With the intention of benefiting producers and consumers, and achieving better crop yields, in Costa Rica the price of rice is fixed by law.
According to an article in Nacion.com "a study by the Institute for Research in Economics (ICSI), at the University of Costa Rica, which was requested by the Ministry of Economy, Industry and Commerce (MEIC)." states that "the law fixing the price of rice will not benefit either the consumer or the producer, as intended by the measure, nor will it promote better returns."
In the past four years, the number of farmers engaged in rice production increased from 743 to 1,200, drawn by a fixed price system which in 2011 was covered by a subsidy amounting to $104 million.
The recent judgment by the Administrative Court annulling a presidential decree and ordering an increase in the price of a 73 kilo bag of rice to almost $49, confirms the wisdom of farmers who switched to growing the grain, confident that the subsidy levels would continue at astonishing levels, despite protests from other countries, the opinion of the World Trade Organization (WTO), and consumers of a product based on the local food basket, who pay one of the highest prices in the world for rice.
Encouraged by distorted prices due to governmental actions, the amount of planted areas sown previously reached 71,000 hectares, now the government, producers and manufacturers have agreed to reduced it to 53,000.
The decision was adopted by a consensus within the National Rice Corporation (CONARROZ), a step that shows clearly that the previously announced target of increasing production has been abandoned.
In the last 5 years the pricing system in force has transferred more than $390 million from the pockets of consumers to rice producers.
A statement of the Ministry of Commerce reads:
Rice sector subsidies in excess of $100 million for the second year
San Jose, May 8th, 2012. Today Costa Rica reported to the Committee on Agriculture of the World Trade Organization (WTO) that subsidies on rice in 2011 reached $104 million, which exceeds by more than 650% the annual amount permitted under the WTO’s Agreement on Agriculture.
The Government of Costa Rica admits that the rice growers will continue to receive support much higher than that allowed by the World Trade Organization.
Costa Rica does not have a defined end date for the high subsidies for rice and reducing them to the level allowed by the WTO, reported Nacion.com.
A WTO spokesman told the EFE news agency in Geneva that the Central American country continues to exceed the agreed ceiling of domestic support (AMS, or aggregate measure of support) with trade distorting effects. In 2010, the entire Costa Rican AMS was for rice, with $109.7 million allocated, despite the commitment of San Jose to set a limit for the support of $15.95 million.
The increase in the price of local milled rice in 2011, has boosted imports.
According to the Ministry of Agriculture and Livestock (MAG) as of September 2011 a total of 17,000 metric tons had been imported. "In the next three months of this year, imports could have tripled the 62,000 metric tons of 2010", reported Elfinancierocr.com
In the country it is the Ministry of Economy that establishes the price of rice, by decree, a measure that has been questioned by the World Trade Organization, who argues that more subsidies are being granted than allowed.
The rice lobby held firm and the price of rice will not fall, at least until stocks from the current harvest are exhausted.
Rice manufacturers must submit alternatives to the current fixed pricing system, within a period of one month.
Producers in the South blocked roads in order to pressure the government to keep the price of a sack of 73.6 kilos unchanged, a condition required by manufacturers for the purchase of the current crop.
Corporación Arrocera Nacional of Costa Rica (Conarroz) will invest 1.73 million dollars to stave off a 10 percent increase in the price of imported rice.
The Executive announced that a two-kilo bag of rice produced at home will rise by 68 American cents, to $2.44. Although it's higher than before, the price of imported rice will be the same thanks to the Conarroz investment.
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