Costa Rica: Evaluacion de los Mercados de Granos Basicos y el Papel del Consejo Nacional de Produccion

Abstract

This paper examines the costs and benefits as well as the redistributive consequences of the interventions of the Costa Rican price stabilization agency (CNP) in the market for basic grains (rice, corn, and beans). Three basic questions are explored: (a) what is the optimum level for the prices of these grains and how should it be established; (b) what is the maximum variability of prices that can be tolerated and how can price instability be reduced; and (c) what are the appropriate roles for the CNP and private firms in the marketing of basic grains. After examining the role of prices in these markets, the paper explores the extent to which prices have been stabilized and the consequences for consumers (cost of the diet) and for producers (farm incomes). The regional transfers implicit in the system are explored, as well. Implicit transfers have favored large rice growers and have hurt small beans producers and all consumers. A political economy explanation of this outcome is suggested. The paper explores the capacity of the private sector to commercialize these grains and the features of a price band (floor and ceiling) mechanism to reduce uncertainty.