Harvesting bananas in Santa Catalina
Courtesy Inter-American Development Bank

In the 1980s most farmers held small plots of land, used low levels of agricultural inputs, such as equipment, fertilizer, and irrigated water, and produced primarily food crops for domestic consumption and some cash crops for additional income. Large holdings, many foreign-owned, operated with much higher levels of farming technology and produced almost exclusively cash crops for the export market. Although agricultural colonization and greater cultivation of cash crops by small farmers were modifying this pattern, the basic agricultural dichotomy generally continued in the late 1980s. Although farming techniques were steadily improving, Paraguay continued to display some of the lowest yield rates in all of Latin America, indicating that agricultural modernization was still far away.

The Mennonite colonies in the central Chaco offered a notable exception to the country's low yields. When Mennonites first arrived in 1926, the central Chaco was a virtual desert. Mennonite pioneers suffered great hardship for at least a generation to make the region's semiarid soils fertile. With time, the Mennonites converted the central Chaco Filadelfia into the major supplier of food for the entire Chaco and made it self-sufficient in almost every crop. The success of the Mennonites was generally attributed to their dedication, superior farming techniques, and access to foreign capital.

A "land without people and people without land," a phrase often used to describe Paraguay, helped explain the country's longstanding farming methods. As a traditionally underpopulated nation, Paraguay suffered from labor shortages and negligent soil practices that favored clearing new land rather than preserving cultivated land. Because of the poor distribution of land, many farmers could not obtain sufficient income from working their own land and often engaged in seasonal wage labor in Argentina. Cultivation practices typically were slash and burn with little use of crop rotation. New forestlands were then cleared by axe, and the cuttings were burned little plowing was done before planting. These practices became increasingly impractical in the 1980s as the market for fertile land tightened, especially in the eastern border region. The need for maintaining and improving soil fertility was greater than ever by the late 1980s.

The use of purchased inputs in agriculture, such as fertilizers, insecticides, farm equipment, and irrigated water, remained low in Paraguay in the 1980s and occurred mostly on large estates. The country's aggregate level of fertilizer use stood at five kilograms per hectare in the mid-1980s, one of the lowest in Latin America. Some fertilizers were produced locally most were imported from Brazil. Most fertilizer use was targeted at a few specific crops such as wheat, cotton, and soybeans. Although Paraguay's lands were naturally fertile, most agronomists felt there was an increasing need f 1000 for higher yields rather than more colonization. Insecticide and herbicide use was even leÍss prevalent than fertilizer use. Weed and insect damage was considerable among some crops, another factor contributing to low agricultural productivity. Because most farms were small, the use of mechanized equipment generally was not appropriate for most farmers, and small farmers tended to use simple hand tools, rudimentary vehicles, and animal-pulled plows. By contrast, tractor use was common among large landholders, accounting for nearly all of the 4.4 tractors per 1,000 hectares that were reported in the mid-1980s. Irrigated farmland represented only 3 percent of all land under cultivation this figure also was low by Latin American standards.

One of the principal reasons for the continued use of traditional farming practices was the limited scope of government extension services. Although the Ministry of Agriculture and Livestock was dedicated to improving extension services and increasing productivity, its greatest obstacle remained a lack of financial commitment on the part of the central government, which allocated only 2 to 4 percent of the national budget to agriculture in the 1980s, despite the sector's fundamental role in the economy. The Ministry's Agriculture and Livestock Extension Service (Servicio de Extensión Agrícola y Ganadera--SEAG) operated only in the eastern border region through 13 extension offices with a staff of under 500. SEAG was able to reach only approximately 15 to 20 percent of the subregion's farmers, offering mostly crop-specific advice rather than more general technical assistance. Livestock extension was generally neglected, and few efforts were made to integrate crop and livestock activity. Only limited technical assistance was available from international development organizations. Other constraints to increased productivity were the lack of necessary support services in rural areas, such as health clinics and schools. Likewise, a lack of basic infrastructure, including feeder roads and rural markets, hindered output.

The Ministry of Agriculture and Livestock also played the leading role in the country's agricultural research. Most research took place inside the Department of Agriculture and Forestry Research. Research was oriented toward specific crops, mainly cotton, soybeans, wheat, rice, sugarcane, tobacco, and certain fruits and vegetables. The principal goals of agricultural research were greater soil conservation and the introduction of highyielding seeds. As with government extension services, the prime obstacle to expanded research efforts was financial.

Credit was another structural constraint limiting agricultural productivity. Aggregate levels of financing to agriculture were insufficient to provide the necessary capitalization of the sector. Furthermore, small farmers received a disproportionately small share of credit, thus exacerbating technological backwardness and skewed land and income distribution. The principal financial institutions providing credit were the National Development Bank (Banco Nacional de Fomento--BNF), the Central Bank, and the Livestock Fund (Fondo Ganadero--FG), as well as about twenty-two commercial banks. The BNF was by far the largest lender to farmers, accounting for 45 percent of the sector's financing. Much of BNF lending did trickle down to short-term financing for small and medium farmers, but little BNF lending went to capital investment. The Central Bank offered approximately 25 percent of the sector's credit, followed by the commercial banks at 23 percent and the FG at 7 percent. Commercial bank lending went to large exporting farms to cover processing and marketing costs. Some smaller cotton and soybean farmers also received commercial bank credit to purchase necessary inputs. The majority of all lending to the livestock sector originated from the FG--the only agricultural government credit-lending institution that was expanding significantly in the 1980s.

Data as of December 1988