agriculture

Increased insurance coverage could pay off

The state agricultural insurer used to cover 75 percent of producers' losses due to weather, pests, and other causes.

Now the state will cover 90 percent, in the hope of sustaining an industry facing many challenges.

LA PRENSA

Losses:Rice growers collected $500,000 from the Instituto de Seguros Agropecuarios (ISA) to cover losses in 2007.1039670

The state provider of agricultural insurance, the Instituto de Seguros Agropecuarios (ISA), paid out $700,000 in 2007 to cover losses in the production of rice, corn and livestock. The rice sector alone collected $500,000 in payments. Corn and livestock producers, including the dairy sector, collected $200,000.

Agricultural insurance covers the effects of weather, pests, and animal mortality, among other things. Olmedo Espino, the ISA's general manager, explained that the Institute used to cover 75 percent of producers' losses, while the producers themselves paid the remaining 25 percent.

But that was in 2007. The ISA now covers up to 90 percent of losses, as provided by the state's Agrocompita program, created to support Panama's troubled agriculture and cattle industry.

This of course is good news for producers, but, as Espino suggested, the Agrocompita provision could cost the state dearly if losses are greater this year than last. ISA revenues from premiums run around $3 million. “In generaly, premiums represent 5 percent of the total [agricultural and livestock] capital insured,” he said.

However, Espino believes increasing coverage is a risk that must be run, considering the global rise in food prices. It could cost the state more to import food to satisfy the country's demand than making sure national producers stay in business and fill out the local food basket. The country had “to take action,” in his judgement.

Araúz Alexander, president of the Asociación de Productores de Chiriquí (APACH), wants to take things one step further. While he agrees with the financial objectives of the Agrocompita plan, he also recommends turning attention toward the commercialization of agriculture and livestock products, which, he says, “is the hardest part.”

APACH, for example, has estimated that between the 2 percent reduction in the preferential interest rate on agricultural loans granted by the Banco Nacional de Panama and the Banco de Desarrollo Agropecuario, which is also plays a role in the Agrocompita plan, and decreasing the selling price of urea from $46 to 24 dollars, rice producers alone would save $99 per hectare in production costs. Felix Santamaría, a producer in Chiriqui, shares Araúz's view. He thinks the government's financing plans are good, but he would also like to see a “more direct relationship with producers, without intermediaries.”