MBA. Hellen Ruiz Hidalgo
Strategic Communicator - OCEX-UNED

Through Resolution No. DSFE 03-2015 of April 22, 2015 of its State Phytosanitary Service (SFE) and under the allegation of protecting the sanitary patrimony of its avocado crops, the Costa Rican State decided to impose a phytosanitary restriction to the import of avocado from the territories of Australia, Spain, Ghana, Guatemala, Israel, Mexico, South Africa, Bolivarian Republic of Venezuela and the State of Florida of the United States. This decision was based on the alleged presence of the viroid called Sun-blotch (Avocado sunblotch viroid, ASBVd), endemic in avocado plantations of those territories.

The imposed measure would have the effect of restricting, above all, imports of Mexican Hass avocado, country that suffered the greatest impact, as it is the main supplier of this fruit, worldwide. Mexico is responsible for the production of 41% of global consumption and 60% of national consumption of the fruit.

The restrictions, considered by the affected countries as arbitrary and contravening international trade law, eventually triggered the opening of a dispute brought by Mexico before the World Trade Organization (WTO) and its dispute settlement mechanism. This dispute has been joined by several affected countries, such as Guatemala, South Africa and the United States. It is up to a Panel, duly formed, to determine whether the measure applied by Costa Rica is a discriminatory and arbitrary restriction on trade, disguised as a phytosanitary measure.

The following is a brief chronology of events in the dispute.

2015

  • May 8th. A restrictive measure was established, surprisingly, because importers had not been duly notified about this measure that blocked, at the border, a shipment of Mexican avocado.
  • June 14th. Faced with this situation, carried out without warning, consultation, or prior notification, Mexico and Guatemala denounced Costa Rica before the WTO.
  • June 21st. The United States and South Africa joined in this measure. The dispute settlement mechanism requires consultations between the parties in conflict. This is nothing more than a direct dialogue between the parties concerned in search of a mutually agreed solution. But there was no agreement.  The State of Costa Rica reaffirmed its position.
  • 11 September. Costa Rica seemed to make its position more flexible by allowing the entry of Mexican avocado under the condition that it had a sanitary certificate from the WTO. This was not the case.

2017

  • March 8th. In view of the failure of a positive outcome to the consultations and bilateral dialogue, Mexico filed a complaint against Costa Rica with the WTO Dispute Settlement Body.
  • 30 March. Costa Rica requested Mexico to seek a bilateral solution outside the WTO. That effort was unsuccessful.
  • Mexico announced that it would continue with its dispute against Costa Rica, under the mechanism established in the WTO.

2018

  • November 22nd. Mexico requested the establishment of a Panel.
  • December 17. Despite the failures of previous attempts, Costa Rica and Mexico agreed to withdraw the conflict from the scope of the WTO and sought a bilateral solution through the creation of Mexican technical and academic groups that would visit Costa Rica's farms in order to verify that they were free of the viroid. The visit took place in February 2019. While this was happening and until a new agreement was reached, the dispute would continue.
  • December 18th. The WTO established a Panel to settle the dispute DS524, in which Mexico complained against Costa Rica for noncompliance with its commitments and obligations under the WTO. It should be noted that this is the first time that Costa Rica has been the subject of a complaint under this mechanism.

2019

  • In view of the agreed visit of the Mexican specialists, the owners of the Los Santos avocado farms, an area especially dedicated to the cultivation of the Hass variety, refused to grant permission to the Mexican delegation to enter their plantations. That was the last attempt at bilateral conciliation.
  • March 6th. A short month after the failed visit by the Mexican technicians, Mexico announced that it would not settle outside the WTO.
  • May 20. The parties to the dispute agreed on the composition of the panel in accordance with WTO rules. Thus, the Special Group analyzing the case against Costa Rica is composed of Gary Horlick (USA), Alejandro Buvinic (Chile) and María de Lourdes Fonalleras (Argentina).

2020

VF ENGLISH Aguacate cronología 9For a broader understanding of the political background of the restriction to Mexican avocado imports, it is worth noting the parallel actions carried out by the Costa Rican state institutions responsible for promoting agriculture. Along with the phytosanitary measure, the Ministry of Agriculture and Livestock of Costa Rica (MAG), the agency responsible for imposing the restrictive measure, implemented activities to assist national producers of Hass avocado and to foster the expansion of the cultivated area.

The movement of the State is in two simultaneous directions:

(1) restriction of avocado imports, creating shortage, price increase, business opportunity for national producers and, at the same time, (2) exploiting this restrictive measure, converted into a business opportunity, by means of concerted action to support domestic producers.

The immediate effect of the measure restricting imports would be a reduction in the aggregate supply of avocados, putting pressure on prices, thus creating an opportunity for domestic producers to try to compensate for the shortfall in supply, with sales prices more appropriate to their low productivity. It should be taken into consideration that domestic producers have barely covered at most 13% of the demand and it would be very difficult, in a short term, to significantly increase their supply.

To take advantage of this opportunity, the Inter-American Institute for Cooperation on Agriculture (IICA) was approached to help design a project to support the sector. This project resulted in the National Plan for Strengthening the Avocado Sector. Additionally, other pillars of state assistance were established, ranging from financing production, through the Development Banking System, to the technical strengthening of avocado growers' organizations to improve the stocking, production and consolidation of the supply and thus negotiate better prices as a group.

Since the beginning of the current administration, in May 2018, the Minister of Agriculture and Livestock, Renato Alvarado Rivera, met with the avocado sector to provide special support to the sector. The National Avocado Commission was created to lead actions in support of this sector.

It was alleged that the purpose of this ban was to protect national avocado production from contagion. However, Costa Rica has been importing this fruit since 1995, i.e. for 25 years, without any infection. This was established by the Laboratory of Molecular and Cellular Biology of the University of Costa Rica, which noted, in a study of December 2014, that all samples collected and analyzed had proven the absence of the disease in the country. That study puts a question mark over the phytosanitary basis of urgency and relevance of the measure since it shows that the massive import of Mexican Hass avocado has not produced, for more than 20 years, any contagion in the national fruit.

It should be taken into consideration, when assessing the Costa Rican measure of restricting the entry for consumption of Mexican avocado, with the alleged aim of protecting the sanitary condition of local fruit, that both the National System of Epidemiological Surveillance of Mexico and the Phytosanitary Service of the State of Costa Rica are unanimous in stating that "The main method of infection is transmission by graft during propagation, or implanted tissue and the introduction of ASBVd infected seedlings from infected graft carriers"
(http://langif.uaslp.mx/documentos/informe_2009/Producto_4/04-11-SUN%20BLOTCH.pdf
and http://www.mag.go.cr/bibliotecavirtual/AF-0070.pdf).

From both studies it appears that avocado fruit or seed intended for consumption is not a medium for transmission of ASBVd.

Therefore, a full grasp of the restrictive measure goes beyond a technical explanation of the preservation of the national phytosanitary patrimony of the fruit. Avocado consumption, in 2014, reached 15 thousand tons and represented a market of 50 million dollars. Local production only allowed to cover 2 thousand tons, that is, 13% of national consumption.

As a result of the avocado import restriction, the country experienced a 30% decrease in imports and this decline in supply could not be covered by domestic production, causing shortages and an increase of more than 70% in the price of fruit for the national consumer. These increased prices caused a drop in the consumption of fruit whose cost was beyond the purchasing power, especially of the poorest families. (See) The supine protectionist stupidity - La Nación - Velia Govaere, 2
March2019:https://www.nacion.com/opinion/columnistas/la-supina-estupidez-proteccionista/LMY5JASAEFECBFRDW53NMKZWPM/story

But this increase in the price of the fruit was appreciated as an opportunity for domestic production. The National Plan for the Strengthening of the Avocado Sector expressly reads: "This drop in the supply of the product at national level has opened a window of opportunity for a better positioning of local production, which has assumed part of the burden of this shortage... but its capacity has not been sufficient to satisfy the high demand of the internal market".

However, the Plan reveals that producers are asking for more governmental support. "... according to the same producers, this significant increase in price has not been reflected in the same way for the producer, who has maintained similar purchase prices to the years prior to the closing of the border".

If the restrictive measure opened the opportunity for national production to increase by 100%, that rise in production, which went from 2000 to 4000 tons, barely covers 26% of the original local demand, which has since decreased by 30%, as an effect of the price increase.

Although the import restriction created an opportunity for local production, domestic conditions make it difficult for local production to supply even a significant proportion of existing demand. The sector suffers from low productivity, poor seed quality, adverse weather and declining rainfall, poor access infrastructure, weak distribution chains, rugged terrain and local transportation difficulties.

It must be taken into account that Mexico has a performance of 16 tons per hectare. The world average productivity is 10 tons per hectare, and Costa Rica barely reaches, with cost, a yield of one ton per hectare, according to a study by the National Technical University of Costa Rica (UTN).

In short, the restrictive measure has not allowed for better conditions and consolidation of domestic supply. The MAG establishes this in its National Plan for Strengthening the Avocado Sector, when it states that the national productive capacity "...has not been sufficient to satisfy the high demand of the national market". Since it was not compensated with local production, the price increase caused by the decrease in the supply of imported avocados resulted in a net decrease in consumption.

Additionally, all this disruption of the avocado market has not generated a significant economic benefit for local producers.

The case of avocado has consequences of several orders:

  • International trade: Mexico filed on March 8, 2017 the request for the filing of a dispute at the WTO against Costa Rica, for its restrictive measures on imports of fresh avocados from Mexico (DS524). This case, still ongoing, is being addressed by a Panel, which will decide whether Costa Rica applied an undue restriction to trade. A negative ruling against Costa Rica would imply that the Panel considers that the country has breached its international commitments by applying a disguised or arbitrary measure against Mexican trade. Apart from that violation of the application of WTO rules; such conduct would be inconsistent with compliance with multilateral trade rules, under which the country's relationship with its trading partners has been governed. This measure, in particular, against Mexico, the first country with which we signed a free trade agreement, not only affects the interests of a major trading partner, but also damages Costa Rica's international reputation. Costa Rica began its trade opening unilaterally more than three decades ago and, since then, has been a member that correctly implements both the obligations arising from the WTO system and those established under trade agreements.

  • Local legal: Following the lawsuit of 6 importing companies, the Contentious Administrative Court condemned the Costa Rican State to pay procedural costs, for damages for prohibiting the import of Hass avocado, based on phytosanitary guidelines of the MAG and the State's Phytosanitary Service.

  • Social: After avocado had been one of the basic products consumed by Costa Ricans, the high prices it reached, as an effect of the restrictive measures, caused a decrease in its consumption, which was an element for the Ministry of Finance to propose the exclusion of avocado from the tax exemption that benefits the products of the basic package, considering it statistically disappeared from the consumption of the lower income sectors. (La Nación, February 1, 2019) (https://www.nacion.com/economia/consumo/por-que-el-limon-mesino-el-aguacate-el-atun-en/IX453FMNHJA6DLUW5YJYQOYDHU/story/) Ultimately, however, given the opposition generated by the exclusion proposal, the avocado was included in the basic package.

  • Economic: The State considers that the restrictive measures, the decrease of imports and the rise of prices create an opportunity to encourage the duplication of the production area in areas without comparative advantages. As an economic policy, it is not good practice to encourage agricultural activity with few comparative advantages. Such policies often result in the need to maintain permanent special protection for sectors with low structural productivity. This has at least three disadvantages: (1) It puts pressure on public finances; (2) higher prices are detrimental to consumers; and (3) protection also harms producers, who are pushed to maintain and expand a crop in which they are not competitive.

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