6 169.9 154.8 1997 1998 1999 2 673.7 5 827.2 2 417.5 2 086.7 556.0 948.1 1 582.1 1 303.9 928.5 1 537.5 466.5 618.1 115.9 182.8 393.0

36.1 95.9 150.8 365.2 503.2 341.0 628.7 475.4 489.5 612.8 188.9 192.2 389.8 419.2 513.5 451.2 177.0 162.5 296.8 376.5 473.6 487.2 177.6 124.7 59.3 192.4 163.7 237.7 142.9 97.3 1 078.5 1 511.8 1 427.5 2 331.2 1 645.3 802.8 6 671.6 9 340.0 10 029.6 12 481.2 11 171.3 7 025.7

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2. The role of government agencies 42. Public-sector agricultural research and extension had a marginal role in the emergence and development of organic agriculture in Las Pilas and in El Salvador in general. This was due partly to the difficulties that agricultural research and extension experienced as a result of budget cuts and the consequences of public-sector reform. 43. Public-sector agricultural research and extension are carried out by the National Centre of Agricultural Technology (CENTA), which is part of the Ministry of Agriculture and Livestock. While El Salvador has a long tradition of financing for agricultural research and extension and of strong interaction with international research centres, the CENTA budget has been declining because of the efforts to reduce public deficits. In 1996, the CENTA budget was equivalent to 1.5% of the GDP in agriculture, while CENTA research activities was equivalent to a little under 0.5% (World Bank, 1997). In addition, most research funds during the nineties came from loans and grants from international organizations and donors, especially the World Bank, the Inter-American Development Bank, USAID and the German Agency for Technical Cooperation. 44. In the early nineties, CENTA had undergone a major reform as a part of a World Bank-financed project that aimed at strengthening the organization through investments in infrastructure, equipment and training. The Government closed CENTA in 1990 and dismissed the 2 700 staff. It then reopened the organization a few months later under new management and with a staff of 700. Although CENTA retained its old name, the organization was officially opened once more in 1993, following the implementation of several changes. CENTA had become autonomous and was now mandated to serve small-scale farmers, a substantial change from the previous focus on commercial crops for export. By 1996, the CENTA staff had grown to 900, of which 650 were technical personnel, and the rest support staff. The technical personnel consisted of 74 researchers and 576 extension agents. 45. In addition to its budget problems, a major weakness of CENTA has been the low level of training among the staff. By early 2000, the number of researchers had fallen to less than 70; none of these had a doctoral degree, and fewer than ten had a master’s degree. 46. CENTA research activities focused on basic grains (corn, beans and sorghum) until the early nineties. As a result of the reorientation, research and extension work at CENTA started to concentrate on small farmers. In addition, new products were joined on the agenda, including livestock and pastures, fruits, vegetables, fibres and oil seeds. However, the research on organic products was almost non-existent and involved only one researcher who was part of a new project supported by the Japanese International Cooperation Agency and who was examining organic fertilizers (locally called ‘bocashi’). The project sought to promote vegetable production and had some interest in organic methods. 47. The interviews carried out at CENTA indicate that most of the researchers are not very willing to undertake research projects on organic products. Most researchers have been trained in conventional methods of production and are not convinced of the potential of organic production. Most of them raised questions about the possible technological and marketing problems and did not express a desire to open new lines of research. 48. While the public-sector agencies dealing with agricultural and rural development have not been especially supportive of organic agriculture, the Prochalate project implemented by the Ministry of Agriculture and Livestock become an important actor in the development of organic vegetables in Las Pilas. Designed by IFAD in agreement with the Government, Prochalate aimed at improving the incomes and the quality of the lives of the rural poor in the department of Chalatenango, one of the poorest in the country and one of the most affected by the war. The project was cofinanced by several agencies and by the Government for a total of USD 39 million, including an IFAD loan of USD 13 million. The project objectives were to: (a) recover the production base, (b) raise incomes and living conditions among rural populations and (c) strengthen peasant organizations. 12

49. The Prochalate plan did not involve a specific mention of organic agriculture as a possible alternative for diversifying agricultural production among the project beneficiaries. However, organic agriculture came to be included through the initiative of one of the consulting firms contracted by the project to provide extension services. Prochalate provided extension services to small farmers through public (CENTA) and private agencies (NGOs and consulting firms) that were contracted and then monitored and evaluated by the project executive unit. Although the project established some common criteria, these NGOs and consulting firms applied different approaches, strategies and methodologies in their work with farmers. In Las Pilas, Prochalate contracted Technoserve. Technoserve’s actions were market oriented and emphasized the search for new crops that could find a demand in dynamic domestic or international markets. Technoserve did not focus only on agricultural technology, but also on marketing and on improving the managerial skills of small farmers. In Las Pilas, Technoserve explicitly took into account the experience of CLUSA, which had already been successful in promoting the organic production of vegetables in the region. C. The Availability of Specialists in Organic Agriculture

50. The interviews carried out with agricultural professionals in El Salvador suggested that the lack of professionals with the knowledge and ability to provide technical assistance in organic technologies has been one of the main obstacles to the expansion of organic agriculture. By 2001, there were virtually no agronomists, agricultural specialists, or extension workers in the country who had studied organic agriculture as part of their preparation. All those working in organic agriculture had only followed training programmes, mostly in other countries. Most of them had participated in the same training programmes as the farmers and said that they were learning from the farmers rather than teaching the farmers about the new organic technologies. 51. In 2001, 12 universities in El Salvador had programmes in the agricultural sciences and agronomy. In all cases, the curriculum was based on conventional agriculture and the use of Green Revolution technologies. Only very recently, a few universities had begun addressing the issues of sustainable development and environmental conservation. In 2001, the School of Agricultural Sciences at the University of El Salvador started a new two-year master’s programme in sustainable agriculture. The programme was based on experiences in foreign universities – mainly the University of Chapingo in Mexico – and had attracted a total of 30 students during the first year, most of them mid-career professionals working in the public and private sectors. Matías Delgado University had started a one-year diploma in organic agriculture. Other universities had programmes that did not concentrate specifically on sustainable or organic agriculture, but which focused on related themes, such as a master’s programme in environment at the Central American University and a master’s programme in natural resources at the National University of El Salvador. 52. These initiatives represent great progress in the provision of opportunities to students in alternative production technologies and methods. However, they are recent and thus did not play a role in the emergence and growth of organic farming in El Salvador. D. The Role of NGOs

53. NGOs had a dominant part in the emergence and expansion of organic agricultural production in Las Pilas and in El Salvador in general. Organic crops were first introduced in El Salvador in 1993, when they were being promoted by the Salvadoran branch of CLUSA, a US trade association representing the cooperative business community. CLUSA had been implementing international programmes in developing countries since 1953 and had become established in El Salvador in 1988. At that time, it started to work through a USD 14.2 million USAID project – the Non-Traditional Agricultural Export Production and Marketing Project – which aimed to increase the production and marketing of non-traditional agricultural products by rural cooperatives, small farmer groups and exporters. The major agricultural exports at that time included traditional crops such as coffee, sugar and cotton, the exports of which had been declining since the early eighties due to several factors, 13

including increased production costs, the conflict that affected El Salvador and low world market prices. 54. CLUSA initially focused on a mix of conventionally grown crops, including melons, watermelons and other fruits and vegetables. After the conflict ended in 1990, leaders of Ucraprobex – a Salvadoran second-tier cooperative organization comprising 57 cooperatives – approached CLUSA to obtain assistance in discovering ways to begin farming again on their lands, much of which had been abandoned during the conflict. CLUSA undertook field research and found that, because large areas given over to coffee crops had remained unexploited for a long time, there was a great opportunity to turn them into organic areas. Following discussions, CLUSA started to promote among Ucraprobex members the idea of cultivating organic coffee. The main actions of CLUSA were to: (a) link producers with the agencies that provided the certification of organic products and (b) furnish technical assistance and training to farmers so that they would be able properly to apply organic methods of production and obtain organic certification. 55. CLUSA began working with two cooperatives of coffee producers in 1993. It brought in specialists and foreign consultants to train cooperative members in organic production. It also contacted the Organic Crop Improvement Association, a recognized US certification agency of organic products, to carry out inspections and certify the coffee crops. The first certified organic coffee was exported in 1994, and Ucraprobex started marketing a new brand (Café Pipil). 56. During this same period, CLUSA started working in other regions of the country and with other crops, including sesame, cashews and vegetables. Its promotion of organic vegetables concentrated on Los Planes, where CLUSA found favourable climate conditions for growing organic vegetables. CLUSA initially worked with only five farmers, but others soon joined. CLUSA provided training and technical assistance with organic crops, as well as with organizational matters to encourage collective action. This eventually led to the creation of a formal organization in 1996, the Los Planes Cooperative of Organic Producers, that originally included 36 farmers. 57. CLUSA helped the Los Planes Cooperative of Organic Producers to establish links with supermarkets and hotel chains. As a result, the Los Planes cooperative began selling organic vegetables to two supermarkets in San Salvador (La Despensa de San Juan and Hiper Europa) and three hotels (Camino Real, Radisson Plaza and El Salvador). The main actions that CLUSA carried out to promote organic crops and help small farmers overcome certain bottlenecks that arose after the introduction of organic crops will be analysed in more detail in Section VI. E. The Support of the Prochalate Project

58. Following the successful experience of CLUSA, the Prochalate project became involved with two other farmer groups. It provided technical assistance to farmers through several specialized NGOs. In Las Pilas and Los Planes, it contracted Technoserve, which had been active in a large number of developing countries and started to work in Las Pilas in 1998 with a group of 15 farmers. In 1999, it began assisting another group of 15 farmers in Los Planes (see Table 5). 59. Since 1999, through Technoserve, the two farmer groups have been selling to Super Selectos and Hiper Paiz, two of the main supermarket chains in El Salvador. In addition, Technoserve has been selling to two other supermarket chains – Hiper Europa and La Despensa de San Juan – through the Federation of Irrigation Farmers of El Salvador, a second-tier organization that comprises four associations of irrigators. Hiper Paiz, a supermarket chain based in Guatemala, has one large supermarket in San Salvador and 19 smaller stores elsewhere throughout the country. Super Selectos is a locally based firm with 74 stores throughout the country, but mostly San Salvador. Hiper Europa has four large stores in San Salvador, while La Despensa de San Juan has 28 stores, of which 60% are located in the capital. Farmers were also able to sell organic vegetables to some restaurants in San Salvador for time, but they stopped due to the small level of demand.

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Table 5: Prochalate and Technoserve: area of organic vegetables, Las Pilas and Los Planes (ha)
Carrots 1.9 Sweet onions 0.8 Cilantro 1.0 Lettuce 0.4 Beet carrots 0.1 Broccoli 0.2 Radishes 1.0 Perejil 0.0 Spinach 0.0 Guicoy 0.1 Green beans 0.4 Tomatoes 3.9 Cauliflower 0.2 Apium 0.1 Repollo 0.2 Escarola 0.1 Total 10.4 Source: Technoserve.

VI. CONSTRAINTS, BOTTLENECKS AND MAIN FORMS OF SUPPORT 60. To succeed in selling to supermarkets and hotel chains, farmers needed to solve several problems. Not all these were specific to organic vegetables; some were specific to any production of vegetables for the market niche that the farmers had selected. The most important problems were the following: A. Technology and Marketing Problems

61. (1) Mastering organic methods of production. To obtain the full benefit from selling organic products, farmers had to acquire certification as organic producers, which in turn required the adoption of organic methods of production. While all the farmers interviewed stressed that they did not find organic technologies difficult, they needed to be convinced of the advantages of switching from conventional to organic methods, and they had to learn how to apply the organic technologies. The adoption of organic production required training and technical assistance to accomplish this. 62. (2) Marketing. Small farmers who grow organic vegetables used to sell their conventionally grown crops (cabbages, tomatoes and potatoes) through middlemen who came to their farms to purchase the output and then sold it in La Tiendona market in San Salvador. In contrast, small farmers sell the organic vegetables directly to supermarkets and hotels, as La Tiendona does not pay a price premium for organic products. Thus, small farmers have had to negotiate and establish contacts with supermarkets and hotels. 63. (3) Obtaining a product of high quality. Supermarket and hotel consumers of organic and nonorganic vegetables assign great importance to the characteristics of the product, such as colour, size, uniformity and taste. These characteristics have to be as uniform as possible, and products of different sizes and different taste have to be avoided. To obtain these quality characteristics requires: (a) the application of a production technology that prevents the attack of pests and ensures as much as possible uniform, visually pleasing products, (b) careful harvesting, classification and post-harvest processing to eliminate any pests that might damage the product after harvest and (c) transport under controlled humidity and temperature. The small organic producers in Las Pilas needed to apply an appropriate technology to obtain a high-quality product and acquire appropriate harvest facilities and transportation. 64. (4) Obtaining a constant and reliable supply of products. The supermarkets in San Salvador required a substantial and constant supply of vegetables (both organic and non-organic), which the

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farmers in Las Pilas needed to send three times a week all year round. If the farmers could not meet this requirement, they would very likely lose access to the market, as the supermarkets would start buying from other suppliers. To obtain a constant and reliable supply of products, three conditions had to be met: (a) the farmers needed to organize themselves to market collectively in order to have available the volumes of product required by the buyers, (b) the farmers had to plan production in order to harvest products every week and at the same time avoid harvesting all the vegetables all at once and (c) farmers needed irrigation in order to be able to grow vegetables all year round. 65. (5) Coordinating a high number of tasks. In contrast to most manufactured products and to grains, most vegetables in Las Pilas are highly perishable and cannot be stocked without sacrificing some quality and value. Thus, the products need to be delivered to the supermarkets soon after the harvest. Any delay involves losses in quality and thus penalties, usually the rejection of the product without any payment. In order to avoid delays, producers need to have labour available for the harvest and packing and trucks to bring the output by road from the fields to San Salvador. 66. Both CLUSA and Technoserve were instrumental in identifying the potential of the promotion of organic crops among small farmers in Las Pilas and in helping them apply organic technologies and obtain certification as organic producers. Both organizations provided several services to farmers, including training, extension, loans and outright grants. In the case of CLUSA, the extension and training were furnished by foreign and local agronomists with great experience in organic production. In the case of Technoserve, they were supplied by three agronomists who were hired and trained by the organization. Two of the agronomists were technology specialists, and the other was a marketing specialist. 67. The technical assistance and training focused on three major areas: (a) the technologies associated with the new crops and the organic methods required to obtain organic certification, (b) the establishment of contacts with supermarkets and other buyers and coordinating product deliveries to them and (c) the organization of tasks, including the planning of production and harvesting. In contrast to the emphasis of most extension services on agricultural technology, the most important issues in Las Pilas were the last two: the negotiation of marketing channels and assistance in planning production and marketing. 68. Because CLUSA was initially working with a small number of farmers, it had a limited amount of products available, so it targeted domestic consumers. It first contacted supermarkets, and, because consumers were still not particularly aware of the organic nature of the product, CLUSA had to undertake an intensive promotion campaign among managers and supermarket workers. The organic market then started to develop rapidly. In order to make the process more sustainable, USAID urged the creation of a local organization that could carry out the marketing of non-agricultural products. As a result, the Producers and Exporters of El Salvador was established in 1994 as a cooperative company. Starting with a fund of USD 7 000 provided by CLUSA, the company initially had 11 members, including a mix of producer, exporter and cooperative groups who purchased a minimum of SVC 20 000 (USD 2 286) of the shares of the company, receiving in return marketing services and a share in the year-end profits. By 2001, the company had 12 members, most of whom were cooperatives and farmer groups, which represented about 2 500 producers. 69. Because the supermarkets required a constant flow of product, the farmers in Las Pilas and Los Planes had to plan their production so that they could harvest every week. The climate in the region permits this sort of year-round production. However, the farmers were used to growing their crops in only two seasons. Irrigated cabbages, tomatoes and potatoes were grown during the dry season (between November-December and April-May), followed by corn in the rainy season (starting in May-June). In contrast, the vegetables for the supermarkets had to be grown all year round. This required planning the production of all the farmers as a group and individually. Each farmer had to plant and harvest every week.

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70. Organizing this programme of production was quite a complex job. It required the collection of information from all farmers in order to determine the availability of the output expected for the next week, communicating this information to the supermarkets, noting the needs of the supermarkets and distributing quotas among the farmers according to this demand. Then, members would harvest their product and send the output on Thursdays to the packing facilities. Once the product had been packed, trucks would collect and transport it to the supermarkets in San Salvador. In the case of Super Selectos, the product would be transferred to smaller vehicles and distributed among the branches. 71. With respect to the training, in 1998, technicians of Technoserve and Prochalate identified a training centre in Costa Rica that provided training in organic agriculture. The centre, the Organic Agriculture Training Centre, was located and managed by a private firm (Jugar del Valle) in Laguna de Alfaro Ruiz (province of Alajuela), which grew vegetables and had obtained organic certification in the early nineties. Jugar del Valle had substantial experience in the production and marketing of vegetables. At the centre, they provided training based on their experience to farmer groups desiring to undertake the cultivation of organic crops. 72. Technoserve arranged with the Organic Agriculture Training Centre to train farmers and extension workers from Prochalate. The training sessions took place in 1998 and 1999, and they included an eight-day programme that emphasized practical issues. Thus, the farmers were able to learn by doing. They were instructed in the inputs appropriate for soil fertilization and for combating pests and disease. Almost all the farmers interviewed had participated in the training sessions and stressed that they had learned most of the technologies of organic production there. 73. To sum up, training was effective mainly for several reasons. (a) The participation of trainers who were also farmers facilitated the learning process because of the similar language and the closer understanding of the problems and difficulties involved in the adoption of organic crops. (b) The sessions were very practical, and the farmers learned how to produce organic inputs independently. (c) Rather than encouraging the farmers to adopt organic crops based on price and market advantages, the training emphasized the benefits of organic crops for human health, the conservation and longterm productivity of soils and the potential reduction in the costs of production. B. Financing Organic Production

74. (1) Carrying out essential on-farm investments. The lack of access to credit to pay for investments such as farm machinery and equipment is one of the most common constraints in the promotion of change among small producers. For this reason, most IFAD projects include a component to help make credit available to farmers, usually by the establishment of credit funds or guarantee-fund schemes. While the role of credit has been important in making possible the introduction of new crops and improving agricultural production, credit components have often faced several problems, including high default rates. 75. Interestingly, the cultivation of organic vegetables in Las Pilas did not require the purchase of any machinery or equipment, as all tasks were manual and relied on simple materials. However, individual farmers had to undertake some essential on-farm investments. Some of these investments were specific to organic production, while others were common to vegetable production in general. On-farm investments had to be undertaken in the following areas: 76. (a) Soil-conservation measures. Most farmers who started to grow organic crops had cultivated conventional crops without applying any conservation measures. Therefore, the shift to organic production required cultivation on level curves and terraces to prevent erosion. These conservation measures only provide returns after a several years. For example, one farmer explained that “the investments are really only at the beginning, when we had to implement the conservation measures. Afterwards, organic crops are not that complicated, although we do need to work more to do the job that pesticides used to do for us.” This represented the opinion of most of the farmers interviewed,

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who all emphasized that the soil-conservation measures were quite costly in terms of labour and represented the most important investment in the shift to organic production. 77. (b) Irrigation infrastructure. The use of irrigation technology was not necessary in organic production, but it was essential for growing vegetables all year round and obtaining a constant flow of the product, especially in the dry season. All the farmers who belonged to farmer groups already had irrigation available, as this was a condition that CLUSA and Technoserve had imposed when they created the farmer groups that would work in organic agriculture. Thus, these farmers did not have to make new investments. However, small farmers without irrigation needed to invest in on-farm equipment and in infrastructure to bring water from the source. The amount of these investments depended on the distance from the water source to the farm. It was around SVC 2 000 (USD 229) for 1 000 m of tube wells and the aspersion devices. The distance over which the organic farmers in Las Pilas had to bring the water varied from between 1 to 4 km, which represented an investment of between SVC 2 000 (USD 229) and SVC 8 000 (USD 916). 78. Interestingly, the organic production of vegetables in Las Pilas emerged mostly in the absence of formal sources of on-farm credit. The most relevant on-farm investments revolved around soilconservation measures. Because these measures involve mainly labour, farmers implemented them using family labour. In addition, the farmers who have continued growing the same crop, but who have shifted to organic methods of production stress that yields fall substantially in the first two or three years and then start to stabilize at levels normally slightly lower than the levels of the yields accruing to conventional methods of production. However, in the case of Las Pilas, because the farmers shifted to other crops for organic production, they did not experience this phenomenon. 79. Farmers growing perennial crops like mango or grapes must carry out significant investments, but they must also wait for two or three years to obtain the first revenues from the plantation. Thus, they need to obtain investment credit and other sources of revenue to maintain their families. In contrast, the farmers in Las Pilas grow annual crops that can be harvested a short time after plantation (usually between two and four months), so they have been able to obtain the incomes necessary to maintain themselves and their families. 80. (2) Off-farm investments: packing facilities and transport. The marketing of fresh organic vegetables has required facilities where the products could be classified according to quality and then washed and packed before being sent to the supermarkets. These facilities could be simple, as were the ones owned by the farmers working with Technoserve, which were located in an open space and included a wood structure with a metal roof, wood tables and plastic tanks cut in half for washing the vegetables, or they could be more sophisticated, like the ones owned by CLUSA’s farmers, which were made of regular construction materials and included a freezing room. While facilities like the former can cost about SVC 10 000 (about USD 1 100), the latter would cost about SVC 150 000 (about USD 17 100). In the latter case, CLUSA provided a combination of grants and credit so that the farmers could build the packing facilities and buy a truck. 81. In contrast to the on-farm investments, the off-farm ones were not affordable for individual small farmers. Moreover, a single small farmer would not be able to produce enough to keep the facilities working at full capacity. Thus, both CLUSA and Technoserve promoted the construction and use of collective packing facilities and transportation and helped farmers to obtain the necessary funds for them. CLUSA helped the Los Planes Cooperative of Organic Producers to obtain grant funds from the Inter-American Foundation to build packing and storage facilities. In addition, the cooperative obtained a soft loan from USAID for the purchase of a truck. Prochalate also provided long-term credit (SVC 115 000, or about USD 13 100) to the Los Planes cooperative for the construction of a greenhouse that could serve the collective production of lettuce plantings. This allowed the cooperative to obtain plantings at a much lower cost, since members used to purchase them from Guatemalan producers. In the case of the other farmer groups that were assisted by Technoserve, Prochalate provided them with outright grants for the construction of packing facilities.

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82. The interviews carried out among farmers showed that there were conditions that had to be met in order to render the investments practical. These included the following: (a) The farmers needed to have land that was under stable forms of tenure. Because the returns on the soil-conservation measures would be obtained only after several years, farmers with unstable forms of land tenure were not willing to carry them out. For example, one of the organic farmers stressed that “it would have been impossible for me to do organic vegetables if I were not the owner of the land. Anyone can rent a piece of land to cultivate cabbage or tomato with fertilizers and pesticides for only one year, but one has to wait for years to see the fruits of starting with organic crops. You work a lot without much return the first year, but the soil gets better year after year because of the organic fertilizers and the soil rotation, and the productivity keeps improving. You can’t make all this effort one year and then leave the gains of your effort for others to obtain.” (b) Farmers needed resources to pay for the labour required to implement the soil-conservation measures. The soil-conservation measures required a lot of labour. Part of the labour was supplied by the families of the farmers, and part was supplied by hired workers. VII. CONCLUSIONS AND POTENTIAL LESSONS FOR PROJECT DESIGN A. Conclusions

83. This analysis of the organic production of vegetables in Las Pilas shows that: 84. (1) NGOs have played the dominant role in the emergence of organic production in Las Pilas and El Salvador in general. These NGOs have not been specialized in organic agriculture or in environmental issues, and they have not promoted organic production as a result of a specific concern for the conservation of natural resources. They are specialized in agricultural and rural development and have a business-oriented perspective, and they participated in the implementation of a USAID project that promoted the production of non-traditional crops for export. They identified organic production as one of the possible non-traditional alternatives for small farmers. 85. (2) Government policies and institutions have in general not been supportive of organic agriculture, and they have frequently posed obstacles for the development of this agriculture. During the nineties, agriculture in general faced a policy environment that was characterized by the overvaluation of the exchange rate, the reduction of tariffs and non-tariff barriers, the reduction of public expenditures through government agencies specialized in agriculture – mainly extension and research – and the lack of agricultural credit. A value-added tax was even imposed on fresh agricultural products in May 2000. These policies favoured imported goods and made access to agricultural services more difficult for small farmers. Furthermore, the government agricultural research and extension agency did not include a research programme in organic agriculture. The IFAD-funded Prochalate project, which was implemented by the Ministry of Agriculture and Livestock, was an exception because it contracted out to public and private agencies the provision of extension services to small farmers. The private providers include NGOs and consulting firms with differing perspectives, strategies and methodologies. One of them (Technoserve) become essential in the development of organic vegetables in Las Pilas. 86. (3) Universities and training institutions in El Salvador have recently initiated programmes in organic agriculture both at the doctorate and the master’s levels. However, no professional has yet graduated from these programmes. Most of the professionals who are working in the public and private sectors have been trained in conventional agriculture. Thus, most researchers and extension workers have little knowledge of organic agriculture and have even frequently opposed it. 87. (4) Because most farmers in Las Pilas have continued growing the same crops they grew with conventional technologies, the shift to organic vegetables has meant a diversification in production,

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with the substitution of organic vegetables for conventional crops and a slight decrease in the total cultivated area. 88. (5) Organic vegetables in Las Pilas have represented an attractive alternative for small farmers and have had a positive effect on output and incomes. They have involved lower production costs and better prices for the products. In addition, they have led to the more sustainable use of natural resources and, according to the farmers, to positive effects on the health of farmers. 89. (6) The adoption of organic vegetables has not required significant on-farm investments. The most important of these has been the investments in soil-conservation measures. All the farmers have been able to implement these on-farm investments – which have involved mainly labour – without a need for credit and by relying on their own resources. The most important off-farm investments that organic farmers have had to make have included collective investments in packing and storage facilities and transport. 90. (7) The chief forms of the support that NGOs and the Prochalate project provided to small farmers who adopted organic vegetables in Las Pilas included training, technical assistance, support for collective action, and a mix of credit and outright grants for collective post-harvest infrastructure (packing and storage facilities) and transport (refrigerator trucks). B. Potential Lessons

91. The case of Las Pilas offers some potential lessons for policy design and implementation that will be tested in the other cases in this research project. These potential lessons include the following: 92. (1) Organic production may be an attractive alternative for small farmers. However, the adoption of organic crops requires a careful selection among farmers, as not all small farmers are likely to succeed. In particular, farmers should have land that is under a stable form of tenure – preferably ownership – so that the required investments in soil conservation can be carried out. Soil-conservation measures are the most important on-farm investment required in organic production, and the returns to them will only be obtained in the medium to long term. 93. (2) Technical assistance and training in organic production technologies are essential, and they should focus on meeting the standards for obtaining organic certification. Organic certification will be essential if farmers are to sell their products on the market and receive premium prices. In addition, the technical assistance must help farmers plan their production so that their products become available when the market requires or when the market pays the best prices. 94. (3) While assistance in agricultural production is essential, it is certainly not sufficient if small farmers are to succeed. Technical assistance and training should also promote and strengthen collective action so that small farmers are provided with the skills necessary to organize effectively. Collective action is a key because small farmers need to have a sufficient amount of product to meet market demands and to gain the benefits of economies of scale in quality-classification, packing, transport and marketing. 95. On-farm credit may not be necessary for all organic crops. Soil-conservation measures that involve basically only labour account for the main on-farm investments involved in organic vegetables, so small farmers may be able to take advantage of the availability of family labour. Thus, the availability of credit for hiring labour could help them expand the area under cultivation, but the absence of credit would not render the adoption of organic crops impossible. Grants could be provided to cover the labour involved in soil-conservation measures. 96. The off-farm investments are the most important investments required in the production of organic vegetables. The investments relate to packing and storage facilities and vehicles for the transport of products to markets. In the case of small farmers, these investments should be collective, 20

and projects could provide outright grants to finance them as a part of the process of shifting to new activities.

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References Barham, Bradford, Michael Carter and Wayne Sigelko (1994), “Agro-Export Production and Peasant Land Access: Examining the Dynamic between Adoption and Accumulation”. Journal of Development Economics, Vol. 46, pages 85-107. Barham, Bradford, Mary Clark, Elizabeth Katz and Rachael Schurman (1992), “Nontraditional Agricultural Exports in Latin America”. Latin American Research Review, Vol. 27, No. 2, pages 43-82. Carter, Michael, Bradford Barham and Dina Mesbah (1996), “Agricultural Export Booms and the Rural Poor in Chile, Guatemala and Paraguay”. Latin American Research Review, Vol. 31, No. 1, pages 33-36. Carter, Michael and Dina Mesbah (1993), “Can Land Market Reform Mitigate the Exclusionary Aspects of Rapid Agro-Export Growth?”. World Development, Vol. 21, No. 9, pages 1085-1100. CENTA (1999), Diagnóstico de la Situación de las Hortalizas en El Salvador, período 1994-1998. San Andrés, El Salvador: National Centre of Agricultural Technology, Ministry of Agriculture and Livestock. CENTA (2000), “Las Pilas: Una Alternativa para la Autosuficiencia de Verduras en El Salvador”. Agroinnovación, pages 16-18. San Salvador, El Salvador: National Centre of Agricultural Technology, Ministry of Agriculture and Livestock. Conroy, Michael, D. Murray and P. Rosset (1994), Fruits of the Crisis: Gambling on Nontraditional Agriculture. Austin, TX: University of Texas Press. Damiani, Octavio (1999), Beyond Market Failures: Irrigation, the State and Non-Traditional Agriculture in North-East Brazil. Ph.D. Dissertation. Cambridge, MA: Massachusetts Institute of Technology. Damiani, Octavio (2000), “El Estado y la Agricultura no Tradicional de Exportación en América Latina: Lecciones de Tres Estudios de Caso”. Serie de Informes Técnicos del Departamento de Desarrollo Sostenible. Washington, DC: Inter-American Development Bank. De Janvry, Alain (1981), The Agrarian Question and Reformism in Latin America. Baltimore, MD: Johns Hopkins University Press. Jaffee, Steven (1993), “Exporting High-Value Food Commodities: Success Stories from Developing Countries”. World Bank Discussion Papers, No. 198. Washington, DC: World Bank. Prochalate (1998), Manual de Costos de Producción, 1998-1999. Chalatenango, El Salvador: Prochalate Project. Schurman, Rachael (1993), Economic Development and Class Formation in an Extractive Economy: The Fragile Nature of the Chilean Fishing Industry, 1973-1990. Ph.D. Dissertation. Madison, WI: University of Wisconsin. Stanley, Denise L. (1994), “The Welfare Effects of an Export Boom: Land Enclosure and Labour Market Segmentation in Honduras”. Paper presented at the Latin American Studies Association Congress, Atlanta. Twomey, Michael J. and Ann Helwege (1991), “Introduction”. In Michael Twomey and Ann Helwege (eds), Modernization and Stagnation: Latin American Agriculture into the 1990s. New York: Greenwood Press. Vice-Ministry of Housing and Urban Development (2000), Diagnóstico y Proyecciones del Plan de Desarrollo Microrregional de La Palma y San Ignacio. San Salvador, El Salvador: Vice-Ministry of Housing and Urban Development. Williams, Robert (1986), Export Agriculture and the Crisis in Central America. Chapel Hill, NC: University of North Carolina Press. World Bank (1997), El Salvador: Estudio de Desarrollo Rural, Informe principal, Vol. 1. Washington, DC: World Bank.

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Annex: List of persons interviewed 1. Professionals and officials at government agencies, NGOs and farmer associations Omar Lara, coordinator, Technoserve-Prochalate Roberto Vega Lara, executive director, Technoserve Mario Montano, director of operations, Prochalate Jaime Bran Recinos, Las Pilas area manager, Prochalate Pablo Sanabria, technical analyst, Technoserve Salvador Arévalo, technical analyst, Technoserve Wilfredo Cuéllar, marketing manager, Technoserve Jorge Antonio Gómez, marketing manager, ROCA Project Cárdenas, ROCA Project Godofredo Pacheco, Encargado de Negocios, Producers and Exporters of El Salvador Néstor Palma, general manager, Ucraprobex Carlos Mario García, management subdirector, CENTA Héctor René Milla, marketing researcher, CENTA Adonis Moreira Rivas, natural resources specialist, CENTA Miguel Román Cortés, Investigador en manejo integrado y hortalizas, CENTA Pablo Posada, chief, Agency of La Palma and Las Pilas, CENTA Martín Antonio Fuentes, extensionist, Agency of La Palma and Las Pilas, CENTA Eduardo Huidogro, director, Oficina de Agronegocios, Ministry of Agriculture and Livestock Francisco Márques, Dirección de Estadística Agropecuaria, Ministry of Agriculture and Livestock Stanley Kuehn, national director, CLUSA José León Bonilla, director-president, CLUSA Mario Urrutia, executive director, CLUSA Francisco Lara, dean of the Faculty Agricultural Sciences, University of El Salvador Guillermo Mogoyón, Gerente de Perecederos, Hiper Paiz Carlos Salazar, marketing manager, Federation of Irrigation Farmers of El Salvador Haydée de Flores, manager of fruits and vegetables, Super Selectos 2. Farmers growing organic vegetables Héctor Deros, Los Planos Cooperative of Organic Producers Adelmo Antonio Arriaga, president, Los Planos Cooperative of Organic Producers Francisco Mancía Israel Guillén Guevara Juan Gutiérrez Rosa Irma Guillén Secundino Mata Teodoso Alvarado Ernesto Hernández Efraín Antonio Hernández Saúl Alberto Vargas Oscar René Hernández Humberto García

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