Costa Rica might be facing repercussions after three straight years of exceeding the amount of rice subsidies set by the World Trade Organization – exceeding it by about 650%. However, the rice producers in Costa Rica remain confident that nothing will happen, since they are practically inconsequential in terms of global rice producers. Rice is a staple part of the national diet, but local production doesn’t cover local needs, and about 140-170 thousand tons (of the 350,000 tons consumed annually) is imported. But the national rice processors are required to buy all national production at a government-fixed price before they are allowed to buy imported rice. And that fixed price is much higher than international prices, which means that the rice processors pass on the increase to consumers in Costa Rica. The result is that Costa Ricans are paying the second highest price in the world for their rice. And most cannot afford this.
The subsidies from Costa Rica’s government – which totaled $104 million in 2011 – go towards price controls at the retail and wholesale levels, as well as price supports, subsidized loans, and subsidized resources such as water for the farmers. The subsidies have been justified because in 2008, a national policy was put in place to increase local food production in an effort to not be dependent on external price fluctuations. Clearly, however, producing rice in Costa Rica, while possible, is not a very economically viable operation, and instead of supporting numerous small, local rice farmers, the subsidies primarily go to the largest farms, often internationally owned. However, the question remains: in this globalized world, how far should we go to protect local producers? If countries with the most efficient systems are dictating world prices, some producers cannot compete. So do we just give in? Throw in the towel and open our borders to foreign imports? That doesn’t seem economically responsible if you’re trying to boost your country’s economy, but neither does forcing your citizens – who are already struggling to feed themselves – pay nearly twice the price for locally grown rice than they would if imports were allowed with no price distortions.
Somewhat related note: Field tests of Bt rice are underway in Costa Rica. More on this later.