crops kept the traditional export sectors at a relative disadvantage. These distortionary policies took the form of financial subsidies, import tariff support and others. For example, the average producer subsidy from 1990-1998 was about 23% per unit price of rice, 57% for maize and 66% for chicken, while there was a negative subsidy (or tax) of 35% on coffee and 30% on sugar cane (see table I.9).<sup>15</sup>

**<u>Table I.9  Dominican Republic Producer Subsidy Equivalents 1990-1998</u>**

||Avg. % Subsidy<br>1990-93|Avg. % Subsidy<br>1994-96|Avg. % Subsidy<br>1996-98|Avg. % Subsidy<br>1990-98|
|---|---|---|---|---|
|ImportSubstitutes|||||
|- Rice|16.0|28.2|30.2|22.8|
|- Maize|73.7|43.4|40.9|56.9|
|-Garlic|47.8|25.2|24.7|35.2|
|-Onion|37.9|40.9|39.3|39.5|
|-Chicken|63.8|67.7|66.1|66.0|
|ExportCrops|||||
|-Coffee|-25.3|-43.0|-30.7|-34.9|
|-SugarCane|-23.9|-34.9|-34.9|-30.0|

Source: IADB (2001).

Thus, despite removal of export tariffs, implicit biases against the traditional sectors have persisted. We use the term “implicit biases” to emphasize the fact that non-traditional agricultural sectors have been receiving various forms of support from the public sector. It is not known the degree to which such biases led to reallocation of resources away from the traditional export sectors, but data on productivity growth in coffee and cocoa (shown below) show that they did not keep pace with competing countries.<sup>16</sup> However, it is important to highlight the fact that public and other resources have gone to the coffee and cocoa sectors during the 1990s. These resources came in the form of support from international development agencies and NGOs to the respective sectors. Most of these funds came in response to natural crises, such as weather and pests, or to adverse market conditions. This support came with the approval of government, and offset and compensated (to some extent) for the institutional biases noted above. What is not known is the full extent of the direct benefits received by producers through these different initiatives. While what is known is that much of the support to the coffee and cocoa sectors has been ad-hoc and not administered with a clear vision as to how they might impact the sectors – and different types of producers – and to what extent they complement other government policies and objectives.

In contrast to historical policy biases that “taxed” exports of coffee and cocoa, government has traditionally protected domestic processors targeting the local market. For example, tariffs on imports of coffee beans are 14% and for ground coffee 20%. Cocoa beans and butter and cocoa powder and chocolate face similar import tariffs. An additional 12% value added tax on imports further protects domestic coffee and cocoa processors from foreign competition. A detailed analysis of these import policies and the impacts on domestic and export coffee and cocoa markets and prices is recommended; especially considering the high degree of concentration of marketing structures in these sectors.

15 For details on producer subsidies and evidence that the support for import substitutes and bias against traditional exports existed previously in DR, see Valdes, Schaeffer and de los Santos (1995). 16 On the other hand, as pointed out in this report, comparing data on average yields as a proxy for productivity are rife with inaccuracies, especially in a country like DR with its periodic hurricanes that cause large scale damage to coffee and cocoa plantations.

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