FOREIGN COUNTRIES' POLICIES AND PROGRAMS
NAFTA Helps Expand Mexican Grain Markets for U.S. Farmers
Through economic troubles and recovery, Mexico has consistently been an important trading partner for the United States. Due to Mexicos close proximity to the United States, the use of export credit guarantee programs, and the significant tariff advantages under the North American Free Trade Agreement (NAFTA), U.S. goods are competitive in the Mexican market. In 1996, Mexico imported a record amount of agricultural products, US$7.75 billion, with US$5.4 billion from the United States. As Mexicos agricultural policy moves away from import substitution and self-sufficiency to a policy of market-oriented competitively structured industries, the outlook for U.S. agricultural goods in Mexico continues to be favorable.
Other reasons for optimism include Mexicos recovery after the pesos crisis of 1994 and the resulting 6 percent decline in economic activity in Mexico. Real GDP growth in 1997 was 7 percent; however, projections for 1998 growth are uncertain. Besides structural problems and issues, including Mexicos dependence on foreign capital and the federal governments bailout of banks suffering from bad debts, the outlook for the near term is uncertain given falling petroleum prices, rising interest rates, and the unstable stock market. Nonetheless, many trends within Mexico such as a renewed focus on exports, improved bank regulations, better management of the exchange rate, and a growing number of young consumers all indicate that there are also reasons to be optimistic about Mexicos economic future.
Selected Economic Data (1997):
|Total Population||97,563,374 (July Estimate)|
|Annual Population Growth Rate||1.8%|
|Total Area||1,972,550 sq. km.(twice the size of Texas)|
|Waterways||2,900 km navigable rivers and coastal canals|
|Highways||93,071 km paved (156,449 km unpaved)|
|Per Capita GDP ($US)||$8,100|
|Real GDP Growth Rate||7%|
|Inflation (CPI)||16% (1996 )|
Major Ports: Acapulco, Altamina, Coatzacoalcos, La Paz, Lazara Cardenas, Manzanillo, Mazatlan, Salina Cruz, Tampico, Tuxpan, Veracruz
Exchange Rate: 10 pesos = U.S.$1 (approximate current rate)
% of GDP: 8%
% of workforce: 28%
Major Agricultural Products: corn, sorghum, wheat, soybeans, rice, dry edible beans, cotton, coffee, fruits and vegetables, tomatoes, beef, pork, poultry, dairy products, wood products
Agricultural and Trade Policy Developments
Nearly one-third of the Mexican labor force is involved in agriculture, which makes up eight percent of the countrys GDP. Thus agricultural issues are of great importance domestically in Mexico. NAFTA, PROCAMPO, CONASUPO, and ASERCA have all played a significant role in shaping the face of Mexican agriculture in recent years. Since NAFTA was implemented in 1994, the trade, and specifically agricultural trade, between the U.S. and Mexico has been bolstered. PROCAMPO, CONASUPO, and ASERCA are all programs created to support Mexican farmers and NAFTA has played a monumental role in eliminating trade barriers between Mexico and the U.S. and consequently, encouraged an increase in agricultural trade activity between these countries.
NAFTA Arrangements for Grains and Beans
|Tariff Agreement||Allocation Method||Time Table|
in 1994, 15% base rate tariff...
1998 NAFTA tariff rate: 7.5%
Non-NAFTA tariff rate: 67%
|No regulation||Over 10 year period the 15% tariff will be gradually eliminated|
TRQ for U.S. corn: 2.8138 MMT
3% annual increase in quantity
172.2% over quota tariff
first six years: aggregate 24% of the tariff will be
- next 15 year transition: remainder eliminated
TRQ for U.S. barley: .1459 MMT
3% annual increase in quantity
5% annual increase in quantity for barley malt
first six years: aggregate 24% of the tariff will be
- next 10 year transition: remainder eliminated
5 % tariff on rough, broken rice
10% tariff on brown, milled rice
No quantitative restrictions
year period for elimination of the rice original tariffs:
10% for rough rice
20% for milled rice
TRQ for beans: 56,276 MT
3% annual increase in quantity
111.2% over quota tariff
first six years: aggregate 24% of the tariff will be
- next 15 year transition: remainder eliminated ending in 2006
The goal of PROCAMPO is to mitigate the impact on farmers as Mexico goes through a transition from a guaranteed price regime to an open market. PROCAMPO was initiated in 1993 and gives farmers a direct subsidy through a cash per hectare basis for nine basic crops. These direct payments will last 15 years, with the payment level held constant in real terms during the first 10 years before decreasing in linear terms starting in the 11th year. Under the Operational Regulations, the payment given to farmers in 1998 will be 626 pesos per hectare, a 12.58 percent increase from 1997. In 1997, PROCAMPO paid 7.5 billion pesos ($939 million) on 14 million hectares of corn, dry beans, wheat, sorghum, rice, cotton, soybeans, safflower, and barley.
CONASUPO is the government agency that sets the guaranteed purchase price for domestic corn and dry beans. However, since NAFTA, it is no longer the sole buyer and seller of corn and beans; private sector buyers now play the largest role because CONASUPOs budget is severely limited. CONASUPO is also involved in other programs, such as "Kilo por Kilo", which is aimed at demonstrating the benefits of certified seed to Mexican bean farmers. In the future, CONASUPO will act more as a private trading company. Unlike many private trading companies, CONASUPO will encourage grower organizations and the private sector to participate in marketing activities. ASERCA , like CONASUPO, sets guaranteed purchase prices for domestic wheat, sorghum, rice, cotton, and soybeans but ASERCAs activity is limited by budgetary restrictions.
Production: The production of wheat in Mexico is relatively stable, ranging between 3 and 4 million tons during the past decade. For the 1998/99 marketing year wheat production is projected at 3.6 million tons, a slight rise over the past few years, because of improved weather conditions in northern Mexico. Wheat acreage has declined recently in competition with other crops, especially corn and cotton.
Of the area of land sown in wheat in Mexico, 70 percent is spring-harvested in the northern region and roughly 30 percent is fall-harvested in the Central Valley around Mexico City. The northern region, including the states of Sonora, Sinaloa, Guanajuato, and Baja California, primarily produces hard red winter, but also produce some soft red winter, white, and durum. The Central Valley largely produces spring wheat.
In the northern region where the majority of wheat is produced, most production is conducted using technology that is similar to the United States. Additionally, many areas in this region utilize irrigation, and as a result, have high yields of up to 6.2 metric tons per hectare. In the past year the cost of production has only increased slightly, except for the sharply rising expense of disease control.
Consumption: Overall consumption of wheat products in Mexico is increasing due to the countrys gradual economic recovery and the growing popularity of wheat-based foods. Per capita consumption of wheat still equals only about a third as much as corn, which is the staple in the Mexican diet. Adding to wheat use is the Grupo Bimbo, Mexicos largest bakery goods company, which has continued to expand into markets throughout Central and South America.
Mexico's Wheat Utilization Continues to Grow; Imports Play a Pivotal Role
Trade: Mexico is a major importer of wheat. Traditionally, the United States has been by far the largest supplier, with Canada providing the balance. For 1998/99, Mexican wheat imports are projected at 2.35 million metric tons.
In the early 1990s, Mexico started to import a significant amount of wheat from Canada. These purchases are a result of Canadas competitive prices, credit, and high quality wheats. Evidence of the recent success of Canadian wheat includes a medium-term contract with the Grupo Bimbo.
In 1994, the enactment of the NAFTA agreement allowed the import licensing requirements for the United States and Canada to be eliminated, and thus removed the European Union (EU) and Argentina from the Mexican wheat market. Under the NAFTA agreement the United States and Canada have tariff-only treatment and the 15 percent base-rate tariff is being gradually reduced to zero over the next ten years. Mexicos 1998 NAFTA tariff rate for wheat and flour is 7.5 percent. The non-NAFTA tariff rate is 67 percent.
Production: Maize has its origin in Mexico, and that is still reflected today in the importance of maize in Mexican agriculture. In the past three years, corn production has averaged 18.5 million tons, significantly above earlier years. In 1998/99, corn production is estimated at 17.5 million tons, down slightly from the ten year average. Corn production is approximately three times that of sorghum, the second ranking grain grown in Mexico.
In Mexico two crops of corn are grown per annum: a spring/summer cycle and a fall/winter cycle. The five states accounting for the majority of the spring/summer corn production are Jalisco, Mexico, Michoacan, Tamaulipas, and Chiapas. 90-95% of corn production is sown in the spring/summer cycle and harvest takes place October through December. Since 85% of the corn produced in spring/summer cycle is rain fed, the monsoons starting in June are the major source of water. Production under the fall/winter cycle is conducted primarily in the states of Sonora, Sinaloa, and Chihuahua. The fall/winter crop is harvested in January through March and 55% of this is irrigated.
Consumption: Domestically produced corn is predominantly white varieties, and is used for human consumption. Over the past three years, corn consumption has averaged just over 22 million tons, and has been rising faster than Mexicos 1.8 percent population growth rate. According to the Ministry of Agriculture, estimated corn use in CY 1997 was as follows: 57% human consumption, 26% animal feed, 11% industrial starch, 4% seed, and 4% waste. SAGAR estimates per capita consumption of white corn at roughly 120 kilograms.
Mexican Corn Use Stable; Higher Imports Add to Available Supply
Because poultry producers prefer yellow corn over the domestically produced white corn, and the access under Mexicos NAFTA TRQ, the majority of feed corn is imported. The outlook for the poultry industry in Mexico continues favorable. Consumption of poultry meat has continued to increase because of the increasing prices for red meats and, until recently, the continuing recovery of consumer purchasing power. Other important end-users of U.S. yellow corn include the swine and wet-milling industries.
Trade: Although corn production has risen over the past three years, consumption has grown at a faster rate. As a result, Mexican imports of corn have increased, with the United States as the only supplier. Much of the expansion in demand is attributable to an increase in the import needs of the wet-milling and feed industries. Another contributing factor to the increase in Mexican imports is the GOM policy to let corn prices fall to international levels. As the domestic corn prices decrease, some producers are expected to go out of production, and Mexicos import needs should increase. Additionally, since the majority of Mexican corn is produced on dryland farms, domestic supplies in Mexico have the potential to fluctuate dramatically. Consequently, import needs tend to fluctuate widely from year to year, and are forecast at 4.25 million tons for the 1998/99 marketing year. Mexico not only imports corn for feed purposes, but has also started to use imports to supplement corn for human use. Importation of corn for human consumption has been in the form of corn flour. Policy: Because of the importance of corn in the Mexican diet, the GOM has a number of programs which subsidize corn and corn products. As mentioned above, the PROCAMPO program is a flat-rate per hectare payment for farmers producing corn. Furthermore, the GOM has established price controls for tortillas which incorporate subsidies directed to the poorest of consumers. In February of this year, the tortilla price was raised by 15 percent. There has been discussion of eventually removing the subsidy, a very difficult political decision. The tortilla subsidy extends to GOM sales of government-held corn to millers and tortilla makers at prices below farmgate levels.
As a result of the enactment of NAFTA in 1994, Mexico changed its import licensing system to a transitional tariff-rate quota for the U.S. and Canada. Under this agreement, the duty-free TRQ for corn will continue through 2008 and will include a 3 percent annual increase in quantity. In 1998 the TRQ for corn is 2.8138 MMT and U.S. exports to Mexico exceeding the TRQ will be assessed a 172.2% over-quota tariff. In the first six years of the agreement, an aggregate 24 percent of the tariff will be eliminated and in a 15 year transition period, the remainder will be phased out in equal annual installments.
Production: Sorghum production in 1998/99 is projected at 6.0 million tons, roughly at the average of the past three years. Sorghum is produced in two cycles in Mexico: fall/winter and spring/summer. Relative to corn, sorghum has a degree of drought tolerance. Consequently, fluctuations in precipitation is not as devastating to yields, and barring disease or infestation, allows production to be relatively stable. In 1997 the largest sorghum producing states were Tamaulipas, Guanajuato, and Jalisco. The fall/winter crop is planted in February and March and harvested in May and June. The fall/winter crop is grown in the northeast and the west coast and comprises 35 to 45 percent of Mexicos total sorghum crop. Roughly 25 percent of Mexicos fall/winter sorghum is irrigated.
The spring/summer cycle is sown in April and May and harvested in November and December in the Bajio region of central Mexico. Because of its high quality and proximity to demand centers, feed manufacturers normally prefer the sorghum produced in the Bajio over the fall/winter crop. 60 to 65 percent of Mexican sorghum production is spring/summer and 45 percent of this crop is irrigated.
Consumption: Sorghum is used interchangeably with corn in the feed industry and primarily for poultry feed. Due to the low international prices relative to corn, the feed industry has recently preferred sorghum to corn. Poultry prices are not government controlled, and thus the reduction in poultry production costs due to the low prices in feed can be directly passed on to the Mexican consumers. Lower poultry prices have resulted in increased demand, which is expected to continue rising, requiring more sorghum usage.
Trade: Mexicos sorghum imports for 1998/99 are projected at 2.7 million tons. The United States is expected to supply virtually all of these imports due to its NAFTA access advantages over Argentina, the only other potential supplier. Imports of U.S. sorghum are duty and quota free.
Production: Mexico has two dry bean crops per year: spring/summer and fall/winter, and on approximately 1.9 million hectares produces roughly 1.1 MMT annually. The spring/summer crop accounted for 72 percent of the 1997/98 production and is produced in the northern part of Mexico. The peak harvest for the spring/summer crop is October through December and the state of Zacatecas is the main bean producing state, accounting for 37 percent of spring/summer production. Other important dry bean producing states include Chihuahua and Durango. The fall/winter crop accounts for 25 percent of total production of which 55 percent is produced in the state of Sinaloa.
As mentioned above, CONASUPO is involved in setting bean prices and has established technical assistance programs such as "Kilo por Kilo." In 1997 CONASUPO set the floor price of 4,350 to 4,450 Pesos/MT for the spring/summer crop and 6,200 to 7,000 Pesos/MT for the fall/winter crop. Additionally, CONASUPO purchases approximately 30 percent of the domestic crop, with the remainder marketed by the private sector.
Based on reports by the Office of Agricultural Affairs, American Embassy, Mexico City. For more information, please contact Laura Saxe at (202) 690-4134.
First-Ever Export Credit Guarantees Offered to Vietnam
For the first time ever, export credit guarantees are now available for shipments of agricultural products to Vietnam. The August 20 USDA announcement followed the recent Congressional renewal of President Clintons waiver of the Jackson-Vanik amendment to the Trade Act of 1974. The amendment restricts economic relations with nonmarket economies that limit emigration.
Vietnam is now part of the $90 million Southeast Asia Regional GSM-102 Program which was previously announced on June 25, 1998. Indonesia, Malaysia, Philippines, Singapore, and Thailand are the other countries for which exports are covered. Any CCC-approved bank in the region and Hong Kong as well, is eligible to participate in the program.
Grain and feed commodities included under the guarantee program are barley malt, feed grains, hay and straw, pulses, rice, wheat, and wheat flour. Coverage on an fob or c&f basis is available. The program will run in both FY 1998 (October/September) and FY 1999 so that unused allocations at the end of FY 1998 will automatically be carried into the next fiscal year.
Wheat - There is no domestic production of wheat, but wheat-based foods are popular and well-established. The EU and Australia normally provide about 40-60% of total wheat and wheat product needs which have historically been predominately flour. In 1997/98, however, it appears there was a significant shift to wheat imports as milling capacity expanded to its current level of about 275,000-300,000 tons. Total imports are estimated at 500,000 tons in 1998/99 (July/June) on a wheat equivalent basis. About 60% of wheat and flour imports are for noodles; the balance are for breads and cakes. The landmark purchase of U.S. wheat in August 1997 was 10,300 tons, half HRW and half HRS.
Corn - Vietnam produces about 1.5 million tons of corn and is expected to import 50,000 tons in 1998/99 (Oct/Sep) and export 100,000 tons. Ongoing development of the livestock sector continues to increase local feed demand and the country is likely to be a sizeable importer of corn in the future, given the reports of aflatoxin in local corn. Imports of U.S. corn totaled 64,000 tons from 1994/95 to 1996/97, but nothing since then.
Rice - Vietnam is the worlds second-largest rice exporter behind Thailand, and is expected to export 3.6 million tons in 1998. Vietnam does not import rice, so availability of GSM-102 will not have any direct impact on the countrys rice sector.
After several years of impressive economic growth, Vietnam is feeling the effects of the regional financial crisis. The country is trying to emerge as a trade power in the proposed ASEAN Free Trade Area and to eventually become a WTO member. Already, its tariffs are the lowest among ASEAN countries and farm subsidies are being phased out.
However, with Vietnams economy slowing lately, and a shortage of foreign exchange and large current account deficits, there may be pressure on the dong, the countrys currency. There are reports that a cumbersome bureaucracy and a less-than-friendly investment climate are driving away foreign capital. Non-tariff barriers are being reduced but licensing, quotas, and inconsistencies in administration lead to delays and extra costs. Ports are generally congested and inefficient.
It should be noted that Vietnam does not have Normal Trading Status (formerly known as Most Favored Nation status) with the United States. A bilateral agreement must first be signed and progress on those negotiations is reported to be slow.
For further information, please contact Rick OMeara at (202) 720-4933.
MERCOSUR Realigning Regional Grain Trade
MERCOSUR (the Southern Cone Common Market) was created in March 1991 with the signing of the Treaty of Asuncion by Argentina, Brazil, Paraguay and Uruguay. Chile and Bolivia are now associate members. Since MERCOSUR was created, the United States has had a much more difficult time competing in these grain markets. This is mostly due to the fact that Argentina receives preferential treatment as a MERCOSUR member, and also that Canada has now formed closer alliances with the member countries.
Grain imports for the four original MERCOSUR member countries are forecast to be 8.8 million metric tons in 1998/99. Most imports will come in the form of wheat - 6.0 million tons; with coarse grains accounting for 1.7 million tons and rice (milled basis) accounting for 1.0 million tons. Brazil is by far the largest importer in the group and Argentina is the major exporter. If Chile and Bolivia are included, imports of wheat are forecast to be 6.9 million tons; 2.8 million tons for coarse grains; and 1.0 million tons of rice, for a total grain import demand of 10.8 million tons.
In 1996/97, 68 percent of the wheat imports by MERCOSUR countries (including Bolivia and Chile) were supplied by other member countries. Non-MERCOSUR imports came from Canada and the United States. For the same year, imports of corn from within MERCOSUR were 66 percent and 34 percent came from the United States. Because Uruguay and Argentina are both rice exporters, rice imports into MERCOSUR member countries are almost exclusively provided by other members. In 1997, rice imports from within MERCOSUR covered 95 percent of total imports, while the U.S. had only 1 percent market share.
MERCOSUR is considered a customs union where members eliminate tariffs among themselves and adopt a common tariff against the rest of the world. In November 1997, MERCOSUR increased its Common External Tariff rates 3 percentage points for 9,000 products, including grains. These tariffs, which apply to all non-MERCOSUR countries, were raised to 13 from 10 percent for wheat, barley (for malting purposes) as well as rough and non-parboiled rice. Tariffs were raised from 8 to 11 percent for feedgrains.
As associate members, Chile and Bolivia do not yet receive complete MERCOSUR treatment for grains. For example, Chile has reduced its tariff rate for corn from Argentina from 11 percent to 7.7 percent and this will be reduced to zero with ten years. When Bolivia became an associate member in January, 1997, it reduced its 10 percent import tax on wheat and wheat flour from member countries to 8 percent. Bolivia will gradually reduce its tax until it is eliminated in 2012, while maintaining an external tariff.
Canada has recently entered some trading arrangements with MERCOSUR countries which are affecting grain trade. The Canada-Chile Free Trade Agreement (CCFTA) came into force on July 5, 1997. Under the CCFTA, access for most agri-food products is duty-free immediately, or will be within 5 to 10 years. Milling wheat is an exception in that the tariff phase-out will take 17 years. In addition, between April 15th and November 15th (Canada's shipping period), durum wheat enjoys duty-free access to Chile. On June 16, 1998 Canada and MERCOSUR signed a Trade and Investment Cooperation Arrangement (TICA), calling for broad negotiations in nine separate areas, including agriculture.
Since the creation of MERCOSUR in 1991, the volume of grain traded by these countries has increased dramatically. In 1989/90 wheat imports were 1.7 million tons, compared to 6.4 mmt in 1996/97. Corn imports were 479,000 tons compared to 1.2 million tons in 1996/97. Given a population of 230 million with an average growth rate of 1.5 percent annually, this sizeable market is expected to keep growing. Furthermore, the average annual estimated GDP growth rate for the region is 4 percent. As the largest importer in the region, Brazils, wheat imports averaged 5.7 million tons between 1992 and 1996, while corn imports averaged 946,000 tons
MERCOSURs wheat imports from members have consistently remained at about 60-70 percent of its total import market. The U.S. and Canada are the main competitors for approximately 30 percent of the wheat market. The EU does make some sales, notably wheat flour in Bolivia and Chile, and some wheat sales to Brazil. U.S. wheat sales to these countries (including Bolivia and Chile) in the late 1980s averaged 16 percent. From 1991 to 1996, however, the U.S. average market share dropped to 9 percent. While Canada also had a 16 percent average market share in the late 1980s, it increased to 23 percent in the 1991 to 1996 period. Looking at the latter period, and excluding Bolivia and Chile, the Canadian average market share was 22 percent while U.S. average market share dropped dramatically to 6 percent. These numbers reveal that in the 1990s, Canada has dominated MERCOSURs wheat imports from non-members, at the expense of the United States.
Whether the United States will be able to improve its market share in the MERCOSUR depends on several bilateral and multilateral issues. One is the ability to reopen the market to U.S. wheat in Brazil, which has been closed for phytosanitary reasons since September, 1996. Another is the ability to increase sales to Chile, which had phytosanitary restrictions on U.S. wheat from March 1996 to October 1997. A crucial factor will be the extent to which the United States is successful in negotiations just beginning in the Free Trade of the Americas (FTAA). In addition, developments in the bilateral Canada-Chile Free Trade Agreement (CCFTA) and the Trade and Investment Cooperation Arrangement between Canada and MERCOSUR will impact U.S. trading prospects in the region.
For further information please contact Barbara Callen at (202) 720-4203.
CAP Reforms Are Changing EU Market Dynamics
The changes to the Common Agricultural Policy (CAP) proposed under Agenda 2000 represent a continuation of reforms begun in 1993 to address the problem of large grain surpluses. In that regard, the 1993 reforms were successful in lowering internal prices and stimulating demand. Under the proposed new reforms, a 20% cut in the intervention (support) price for grain should further lower internal prices, which in turn would help stimulate greater use of grain. To offset the lower prices, larger direct (compensatory) payments to the farmers would protect their incomes, but they could also mean larger grain crops, because the mandatory set-aside, at least initially, would be zero.
If the growth in consumption exceeds production, exportable surpluses of grain (especially wheat) would be expected to decline as occurred in the first round of reforms. Perhaps more importantly, the lower EU grain prices may alleviate the need for export subsidies. In fact, the proposed intervention price for 2000, equivalent to about $105 per ton, is not far from current world market levels.
Lower Prices Stimulate Higher Grain Use
EU Wheat Exports Down 37% In 5 Years Since CAP Reforms
For further information, please contact Jay Mitchell at (202) 720-6722.
Peru Reduces Wheat Import Duty
The Government of Peru (GOP) has recently eliminated its import levy, or "surcharge" for wheat. The levy was administered under a Specific Surcharge System, which still applies to other grains, such as corn and rice.When in force, the surcharge was determined by international wheat prices, which at recent low levels, resulted in a levy of around $40 per ton. Although a basic import tariff on wheat remains at a relatively high 25 percent ad valorem, the removal of the levy is an important step, especially when viewed in the context of the prospective regional integration of Mercosur and the Community of Andean Nations, under which there will be differentiated duties applying to imports from non-members.
Removal of the import surcharge on wheat is widely seen as a positive GOP move. The Government had argued that surcharges were necessary to protect small producers. But with such little domestic wheat production, this became difficult to justify. Though the Ministry of Agriculture stated the intent of the surcharge was to indirectly protect the price of potatoes, many argued that the high duties raised the price of wheat products beyond the reach of poor families, thereby depriving them of a more balanced diet (i.e. limiting them to consumption of root crops). Nonetheless, the elimination of the surcharge has caused an outcry among local producer groups.
Though Perus Specific Surcharge System and the Andean Community Price Band System are similar, there is one important difference. Both systems have floor prices, which are the basis for the surcharge when world prices are lower. The Andean Community system also has a ceiling price, which when exceeded by world prices leads to a reduction in the regular import tariff. Perus system does not allow for ceiling prices, so regular import tariffs still apply, even when world prices are well above floor prices.
In the discussions currently underway to integrate the Community of Andean Nations and Mercosur, private sector sources indicate that one proposal would place a beginning 12 percent total tariff on wheat produced within the trading zone (subject to phase out), while imposing a 15 percent base common external tariff, plus a "price band" surcharge, on wheats imported from outside the pact. It is unclear how this would affect wheat import duties imposed by Peru, given the countrys recent removal of the wheat surcharge.
U.S. wheat exports to Peru surged in the first quarter of U.S. Marketing Year 1998/99 (June/May). As of August 20, export sales were already 263,000 tons, exceeding by 38,000 tons the figure for the entire 1997/98 season. This increase is mainly due to the sole presence of U.S. wheat in the Peruvian market, as two major competitors, Canada and Argentina, are not currently offering wheat to this market. Argentine wheat will not be available until December or later, while the Canadian Wheat Board is apparently assessing production results and sales options. In the meantime, the removal of the wheat surcharge can only add to the ongoing rise in Perus demand for imported wheat.
Prepared by Gaspar Nolte, Agricultural Specialist, Office of Agricultural Affairs, American Embassy, Lima. For more information, please call Barbara Callen at (202) 720-4203.
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