El Salvador + 3 more

USAID assistance to Central America Region Update #1

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Central America has been plagued in recent years by such devastating natural disasters as Hurricane Mitch and the earthquakes in El Salvador. Persistent dry conditions affecting Honduras, Nicaragua, El Salvador, and Guatemala have created food shortages and increased internal and external migrations. Low international coffee prices have put coffee farmers out of work and eliminated employment opportunities for many small farmers and landless poor, and decreased tax revenues have exacerbated already difficult economic conditions.

Drought conditions are continuing to cause serious crop damage and severe transitory1 food insecurity in the region. Although rains began in July and August in some areas, rainfall has been unevenly distributed and erratic throughout the drought areas in the region, making it difficult to project expected crop yields for the second planting season that takes place in August and September. Actual yields during the second harvest will determine whether additional emergency food aid will be required.

Low coffee prices have had a devastating effect on the coffee-producing areas of the region, many of them also affected by the drought. The attached map indicates where coffee producing areas and drought areas intersect. Coffee supply worldwide now far exceeds demand - due in large part to Vietnam's entry on the world scene as a major coffee producer - resulting in a slide in the price of coffee on the world market to a 100 year low - falling from $1.45 per pound to $.55 per pound (New York price) in the last 18 months, using regional averages. The cost to produce coffee ($.65 per pound) exceeds the selling price, making it impossible for small farmers to continue production, and putting larger farmers out of business. Seasonal employment for small farmers and landless workers who would normally work on coffee plantations has been eliminated, and those affected by the drought are now without a source of income to replace their crop losses with purchased food.

Reports by USAID Missions indicate that internal and external migrations have been increasing over the past few months. Although seasonal migrations are common during the coffee harvesting seasons in Costa Rica, reports by the Costa Rican presidential spokesperson indicate that increased numbers of legal and illegal Nicaraguan immigrants have entered Costa Rica this year in search of work and food, although numbers of immigrants have not yet been verified.

USAID has been monitoring weather conditions and crop production in Central American countries during the two-year dry spell that has affected crop yields and farming conditions of small and subsistence farmers and landless workers. As drought conditions have worsened in the region, USAID, along with other US government agencies, has been working actively in the region to provide assistance to families affected by the drought and the coffee crisis. Since July, the US government has been working with private voluntary organizations (PVOs) responsible for distributing PL480 Title II development food aid (Title II partners) to transfer in-country Title II commodities to drought emergency zones. Most emergency food aid is being distributed through food-for-work projects aimed at improving long-term food security and rehabilitating community infrastructure. In addition to emergency and non-emergency food aid, the US government is supporting programs that also provide seeds and other agricultural inputs to farmers for the second planting season in August and September in these affected regions. US government food aid for the region for FY01, including regular program and emergency assistance, totals $87,649,000 (see attached tables with full breakout of USG assistance by country and by type of assistance COMBINED U.S. GOVERNMENT FOOD ASSISTANCE FY 2001 (revised 9/7/01) )

The World Food Program (WFP) emergency Central America Protracted Relief and Recovery Operation has requested 16,000 tons of food to address the drought in the region. In response, USAID's Office of Food for Peace will contribute 4,800 metric tons of PL 480 Title II commodities to the WFP to assist drought-affected farmers and unemployed coffee plantation workers in Nicaragua, Honduras, El Salvador, and Guatemala. The estimated value of the food aid, including ocean freight, internal transport, storage, and handling is $2.1 million.

The August 15 WFP "Fact Sheet" reports that approximately 1.5 million people have now been affected by the drought and that approximately 700,000 people are in need of emergency food assistance. Assessments by USAID Missions tend to corroborate those numbers, which have increased over the past two weeks. The table below provides USAID Missions' summary figures on the number of people estimated to require short-term emergency food aid.

Country
Number of People Requiring Short-Term Emergency Food Assistance
Honduras
300,000
Nicaragua
206,250
El Salvador
200,000
Guatemala
65,000
Mexico
NA
Total
771,250

USAID's "Central America Drought 2001 Fact Sheet," dated August 9, 2001, provides an overview of drought conditions in Honduras, Nicaragua, El Salvador, and Guatemala, and the US Government response to these conditions. The following presents an update on new or changing conditions in the region, including Mexico.

HONDURAS

Overall Country Situation - Depressed international coffee prices have had a profound effect on the overall economic situation in Honduras. Coffee accounted for five percent of GDP in 1998; however, it is expected to account for three percent of GDP this year. The 60 percent decline in coffee export earnings since 1998 has gravely affected the governments' balance of payments and trade deficit. This has been exacerbated by a decrease in demand for Honduran apparel due to the slowdown of the US economy. Finally, yields in the important shrimp sector have diminished due to the drought. Evidence also exists that citizens are beginning to withdraw their savings from banks due to decreasing confidence in the economy.

The Drought - Extremely low rainfall during June and July has had a drastic impact on poor, subsistence farmers in southern, central, and western parts of the country - the non-grain producing areas of the country. This group of farmers supplements its income by wage labor on coffee farms but received little to no wages this past harvest season (November-March) due to falling coffee prices on the world market.

Actual figures on crop loss, food aid needs, and seed availability for the second planting season differ substantially. The US Department of Agriculture's Production Estimates and Crop Assessment Division (PECAD) predicts that corn production will be 23 percent below last year's level, while the Honduran Statistics Institute (INE) states that crop production is 50 percent below average production levels. The USDA PECAD team found that the major basic grain areas producing for the national market will have near normal grain yields. However, in areas heavily affected by the drought, crop loss is ranging from 70 - 100 percent.

The Coffee Crisis - Coffee prices are their lowest ever. Prices have slumped from an average of $1.25 in 1999 to lower than $.50 a pound today. The financial situation has worsened substantially for many farm families who subsist by producing corn and beans, and who normally migrate to coffee farms during November to March to supplement their income and to purchase livestock and other food and supplies. Last year, on average, coffee farmers received $.57 per pound while their production costs totaled $.55 per pound. Farm laborers were paid minimal wages. This year, prices will not cover the costs of production. As a result, we expect a sizable number of farmers will not hire laborers, but will either harvest the cherries themselves or abandon the trees.

The USG Response - USAID and USDA teams have carried out rapid assessments in drought-affected areas, and the USAID drought working group continues to monitor the situation and recommend appropriate actions based on findings from monitoring visits. USAID approved the transfer of Title II resources of 217 metric tons of food commodities from its regular program to CARE to respond to the drought emergency. The US Ambassador issued a disaster declaration for drought relief that supported the World Food Program's appeal for additional food aid contributions and provided $25,000 from USAID's Office of Foreign Disaster Assistance (OFDA) to purchase and distribute seeds. OFDA provided an additional $150,000 for seed purchase and distribution through Zamorano Agricultural School. USAID has provided WFP with 1,640 metric tons of food with a value of $712,000 for emergency food relief.

NICARAGUA

Overall Country Situation - With less than two months before national elections, the situation in Nicaragua can best be termed a crisis. The drought and low international coffee prices have led to large-scale unemployment, food shortages, bank failures, and both internal and external migration. Falling government revenues and dangerously low international reserves have drastically reduced the government's ability to respond to a troubled economy.

The Drought - Field visits to drought areas by OFDA and USAID/Managua during the weeks of August 20 and 27 confirmed that the lack of rain in the month of July has led to increased first harvest crop losses and deteriorating health conditions of people in drought areas. Municipalities listed previously by the Ministry of Agriculture as having 20 to 30 percent crop losses have moved into the 50 to 80 percent crop loss categories. The drought-affected areas cover the northern departments of Chinandega, Estelí, Jinotega, León, Madríz, Matagalpa, and Neuva Segovia, which are the same areas devasted by Hurricane Mitch.

The Coffee Crisis - The impact of the drought has been greatly exacerbated by the precipitous decline in international coffee prices. During the last 18 months, the price of coffee has fallen more than 60 percent, reducing foreign exchange earnings by $80 million and plunging rural areas into dramatic economic decline. Historically, larger coffee plantations generated employment for 80,000 people and have served as an important source of employment for small farmers and the landless poor. Half of the large plantations are not hiring workers at all, and the other half are working at only 40 percent of capacity. As a result, farmers and unemployed coffee workers continue to leave or be forced off coffee farms and are migrating to the department capitals or outside the country to seek employment and food.

USG Response - As an immediate USG response, $2 million of PL 480 Title II food stocks that arrived in Nicaragua on July 23, 2001 were reprogrammed to assist drought victims. This food will last until the end of September and will benefit an estimated 157,000 people under food for work programs. OFDA will provide new funding of $175,000, in addition to reprogrammed DA funds to procure seed and fertilizer for approximately 69,300 people to replant their corn, sorghum, beans, sesame crops. USAID has provided WFP with additional 740 metric tons of food with a value of $307,000 to benefit an additional 49,500 people.

Commodities under 416 (b) valued at $3 million are expected to arrive in late October. OFDA has also provided cash in the amount of $200,000 to the USAID Mission in case there are any delays in food deliveries at the critical second harvest period. Both USDA and BHR/FFP are working to expedite food shipments.

Internal and External Migrations - Reliable data on recent migrations resulting from the drought and high unemployment are difficult to obtain. Anecdotal information indicates that there has been a significant increase in legal and illegal migration to Costa Rica. Many rural communities visited by a USAID assessment team reported that between 15 to 30 percent of the adult population has migrated to Costa Rica in search of work. This indicates earlier than usual movement to Costa Rica for the annual fall coffee harvest and no doubt reflects the deteriorating economic situation in Nicaragua.

EL SALVADOR

Overall Country Situation - The drought seems to be localized, with assistance over the short-term in place. The economy is suffering as a result of the coffee crisis, but it is also being affected by the slow down in growth in the United States, its largest trading partner.

The Drought - El Salvador was touched less by the drought than some of the other Central American countries. The drought has affected four departments in the east of the country: La Unión, Morazán, San Miguel, and Usulután. Usulután is part of the area benefiting from earthquake reconstruction, including WFP and NGO feeding programs. The drought is localized, affecting 66 municipalities, of which 19 are deemed critical. The value of the lost crops is expected to reach $24 million. The government estimates that 75,000 people may need food assistance over an extended period, with another 200,000 people needing assistance over a shorter time. President Flores declared a "yellow alert" on August 9, stating that the situation did not warrant national emergency status. The next day, the Legislative Assembly passed its own resolution announcing a "national state of emergency."

To date, the Ministry of Agriculture has distributed enough corn to the 75,000 critically affected victims to cover a three-month period. It is developing public works programs in rural infrastructure for these families who were unable to plant this season.

WFP has reprogrammed sufficient food from existing program stocks to feed approximately 100,000 people for 3-4 months. The French Government will provide an additional 5,000 metric tons of food to the WFP, and Germany will donate $250,000 to WFP for procurement of local food. That and the recent USG contribution to the WFP regional appeal will feed another 100,000 for two months.

The Coffee Crisis - Coffee growing areas have been hard hit by the slump in world coffee prices. While earthquake and drought damage to the coffee crop has been minimal, the quakes did destroy market roads and coffee processing plants, providing an additional disincentive to harvest to the free-falling world market prices.

The USG Response - The USAID program in El Salvador is dedicated to the alleviation of poverty in rural areas, and as such has a wide variety of programs aimed at improving the quality of life in rural areas. The objective is to close the opportunity gap between urban and rural areas and reduce the need for citizens to emigrate to the city or abroad. As part of this program, USAID is providing limited assistance to coffee growers to help them diversify income sources and to produce higher value organic coffee for very specialized market segments. USAID has provided WFP with 1,290 metric tons of food with a value of $584,000 for emergency food relief.

Internal and External Migrations - Migration from El Salvador increased after the earthquakes in January and February 2001. The drought does not seem to have increased the flow. Normally, workers from the drought areas go to the coffee producing regions in the Western highlands. This flow may not take place as usual this season.

GUATEMALA

Overall Country Situation - The present crisis situation has resulted in a confirmed number of 41 deaths. On September 3, President Alfonso Portillo declared a nation-wide "State of Public Calamity" for a 30-day period to call attention to the poverty that affects the entire country. President Portillo plans to direct proceeds from the recent controversial increase in the value added tax (IVA) to address immediate needs of drought victims.

The Drought - The current drought has affected nine departments in Guatemala - El Progreso, Jutiapa, Santa Rosa, Baja Verapaz, Zacapa, Chiquimula, Jalapa, Retalhuleu, and San Marcos. The dry conditions are severely affecting Chiquimula, especially its two eastern municipalities of Camotán and Jocotán. Reports on localized areas of other departments indicate that up to 80 percent of the beans have been lost in Jutiapa, and up to 80 percent of the corn in El Progreso and Zacapa. At the national level, Guatemala will experience an estimated 5 percent decrease in corn production and a 1.5 percent decrease in bean production.

The Coffee Crisis - The drought conditions in Guatemalan coffee-growing regions, such as San Marcos, combined with the low world coffee prices, have led to a reduction of work opportunities on coffee farms. Many poor rural families derive a large portion of their livelihoods from this seasonal employment. The coupling of the drought and the coffee crisis have caused many communities to enter into short-term crisis situations.

USG Response - As part of a continual effort to assist Guatemala with its chronic malnutrition problem, the USG supports an ongoing PL480 Title II food aid program valued at $18 million this fiscal year. The food is used to address the root causes of chronic child malnutrition, including household poverty, a lack of nutrition education, and low access to health and sanitation services.

In direct response to the current crisis, US Ambassador Prudence Bushnell issued a disaster declaration for drought relief to provide $25,000 from USAID's Office of Foreign Disaster Assistance (OFDA) for the local purchase of medical supplies for acutely malnourished children in Zacapa and Chiquimula. USAID authorized Catholic Relief Services to use 311 metric tons of PL480 Title II rice, CSB, beans, and vegetable oil, valued at $142,298, already in-country to provide 30 days of emergency rations for 4,774 families in 147 communities in Zacapa and Chiquimula. The USG also approved a donation of 1,130 metric tons of yellow corn, beans, and vegetable oil valued at $520,000 to be distributed by the World Food Program. These commodities will arrive in country at the end of September through mid October.

Internal and External Migration - While precise numbers are not currently available, the USAID Mission reports that crises in rural communities are encouraging increased migration in Guatemala, including migration to urban areas, emigration to other Central America countries, notably Mexico, and emigration to the United States.

MEXICO

The Drought - There have not as yet been any indications of drought emergency in the southernmost states bordering Guatemala and Belize. High-level representatives from the International Boundary and Water Commission, which includes officials of both the U.S. and Mexico, met on March 16th, 2001, to examine the current problem of water along the border. At the meeting they agreed to identify measures of cooperation in the areas of drought management and sustainable management of drought-prone areas in the country. Another sub-group met on August 21, 2001, and agreed to form a task force to hold a summit focusing on drought management.

Footnote

1 Existing Title II food programs in Guatemala, Honduras, and Nicaragua are focused on chronic food insecurity conditions in these countries.

Annex #1

Map of Drought and Coffee Production

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