1. Press Release C. 29-12
El Salvador, October 11th, 2012.
CS Explained Competition Barriers in Rice and Sugar
The Competition Superintendence (CS) dedicated its last day of the 2012 Competition Week to explain
its proceedings to promote competition in rice and sugar agro-industries. The CS has identified
important competition barriers that difficult the entry to new competitors, affecting economic efficiency
and consumer welfare.
“The products of these The CS made public a summary of its proceedings in the rice and sugar markets
and the damages to competition identified in both.
two markets are part
of the family basic With respect to the sugar market, the CS has carried out two relevant
basket and its proceedings: a study on its competition conditions in 2008 and an administrative
conditions contrary to sanctioning process against the company Distribuidora de Azúcar y Derivados, S.
competition are A. de C.V. (hereinafter, DIZUCAR), for abuse of dominance concluded with
causing grave harm to sanctions in 2012.
economic efficiency
and consumer The study identified conditions that could affect competition such as: discriminatory
welfare”, affirmed dealings in sugar distribution; participation of some economic agents in the Board
Francisco Diaz of Directors of the Salvadoran Counsel for the Sugar Agro-industry (CONSAA);
40% tariff quotas for sugar cane and beet imports; obligation to fortify sugar with
Rodriguez, vitamin A, amongst the most important. Pursuant to said findings, the CS issued
Competition recommendations of the utmost importance to promote competition in this market.
Superintendent.
In the administrative sanctioning process, the CS confirmed that DIZUCAR
implemented actions to create obstacles for the entry to new competitors or for the expansion of the existing ones
in the market of processed sugar distribution at a national level. Hence, the aforementioned company was fiend
with US$1,096,750.00, the maximum fine set forth for this practice in the Salvadoran Competition Law. As a
result of this practice, the CS estimated that from 2007 and 2010, Salvadoran homes could have paid more than
US$12 million per year in excess.
The sanctions imposed to DIZUCAR included an order to cease discriminating prices in the sale of sugar
amongst its clients, and, in addition, to sell sugar without any type of restrictions to any buyer who wants to
purchase sugar, regardless of its destination or presentation, bulk or packaged, and of the quantities required.
In the rice market, in 2009 the CS carried out a study on its competition conditions, study which was up-dated in
2012. As a consequence of the above cited up-date, the CS identified potential problems to competition caused
by entry barriers to new competitors and privileges to certain economic agents damaging the market and
consumers.
The CS estimated that consumers could have been paying an average of US$1.46 million per year 1 in excess,
due to the conditions of the legal framework currently in force and to the high intermediation margins in the value
1
As income transfers from consumers to the agro-industry, due to the fact that the prices paid for rice in the Salvadoran economy are
higher than those which could be paid if the Salvadoran market was more open to imports.

2. chain, of which 73% are transferred to industrialists and 27% to rough or paddy rice (rice that has yet to have
the outer covering (rice hull) and bran layers removed) producers.
The legal framework that regulates the rice agro-industry creates said distortion and disincentivizes the
participation of new importers and allows disparate conditions in the distribution of rice quotas 2.
Amongst the entry barriers to a new economic agent to have access to the Rough or Paddy Rice Agreement 3
and to import with 0% tariff from the USA are: (1) to be admitted by a Supervision Commission 4 formed by its
competitors; (2) the period to obtain the status of historical importer is one year, together with granting the new
participants an import percentage equal to the smaller participation of those industrial economic agents who are
historical importers; and, (3) to invest in quality laboratory and machinery with less than ten years of operating.
These requirements are not obligatory for historical importers and are considered to constitute disincentives for
the entry of new competitors in this market.
The participation structure of the industrialists in the purchases of national paddy rice has not practically changed
since the year 2000 when the Agreement was subscribed, with two economic agents who acquire approximately
80% of the total.
In order to promote competition in the paddy rice market, the CS recommended encouraging the approval of a
regulation that substitutes the Agreement for Rough or Paddy Rice Trade, which sets forth a mechanism for
assigning participations in the paddy rice quota, incorporates market criteria, supports the expansion of small mill
owners that already participate in the market, and facilitates the entry of new economic agents.
So as to promote competition in the white (processed) rice market, the CS recommended amending the
“Regulations for the Administration of Tariff Quota for Processed White Rice within the Free Trade Agreement
amongst Central America, the Dominican Republic, and the United States of America”, aiming to eliminate the
entry barriers laid out by said regulations. Both amendments are a prerogative of the Republic of El Salvador.
Links for more information:
Administrative sanctioning process against DIZUCAR: final resolution
http://www.sc.gob.sv/pages.php?Id=1151
Study on the competition conditions of the sugar agro-industry
http://www.sc.gob.sv/pages.php?Id=270
Up-date resolution of the study on the competition conditions of the rice agro-industry
http://www.sc.gob.sv/pages.php?Id=1210
2
The tariffs (import) quotas are those established for the import of certain merchandise when the import tariffs applied to the quantities
in the quota are lower than those applied to quantities outside the quota.
3
This Agreement and the “Regulations for the Administration of Tariff Quota for Processed White Rice within the Free Trade Agreement
amongst Central America, the Dominican Republic, and the United States of America” contain the main legal framework.
4
Formed by 17 representatives of the private sector who signed this Agreement, 20 in total, 7 of whom are representatives of the
industrial sector. The above cited situation presents an evident conflict of interests which might impede issuing objective decisions since
said conflict opens up the possibility to go against the participants´ interests.