Cashew Production, Taxation, and Poverty in Guinea-Bissau

Agriculture is the engine of Guinea-Bissau’s economy. The sector relies mainly on cashew nuts, rice, and the subsistence production of food crops. Cashews represent 90 percent of the country’s exports and the principal source of income in rural areas. Unfortunately, cumbersome administrative arrangements, weak legal systems, and an absence of credit often lead to high transaction costs for cashew buyers and exporters, which help decrease the farm-gate price of the raw nuts. This chapter provides a review of the cashew sector in Guinea-Bissau, as well as estimates of the likely impact of changes in farm-gate prices and export taxes on poverty among cashew producers and in the country as a whole. The chapter also notes that over the last three decades, the production of rice has significantly decreased in favor of cashew farming. This situation represents a threat to food security. For the rural sector to ensure food security and create new jobs, policymakers would need to adopt a coherent agrarian development strategy in the context of the PRSP, which would aim at rehabilitating and encouraging rice production, and also promoting the processing of raw cashews into exportable cashew kernels, in order to generate more value added in the cashew sector.