In
the midst of mass protests of dissatisfaction and rejection by
various organized groups within Guatemala, president Oscar Berger
made the “authoritarian” decision to ratify the Central
American Free Trade Agreement (CAFTA) that had earlier been approved
by the Guatemalan Congress.
This
agreement is part of a “package” quickly negotiated in
2003, that excluded the majority of social civil organizations (with
the exception of the business sector) between United States, the five
Central American countries and more recently the Dominican Republic.
Plataforma
Agraria considers that the
implementation of CAFTA will have serious implications for
Guatemala's social structure, because it reinforces a production
model based on the export of unprocessed farm produce which has
favored economic benefits for some at the cost of maintaining the
rest of the population segregated from the possibilities of economic
and social development.

CAFTA
has implications beyond the commerce, because it regulates
investments and intellectual property, and opens the service sector
and government acquisitions, in a process that redefines the role of
the Guatemalan State. Because of this, CAFTA is a legal
instrument that will lead to the loss of sovereignty and strengthens
"market oriented economic reforms"[1].
It is widely known that these measures have caused the ruin of
peasant economies and of small producers in countries that have
signed the North American Free Trade Agreement (NAFTA) while
benefiting transnational companies in Mexico, the US and Canada[2].

1.
The Economic Winners
United
States is the second principal destination
for Guatemalan exports. These producers have taken advantage of
already existing trade agreements, such as the Caribbean Basin
Initiative, the Generalized System of Preferences, and the Law of
Trade Association of the Caribbean Basin, to add apparel and non
traditional farm exports to the list of traditional exports such as
bananas, sugar and coffee (traditional exports in 2003 comprised
37.5% of exports).
The
productive structure of Guatemala's "traditional exports"
is based on the continuance of large-scale farms (0.15% of the owners
possess 70% of the cultivated agricultural area, according to
official figures), low salaries (less than US$4 a day) and the sale
of products with little value added to a handful of countries
in a framework that favors monopolies. The majority of the rest of
these products are produced by small-scale peasant farming or on
midsized farms with limited access to credit, technology, market
information or management techniques to help them access the foreign
market.
The
textile industry is dominated by foreign business capital (60% of the
350 textile businesses are Korean) that operate without paying taxes
(they are exonerated for 10 years from paying income tax and other
taxes) in labor intensive operations that include long hours
and repeated labor violations[3].
This
productive base generated decades of economic growth that benefited
only a small portion of the population, because while the value of
the production multiplied by 4.5 between 1950 and 1980, poverty
increased in the country from 60% in 1960 to 79% in 1980, heading
towards 87% by the end of that decade[4].
2.
CAFTA: more of the same
In
terms of the possibilities for increased Guatemalan exports, CAFTA
does not signify any important changes. The commercial benefits are
practically the same that they had been with the prior system of
preferential tariffs, benefiting 99.4% of Guatemala's exports,
including products such as glass, footwear, tuna, and tobacco. In the
case of sugar they have not achieved in eliminating the tariff, only
an additional quota. For the textile industry it is estimated that
the agreements reached will only help Guatemalan producers survive in
the face of increased market access in 2005 for world giants such as
China and India (which together are expected to capture 65% of the
world market in clothing and textiles)[5].
An
analysis of the distribution of income among the distinct economic
players throughout the commercialization process would lead to the
conclusion that those most favored by the new preferential tariffs in
CAFTA, are a series of businesses from the US and other
countries that operate in Guatemala and the rest of the region, that
will be producing with high levels of imported components (an example
is the textile industry) or commercializing farm products with little
value added.
This
situation is repeated in each of the products analyzed. In the case
of a traditional product, such as coffee, the direct producer
receives only three percent of the final consumer price, while the
commercial roaster receives 90 percent of the income generated[6].
Regarding non traditional products (the basis of the current
government's strategy for economic growth) there is the case of
melons in which 75% of the final price is appropriated by the
distributing company (transnationals, such as Dole or Chiquita) while
the direct producer receives one percent. The maquila is also
affected by this logic, since diverse studies have documented that
the profit margin for transnational capital invested in Guatemala is
more than 40%[7]
(Fifty percent of sales income, according to a study by AVANCSO)[8].
As
a result of this, the benefits of an eventual increase in exports to
the United States stemming from CAFTA will accrue mainly to
transnational firms, on the one hand, and to a lesser degree to the
large-scale farmers who take advantage of their vast lands and their
political clout to impose on their workers unfair conditions with
extended work days and salaries insufficient to cover their basic
needs. This explains the high levels of poverty in the country.

This
phenomenon is reproduced on all levels of the country's economy,
since according to Central Bank statistics, the level of business
profits has historically absorbed between 55 and 60 percent of total
national income, while the proportion corresponding to salaries
remains about one third of national income[9].
3.
While the large-scale farm units are strengthened, and transnational
capital is consolidated, the peasant economy is devastated.

Although
the negotiations excluded the elimination of tariffs for white corn
imports into Guatemala, the rest of US basic grains and farm products
will enter the national market sooner or later to compete with local
production (even US white corn will be able to enter in this
competitive framework through triangulation caused when Costa Rica
allowed free entry to that product that will thus arrive to the rest
of the region).

The
basic problem is that the CAFTA will be creating similar levels of
competition for two productive sectors with totally distinct
conditions and structures. One the one hand the US commercial farmer
benefits from medium or large size farms with fertile and flat
farmlands, apt for intensive farming, access to low interest bank
credits, technified and mechanized production with high productivity,
and if that is not enough, the support of Federal government
subsidies averaging US$21,000 per producer. On the other hand, the
approximately 800 thousand Guatemalan basic grain producers, the
majority of who are small and medium sized producers, farming on
small parcels of lands that are more apt for forestry than for
farming, producing with traditional labor-intensive techniques, with
limited access to expensive credit and no government support at all.

US
export subsidies alone allow corn to sell at 20%
below the cost of production, market conditions impossible for any
peasant producer to compete with[10].
Due to these advantages the CAFTA is estimated to provide the US farm
sector with US$1 billion in additional exports each year,[11]
mainly benefiting the largest 10 percent of the US farms.
The
outlook based on this information is one of devastation for peasant
and indigenous production in Guatemala, already sectors affected by
high levels of poverty. [12]
The case of corn is especially dramatic given the fact that it is the
most important food produced in Guatemala and the principal source of
employment nationally. The process of tariff reduction during the
first ten years (from 1990 to 2000) caused an increase in imports of
450 percent and a fall in production of around 17 percent. The case
of wheat is also illustrative. Guatemala, after being the ninth most
important producer in Latin America during the 1960s, eliminated
import quotas, allowing the entry of highly subsidized US wheat,
resulting in the bankruptcy of 30 thousand small farmers who had
produced most of the total wheat harvest.

The
threat extends to all the basic grains producers which is mainly made
up of peasant economies dedicated primarily to covering their
subsistence needs and to a lesser degree to meeting demand in local,
regional and national markets. According to the National Coordinator
of Basic Grains Producers (CONAGRAB), some 800 thousand producers
depend on this activity, and as a result of the tariff reductions
begun in 1990 they have been reducing farm area by some 250 thousand
hectares each year, which led to the loss of 240 thousand work days
each year[13].
The
crises affecting the peasant and small producer economies are already
a reality as the result of a similar instrument: the North American
Free Trade Agreement, in existence for more than ten years, including
Canada, the United States and Mexico, better known as NAFTA.

In
Canada, following NAFTA there were reports of a drastic fall in farm
income and farm debt as a result of the substitution of foods
cultivated nationally for imported farm produce which exposed
Canadian farmers to low prices and high volatility of the export
markets, even though the farm trade balance remains positive and
continues increasing.[14]
In
the US family run farms are suffering from a fall in real grain
prices, as much as 20 percent, alongside the drastic reduction
of national programs of price supports, loans and others that made
the rural family economy viable by protecting it from the
capriciousness of speculators and the uncertain fluctuations of the
market. The crisis of the family farms is so great that Congress has
had to assign emergency farm subsidies, in the form of massive
financial assistance each year since NAFTA went into effect. Even
with this assistance, more than 33 thousand farms of small and medium
sized producers have shut down during the period since then.

In
Mexico, millions of peasants were forced to abandon the small parcels
that had assured their families with sustenance, in order to migrate
to the cities or the US, due to the impossibility of competing with
the US farm exports which have more than doubled since NAFTA went
into effect, causing the decline in basic grain prices, while the
cost of the basic consumer basket increased by 257 percent. In this
view, the case of corn is dramatic, since even though NAFTA provided
15 years for gradually introducing corn imports, the Mexican
government opened the market in two years. Tons of imported corn were
sold for prices below the minimum price that the Mexican producers
had received prior to NAFTA. Between 1994 and 1998 alone, an
estimated 15 million Mexican farmers reportedly left their lands.

The
other side of the coin includes many agri-businesses that operate in
North America who have taken advantage of the increased market access
for farm produce and the protection that NAFTA gave investors and
they rapidly began to consolidate their businesses. The enormous
fusions of agri-businesses such as Smithfield Foods and Murphy Family
Farms, or that of the largest producer of poultry, Tyson Foods, with
the meat packer IBP, are already a reality from the era of NAFTA.
The agri-business sector has been able to create new export platforms
that have placed in conflict farmers in the US, Canada and Mexico in
a struggle to survive as producer prices continue falling. While the
number of independent farmers declined between 1993 and 2000, the
agri-industrial giants such as ConAgra and Archer Daniels Midland
obtained important profits. From 1993 to 2000, ConAgra profits
increased in 189 percent, while Archer Daniels Midland profits
practically tripled during the same period.

5.
Conclusions
After
10 years of observing NAFTA and the analysis of the social structure
of production that would stem from the implementation of CAFTA,
Plataforma Agraria considers that the trade agreement:

1.
Is against the interests of peasant communities
2.
Endangers food security for the most of the rural indigenous and
peasant population living in poverty.

3.
It will benefit the transnational businesses and the large national
businesses, especially the large scale farms which historically has
controlled land tenure, capital and technological resources to take
advantages provided by the foreign market.