This week, U.S.-based organizations working in El Salvador published a letter opposing the U.S. State Department’s threats to withhold a $277 million Millennium Challenge Corporation (MCC) grant over a possible violation of the Central American Free Trade Agreement (CAFTA). Sixteen U.S. Congressmen signed onto the letter and sent it to the U.S. Department of State, sharing their concern over the controversy.
At issue is a seed distribution program for which the Ministry of Agriculture (MAG) purchases seed corn and beans from Salvadoran cooperatives and distributes to more than 400,000 small farmers. The program is a huge benefit to rural families and the 17 agricultural cooperatives that supply the seeds. The U.S. Embassy argues that the MAG violates CAFTA by not allowing international seed producers participate in the procurement process, buying seeds only from Salvadoran producers. The Embassy will not release the $277 million grant until El Salvador is in compliance with CAFTA.
Voices on the Border, at the advice of our Salvadoran partners, did not sign the letter published by the other solidarity organizations for one simple reason. Communities and organizations in the Jiquilisco Bay oppose the $277 million MCC grant and believe the outrage over the seed program, while justified, fails to address a much bigger issue – the MCC fund will destroy El Salvador’s coastal environment and agrarian way of life.
Yes, the Embassy’s complaint about the seed program is wrong. But the impacts of the $277 million MCC grant will be worse. Here’s why:
1. FOMELINIO will fund large-scale tourism development in the Jiquilisco Bay, causing irreparable harm to the region’s fragile mangrove forests, beaches, and agricultural lands, and drain the El Salvador’s scarce water resources.
2. MCC and FOMELINIO (the Salvadoran counterpart to the MCC) have never considered how the projects they are funding will affect the targeted communities. Jose Santos Guevara, resident of La Canoa and President of MOVIAC, makes this point well. “During the design phase of the FOMELINIO [proposal], they did not consult [the communities] with respect to the type of projects needed for the development of the communities. We have a series of proposals aimed at reactivating production in the region – the construction of levees, improving roads and drainage systems. However, none of these were incorporated into the proposal that the Government of El Salvador sent to the MCC.” The only people consulted were private investors and others with financial or political interests in the outcome of the proposal.
3. In order to have a project proposal considered for MCC funds, an applicant must be able to invest at least $100,000. There are no communities or community-based organizations that are able to front those kinds of funds meaning the only people who can develop projects are outside investors.
4. There has never been a public discussion or debate about the content, objectives, and impacts of FOMELIO projects. State institutions control the information about plans and projects, releasing only vague statements to the media when it is politically expedient.
Over the past couple of years the U.S. Embassy has used the $277 million MCC grant to get El Salvador to adopt several laws and policies that promote corporate interests. Just last year the Legislative Assembly passed the Public Private Partnership Law, which the U.S. Embassy had made a prerequisite for approval of the MCC funds. The Embassy, however, did not like a couple provisions in the final draft of the law and are requiring reforms before they will release the MCC funds. The U.S. Embassy also made reforms to the Law on Money Laundering a requirement for receiving MCC funds. And of course, the Embassy is requiring the MAG to reform the seed program so that international seed producers like Monsanto can compete for contracts alongside Salvadoran agricultural cooperatives.
Just this week, Medardo Gonzàles, the Secretary General of the FMLN, said the government has done everything the Embassy wants, but it seems they will never be able to satisfy their demands. Yesterday, Danilo Perez, the Director of the Center for Consumer Protection, recommended that the Government of El Salvador reconsider signing the second MCC Compact because of all the U.S. Embassy’s conditions.
Communities and organizations in the Jiquilisco Bay see the reforms and MCC funds as a really bad deal – adopt pro-development economic policies so wealthy developers can receive financial support to take their land and destroy the region’s mangrove forests, beaches, and agrarian culture. They prefer that the Salvadoran government just say no to the MCC; maintain the seed program the way it is; and start pushing back on the pro-corporation economic policies being pushed through the Legislative Assembly.
Yes, folks in the Jiquilisco Bay are angry that the U.S. is trying to get El Salvador to change a seed program that provides so many benefits for so many families. But they are even more concerned about the long-term negative impacts that the $277 million will have on the region.
Since Sanchez Cerén became the President of El Salvador on June 1, his administration has said securing the $277 million Millennium Challenge Corporation (MCC) grant is a top priority. Vice President Oscar Ortiz said they want to get it done within their first 100 days in office, which means within the next three months.
The MCC approved the grant in September 2013, but the US Embassy blocked the release of the funds until the government met conditions such as reforming the Public Private Partnership Law (P3 Law) and restructuring a popular seed program.
The P3 Law facilitates government contracts with private entities to provide public goods and services. The US Embassy made the P3 Law a prerequisite for the MCC funds but they don’t like the law passed by the Legislative Assembly. They don’t approve of the oversight role the Legislature created for itself – a committee that must approve all P3 contracts. The Embassy and business community also don’t like that the law exempts important public goods and services like water, health, education, and public security from public private partnerships.
One of the most vocal opponents of the P3 Law has been El Salvador’s labor movement. Unions fear that public private partnerships will result in a loss of jobs, decrease in wages, and even worse working conditions as private investors maximize profits. Other civil society organizations fear the P3 Law, even with the exemptions, will lead to the privatization of important goods and services – like water, health care, and education.
The US Embassy also doesn’t approve of the Seed Distribution Program operated by the Ministry of Agriculture (MAG). Officials argue the procurement process violates the Central American Free Trade Agreement (CAFTA) because the government only buys seeds from Salvadoran Farming Cooperatives, excluding international seed producers like Monsanto. The program provides thousands of jobs for people working for the cooperatives and ensures that more than 400,000 farmers have quality, non-GMO seeds.
Last week US Ambassador said that the Embassy’s problem was not with the seeds, but with the process. On May 2 Voices wrote an article arguing that the problem was not the seeds or the procurement process, but CAFTA.
The MCC program is popular with a lot of Salvadorans and politicians who see it as free money for development projects. But a growing number of environmentalists, unions, and communities argue that the Embassy’s conditions are too high a price to pay for development projects they don’t want anyway. And many see the conditions as an encroachment on El Salvador’s sovereignty.
Among those who oppose the MCC program outright are environmental groups and communities in the Jiquilisco Bay. MCC funds will support tourism development in the Bay and residents fear it will cause irreparable harm to mangrove forests, nesting grounds for the critically endangered Hawksbill sea turtle, and El Salvador’s most fertile agricultural land. (Voices has written about Tourism on this blog in the past – here are two reports we wrote on tourism in the Jiquilisco Bay).
Roberto Lorenzana, President Sanchez Cerén’s Chief of Staff said two weeks ago that the administration already has a draft Fomelinio Law (in El Salvador the MCC is called Fomelinio) that they will send to the Legislative Assembly soon. It’s unclear what is in the Fomelinio Law, but it likely contains all of the reforms the US Embassy is requiring for release of the MCC funds. Even before he became Chief of Staff, Lorenzana said the new administration is going to open the procurement process to national and international seed producers, in an apparent effort to satisfy the Embassy’s concerns.
While some Salvadorans have spoken out against the second MCC compact, the P3 Law and other neoliberal policies, many have not. The politics of opposing neoliberal economic policies grew more complex when the leftist FMLN party took office in 2009 and again on June 1, 2014. People and groups that organized against privatization, dollarization, CAFTA, and the first MCC compact (all policies adopted by the rightwing ARENA party between 1994 and 2008) have not been as critical since the leftist FMLN party took power. The result is that opposition to these destructive policies is less now that the FMLN is power.
El Salvador will soon get a $277 million grant from the U.S. Millennium Challenge Corporation, but it should be clear – this is not free money.
The 17 farming cooperatives that have been growing seed corn and beans for the MAG’s Seed Distribution Program will pay for the MCC grant when they have to compete with Monsanto and other international seed giants.
Communities that depend on the mangroves for their survival will pay for the MCC grant when developers cut down forest to build resorts and golf courses.
The Salvadoran labor force will pay for the MCC grant when private contractors take over government services and cut jobs and wages to increase profitability.
And all Salvadorans will pay if public goods and services like water, education, and health are contracted out to for-profit entities, especially if there is no oversight in the process.
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.