Economic and financial sustainability of private agricultural extension in El Salvador

Since the beginning of the 1980s, El Salvador has shown a dramatic decline in the public funding for agricultural extension. This process follows a worldwide tendency to reduce the public sector involvement in agriculture. To respond to the reduction in public expenditure in extension programs, a privatization process has been proposed as a feasible alternative for agricultural development. The main purpose of this paper is to evaluate the sustainability of the Farm Management Center (FMC) model as a specific private agricultural extension option in El Salvador. To pursue this objective, an ex ante economic and financial cost-benefit analysis based on a multiperiod linear programming model is performed. The general results of this study suggest that a combination of better farm prices (paid and received), reallocation of resources, and crop diversification, which would be promoted by an FMC, can lead to an increase in farm level profits that is sufficient to cover the operation of a private farm management center while also generating net gains in household income. It is important to point out that public support is crucial as an initial injection to get the FMCs started. Moreover, this public Support Could help to break the inertia typically shown by peasant farmers to get involved in new endeavors.