Managua, Nicaragua: ‘Prices are so low we have to grow more and more just to meet ends.’ That’s how a leader of a new Nicaraguan campesino organisation, FEDICAMP, describes the current situation for small farmers here.
Already struggling to complete with subsidised imports from the United States, small farmers in Nicaragua are concerned about the prospect of being inundated with corn and rice imports sold below costs of production if the Central America Free Trade Agreement (CAFTA) is implemented. CAFTA – referred to as El TLC, the free trade treaty in Spanish – is already well known and much feared in Central America. The roadsides in Managua are full of graffiti denouncing the agreement. The favourite is ‘TLC = miseria’ (CAFTA equals misery).
The ruling governments in Central America, however, celebrate CAFTA. Ministers argue that CAFTA will help consolidate democracies in the region and open a new path for development. ‘This is the consolidation of a very difficult, very grave process that for some of our neighbours started with civil war. It has taken courage and vision to get to this point,’ Alberto Trejos, Costa Rica’s Trade Minister, told reporters.
The future of FEDICAMP and other small farmer organisations – and of Central America’s heavily rural population – rests on which assessment of CAFTA is right: misery or opportunity.
‘Where there is no balance of power, negotiation is imposition,’ says Carlos Pacheco of the Center for International Studies in Managua, Nicaragua. It would be difficult to find another multilateral negotiation process with less ‘balance of power’.
The US economy is a global behemoth, topping $11 trillion in 2003 and accounting for nearly 70% of the gross domestic product (GDP) of the entire Western Hemisphere. Meanwhile, the combined GDP of countries in Central America was $58 billion in 2000 – smaller than the total income of just two US-based agriculture companies that will benefit from the accord: Cargill and Archer Daniels Midlands. The smallest economy, Nicaragua, produces just $3 billion a year in goods and services.
Politically, the elite of Central America are also historically dependent on the United States, with Costa Rica being something of an exception. Inequality and dependence played themselves out most clearly in CAFTA’s agriculture negotiations, where Central America had arguably the most at stake.
During informal talks that preceded the launch of official negotiations, the Federation of Central American Agricultural Producers lobbied hard for a separate negotiating table for agriculture. The USTR (United States Trade Representative) refused, requiring agriculture to be placed along with other contentious items, such as textiles, into a single Market Access Table – a single negotiation over tariff issues.
Central American negotiators then attempted to create a list of sensitive agricultural products they hoped to exclude from the agreement until the United States opened discussions on domestic agriculture subsidies. For example, groups such as the Nicaraguan Agricultural Cooperative Federation pressed for the exclusion of white corn, red and black beans, rice and dairy products. The USTR refused, requiring that all products be ‘on the table’ for negotiations.
In the end, the USTR did agree to a gradual rather than immediate elimination of tariffs on some sensitive products, extending deadlines to 15 and 20 years in some cases. However, even this ‘concession’ is not secure. Chapter 19 of the agreement grants the Free Trade Commission, which will administer CAFTA, the power to accelerate tariff elimination.
Thus, from the opening, the negotiations were framed to exclude the most fundamental of Central American agricultural demands. What was left to Central American negotiators was to bargain as a unit in order to strengthen their positions on the remaining details. This too fell by the wayside as the USTR opened bilateral talks on market access with individual country teams, effectively playing one country against the other. The result, evident in the final agreement, is a patchwork of market access rules with minimal concessions from the United States.
Another result of this divide-and-conquer strategy was to seriously reverse the process of regional economic integration in Central America by making a unified tariff structure – with the countries eliminating tariffs between each other and maintaining a single tariff structure for imports from outside the region – nearly impossible. The irony is that the Bush administration promoted enhanced regional integration as one of the goals of the talks.
Stark inequality, unfair competition
A popular education piece on CAFTA and agriculture published in Nicaragua asks, ‘Is CAFTA competition or a massacre?’ – comparing the agricultural sectors of Nicaragua and the United States. The level of inequality between the two countries, and between the United States and the rest of Central America, is stark.
‘CAFTA will force farmers in the region to compete, not against US farmers but against US taxpayers and the world’s most powerful treasury,’ Stephanie Weinberg of Oxfam America told congressional staff in a January briefing. Average US subsidies to its agriculture sector dwarf small farmer income in Central America. While the average farmer in Nicaragua struggles to earn $400 a year in income, government-funded producer supports in the United States averaged $20,000 a farm from 1999-2001, according to the annual report of the Organisation of Economic Cooperation and Development (OECD, a grouping of rich countries). (However, the average figure obscures extreme inequality; the vast majority of US farmers receive less than $1,000 a year.)
The inequality between agricultural sectors in the United States and Central America goes well beyond the issue of subsidies. When measured as a factor of labour productivity (value of production per worker), farm output in Nicaragua is 2.76% that of the United States. This enormous gap is the result of much heavier use of fertilisers and the mechanisation of agriculture in the United States. In the United States, there are 1,586 tractors in use for every 1,000 workers in the agricultural sector. In Nicaragua, the number is 3.87. The gap in breeding and biotechnology research also affects these production numbers, in ways that may have profound effects if CAFTA comes into force.
The tale of the ‘rojo chiquito’, or small red bean, illustrates what is at stake. Researchers at the University of Washington developed the rojo chiquito under a US Department of Agriculture-funded research programme. The rojo chiquito is the first red bean that will grow in the United States that has the same qualities as red beans from Central America. The USDA’s Agricultural Research Services news release on the discovery of this strain in April 2002 stated, ‘Rojo chiquito is primarily intended as an edible dry bean crop that US farmers can grow for export markets in Honduras, Nicaragua, El Salvador and other Central American countries.’
While not a major news item in the United States, a front-page article in El Nuevo Diario in Nicaragua denounced the rojo chiquito as potentially more devastating than Hurricane Mitch. Farmer groups fear US imports will knock local farmers out of business and off the land. Alvaro Fonseco of the Foundation for Rural Social and Economic Development in Nicaragua claims that the livelihoods of 200,000 farmers are at stake.
Given the gross agricultural inequalities between the United States and Central America, in Central America, even CAFTA supporters are nervous.
‘The level of asymmetry is obvious,’ says Oscar Aleman, an external commerce specialist in Nicaragua, and one of the pro-CAFTA voices in the country. ‘The US has to start from reality, even for its own sake. Unless it develops an economic cooperation plan that will level out inequalities through investment and technical transfers, the resulting job losses and further depression in Central America will only increase the pressure of migration on its own borders.’
Evaporating jobs in the countryside
Across the region, tariff elimination, even if phased in for some products, ultimately will mean people in rural areas lose their land and jobs.
Consider the impact of the North American Free Trade Agreement (NAFTA) in Mexico. The collapse of corn prices following the influx of US corn has cost 1.7 million Mexican agriculture jobs, with almost 15 million small farmers losing significant income.
‘If CAFTA were to go into effect today,’ says Alvaro Fiallos, the president of Nicaragua’s Union of Farmers and Ranchers (UNAG), ‘420,000 Nicaraguan agricultural sector jobs – including those of the producers themselves – could just disappear, increasing migration to the cities, Costa Rica and the United States.’
Oxfam researchers estimate the immediate loss of 22,000 jobs and as many as 80,000 over five years. This would be in addition to the loss of hundreds of thousands of jobs in domestic production. These job losses will exacerbate an already desperate situation. The region is already suffering from the loss of 600,000 jobs in recent years from the international collapse of coffee prices.
Meanwhile, Central America’s elite exhibits little concern. Costa Rica’s government, for example, has refused to protect its corn producers for years, siding with ranchers who demand access to cheaper livestock feed. As with the rest of the region, Costa Rican farmers fear CAFTA will put the nail in their economic coffin.
The World Food Programme estimates that one in four people in Central America – 8.6 million people – suffers from hunger. The vast majority of the hungry live in rural areas. Some CAFTA proponents say these people will benefit from the lower prices that the agreement will usher in. But lower commodity prices typically do not translate into lower marketplace prices for food.
In Mexico under NAFTA when the domestic price for corn fell, the price of corn food – especially the Mexican staple, the tortilla – did not decrease; in fact it increased 279%. The reasons for the price hike was the decline in government subsidies to tortilla producers, and the fact that the market is highly concentrated – two companies control 97% of the market.
Even without CAFTA, multinational corporations are already grabbing control domestic food markets in Central America. Cargill has bought interests in Nicaragua’s poultry company Tip Top, and is seeking to purchase the regional giant Polio Campero, currently a Guatemala company. The dairy industry giant Parmalat controls the only dairy processing facility in Nicaragua with the capacity to meet pasteurising requirements for entry into US markets, and is the main supplier of domestic dairy products.
Countries in Central America are losing the capacity to supply food from domestic stocks at reasonable prices every day. CAFTA will accelerate this process dramatically.
There is little reason to doubt that implementation of CAFTA will result in widespread displacement in rural areas of Central America. Farmers in Nicaragua and elsewhere in the region understandably are not eager to participate in such an experiment, which, in a best-case scenario, will cost tens of thousands their land and, in a worst case, will cost them their land without providing employment alternatives. Given the dismal record of economic neoliberalism in the region so far, that worst-case scenario seems to many to be the one likely to be realised. – Third World Network Features
About the writer: Tom Ricker is policy coordinator for the Hyattsville, Maryland-based Quixote Centre.
The above article first appeared in Multinational Monitor (April 2004).