RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/PRY/4
28 February 2002
(02-1005)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Replies to Questions Posed by the UNITED STATES1 Regarding
the New and Full and Updating Notifications of PARAGUAY2
The following communication, dated 25 February 2002, has been received from the
Permanent Mission of Paraguay.
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Question 1
Can you please describe in detail the government-supported cotton regime in Paraguay?
Question 2
What supports are offered to cotton producers in Paraguay?
Question 3
Are these supports offered to all cotton producers - both large and small?
Replies
Cotton production has drastically decreased over the last 10 years on account of setbacks at
the national and international levels; these include the steady decline in cotton fibre prices on the
external market, the introduction of a quarantine pest, as well as the impact of unfavourable climaticevents. These factors taken together have had serious repercussions for the economic welfare of a
major sector, which is also the most needy segment of the population.
Two key episodes bear heavy responsibility for this state of affairs. First, the arrival of the
cotton boll weevil, which exerted a considerable impact on production costs and cotton yields. Nextcame the climatic events associated with El Niño (in 1991/1992 and between 1996 and 1998)
followed by La Niña (1999), which had decisive implications for cotton production in Paraguay. The
advent of the boll weevil virtually wiped out the production of seeds—with consequences that
continue to be felt to this day—whilst El Niño inflicted heavy losses across all categories of
agricultural and stockbreeding activity in general. In the wake of La Niña, small-scale farmers' stocksof self-consumption products were reduced to a minimum.
                                                     
1 G/SCM/Q2/PRY/3
2 G/SCM/N/3/PRY-G/SCM/N/16/PRY-G/SCM/N/25/PRY-G/SCM/N/48/PRY-G/SCM/N/60/PRY-
G/SCM/N/71/PRY.G/SCM/Q2/PRY/4
Page 2
The pertinent figures clearly demonstrate that compared to a production of 631,728 tons in the
1990/91 crop year, the 2000/01 harvest amounted to just 282,605 tons. At the same time, of the
307,000 farms recorded by the census in 1991, 189,554 were engaged in cotton farming. Current
estimates put these figures at 32-47 per cent less. Furthermore, according to data from the Directorate
of Census and Agricultural Statistics, 64 per cent of agricultural production is accounted for by plotsof land covering fewer than 1.5 hectares, and 30 per cent of cotton farming is carried out on land that
is not owned by the cotton producer in question.
Against this backdrop, the Government of Paraguay has implemented critical poverty relief
programmes for rural households. These include government aid to rural households in the cotton
sector. This aid consisted of the following for the 2000/01 crop year:
• 309,826 bags of selected and treated seed, amounting to US$9,129,699.
• 294,060 boll weevil killer tubes, amounting to US$3,234,665.32.
Question 4
On what terms does the Government of Paraguay extend credit to cotton producers?
Reply
The Government of Paraguay's credit assistance for agricultural producers generally entails
financing for 25 per cent of estimated production costs, at a maturity of 6 months with an interest rate
in the range of 18-20 per cent in local currency. In view of budget constraints resulting from theeconomic crisis referred to above, no more than 15 per cent of producers benefited from these services
in the 2000/01 crop year.
The remaining percentage of production is financed by the private sector.
Question 5
Are additional incentives or supports offered to producers who export their products?
Reply
There are no cotton producers that export their products. This is because the entire amount of
cotton production is acquired by ginners (13 in the 2000/01 crop year, who are not involved in
farming), who in turn sell the cotton to brokers wh o deal on the international market. It follows that
there are no incentives or exemptions for export activity.
Question 6
Early last year (2000), it was reported that the Government of Paraguay had promised
US$230 million in state aid to its farmers over the next three years.
Question 6.1
Was this aid granted to farmers?
Question 6.2
If so, how much was given?G/SCM/Q2/PRY/4
Page 3
Reply
We do not know the source of information on which this question is based. During the period
of time under consideration, official aid consisted of a contribution amounting to US$6.5 million for
the implementation of production projects and emergency assistance, and US$9 million for landpurchases and land tenure regularization.
Question 6.3
Under what terms was the aid given?
Reply
The aid in question is geared towards assistance for rural sectors facing critical poverty.
Accordingly, emphasis has been placed on food aid and emergency assistance to alleviate the damage
caused by the successive waves of El Niño and La Niña activity, which have inflicted losses of the
order of US$300 million and which have brought Paraguay to the brink of a famine situation.Resources have also been allocated for infrastructure projects (roads in particular), as well as for land
tenure regularization.
The figures quoted in the replies to questions 1, 2 and 3 are included in the overall amount of
aid.
Question 6.4
Was the aid available to all farmers or was it limited to specific sub-sectors of farming?
Reply
As indicated above, the aid was confined to the specified categories and had nothing whatever
to do with the ability, expected ability or intention to export.
Question 7
We understand that the Government of Paraguay provides subsidized inputs, such as
seed and pest control products, to its farmers.  Can you please confirm whether this is correct?
What other subsidized inputs does the governme nt provide?  Are these inputs provided to all
farmers?
Reply
Apart from the actions described in the reply to questions 1, 2 and 3, the Government has
provided its farmers with no subsidized inputs, such as seed or pest control products.
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