Agroindustrial project analysi

THE PROCESSING FACTOR 125labor permutations for capital intensity. The wide variations incapital and variable costs that exist among similar or different processesare illustrated in appendix A. (The cost estimates providedin the tables of appendix A are reference data for costing comparablefood-processing technologies.)A project can often save significant capital-without sacrificingproduct quality or jobs-by purchasing used machinery. High laborcosts in more industrialized nations put a premium on labor-savinginnovations; hence, manufacturers purchase new machinery tocompete. Although the equipment displaced by this practice is noteconomically viable in the industrialized market where it originated,it can be viable in the less industrialized nations. These nationshave lower labor costs and are willing to install the laborintensiveequipment for both financial and social reasons. The usedequipment does not alter the quality of the end product but simplytakes advantage of the cost differentials between factors; what hasbecome inappropriate technology for one environment can be quiteappropriate for another. For example, a Colombian textile manufacturervisited by the author purchased a large equipment complexfrom a U.S. textile firm that was shifting to a newer, labor-savingtechnology. The capital savings to the Colombian firm from purchasingused equipment were sufficient to pay for the training ofworkers in disassembly and operation of the equipment, the freightcosts, and the reassembly and installation of the whole equipmentcomplex.There are several reasons why secondhand equipment is not purchasedmore frequently. The information on the kind and qualityof available equipment is frequently scarce, and the purchaserfrom a developing country may have to travel to the industrializedcountry to inspect the machinery. The supply of replacement partsfor older machinery may be difficult to obtain. 7 Policymakers orplant engineers may psychologically view used equipment as "lowstatus" or "unprogressive." 8 In this case, the analyst should remind7. The analyst should verify the availability of parts and servicing (relativeto costs and quality) of any imported versus local equipment, whether theimported equipment is new or secondhand.8. Louis T. Wells, Jr., "Engineering Man vs. Economic Man," in Timmerand others, The Choice of Technology in Developing Countries: Some CautionaryTales, Harvard Studies in International Affairs, no. 32 (Cambridge,Mass.: Harvard University, Center for International Affairs, 1975), pp. 319-42.