In Big Trouble, Farmers Demand Tariff Hike

By Silvio Hernández, IPS, 19 August 1999

PANAMA CITY, Aug 19 (IPS) - Panama's farmers, in serious trouble since the high protectionist import duties of the past were slashed, are demanding urgent help from the next government of Panama, to take office Sep 1.

Designated cabinet officials and private sector representatives are debating whether raising tariffs, as demanded by farmers, is in order.

In January 1998, President Ernesto Pérez Balladares cut import duties from an average of 100 percent to 8.5 percent to bring Panama into line with the policies of neighbouring countries, live up to World Trade Organisation (WTO) standards, and insert the country into the process of globalisation.

One of the first consequences of the abrupt shift was a sharp decline of the agricultural sector, with some areas, like pig breeding and the production of vegetables, in danger of disappearing altogether.

Last week produce farmers from the western province of Chiriquí held continuous protests and roadblocks, demanding solutions.

Vicente Veros, president of the Association of Producers of Chiriquí, said many farmers, especially onion growers, "are on the verge of disappearing due to the tariff policies adopted by the government."

Local farmers lost five million dollars in sales last year due to the entry of cheap onions from nearby countries because of Panama's low duties, said Veros.

Although the agricultural sector accounts for only nine percent of Panama's gross domestic product (GDP), it provides 26 percent of jobs for the country's economically active population of 1.2 million (total population 2.7 million).

The National Livestock Association (Anagan) demanded that president-elect Mireya Moscoso live up to her campaign pledge to review the current policy on import duties.

"It is glaringly urgent to review the tariff policies and health standards that concern protection of consumers, farmers and the national economy," Anagan said in a statement.

Veros said he was confident that Moscoso, elected May 2, "will protect the farming sector in the same manner as do the presidents of developed countries."

But designated Minister of Agricultural Development, Alejandro Posse, said "you can't just glibly talk about lifting duties," which could lead to a freeze in the disbursement of funds agreed by Pérez Balladares with the World Bank and Inter-American Development Bank to finance the process of modernising and restructuring the state.

"The president-elect pledged to review the tariff policy, and she will do so," said Posse.

He conceded, however, that the aim of cutting the cost of living by allowing the inflow of cheap imported products "unfortunately has not had positive results" because middlemen have pocketed the difference.

Describing Pérez Balladares' slashing of duties as "hasty," Posse promised farmers that when he takes his post in the ministry, he will try "to give them some breathing room so they have a chance to become more efficient and competitive." He did not provide details, however.

Businessman Marco Fernández is opposed to a review of tariffs as urged by farmers, arguing that a return to the sky-high duties of the past "would drive up the cost of farm products." Hence, "consumers would suffer more, and the situation would only get worse."

Moreover, a return to high tariffs "would be punished by the international market, because uncertainty is penalised by foreign investors and importers," he stressed.

Other business representatives, like rancher and former legislator Hermann Gnaegi, believe that despite the fears of entrepreneurs like Fernández and Posse's warnings, urgent measures are needed "to fix the enormous chaos" triggered by Pérez Balladares' farm policy.

Outgoing Minister of Agricultural Development Manuel Miranda said he was opposed to a return to a protectionist tariff regime, but admitted that compensatory mechanisms could be established for sectors in need of more time to adapt to the new free market policy. (END/IPS/tra-so/sh/mj/sw/99)