Saturday, October 14, 2006

DR-CAFTA's negative impact on Salvadoran farmers

A recent article from the Inter Press Service looks at the impact of the DR-CAFTA free trade agreement in the first year of its implementation. The article points to evidence that cheap agricultural imports from the US are threatening the existence of small corn and rice farmers in El Salvador:

The massive influx of U.S. goods demonstrates the competitive disadvantage under which small Salvadoran farmers must labor, and they feel their future to be most uncertain.

For example, Miguel Alemán, a leader of the Confederation of Agrarian Reform Federations, said, "a sack of fertilizer cost 18 dollars last year, and now it's gone up to 23 dollars. We were selling a hundredweight (quintal) of creole maize at 11 or 12 dollars, but this year it's only worth 8.50 dollars."

"Under CAFTA, U.S. maize sells in El Salvador at 6.40 dollars, so who's going to buy from us?" the small farmer asked. "Last year I cultivated just under a hectare of maize for my family's own consumption, but I'm not going to do that any more because it's not cost-effective," he added.

"In five years' time we'll be completely bankrupt, there will be a production crisis and we won't be able to guarantee food production to feed the country," warned Alemán.

Figures from the U.S. Department of Commerce show that El Salvador exported goods to the value of 984 million dollars to the U.S. between January and June 2005, while for the same period this year, with the treaty in force, only 798 million dollars were exported.

In contrast, purchases by El Salvador from the U.S. totalled 956 million dollars in the first six months of 2005, increasing in the first half of 2006 to 1.07 billion dollars.

During its first year, CAFTA-DR provides for up to 35,000 tons of white maize, 350,000 tons of yellow maize, 10 tons of milk and close to 65,000 tons of rice to be exported tariff-free from the U.S. to El Salvador, among other products, most of which are already sold in the country.

Afterwards, these "quotas" will be increased by between one and 10 percent a year, for the 20 years' duration of the agreement.

According to a study by [economist Raul] Moreno, imports of white maize, sorghum and rice under the treaty will eliminate 92,471 jobs a month during the first year of DR-CAFTA, and thereafter there would be further job losses of 1,557 a year, on average.

The numbers forecast tough times ahead for El Salvador, in spite of the government's enthusiastic arguments infavorr of the free trade agreement.(more)

There is a dilemma here. The majority of El Salvador's population is not agricultural and is not growing corn, rice and beans. Instead, they are buying those products. Since the impact of inflation on the poor is a real problem for the country, lower prices for food, would seem to be a good thing, even if that food is imported from the US. Yet lower corn and grain prices drive small producers off their farms and increase urban poverty in the country or increase emigration to the US.

The way to deal with this dilemma must be to provide support, subsidies and training to the Salvadoran farm sector to allow it to produce foodstuffs at lower prices. Improve the system of farming in the country, rather than taking steps which drive up the price of basic food items. If we want to have lower food prices for all Salvadorans and to support the small, rural farmer, it is more important to modernize farm production than to re-impose the old trade barriers. Unfortunately, the Salvadoran government has lowered the trade barriers but has not shown any type of concerted effort to support the small farmers who are being negatively impacted.


Miguel Lerdo said...

In a country with so many dire needs, is subsidizing the production of overpriced corn the best use of its resources?

Justin Delacour said...

I think you're missing the point, Miguel. The United States subsidizes the production of its corn, which in turns drives down the prices of its exports of corn and thereby puts other country's corn farmers at a competitive disadvantage.

Dr. Mathews said...

Just brainstorming a bit, what if Salvadoran farmers switched to producing higher value added specialty and non-traditional fruits and vegetables to export to the US market? With the US population aging, I can see the possibilities for creating a demand over there for healthy "exotic" fruits and vegetables that the US public is unfamiliar with.