SUNS 4364 Monday 1 February 1999

Panama, Jan 28 (IPS/Silvio Hernandez ) -- Farmers in Panama have been lobbying hard for the government of the Central American nation to raise tariffs on agricultural imports.

The tariffs had been lowered in January 1998 as part of an economic adjustment programme and this, farmers say, sparked a crisis in the production of potatoes, sorghum, maize, salt and pork products.

Competition from imports, they charge, was one of the main causes of a decline of almost three percent in agricultural output in 1998.

"We feel very affected by the government's tariff policy," said Angel Aguirre, president of the Asociacion de Productores de  Panama (Producer's Association of Panama). He said 90 percent of
potato producers could not plant this season because they did not have enough money to buy seeds and inputs.

Import duties were slashed from an average of 100% to 15% in 1998.
This, Aguirre said "caused chaos and threatened with bankruptcy thousands of rural producers who do not have the means to adapt to the changes".

Agriculture represents just nine percent of the gross national product (GNP) of Panama - whose economy is dominated by services - but it provides jobs for about 26 percent of the estimated 1.1
million Panamanians who are economically active.

"We need time and financial support to be able to adapt to the changes," said Aguirre. Up to 1997, he explained, producers knew that under an agreement with the World Trade Organisation (WTO),
Panama had 10 years to reduce tariffs on agricultural imports before throwing the local market fully open.

"But secret agreements the government made in mid-1997 with international financial institutions so as to get loans speeded up the reduction of tariffs and left the agricultural sector
unprotected from competition from foreign goods," he said.

But the Minister of Agricultural Development, Manuel Miranda, argued that the results would be the same if the process of tariff reduction were spread over 10, five or three years.

Agriculture and agro-industry in Panama have lagged behind technologically because of 50 years of overprotection and that has prevented the country from becoming competitive on the world
market, Miranda said.

The dilemma, Miranda explained, was whether to keep producing at a high cost for a population of 2.8 million people or to compete for other markets.

The minister said that while the government was willing to revise its tariff policy, it would not reintroduce the high tariffs that obtained up to December 1997. Rather, it would try to provide
compensatory measures for those sectors that need more time to adapt to the change.

But economist Rolando Gordon, director of the Center for Economic Research of the state University of Panama, doubted that the such measures would solve the problem.

The country "has seen the establishment of several cartels, like the beer, poultry and soft drink industries, which agree to set their prices beforehand, thus eliminating competition and maximizing profits," said the economist.

Others, such as food distributors, jointly import large quantities of products at lower prices "and then they divide up the market to avoid competing against one another," said Gordon.
"The consumer ends up paying the price."

Jose Hilario Lopez, a maize and sorghum producer, said farmers were also hampered by the obstacles banks placed in their way when they applied for loans.

"They require much more of producers than what they can give," he said, adding that this, together with high production costs, had placed the maize and sorghum sectors on the verge of bankruptcy.