Focus on Bolivia

by Meyer Sosland
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Bolivia is a country rich in natural resources, but it is, nevertheless, one of South America’s poorest countries. Named after the independence fighter Simon Bolivar, it achieved independence from Spain in 1825. After a long history of coups and countercoups, it finally achieved democratic rule in 1982.

In December 2005, Evo Morales, leader of "Movement Towards Socialism," was elected president, the first member of Bolivia’s indigenous population to achieve that office. He has already nationalized much of the energy sector and come into potential conflict with the United States (U.S.) by promising to relax restrictions on the growing of coca, the raw material for cocaine.

He has also triggered concern in the U.S. and Europe by moving closer to Iran. In September, Iranian President Mahmud Ahmadinejad visited La Paz and the two leaders signed a joint statement recognizing "the rights of developing nations to develop nuclear energy for peaceful purposes." Bolivia has re-established full diplomatic relations with Iran.

FLOUR MILLING
Although it is one of the world’s biggest coca producers, Bolivia has been much less successful as a grower of wheat. According to the International Grains Council (IGC), Bolivia’s wheat flour imports totalled 200,000 tonnes (wheat equivalent lent) ) in in 2006 2006-07 07. In 2007-08, its total wheat imports have been estimated at 300,000 tonnes by the IGC.

According to figures from Bolivia’s millers association, the Asociación de Industriales Molineros (ADIM), 10 years ago there were 19 mills in Bolivia, with a total capacity of 840,000 tonnes. There are now nine, five in La Paz, two in Santa Cruz, one in Potosi and one in Sucre, with a total capacity of 522,000 tonnes a year.

Millers complain that little of the wheat produced gets to the mills. "Don’t forget that it’s a country of 9 million with close to 40 percent of the population in rural areas," Jorge Calvo, United States Agency for International

Development (USAID) agriculture specialist in Bolivia told World Grain. "They do much of their own milling in the traditional way."

According to the United Nations Food and Agriculture Organization (FAO), 2 million people, or 23% of the total population of 8.6 million, were undernourished from 2001-03. More than 60% of the population was considered to be living in poverty, including 81.7% of the rural population and 50.6% of those living in urban areas.

For many years, Bolivia relied on shipments of U.S. wheat under the Public Law 480 Food Aid Program (PL480). Now that those shipments have stopped, although there are still U.S. shipments of flour, millers are reliant on imports. "Consumption is about 400,000 tonnes of wheat, out of which 20 to 25 percent is Bolivian production," Calvo said. "The rest is from Argentina and Canada."

The problem with Bolivia’s own wheat production is that much of it is on a very small scale and yields are poor, he explained. "If you talk about the land in irrigation, it’s maybe a quarter of a hectare," he said. "They produce high-value food crops like vegetables and potatoes."

Bolivian farmers achieve yields of around 600 kilograms a hectare, compared with 10 times that figure in Chile or Argentina. "Bolivia cannot compete on price," he said. "We don’t have any industry producing fertilizer or insecticides. We depend on imports. The margins are very small and it’s not attractive."

Most of Brazil’s largest cities are located in the Andes Mountains, and the highlands have formed the most developed part of the country. However, the eastern lowlands, particularly in Santa Cruz, developed rapidly in the late 20th century.

Millers, hard hit by high prices, have pressed the government to act. The response has been a series of imports, announced on Aug. 21, 2007 by the Ministry of Production and Small Business (Ministerio de Producción y Microempresa). The first delivery, of 6,528 tonnes of flour arrived in September, followed by 16,000 tonnes each month to a total of 50,000 tonnes.

Monthly demand for flour is 37,000 tonnes, of which 7,000 tonnes comes from Bolivia’s own mills, 4,000 tonnes under PL480, 10,000 tonnes from traditional trade importers. The 16,000-tonne-a-month shipments planned will make up the shortfall.

For many Bolivians, wheat flour plays a small part in their daily diet, "They eat more potatoes and rice as a staple," Jorge Calvo said. "They also eat quinoa. In rural areas they eat cassava rather than bread."

"Consumption of bread, noodles and pasta is the lowest in South America," he said.

"Bolivia could have a big agricultural industry, but we are lagging behind," he said. "Compared with Ecuador or Peru we’re 100 years behind." He did point out that Brazilian agriculture has excellent conditions for growing cash crops like soy and sugarcane.

SOY INDUSTRY
Soy is Bolivia’s most important crop. According to the U.S. Department of Agriculture’s (USDA) latest estimates, Bolivia’s 2007-08 (March-February) soybean crop fell to 1.65 million tonnes from 2.06 million the year before, following severe floods that affected the production area at the beginning of the year. The USDA attaché put the cost of the damage at $45 billion in a recent report on the Brazilian oilseeds sector.

Most of the soy crop comes from the Santa Cruz region. Two crops are produced each year: a summer crop, planted in November and December and harvested in March and April, which accounts for about 70% of production; and a winter crop, planted in June and July and harvested in October and

December. The winter crop will also be affected, according to the attaché, which pointed out that flood-related landslides had covered around 20,000 hectares in the summer. "It will be impossible to recover those areas in time for the new crop," the report said.

Soybeans are Bolivia’s most important crop, covering 950,000 hectares in 2005, compared with 110,000 hectares of maize and 70,000 hectares of sunflowers. There are about 14,000 soy producers, 77% of whom own less than 50 hectares.

Bolivia has a total soy crushing capacity of 7,500 tonnes a day which is enough to process the whole crop. The biggest crushing company is ADM-SAO, which has about 35% of the market. Fino and Rico have about 25% each.

Soy is Bolivia’s largest agricultural export, with a total value of $362 million in 2007. In the past, almost all exports have gone to the Andean countries: Colombia, Ecuador, Peru and Venezuela. Bolivia has a disadvantage when it comes to transport costs. According to the attaché, freight from the Gulf of Mexico to Colombia costs $45 a tonne, compared to $113 a tonne from Bolivia. Brazil and Argentina also beat Bolivia on freight costs to Colombia, at around $59 per tonne.

Venezuela has increased its commercial purchases to the point where it is taking most of Bolivia’s soy crop, creating concern about overdependence on one customer.

Bolivian exporters have also expressed concern about the loss of tariff preferences under the Andean Community of Nations (CAN). The CAN is going through a crisis because of the U.S.-Andean FTA. At present, Bolivian soy meal is imported into Colombia and Peru duty free. Under the FTA, duties on U.S. soybeans would go to zero.

Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.

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