Wednesday, April 13, 2011

Rice Cartels in Philippines and Revolutionary Situations

The thing about rice is it is the only confirmed element that affects politics in this country. Traditionally, when you fail in fixing the economy, and fail to anticipate the rise of this basic staple, sure enough, expect a potential crisis in the streets. Marcos experienced that during his term, so does Cory. 

Rice in the Philippines is cartelized. Yes, whatever your government says, it is confirmed--there are seven rice cartels here in the Philippines, all controlled by Filipino-Chinese traders. 

How to disrupt the movement of rice in the Philippines? Deny these traders the ability to procure imported rice from government stocks. Cartels use legitimate rice traders cooperatives or farmers cooperatives to get rice importation permits. These permits are then used to procure rice from abroad. 

What traders do is put aside the whole milled rice with that of the broken. NOrmally, when you buy a kilo of rice, quality is measured on four things:

1. First, aroma.
2. Second, see if the rice is unbroken.
3. Third, see if the rice is clean of debris from milling
4. Fourth, touch if the rice is not powdery

A kilo of rice differs in prices depending on the composition of whole and broken rice. Normally, its 70-30, meaning 70% whole grains with 30% broken ones. The percentage of broken rice decreases if the trader wants to increase price. So price really depends on how small or how little the percentage of broken rice you have in a kilo. If you buy a kilo of whole grain, that is higher than that of all broken rice.

Government, thru the Department of Agriculture, recently set the target rice importation at 700-800,000 tons. The cartel in the Philippines wants it at a million tons. That's why these cartel members are pressuring this government to accede, even dangling juicy offers to DA and NFA officials so that they can make huge profits from the public.

The thing is, its wrong timing. 

Everything already shot up in prices and Filipino consumers are really hard pressed. If this government agrees to increase the price of rice, there will be looting and protests everywhere. People can't afford to buy a 50 per kilo of rice. Imagine if you have 5 or even 10 members of your family, eating 10 kilos of broken rice worth 50 pesos. You can't do.

There is a potential political crisis in the offing for this administration. The only reason the environment is still very much "managed" is the fact that cause-oriented organisations are still allied with this administration. If these groups break from the administration, then, we, my friends, will see a full blown revolutionary situation.