Envío Digital
Central American University - UCA  
  Number 267 | Octubre 2003



"We're Saying No to CAFTA With Arguments and Conditions"

The president of the National Union of Farmers and Ranchers (UNAG), discusses the reality of agricultural production in Nicaragua and this sector’s proposals and concerns related to the US-Central American Free Trade Agreement currently being negotiated.

Alvaro Fiallos

In UNAG we have analyzed the advantages and disadvantages of the Central American Free Trade Agreement (CAFTA) with the United States—which we’re already unfortunately calling by its English rather than Spanish acronym. For eight months we toured the country and met with 640 grassroots peasant leaders affiliated to UNAG to discuss the agreement. Some of them say a categorical “no” to CAFTA, without attempting any other interpretation, but not a single UNAG leader or member is totally in favor of it. There’s a wide gamut of positions.

This intense and prolonged discussion has enabled us to adopt a common position that we have presented to the Nicaraguan government and the international community. We’re not saying a mere ideological “no,” but rather a “no” with conditions, with arguments, a “no” that we’ve been putting together based on the productive sector’s reality. Unfortunately, although the rationality of our proposals has been recognized, both the US negotiators and the Presidents of the Central American countries have asserted and reasserted that CAFTA will be signed in mid-December, despite all the remaining contradictions and incoherencies.

Complex, multilateral negotiations
that are more political than economic

The CAFTA negotiations are more political than economic and the final decisions will be fundamentally political as well. This means that the Central Americans are not presenting a united position, because the correlation of political forces in each country is different, as are their current political situations. In the fourth round of negotiations, for example, Guatemala unexpectedly proposed totally opening its borders to US products. On the eve of very delicate Guatemalan presidential elections and with the Guatemalan government under US scrutiny for alleged drug-trafficking links, Guatemala unilaterally decided to offer economic advantages to the United States in exchange for the US softening its position against the government.

The negotiations are complex because they’re multilateral, and many, many actors are involved. As a result, the Nicaraguan agricultural sector has had to approach the talks by playing on different levels at the same time. On the first level, we’re trying to reach agreement among all of the country’s agricultural organizations, but despite our many common interests, this isn’t so easy given Nicaragua’s political polarization. For many years UNAG, which was founded in 1981, was an FSLN grassroots organization, mainly consisting of agrarian reform beneficiaries. But although our links to the FSLN have been transformed since 1990 and we’re now autonomous, with our own dynamic, and although we advocate a trade-association ideology, the original affinity remains and political ideology dominates. Of the total UNAG members, 85% are Sandinistas, of which 60% are of the “orthodox” line associated with FSLN general secretary Daniel Ortega. The other big agricultural producers’ organization is UPANIC, which is part of the Superior Council of Private Enterprise (COSEP) and mainly consists of large producers affected by the agrarian reform. Such contrasting historical backgrounds mean that whenever we sit down together for any activity, whenever we hold talks to form strategic alliances, there are always suspicions that “he took my land,” on the one hand, and “he wants to evict me from my land,” on the other. It’s extremely difficult to form an alliance with the big private businesspeople from UPANIC under such conditions. We can join forces to carry out certain concrete, very specific and isolated actions, but nothing more.

On the second level of negotiations, we have to reach agreement with agricultural sector organizations from other Central American countries, though they haven’t yet achieved the level of trade-association organization that exists in Nicaragua. On a third level, we have to negotiate with our government, which at the end of the day has the decision-making power and in turn has to negotiate with the other Central American governments. And after all this, the Central American countries have to negotiate as a region with the United States. The negotiation of this agreement is not at all easy, unlike most of the negotiations around the Nicaragua-Mexico free trade agreement of 1997.

It’s only fair to admit that the Nicaraguan government has been the most open Central American government in the CAFTA negotiations, allowing the most participation for the national private sector and social organizations in the sense of sharing information and permitting a certain degree of discussion. Nonetheless, the information we’re getting isn’t enough. We’re informed, for example, that “we have now agreed on the mechanisms for resolving phytosanitary controversies,” but that’s all we’re told, not which mechanisms were agreed on. Generally speaking, the most valuable information we get doesn’t come from official channels, but from personal connections and previously-established friendships.

The current state of play
in the agricultural sector

What is the agricultural situation as of the seventh round of negotiations that took place in Managua in mid-September? The Central American and US government negotiators reached the “great agreement” of establishing four “baskets” of agricultural products, known as A, B, C and D, including D*, each of which has a different time frame for dropping the tariff barriers. The import duties will be eliminated totally and immediately for the products in basket A , over 5 years for those in basket B, over 10 years for those in basket C, over 12 years for those in basket D and over 15 years for those in basket D*, which contains the most “sensitive” products.

But tariff elimination, while important, isn’t the only issue or even the main one. In UNAG we’ve been increasingly compacting and simplifying our position to leave no room for error. And although we accept that no protection should be indefinite, we propose clearly and as a priority that Nicaraguan agricultural production requires a good level of protection from US exports.

Pitahayas, Chontales cheese and sugar:
The limited benefits of tariff-free exports

The negotiation reports say things like “Authorization was obtained to export such and such a product.” And in the sixth and seventh rounds of negotiations it was celebrated, for example, that Nicaragua has been immediately authorized to export “pitahaya” [a purple cactus fruit whose pulp is used for making fruit juice] to the United States duty free. But the most we can currently export is $40,000 worth of pitahaya, which in time might rise to $100,000. This is naturally a positive development for pitahaya producers, but it doesn’t mean much for the country’s economy.

We were also “authorized” to export cheese from the department of Chontales immediately and duty free, which means not only matured cheese, but also the traditional “green” or unripened cheese, but it will have to come from a pasteurizing plant rather than from the area’s rudimentary cheese makers. While this is obviously best for human health, it means that the only beneficiary of the authorization will be PARMALAT, a transnational company that has Nicaragua’s only pasteurizing plant. Converting all of the unpasteurized cheese production in Chontales to involve the required process will take many years.

Finally, we were “authorized” to export sugar. But is the San Antonio sugar refinery really interested in exporting sugar? Surely it is more interested in producing it for domestic consumption. Why? Because with the international sugar price at $10 a hundredweight and the Nicaraguan price at $23, it makes a killing selling sugar at home. With this price differential, Nicaraguan sugar consumers are subsidizing the powerful Pellas Group, which owns the refinery, to the tune of $180 million a year.

We need protection from imported products
because of unequal production and technology

Nobody denies that exporting to the United States is a great economic benefit, a major advantage for national production, regardless of the products we export. It is an even greater advantage when we can export our products free of entry tariffs. Our concern isn’t exportation, but rather importation.

We need protection from imported US products because of the inequalities that exist between Central America and the United States. While Nicaragua’s national average production rate for maize is 42 hundreweight per acre according to the Agricultural Ministry, the national average in the United States is 200 to 250. To these production volumes we have to add the subsidy US corn producers received. But there’s also technological inequality. According to the agricultural census, Nicaraguan producers with farms of over 85 acres have an average of only a thousandth of a tractor per farm, while the average in the United States is four pieces of agricultural machinery per producer! What’s more, the newest tractors in Nicaragua came into the country 14 years ago. How can we be competitive in such conditions?

Another of the products we’ve been “authorized” to export is peanuts, 34,000 acres of which are currently sown in Nicaragua. We’re the only country in Central America that exports peanuts, a good part to Mexico and the rest to Europe. Now we can export a quota to the United States, which is obviously very positive, but how can we exploit this opportunity? Naturally, by increasing the area of cultivation, which is currently very limited. But the peanut is a crop that requires a high level of mechanization, which in turn requires enormous investment in machinery and other technologies to increase the area of cultivation, and peanut producers just don’t have the capacity to make that kind of an investment.

Contradictions among the economies
and the need for a unified tariff rate

What kind of protection are we asking for? The easiest of all is to place an import duty on US products sold in Nicaragua. Under what terms? We need an average tariff base of 40%, which would have to be applied across the board in Central America. And that’s where we run up against another of CAFTA’s great problems: the Central American sphere of negotiation. The Central American economies aren’t homogeneous: they have different production, different tariffs and different legislations. There are big contradictions among the Central American economies and this is repeatedly reflected at each step of the talks. It was agreed that as of January 1, 2004, there would be no customs checks between the Central American countries and it is assumed that from that date there will be no internal Central American tariffs. Will such an advance really be possible? In whatever time scale this goal is achieved, we will need to have a single tariff rate for agricultural products coming in from outside the region. We’re proposing a regional average of 40%.

Beef offers one of the best examples of the need for a unified rate. At the moment, Nicaragua, which produces beef, has a 30% tariff rate on imported beef, Costa Rica, which produces less, has a 15% tariff. But El Salvador, which virtually doesn’t produce beef, wants to eliminate the tariff because it’s more interested in reducing beef prices than in protecting its handful of ranchers. In this case, if the customs offices are eliminated but we don’t agree on a unified tariff for imported products, someone could purchase beef in Uruguay, where it is very cheap, then export it first to Costa Rica, where the tariff is 15%, and from there introduce it tariff-free to Nicaragua, which would effectively bankrupt our national industry.

Protection not just for raw materials
but also for transformed products

We need protection not just against raw materials, but also against all transformed and industrialized products on the agricultural foods chain. We’re not just calling for protection of our maize. Nicaraguan maize is not being ruined by maize imports, but rather by the importation of Mexican MASECA corn flour, because while imported maize is subject to a 30% tariff, Mexican corn flour has no tariff at all because of the free trade agreement with Mexico. We did a study of a group of tortilla makers in a neighborhood of the city of León. MASECA representatives had given them free corn flour to work with for a month. All of the women felt it was an improvement as they didn’t have to go buy maize kernels, then soak them in lime and grind them. It was much easier to make the tortillas with the already prepared flour. It had an immediate effect and the following month none of them wanted to go back to buying the grain; they all started buying corn flour.

There are also other forms of non-tariff protection, such as quality norms and sanitary measures that can be used to hinder the introduction of any product without committing the commercial “sin” of imposing a high tariff. There is now an international reference institution, the World Trade Organization (WTO), which is responsible for setting the norms of the international tariffs policy, imposing fines and punishments for those who fail to comply. Any tariff we establish in the region must now be in line with the WTO norms, but there are always non-tariff alternatives. In the case of maize, for example, Nicaragua could establish that a certain kind of maize that is to be introduced does not comply with our quality norms because it has been stored for so many years or because it’s a different kind. There are always ways out if the will exists to protect national production.

We won’t be competitive
without productive conversion

UNAG is arguing that the protection given to our products must be closely linked to three aspects: productive conversion, Central American integration and the reduction of agricultural subsidies in the United States. If this is really an issue of “free trade,” then Nicaraguan producers must be protected until they can convert their productive units. Each producer has to be given the possibility of modernizing his or her farm with machinery, implements and modern technology to avoid soil erosion, guarantee water retention, etc. until they have caught up in terms of competitiveness. It has been over 20 years now since Nicaragua has had a long-term financial credit program that allows producers to invest in their farms, which are now practically obsolete. Such prolonged abandonment has led producers to sow when they can rather than when they should; to control pests when they can, not when they should; and to sow the seeds they can get rather than those they need. And all of this makes them totally inefficient.

The governments of Nicaragua have limited themselves to saying that “national producers are inefficient” without looking for a real solution to the problem. We have calculated that the productive conversion of all Nicaraguan producers—large, medium or small—with long-term credits would involve a total of $835 million, an amount considered conservative by the government and the international community. But funds aren’t enough. There’s also a need for an institution, a development bank, whatever you want to call it, to manage those funds, because the private banking sector will never risk managing this kind of very high-risk credit; it can only be assumed by the state. Furthermore, the Nicaraguan state has to invest in infrastructure—highways, local roads, bridges, ports, electricity, communications—to guarantee the country’s productive modernization. The average time to export a load from Central America to Amsterdam (farm-airport-airport-company) is 15 to 18 hours. That same load takes 6 to 10 days to go from Managua to Guatemala, because in addition to having to go through four customs checks it has to travel a 70-km stretch of the Chinandega-El Guasaule highway that takes two and a half hours, followed by several stretches of highway in Honduras that are in a deplorable state... The Nicaraguan government has invested in highways, but mainly in high-profile places, while a producer from Wiwilí still has no road on which to get his harvest out to the city.

To date, only 18% of Nicaraguan farms have been able to make conversions to improve national agricultural production. And that 18% is fundamentally thanks to the conversion of sugar cane, poultry farms and milk with the arrival of transnational companies such as PARMALAT. In the current conditions, agricultural production in Nicaragua just isn’t sustainable; it isn’t profitable. And if it isn’t profitable then it won’t be considered for credits, and without credits it’s impossible to produce.

CAFTA could trigger the loss of
420,000 Nicaraguan agricultural jobs

The greatest poverty in Nicaragua is concentrated in the rural sector. If CAFTA were to go into effect today, 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. Only that converted 18% of the national agricultural sector would have any real competitiveness. And if it’s hard enough to find a work force in the agricultural sector today after such intense migration and many agricultural activities can’t be carried out due to a lack of labor, the onslaught of CAFTA could see an extreme deterioration in the situation. The Nicaraguan government presents CAFTA as a source of investment and jobs, stating that it will create 70,000 new jobs, mainly in the new free-trade assembly plants. Leaving to one side the fact that the free trade zones generate slave labor, we’re arguing that Nicaragua currently has some 200,000 agricultural production units, in round numbers, and each could feasibly generate three jobs over the short term with a supportive policy, which would mean a lot more than 70,000 new jobs.

There’s an urgent need for a
change of mentality among producers

For now, productivity is continually dropping in the Nicaraguan countryside. Coffee is going through a particularly critical phase. It is now clear that the coffee growers who can’t convert their production for new markets and continue producing coffee in the same old traditional way won’t survive; they won’t be sustainable within the new global market relations. The most viable solution is to convert to modern, low-cost technologies (biological controls, etc.), that reduce the volume of production but make it more profitable. Unfortunately, Nicaraguan coffee growers, particularly the large-scale ones, continue insisting on producing the old way. All of us Nicaraguan producers have sinned, because in the “green revolution” we learned to maximize production, and in the modern world that is neither possible nor desirable. What we have to maximize is profitability. That was the case with cotton. In the sixties, when I was starting to work on the farm with my father, the challenge among cotton growers was “See you at the scales!” and the winner was the one with the greatest amount of cotton. In a few years everything had changed and the challenge was “See you at the cotton gin!” where the winner was not the one with the greatest amount of cotton, but rather the one with the greatest percentage of fiber, which was what really counted. Later, when the crop was in its dying years, the challenge was “See you in the bank,” because the winner was the one with the greatest profitability who paid the bank back the quickest. We’re not only going through an economic depression in Nicaragua; we’re also going through a mental one. There’s an urgent need for a change of mentality among producers.

Central American integration
and the elimination of US subsidies

The protection we need must also be linked to Central American integration. For CAFTA to be advantageous, to be effective, Central America simply must be integrated, although this still looks a long way off. The customs union is just the first step and that already assumes that the Central American region will be integrated.

The protection we require must also be linked to the reduction, the virtual disappearance, of the subsidies that the United States so generously gives its agricultural producers. Central American could peg the freeing-up of its trade to the reduction of those subsidies. In the same way, we could free up our trade according to the level of Central American integration and the progress achieved in terms of real competitiveness. This is our proposal in terms of demanding protection. Are we likely to achieve this? Whether we are or not, this is the heart of UNAG’s position. The government has told us that it’s a rational position. We’re aware that asking for protection—related to conversion, regional integration and the elimination of US subsidies—is equivalent to saying “no,” although we’re not actually saying “no.” In practice, this is a “no” with arguments. We have to ask ourselves whether Nicaragua is in a position to say “no” and not negotiate. Would such a “no” only increase our poverty and backwardness?

The sad tale of Nicaraguan black beans

Achieving competitiveness, integration and free trade also implies restructuring the state. The current state bureaucracy in Nicaragua is a real obstacle to assuming this kind of commercial agreement.

In UNAG we have already experienced a classic case related to the free trade agreement signed by Nicaragua and Mexico. UNAG has a company dedicated to the import-export business that specializes in grains, aimed at ensuring a market for the harvest of small producers affiliated to UNAG. In the agreement with Mexico negotiated in 2002, Nicaraguan had a quota of 5,000 tons of black beans that it could export to Mexico duty free. We negotiated this with Mexico from September 2002 to January 2003 and linked up with Mexican businesses that were willing to buy our beans at $27 a hundredweight. To encourage our producers, we promised to buy from them at $23 a hundredweight. Throughout the negotiation stage, Mexico’s economy and agriculture ministers and the administrator of the agreement ensured us that there would be no problems, while Mexico’s ambassador in Nicaragua released statements celebrating the opening of the trade borders. But just when the UNAG company and other companies had the 5,000 tons ready, Mexico’s President Fox suddenly announced that he was closing the borders to Nicaraguan black beans, with no explanation whatsoever! So we called on our economy minister to respond by cutting certain Mexican imports. As a result, Mexican Tecate beer was cut, but the measure barely lasted two weeks because Nicaragua couldn’t resist the pressure applied by Mexico. When the conflict ended and the borders were opened, the Mexicans were offering to buy at just $12 a hundredweight.

At the same time, Costa Rica closed its border to black beans and the Nicaraguan government again lacked the capacity to close our borders to imported Costa Rican products, such as vegetables. As a result, thousands of hundredweight of black beans have been left unsold and UNAG has run up a large debt with the producers who had made such an effort to produce this crop, trusting in the supposedly open FTA borders. Naturally, these are maneuvers dreamed up to drive down prices and then buy the product on the cheap. The question raised by all of this is quite simple: if this happened to us with Mexico and Costa Rica, how will the Nicaraguan government be able to face up to pressure from the United States?

CAFTA and transgenics

CAFTA has also forced us to reflect on the issue of transgenics, which is extremely controversial due to the contradictory scientific information presented to us. CAFTA would certainly facilitate the indiscriminate entry of transgenics into Nicaragua due to the lack of non-tariff regulations and because there are no unified prohibitions across the Central American region. In Guatemala, for example, there are no restrictions at all on the introduction of transgenic seeds, so once they’ve entered Guatemala they could easily circulate through a customs-free region and reach Nicaragua, which has the most restrictions on the introduction of transgenic varieties in Central America.

After wide-ranging discussions, we haven’t been able to define a position on transgenics within UNAG. We’re clear that we have to err on the side of caution and seek as much information as possible in each particular case. In fact, we have been consuming transgenics in Nicaragua for some time now, because although we still aren’t importing transgenic maize, we are importing MASECA corn flour and corn-flake-type cereals, which do use them. Some producers see immediate advantages in the use of transgenic seeds, not because they increase production—they don’t guarantee that—but because they reduce production costs by avoiding agrochemicals. But there are also great dangers. One of the greatest is that, like all genetically uniform populations, transgenic crops are weaker and susceptible to the loss of an entire crop in the event of an environmental change or a pest mutation.

I believe that in the debate over transgenics we’ve made the mistake of concentrating our opposition solely on the transgenics themselves, on the living crop, and not on their marketing by the big transnational monopolies, such as Monsanto, that distribute transgenic products. The criticism should focus on the monopolistic system through which these products are marketed and on all of the mechanisms employed by these monopolies to control the seed and food markets in the countries of the South.

US interests behind CAFTA

We know that the United States is using CAFTA as a spearhead for the Free Trade Area of the Americas (FTAA), which will cover the whole of Latin America. It wants to use CAFTA as a “trophy” it can show off to the rest of the region’s countries and shepherd them into the fold. We know that CAFTA responds to the interests of the United States in its “own back yard.” President Bush stated in the OAS that any regional trade negotiation has to be closely linked “to hemispherical security.” It is obvious that the United States has a more political than economic position in relation to CAFTA. If we Central Americans—not just Nicaraguans—really take advantage of this, we could perhaps extract funds from the United States to guarantee our productive conversion. Will we achieve this? Civic mobilization related to CAFTA has been poor in Nicaragua and we have very limited capacity to express ourselves as citizens.

There has been an intense discussion for some time now in the World Trade Organization about the subsidies governments in the North provide to their agricultural producers, which severely affects impoverished producers in the South. Nicaraguan workers would love to receive the income of European cows, which get the equivalent of US$2.50 a day in state subsidies. In September’s WTO meeting held in Cancun in September, for the very first time a group of 21 countries from the South took the unexpected initiative of refusing to negotiate anything until the subsidies in the North had been removed. Costa Rica and Guatemala were among the 21. What can we expect? We hope that there will be 100 countries in the next meeting rather than 21, but we must also expect that the United States will pressure Costa Rica and Guatemala and that it will find some way of “punishing” them in the CAFTA negotiations. By participating in this group, both Central American countries are seeking to negotiate specific political problems. In Costa Rica’s case, it wants the United States to stop pressuring it to privatize telecommunications and other state-run services, which it can’t do because of the powerful social mobilization of a population opposed to the measure. How long will Costa Rica be able to maintain its position?

The crisis in the WTO is a warning of the political dimension to the “economic” negotiations on the global market and indicates that it is more convenient for Nicaragua and the rest of Central America to use the WTO as a reference point than CAFTA, as no free trade agreement can go around the WTO’s norms and agreements.

CAFTA and our natural resources

Our water sources and our rich regional biodiversity—which also help explain the US interest in CAFTA—provide us other advantages that offer certain opportunities. We have to ask ourselves what’s the use of such natural wealth if Nicaragua lacks the capacity to transform its biodiversity, forests and water sources into well-being for its people. Just to look at? Does preserving forests just to look at make any sense in Nicaragua? There is obviously even less sense in destroying the forests, as is currently happening. This doesn’t mean that we should sell the water and the biodiversity at any price. What it does mean is that we can use these highly valuable natural resources as a bargaining chip for successful political negotiations. In this, as in everything, the final result will largely depend on the negotiations we’re able to carry out and on the mass mobilization of Nicaraguans in defence of their rights and opinions.

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