Free Trade Threatens El Salvador’s Seed Distribution Program

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Agricultural workers in the Bajo Lempa harvesting seed corn for the MAG’s distribution program

In recent months conservative groups and the U.S. Embassy in San Salvador have criticized a popular seed distribution program run by the Salvadoran Ministry of Agriculture (MAG). They allege the Ministry’s procurement of seeds violates section 9.2 of the Central American Free Trade Agreement (CAFTA) and lacks transparency.

Salvadoran farmers, however, argue that the seed distribution program provides real benefits to farmers and farming cooperatives, and that if there is a problem it is rooted in CAFTA and free trade.

Since 2004, the Salvadoran Ministry of Agriculture (MAG, in Spanish) has provided seed packages to small farmers in one form or another. The latest incarnation of the program is part of the Family Farming Program. In 2012, Vice-Minister Hugo Flores told the UN Food and Agriculture Organization that “after 20 years of neo-liberalism – a model that has neglected subsistence farmers, which total some 325,000 in the country, and left them in a situation of extreme poverty – a targeted approach had to be put into action given the lack of technical assistance for these sectors.”

Every year MAG buys beans and white corn seed, primarily from Salvadoran producers, and distributes them along with 100 pounds of fertilizer to peasant farmers. The seeds program amounts to a small agricultural subsidy of less than $100 per family, covering only part of the cost of producing corn and beans.

The program is very popular with the cooperatives that produce the seed and the small farmers who receive them. Will Hernandez, a member of the Nueva Esperanza Model Cooperative, told Voices on the Border, “the seed program has strengthened our cooperative, both economically and technically. Before it was just transnational corporations that had the capacity to produce seeds [on a large scale], now we also have the technical capacity.” In addition, the seed program generates employment in rural areas. Mr. Hernandez said that in 2013 the seed program resulted in $1.5 million in wages in rural communities, which is particularly important for thousands of peasant families.

MAG officials say the seed distribution program promotes domestic production of basic grains and food security for the population. They report the program resulted in a record 22.6 million bushels of corn and 2.7 million bushels of beans at harvest in 2013.

In April, MAG distributed more than 188,000 seed packages to small farmers throughout El Salvador. MAG officials plan to distribute more than twice that amount the first week of May to reach of total of 400,000 packages for the year, almost all small farmers in El Salvador.

In January, Vice-Minister Flores said that MAG will “prioritize domestic seeds and the importation of seeds will depend on the offers that we have. Last year we imported 8% of the seeds, because the cooperatives were unable to satisfy demand.” In fact, last year 17 Salvadoran Agricultural Cooperatives, three of which are located in the Bajo Lempa region of Jiquilisco, Usulután, supplied more than 91% of all the seed used in the MAG packages. The remaining 9% was from Guatemala and purchased on the Bolsa de Productos y Servicios de El Salvador (BOLPROS, in Spanish) market. The domestically produced seed cost the MAG $124 per quintal while the imported seed bought at the BOLPROS seed cost $132 per quintal. The domestic seeds used in the program are a specific hybrid and the MAG carefully monitors its quality.

The decision to buy domestic seeds was not just MAG’s. In December 2012 the Legislative Assembly passed Law No. 198, entitled the “Temporary Special Provisions for the Promotion of Certified Production of Corn and Bean Seed.” The law required that all seed used in the agricultural packages be purchased from Salvadoran farmers. Law No. 198 expired in December 2013, at which time the Legislature passed the Temporary Special Provisions to Promote the Production of Basic Grains, which governs the seed program this year. The new law allowed the MAG to purchase seed directly from Salvadoran farmers without going through an open bidding process or purchasing on the BOLPROS. The justification was that the Ministry did not have time to go through the procurement process and still have the seeds ready to distribute by April and May.

There are several reasons why it is more beneficial for the MAG to purchase seeds for the distribution program from Salvadoran cooperatives. As Vice-Minister Flores and Mr. Hernandez pointed out, the program invests in the technical capacity of farming cooperatives. Similarly, the money invested in the seed distribution program, $25 million in 2013, remains in the Salvadoran economy and generates jobs rural communities where they are needed most. Another benefit is that the domestic seeds in 2013 were $8/quintal less than the seed from Guatemala bought off the BOLPROS. This is likely due in part of the cost of transporting seeds from Guatemala to El Salvador. Another reason for contracting with Salvadoran growers is that the MAG can more easily monitor the quality of seed they are buying. The government works directly with farmers on producing hybrid seeds that are able to better withstand El Salvador’s increasingly extreme climate, which can present drought and floods in the same growing season.

Despite the economic and social benefits, John Barrett, an Economic Advisor for the U.S. Embassy, and Amy Angel, an agricultural economist with FUSADES, argue that requiring MAG to buy seed from domestic producers violates CAFTA. Section 9.2 of CAFTA requires the Salvadoran government to give domestic and international providers equal consideration and treatment when procuring goods and services. If the government wants to buy seeds or any other goods or services, Section 9.2 requires that it treat all interested vendors the same, without giving preference based nationality or country of origin.

Amy Angel and members of the ARENA political party also argue that the procurement process this year violated the Law on Acquisitions and Contracts for Public Administration (LACAP, in Spanish) and lacks transparency. Ms. Angel argues that Article 72 of LACAP requires specific conditions to be in place in order for the MAG to directly purchase seeds from the Salvadoran cooperatives, and that the seed purchases did not meet any of the conditions. She rejects the argument that the MAG did not have time to go through a formal bidding process. Ms. Angle says that even if they did not have time they could have gotten a third party to contract with buyers or just bought seeds off the BOLPROS, which would have made the procurement process transparent and CAFTA-compliant.

In January when the Legislative Assembly passed the Temporary Special Provisions to Promote the Production of Basic Grains bill, the rightwing ARENA political party accused MAG of ignoring LACAP and transparency norms in order to give “benefits to one of the FMLN businesses, Alba Alimentos.” Members of the leftwing FMLN party created ALBA in 2006 as a framework for working with the Bloivarian Alliance for the Peoples of the Americas, an economic trade alternative created by Venezuela. In April,Minister of Agriculture Pablo Ochoa reiterated that the reason for bypassing the formal procurement process was a time issue, and the claim that ALBA is at all involved in the seed program was a politically motivated claim that is untrue.

The seed program’s apparent violation of CAFTA is one of several issues that is currently holding up the release if the Millennium Challenge Corporation funds – a $284 million grant from the U.S. government to help develop El Salvador’s economy. While there is no indication that the U.S. government is planning to file a complaint against El Salvador over the program, John Barrett said “the seed issue is very important because it is an example of where the Salvadoran Government has to give confidence in how it will respect their obligations to free trade.”

According to Jose Santos Guevara, Coordinator of the Movement of Victims of Climate Change, the problem is not the seed program – it’s CAFTA. He believes the U.S. Government is using free trade to allow giant transnational organizations like Monsanto take even more control over El Salvador’s agricultural sector. Monsanto is the largest seed company in the word, controlling more than a forth of the global seed market. A few years ago Monsanto bought Semillas Cristiani Bunkard, the largest seed company in Central America, for more than $100 million, taking control of the regional seed market.

The United States, Central American countries, and the Dominican Republic all signed and ratified CAFTA in 2006. By 2011 U.S. exports to El Salvador had risen more than a billion dollars, a number the U.S. government says was low due to a spike in fuel prices. During the same period Salvadoran imports to the U.S. rose half that amount, resulting in a significant trade deficit that did not exist pre-CAFTA. More relevant to Salvadoran peasant farmers, in the seven-years between 2006 and 2013 U.S. agricultural exports to El Salvador doubled to $467 million. The US claims that under free trade they have increased its agricultural exports around the world by $4 billion. The U.S. maintains a trade surplus in agricultural products in part by ensuring that U.S. farmers, which receive large agricultural subsidies, have access to foreign markets and can compete in the kind of procurement opportunities like the MAG’s seed distribution program. While free trade has been good in allowing U.S. farmers to access to Salvadoran markets, it has been bad for the Salvadoran economy and the peasant farmers who are trying to survive and feed their families.

Every dollar (and it is dollars because in 2001 El Salvador traded the Colon for the U.S. dollar) that El Salvador spends on agricultural imports is a dollar that leaves the local economy and not invested in local farmers and agricultural workers. If MAG officials are forced to allow international producers to bid on contracts for the seed distribution program, it is likely to increase the trade deficit with the U.S even more. It will mean the 17 cooperatives that have been providing the seeds will lose their most stable source of income, and agricultural workers will loose their jobs.

Perhaps the MAG’s seed distribution program violates the Central American Free Trade Agreement, but that does not make it a bad program. It is just another reason why CAFTA and free trade are bad policies.

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