USAID CBJ FY 2002: Guatemala

Summary: Poverty in Guatemala is pervasive and severe. The 1998/99 Demographic Health Survey (DHS) showed that 67% of indigenous children under 5 years of age are chronically malnourished. This is strongly linked with the greater probability of indigenous and rural populations being poor. Access to land and credit is out of reach for those living in rural areas. The lack of adequate economic opportunity to produce sufficient food or to earn enough income to purchase food contributes to malnutrition. The poor in Guatemala spend 70% of their total income to purchase basic foods that are often of low nutritional value.

This objective is to increase the capacity of a significant number of poor rural families, particularly women and indigenous people, in selected areas of the country to improve their income and food security. Many of the target communities were also those most affected by the civil conflict. The direct beneficiaries of actions under this objective will be small farmers, microentrepreneurs, and food aid program participants. The indirect beneficiaries will be rural communities living within the selected geographic areas of intervention.

Key Results: (1) Small farmers engage in higher-value production, secure land titles, use sustainable agricultural production practices, and use market information to increase sales; (2) Microentrepreneurs expand their businesses by accessing financial and technical services; (3) Market towns stimulate economic activity by attracting public and private investments; and (4) Improved family nutrition supported by food aid programs to reduce chronic malnutrition in children under five years of age.

Performance and Prospects: This objective has exceeded anticipated results both in terms of quantifiable targets and other identifiable impacts. Through Food for Work agriculture development and microenterprise programs supported by P. L. 480 Title II, 51,575 families have improved incomes and child nutrition. In Barillas and the Ixcán, income generation activities since 1996 have had a dramatic effect on the local economy. In Barillas, local farmers' exports of organic coffee and local returns to cardamom exports have increased. Small coffee and cardamom farmers obtained organic certification. Coffee growers produced over 287 metric tons of higher-priced organic coffee, which the small farmers association exported to the U.S., helping to insulate producers from the drop in world coffee prices. Over 45 metric tons of organic cardamom was marketed, double the 1999 amount. In the Ixcán, USAID assistance helped improve the farm-to-market road infrastructure and boost local investment. Both towns are now vibrant economic centers with new bank offices opening and a burgeoning microenterprise sector drawing on increased farm incomes and demand for goods and services. Not only did the number of small farmers engaged in higher value production exceed the FY2000 target, planned numbers of microentrepreneurs expanding their businesses were exceeded (73% of those served were Mayan, 34% women). The actual level of new public and private investment in market towns was $4.0 million, double the target.

The programs implemented by P.L. 480 Title II partners (CARE, Catholic Relief Services, the Self-Help Resource Exchange (SHARE), and Save the Children) continue to form the primary basis for outreach to the rural poor. During 2000, USAID provided a monthly food ration and health education to 56,891 mothers and 91,864 children, and responded to an emergency food shortage in Chajul. In addition, Food for Work rations were provided to 51,575 workers and their dependents. All programs provided income generation and education interventions enhancing food security to improve the family's livelihood, while promoting sustainable agriculture practices and microenterprise development.

Key actions were completed in 2000 to replicate the Barillas/Ixcán experience in nine other market towns, as USAID expands technology, market, and financial services to small farmers and micro-entrepreneurs to these areas. Under the program, subgrants to local NGOs provide expanded technical and financial services, taking advantage of the conditions that are favorable to both rapid growth and to efficient conversion of growth into poverty reduction. These conditions include highly productive soils and climate, high population density, and relatively equal distribution of land and income. Small farmer coffee and horticulture activities form the core of the strategy, increasing incomes of this population who will, in turn, increase their demand for employment-intensive rural goods and services.

The key to success of the SO will be the strategic and catalytic provision of technical, financial, and marketing services. On the technology and marketing side, the National Coffee Association (ANACAFE) and Nontraditional Exporters Guild (AGEXPRONT) are playing key roles, providing technical assistance in production and marketing. The Rural Development Bank (BANRURAL) remains a principal partner for increasing access to financial services. During 2000, USAID also provided direct grants to two Guatemalan NGOs, which together are assisting 19,295 microenterprises, particularly ones owned by women, to respond to increased demand from the small farm sector. Prospects for expanding the impact of the program in 2001 and achieving sustainable increases in rural income by the year 2003 are excellent. Relations continue to be excellent with the Ministry of Agriculture (MAGA), which is committed to land issues and looks toward USAID support as a key means of reestablishing small farmer technology transfer services. MAGA's private extension services will be fully functional during 2001 despite significant personnel turnover in the Ministry, and a major expansion of activities supporting increased small farmer land titling and land conflict resolution are anticipated in the target area.

Some of the major constraints faced by small and microenterprises are: (1) lack of access to credit and savings facilities; (2) weak microfinance intermediaries, and; (3) limited access to technology. USAID's strategy seeks to promote financial intermediation in rural Guatemala by increasing the availability of financial services from private sources. USAID promotes financial intermediation through commercial banks, savings and loan cooperatives and microfinance NGOs through various mechanisms. These include technical assistance for institution-building to promote profitable intermediation; increasing the availability of funds through a market-price delivery system; creating a small incentive fund to promote rapid institution transformation;introducing microfinance technologies in commercial banks and savings and loan cooperatives; and supporting a network of business centers in rural areas. Internet business centers are being established in four market towns, which will provide up-to-date market information to rural based businesses and the possibility of marketing their products and services at reduced costs.

Of the $4,780,000 DA funds for FY2001, $2,868,000 will support higher-value production, secure land titles, and promote use of sustainable agricultural production practices for small farmers; of this amount, $370,000 will directly support activities to improve coffee production among small farmers, including technification and marketing services. The remaining $1,912,000 will be provided to support microenterprise, financial and technical services.

Of planned FY 2002 obligations of $3,500,000 in DA funding, approximately $1,600,000 will go to promote higher-value production and use of sustainable agricultural production practices for small farmers; another $500,000 will be used to assist policy reforms to support agricultural diversification and marketing. Some $1,400,000 will be used to support microenterprises, including both credit and NGO delivery of business services to microenterprises.

Possible Adjustments to Plans: Low world coffee prices and the impact of the GOG's failure to meet increased revenue targets could limit public, private and local investment in the strategy's target geographic areas during the coming year. Large parts of these target areas suffer serious productive infrastructure constraints that limit the marketing of agricultural products. During 2001, USAID plans to address this constraint by providing technical assistance to municipalities to design and implement projects that support economic development and investment, such as farm to market road upgrades.

Other Donor Programs: The Mission coordinates closely with the World Food Programme on food aid issues; the World Bank, Inter-American Development Bank (IDB), GTZ, and the Netherlands on land titling, watershed management issues and activities in the Petén; the IDB on activities in Huehuetenango, the Ixcán and watershed management issues; the IFAD and GTZ on activities in Quiche and Alta Verapaz; and the EU on activities in the Petén. USAID continues to provide approximately 20% of all donor contributions that currently support Guatemala rural household income and food security activities.

Principal Contractors, Grantees, or Agencies: Implementing U.S. organizations supporting this objective are: Cooperative Housing Foundation (CHF), CARE, Catholic Relief Services (CRS), the Salesians Missions, Abt Associates, SHARE, Feed the Children, and Save the Children. Guatemalan and other organizations include: National Coffee Association (ANACAFE), Banco de Desarrollo Rural (BANRURAL), the Guatemalan Nontraditional Exporters Association (AGEXPRONT), and the Canadian Center for Studies and International Cooperation (CECI).

FY 2002 Performance Table

Guatemala 520-004

U.S. Financing

(In thousands of dollars)

	Obligations		Expenditures		Unliquidated
Through September 30, 1999	8,365	DA	1,490	DA	6,875	DA
	0	CSD	0	CSD	0	CSD
	0	ESF	0	ESF	0	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA
Fiscal Year 2000	3,570	DA	1,932	DA
	0	CSD	0	CSD
	0	ESF	0	ESF
	0	SEED	0	SEED
	0	FSA	0	FSA
	0	DFA	0	DFA
Through September 30, 2000	11,935	DA	3,422	DA	8,513	DA
	0	CSD	0	CSD	0	CSD
	0	ESF	0	ESF	0	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA
Prior Year Unobligated Funds*	0	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
Planned Fiscal Year 2001 NOA	4,780	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
Total Planned Fiscal Year 2001	4,780	DA
	0	CSD
	0	ESF
	0	SEED
	0	FSA
	0	DFA
			Future Obligations		Est. Total Cost
Proposed Fiscal Year 2002 NOA	3,500	DA	4,742	DA	24,957	DA
	0	CSD	0	CSD	0	CSD
	0	ESF	0	ESF	0	ESF
	0	SEED	0	SEED	0	SEED
	0	FSA	0	FSA	0	FSA
	0	DFA	0	DFA	0	DFA

Guatemala

Activity Data Sheet

FY 2002 Performance Table

Guatemala 520-004

U.S. Financing