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Local market spared any major impact from E.U. milk imports
By Dennis Rogers
For The CAFTA Report
(posted May 25,2010)

Costa Rica’s dairy industry dodged a bullet in negotiations with the European Union, but Central America overall was made to accept 1,900 tons of powdered milk. The subject was a serious sticking point to the free trade agreement.

Only 200 tons of dry milk powder per year will be allowed duty-free into Costa Rica, where the dairy industry is much more advanced than elsewhere and was able to defend its interests. But the local company Dos Pinos will be hit in its ongoing efforts to expand to Guatemala and the other Central American countries.

The local industry hides behind an import tariff of 65 percent for milk products. That will make exports from Europe competitive in spite of high production costs there.  The northern Central American countries have tariffs of 15 percent on powdered milk, while Panama’s are higher. Imports from both Costa Rica and outside the region (New Zealand, United States) are already a factor in the poorer countries, but duty-free treatment of the negotiated amount will make Europe more competitive.

Costa Rica is also obliged to allow duty-free 317 tons of hard cheeses. Aside from the obvious possibility that the dry milk might be used to make cheese, those imports should be a lesser impact of imports on small-scale dairy producers in Central America, who largely produce and sell fresh cheese. Given the high prices of aged cheese in Costa Rica, the few local producers, like Monteverde, are facing a reduction in sales.

Negotiators did manage to repel export subsidies. Exports of milk, cheese, and butter are heavily supported through the European Union’s Common Agricultural Policy. Subsidies take the form of a “refund” which is paid to the processor (not the farmer) who exports milk or cheese at a rate less than the internal EU market price, which is itself artificially high due to import tariffs. These can be dumped at the world market forcing those prices down. Overall the policy costs the European taxpayer about 55 billion euros per year in direct subsidies, or 100 euros per person. About one billion of that is for dairy.

Other advanced countries including the United States have
generous subsidies for farmers, and that was an issue during negotiations on the Central American Free Trade Agreement with the U.S. Quotas on imports of dry milk and cheese are actually rather similar to what was conceded to the Europeans. Eventually the U.S. free trade treaty requires total elimination of import restrictions and duties, but over a 20-year term for milk.

Powdered milk as a commodity can end up anywhere, and one of the main destinations from the United Kingdom in 2006 was Nigeria, according to FarmSubsidy.org, a watchdog organization. In many places like south Asian countries or Africa, investment in a single cow can be a way out of poverty. Cheap foreign milk, while benefiting the consumer, tends to destroy dairy production when it arrives.

Central America is wealthier, but most milk production in the region outside Costa Rica qualifies as small-scale, with hand milking and usually cheese made on the site for easier transport and storage. In other countries such as El Salvador, farmers and consumers contend with issues such as smuggling, contamination, and extortion not known here.

Costa Rica has a relatively advanced dairy sector, with about 60 percent of total production given industrial treatment, according to figures from the Cámera Nacional de Productores de Leche. The remainder is made into cheese, natilla, or sold as raw milk locally.

Most dairy farms are in the cooler areas of the Central and Tilarán mountain ranges, with Holstein about 65 percent and Jersey 30 percent of milk cows. In 2000, at the time of the last census, there were about 162,000 head though that number has declined with increases in production per cow.

There were about 6,000 specialized farms.

The market for milk products is dominated by Dos Pinos, which places its products in even the most remote towns and smallest pulperías. In addition to milk products, it has a substantial line of sugared drinks and juices.

Dos Pinos didn’t respond to requests for up-to-date information but it has 80-85 percent of the market for industrialized production and packages about a million liters of milk per day. Of that, about 20 percent is presently exported to Central America and the Caribbean.


 

Gutierrez and fruit
U.S. Embassy photo
 U.S. Secretary of Commerce Carlos M. Gutierrez checks out the produce at   
 Hortifruti/Wal-Mart Oct. 1, 2008. Gutierrez was in the country with a group of
 U.S. business executives looking for trade possibilities.


Agriculture opportunities at a glance

According to the U.S. government under the Central American Free Trade Treaty:
 
· More than half of current U.S. farm exports to Central America become duty-free immediately, including high quality cuts of beef, cotton, wheat, soybeans, key fruits and vegetables, processed food products, and wine, among others.

· Tariffs on most U.S. farm products will be phased out within 15 years. U.S. farm products that will benefit from improved market access include pork, beef, poultry, rice, fruits and vegetables, corn, processed products and dairy products.

· U.S. farmers and ranchers will have access to Central American countries that is generally better than suppliers in Canada, Europe and South America.

· The U.S. and Central America are working to resolve sanitary and phytosanitary barriers to agricultural trade, in particular problems and delays in food inspection procedures for meat and poultry. Central America ismoving toward recognizing export eligibility for all plants inspected under the U.S. food safety and inspection system.



Container truck gets a washing outside new lab to eliminate any diseases before hitting the highway. truck washing
Ministerio de Agricultura y Ganadería photo

New lab in Caldera cuts
down testing time for boats

For the CAFTA Report

(Agu. 19, 2008) Every product of vegetable or animal origin that enters the country must be checked to make sure there are no diseases or insects. Until recently the only government lab capable of doing those tests was at Juan Santamaría airport.

Now the Ministerio de Agricultura y Ganadería has opened a lab in Caldera where most of the grain carriers and other ships dock. In the past, the unloading was delayed 24 hours until samples could be taken to the lab near the airport. That could cost boat operators up to $80,000 a day, said the ministry.

The ministry reported Monday that the new lab has had a test run since January and has handled 800 samples of beans, corn, wheat and other products. During that time technicians have discovered 12 suspect shipments, they said. The lab was put together with the help of the various organizations that use the port, the ministry said.

Now technicians are gearing up for heavy shipments of fruits that is typical of the upcoming holiday season, they said.



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