Atavism is already the scene of the prefect with his mayor at the market asking “speculators” to tell them how much rice has risen in price. In other words, it reveals an archaic practice that is the product of a wrong food import policy.

Sensitive products such as wheat, rice and maize can be bought on international markets at any time, so if there is a shortage, it is because imports are prohibited, or because import permits are very complicated, or because there is a tipping offer governments on who should import.

International markets for these products are distorted, since industrialized countries, by heavily subsidizing their agriculture, create surpluses that are ultimately placed on international markets at very low prices (dumping). These low prices compete with national agriculture and harm the sector, if they ever enter the country.

Unlike wheat, which is almost entirely imported, Ecuador produces enough rice to meet domestic demand. But because agricultural activities are subject to uncontrollable weather changes, in some years like this one there is a need for imports, as domestic production falls and prices rise.

(…) its application would create adequate customs protection for agricultural products.

Ecuador is a signatory to the Andean Price Range System (SAFP), established by Decision 371 of the Andean Community of Nations. This system, which was created as a common external tariff for the Andean countries, establishes new rules of the game for the import of these cereals. The first element he introduces is that every business entity can import, without the need for state permits. However, this does not mean that agriculture remains unprotected, because the importer has to pay a high tariff, which protects domestic agriculture and indirectly acts as a support price. The SAFP not only protects agriculture but also stabilizes domestic prices, as the variable duty applied increases when the international price falls, and conversely, decreases when the international price rises.

Since Ecuador is a signatory to the SAFP, its application is avoided through the application of other international standards that contradict the application of the SAFP. So now we find ourselves in these archaic practices, and what’s worse, the decision on which companies will be favored with import licenses is given to the Government. The price difference is noticeable, while rice can be imported at $0.70 per kilogram, the internal price would be $1.60. Importers have a strong incentive to capture this difference.

The favorable opinion of the SAFP is not only from this columnist. Already in 2003, the Central Bank of Ecuador published the results of the evaluation of the mentioned system (technical note no. 70). It was concluded that the SAFP would not only significantly affect the reduction of price variability, but that its application would create adequate customs protection for agricultural products. (OR)