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CAFTA- Taks for in Honduras

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July 1, 2005 Phone: 406-672-8969; e-mail: [email protected]

CAFTA-DR Task Force in Honduras

(San Pedro Sula, Honduras) – The R-CALF USA task force assigned to visit specific Central American nations to research and analyze support for, and the impact of, the U.S.-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR) arrived on Thursday in San Pedro Sula, Honduras.

Members of the task force are: Dennis McDonald, who chairs R-CALF USA's International Trade Committee and serves as president of the Montana Cattlemen's Association; R-CALF USA Director and Missouri veterinarian Max Thornsberry, who also chairs R-CALF USA's animal health committee; Joel Gill, R-CALF USA's state membership chair for Mississippi, who also is vice president of Mississippi Order Buyers and president of the Mississippi Livestock Marketing Association; and Doug Zalesky Ph.D., a Colorado State University bovine research scientist and cattle producer from Colorado, who was recently elected president of the Colorado Independent CattleGrowers Association.

"This is the poorest of all the CAFTA countries," said McDonald. "The unemployment rate is 40 percent, and 80 percent of the people live below the poverty level. A farm and ranch worker can expect to earn $2.50 per day."

On June 30, the task force visited a Honduran dairy and cattle ranch, which is worked by the family patriarch and his five children. The dairy consists of three milking cows, while the total cattle herd consists of eight head. This ranch once ran 80 head of cattle, according to the owner.

"He lost his herd during the Contra-Sandanista war, followed by Hurricane Mitch in 2000," said McDonald. "With no financing available to families like this one (there is no viable banking system in Honduras), rebuilding their herd is only a dream.

"With investment capital available to Honduran ranchers, the herd in this country could multiply several times over," continued McDonald. "Presently, the Honduran herd is at 2.4 million head. It is a country the size of the United Kingdom."

The overwhelming constraining factor limiting beef trade with Honduras is the country's extreme poverty.

"Anyone who believes Honduras will provide a market for U.S. beef need only look at the standard of living to know that such a notion is absurd," McDonald noted. "On the other hand, Honduras will be yet another source of cheap beef, which will pose yet another economic challenge to U.S. producers."

The Honduran government has already ratified the CAFTA-DR agreement. Honduras did so, despite its unpopularity. In exchange, the World Bank forgave the country's immense foreign debt.

"This debt was limiting Honduran growth and was a debt the country could never have paid back," commented McDonald.

Task force members said Honduras presents an interesting case, in that representatives of the cattle industry generally favor CAFTA-DR for its perceived benefits, but they say they also worry that the beef production sector will suffer greatly in the future.

"Cattle industry leaders here say that while there will be very limited increase of high quality, marbled beef being imported due to the taste preference of the population here, the possibility of the increased sales of imported select cuts and ground beef could threaten local markets for these products," said Zalesky. "While the cattle in Honduras are of poorer quality than other Central American nations we have visited, the desire to improve and expand the national cattle herd certainly exists, and like other Central American nations, the potential to expand is large."

Thornsberry noted that a local packer, whose company exports to the U.S. and sells locally to Burger King and Wendy's, noted there would be little increase in demand for U.S. prime and choice cuts.

"Yani Rosenthal, the packing plant owner, told us there will little or no increase in demand for higher-end U.S. cuts of beef, but there is the potential for greater demand for canner, cutter and no-roll products," Thornsberry said.

Gill noted that Hondurans currently pay 20 percent to 28 percent interest rates on three-year to five-year loans, with loans being no longer than five years in length.

"Should cheap capital become available, like the other CAFTA nations we have visited, production could rapidly expand," said Gill.

Currently, land costs approximately $700 per acre with a cow/calf pair bringing $500 - $600.

After meeting with a number of Honduran cattlemen, Thornsberry questioned the validity of requiring a poor agrarian nation like Honduras to electronically identify individual cattle.

"These cattlemen believe they must match the U.S. system of premise identification and the eventual RFID (radio frequency identification) of all cattle," Thornsberry said. "According to cattle industry leaders in Honduras, the process of individual and premise ID will be difficult, if not impossible.

"Many poor farmers in Honduras hold little land and raise only two to four individual head, so the number of premise IDs alone would be cost prohibitive to the Honduras production system," he continued.

Thornsberry attended a local regional livestock fair near San Pedro Sula and discovered some very disturbing information.

"A number of pharmaceutical companies were advertising their products at this event," he said. "While CAFTA proponents claim equal livestock slaughter facilities and production practices exist in Central America, I continue to identify medications and insecticides commonly utilized in Honduras that are prohibited by the U.S. Food and Drug Administration (FDA).

"Honduran producers see little opportunity to export their very lean Brahman beef into the U.S., since their meat is already allowed to enter the U.S. under previous Caribbean trade agreements," Thornsberry continued. "I remain extremely concerned about the potential for unapproved drug residues in Honduran beef and I intend to investigate the subject thoroughly before we complete our Central American tour."

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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) represents thousands of U.S. cattle producers on domestic and international trade and marketing issues. R-CALF USA, a national, non-profit organization, is dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA's membership consists primarily of cow-calf operators, cattle backgrounders, and feedlot owners. Its members – over 18,000 strong – are located in 47 states, and the organization has over 60 local and state association affiliates, from both cattle and farm organizations. Various main street businesses are associate members of R-CALF USA. For more information, visit www.r-calfusa.com or, call 406-252-2516.

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