Belize Agricultural Policy Impacts Presentation [39772076].ppt

IMPORTANTE

1. BelizeBelize
Rural Development, Environment and Disaster Risk Management Division
Inter-American Development Bank
January 2015
Measuring the effect of Measuring the effect of
agricultural trade and price agricultural trade and price
interventions on producer interventions on producer
incentives and consumer real incentives and consumer real
income: 2010-2013income: 2010-2013

2. Measuring the effect of agricultural trade and price
interventions in Belize on producer incentives and
consumer real income: 2010-2013
1.Context: review of Belize conditions,
agriculture and policy
2.Border measures in Belize: a quick review
3.Research method, results & significance:
–NRP and ERP: method, results & significance
–PSE: method, results & significance
–Impact on consumers: method, results &
significance
4.Conclusions & policy implications
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3. Context
•Agriculture represents about 9.4% of GDP.
•Sector employs about 16% of workforce.
•Agriculture and food represent a large share of
merchandise exports – 75% in 2013.
•Poor data availability: hampers policy making
& analysis.
•Bottlenecks: Ports and roads are the most
mentioned constraints by agricultural
exporters, are not part of PSEs and other
indicators.
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4. 4
Belize farm sector is highly volatile: Year-to-year
percent changes in real agricultural and forestry
sector GDP, 2009-2013
Authors’ elaboration based on data from the Belize Statistical Institute

5. 5
Year-to-year percent changes in real agricultural
value added, 1995-2009
Authors’ elaboration based on data from the Belize Statistical Institute

6. Why an agricultural policy study?
•Future growth of the agricultural sector depends on policies
that promote efficiency, social inclusion and economic
profitability
•General service support – public goods are key to sustaining
growth, potential new investments and the search for new
products and the expansion of proven successes.
•For Belize, international markets are important to reach
economically viable scale of production:
–Public support for safety, sanitary standards, etc. to compete
internationally.
–Innovations and extension to aid farmers and producers in
sophisticated markets.
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7. An economist’s view…
•In general, a low, uniform tariff rate on imports:
•reduces uncertainty of key imports costs and elevates returns.
•facilitates the development of activities in general, and
particularly could aid in the growth of small processing firms
for export, and other activities whose cost structure is
weighted to imported goods.
•Reform of tariffs, licenses and price controls presents a
political challenge: in the short term it reduces tax revenue
and creates losers as well as winners.
…but this study demonstrates also that reform
would bring benefits in terms of living standards
and likely opportunities for the export sector in
the longer term.
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8. Why are we worried about agricultural policy? Why are we worried about agricultural policy?
Policy affects resource decisions and economic Policy affects resource decisions and economic
growth.growth.
Efficient resource use to
capitalize on country’s
real comparative
advantages
Social inclusion
Economic viability and
income generation.
Economic efficiency
depends on
eliminating distortions
Wide coverage of
farmers, emphasizing
the most vulnerable
Benefit rural families,
farmers, workers.
Contribute to national
welfare.

9. OECD’s classification of policy instrumentsOECD’s classification of policy instruments
Category Instrument Beneficiary Source of
resources
Price
supports or
interventions
Drive a wedge between domestic prices
and border prices
Individual,
with a direct
impact on
revenues
and costs of
producers
Consumers
Direct
supports
Payments & subsidies :
 Per unit output

Inputs: fertilizers, seeds, energy, etc.
 Capital formation: credit for irrigation

Farm services: extension, pest control.
 Based on production area, current or
historical.
Taxpayers
Government
General
services
Public goods
Sanitation, food safety. R&D
Information systems. Land titling.
Rural public infrastructure
Roads, big irrigation projects, rural
electrification
Collective

10. InstrumentInstrument
Level of Level of
distortiondistortion
CoverageCoverage
Potential for Potential for
economic economic
growth growth
impactimpact
Public goods (GSSEs)
Direct support (DS)
Trade protection & price
interventions (MPS)
Why are we worried about the types of policy
instrument?

11. Research method: some terminology
Interventions : product specific
•Tariffs, duties.
•Implicit price distortions caused by licensing, import restrictions, and
perhaps monopsonistic behaviour.
NPR = Nominal Protection Rate
•A price wedge: % difference between observed farm price and
hypothetical price in the absence of interventions.
•Significance: measures the amount of protection for domestic
producers in terms of the effect of tariffs on import prices.
ERP = Effective Rate of Protection
•Measure of impact of interventions on value added as a proportion of
costs of tradable inputs.
•Takes into account interventions on both the output and input side.
•Significance: measures the amount of protection for domestic
producers in terms of the net effect on their income, taking into account
the impact of interventions on input costs.
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12. Research method:
NRPs and ERPs product coverage
•Ten important crops:
–bananas,
–red beans,
–cacao,
–maize,
–onions,
–oranges,
–peppers (for hot sauce),
–poultry (chicken),
–rice,
–sugar cane.
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13. Research results
Summary: Average NPRs and ERPs and crop value at farm gate
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Product NPR % ERP % crop value Bz Years
poultry 95.7 123.8 79,710,882 2010-2013
bananas -11.0 -11.0 66,260,000 2007-2012
sugar cane -1.6 1.6 66,105,620 2009-2013
oranges -1.9 -15.3 54,431,325 2010-2013
maize 12.2 1239.0 31,891,578 2010-2013
rice -8.7 -215.8 21,955,286 2010-2013
beans -6.4 -20.9 12,971,644 2009-2012
onions 0.72 0.63 600,000 2010-2013
peppers -2.2 -5.8 435,595 2010-2013
cacao -26.6 -26.7 252,278 2010-2013

NPR positive only for
poultry, maize and onions!
ERP only significantly
positive for maize and (to a
lesser extent) poultry!

14. From specific products to general sectoral support
Understanding PSE calculations
PSE : Producer Support Estimates
•Market Price plus Direct Supports
•Adding all supports relative value of production.
•What % of income is due to gov’t policy?
MPS : Market Price Support
•Transfers from consumers and taxpayers to
agricultural producers due to interventions that drive
a wedge between domestic and border prices (at
farm gate).
GSSE : General Services Support Estimate
•Gov’t spending on R&D, agricultural education,
infrastructure, and promotion.
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15. Significance of research results: considerations.
Interpreting PSE estimates
•Historically, low product-specific expenditures
relative to region.
•Recently some spending related to banana and
sugar, funding from EU. Included in PSE.
•Unexamined, no data: fuel tax exemption for
sugar cane farmers, foregone revenue and
implicit support.
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16. Significance of research results: considerations.
What PSE estimates tell us
•Averages 8.1 % of farm gate value over 2010-2013
•Based on the MPS’s for the product coverage and
gov’t expenditures more generally.
•The market price support calculated without poultry
would be negative.
•There simply is no support for export sector.
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17. 17
Country PSE % Year
Jamaica 33.26 2012
El Salvador 25.32 2010
Colombia 19.29 2009
Bolivia 18.17 2009
Honduras 16.46 2009
Costa Rica 16.12 2012
Nicaragua 15.00 2010
Mexico 12.30 2013
Belize 8.10 2010-2013
Ecuador 7.04 2012
Guatemala 6.98 2010
Dominican R. 5.35 2012
Brazil 4.61 2012
Peru 3.70 2013
Chile 2.72 2013
Suriname -3.13 2011
Argentina -43.27 2011
How does Belize compare with other countries?

18. Research results:
GSSE total
•Averaged 18.6 million Belize dollars between 2011
and 2013.
–R&D, extension, and infrastructure (rural water and
sanitation).
–Likely transitory, the Cattle Sweep program, which was
aimed at documenting and assuring animal health for
assuring access to export markets (Mexico).
–Relative to the gross value of output of selected crops,
GSSE averages about 6.3%,
–sum of PSE and GSSE averaged 41 million Belize dollars
since 2011.
–The GSSE represents about 50 percent on average 2011-
2013 of the total support estimate, due to the relatively
low market price support and direct payments to farmers.
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19. Structure of the support to the agricultural sector in recent years
in Belize.

20. Monetary Value of Agricultural Support in BelizeMonetary Value of Agricultural Support in Belize
(millions of BzD)(millions of BzD)
Support Category 2011 2012 2013
Price Support
28.4 2,5 9.4
Direct Support 12.2 6.3 15.5
General Services15.5 26,4 14.2
Total 56.1 35.1 39.1
So who pays? Who benefits?So who pays? Who benefits?

21. The structure is different in different countriesThe structure is different in different countries

22. Total Support Estimates as a % of AgGDP in Latin Total Support Estimates as a % of AgGDP in Latin
America and the CarribeanAmerica and the Carribean

23. Research method:
Effects of border interventions
on the consumer
•Estimate increase in cost of food basket of
households due to higher domestic prices from
protection.
•Share of CPI weights associated with food and
beverages is 21%. Weight for low income higher.
•Only 15 items consume 50% of food basket, with
beer (6.2%), rice (6.2%), and chicken (11%
whole and in parts) making up 23% of all food
expenditures.
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24. Research results:
Impact of border taxes and other measures on
consumers
•Border protections on food products are
significant and regressive taxes
•6.8% increase in overall average cost of living
•32.5% increase in cost of the food basket
•Specific products
•Bulk rice (largest share of rice imports) enters with
zero tariffs and taxes.
•Whole chicken and chicken parts together make up
11% percent of the food basket but are relatively
highly protected, with a total border tax of 37.5%.
•Soft drinks, bottled water and beer also have
relatively large weights in the food basket and high
border taxes.
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25. Research results:
impact of Supply Control Regulations
on consumers and the agricultural sector
•Rice, beans, sugar, bread, flour, butane, and fuel fall
under the 1987 consumer price control law.
•Sugar retail price ceiling coupled with agreement that
monopoly refiner supply quota to the domestic market.
•Impact: unsurprisingly, price controls meant to
aid consumers lead to perverse consequences.
–Although Belize Sugar Industry Ltda supplies 14,000
tons to domestic markets, there are often shortages on
store shelves.
•NB: care is needed when comparing internal sugar price
with export price, when the internal price is controlled.25

26. Conclusions: effect of agricultural trade and Conclusions: effect of agricultural trade and
price interventions on producer incentives and price interventions on producer incentives and
consumer real income, 2010-2013consumer real income, 2010-2013
•Two products, poultry and maize, can be said to be
protected. Contributes to higher consumer prices.
•Consumer food prices are inflated by policy. The basket
is heavily weighted by imports and import-competing
products; export products have much less weight.
•The effect of current policy is to dis-incentivize
innovation, investment and production.
•Especially for export products.
•Best policy instrument is investment in public goods (e.g.,
infrastructure and BAHA and statistics).
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27. Thank you
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