LAC’s agricultural sector could be more competitive with risk management policies
San Jose, Costa Rica, May, 06, 2014 (IICA). Following enactment of the US Farm Bill, the Latin American and Caribbean (LAC) countries need to implement State policies that guarantee the region’s agricultural sector stability and greater legal security.
According to a technical note prepared by the Inter-American Institute for Cooperation on Agriculture (IICA) and sent to the ministers of agriculture of the Americas by the organization’s Director General, Víctor M. Villalobos, the Southern Cone countries will feel the impact of the new regulations especially hard, while other nations will be affected to a lesser degree.
The new act implements an agricultural safety and risk coverage network for US farmers that will offer them guaranteed profit margins and larger production volumes, and at the same time allow them to compete in international markets under advantageous conditions.
This development will undermine the ability of major LAC commodity producers and exporters to compete with their US counterparts, while tropical countries will enjoy the benefit of cheaper agricultural imports.
Rafael Trejos, a specialist with IICA’s Center for Strategic Analysis for Agriculture (CAESPA), explained that the Southern Cone countries would be hardest hit, while the Central American and Andean nations would benefit from lower prices of the products they import.
The LAC nations need to respond by developing policies aimed at better organizing and supporting their agricultural sectors that dovetail with the regional integration mechanisms.
“The policies that should be promoted include those designed to improve comprehensive risk management, which calls for new and better developed agricultural insurance schemes that offer wider coverage,” observed IICA policy and sectoral analysis specialist Joaquín Arias.
In his opinion, if the new types of protection implemented by the US result in distorting trade, the LAC countries will be able to take advantage of the mechanisms established in multinational regulations used by Brazil to challenge cotton subsidies in the US and by Canada to contest meat-labeling standards.
The measures approved in the US Agricultural Act, which was signed into law by President Barack Obama in February, include two programs: one that authorizes payments to producers if the average market price falls below the reference price, and another that provides for profit-margin insurance, linked to the income of the farm or county.
The technical document prepared by IICA also notes that the new regulations include specific support to promote rural enterprises, generate value added, attract young people to the countryside and increase organic production, among others, with a view to contributing to the long-term development and sustainability of the US agricultural and rural sector.
“More resources are earmarked under the new legislation. For example, the US helps its producers to be competitive by insulating them from price and climate-related factors. This makes agricultural activities less risky for producers,” pointed out Hugo Chavarría, an IICA specialist in strategic analysis.
For further information:
rafael.trejos@iica.int