Portugal Adjusts to Life in the EC

AT the Leoes flour mill in this southern Portuguese city, weeds grow through cracks in the concrete loading dock where local grain farmers once brought their produce.

Except for a few hangers-on in Leoes T-shirts drawn by rumors of an imminent return to work, the mill is deserted, the victim of Portugal's exposure to the international agricultural market and its steady integration into the European Community (EC).

Like the locked-up tomato-processing plant not far away, the Leoes mill was doomed by the Portuguese consumer's developing taste for higher-quality imports and by the high cost of working with Portugal's low-productivity farmers.

The 50-year-old mill is a symbol of the dramatic change coming to Portuguese agriculture, a world that until the last decade was in many ways not radically different from what it was 500 years ago.

The country's 600,000 farmers - nearly 20 percent of the working population - are expected to decrease by 50 percent over the next decade. Tens of thousands of small, unprofitable, but centuries-old farms will disappear, while remaining farms will be bigger, producing different crops and yielding more per acre.

It is a change that is largely welcome in a country that imports half of its food, and where a steadily urbanizing population with loosening ties to rural communities can greet unambiguously the lower food prices promised by full exposure to EC and international markets.

"We are aware that for the Portuguese consumer it is a better deal to buy on the international market than to support the Portuguese farmer," says Luis Rosado, director of the National Association of Cereals Producers (ANPOC). "But at the same time a country that doesn't produce anything to eat faces other problems, including questions of security."

Mr. Rosado acknowledges that the advent of the EC's single market renders the national-security argument less compelling. Even if that concern is set aside, he adds, the issue of rural Portugal's future remains.

"Some of the land around here has been growing wheat for more than 500 years," he adds, "and such traditions don't die without causing a lot of shake-up and uncertainty."

"People should accept that as the American model is adopted the corporate reapers will come, and we will have farming without a face," says Raul Rosado Fernandes, president of the Confederation of Portuguese Farmers.

The government, too, recognizes that reform presents special difficulties. "We cannot disregard the fact that this is not the New World but old Europe," says Luis Capoulas, the Agriculture Ministry's secretary for farm markets and food quality. "Land here is not just a material factor, but emotional and cultural, carrying centuries of history."

Yet despite their concerns, none of these officials is squarely opposed to agricultural reform. What worries them most is that Portugal will not have the time to adjust properly to changes that are inevitable.

"As substantial food importers we favor the shift to liberalized agriculture markets and lower food prices, but the social problems that move will entail don't allow us to move too fast," says Mr. Capoulas. "We need to diversify our producers who stay, implement retirement programs for those who leave, and increase productivity. We think we need about 10 years to successfully reform."

There is no question that Portugal's lumbering agriculture system "needed a kick," as Mr. Fernandes himself says. But he adds that the country also needs time to switch farmers to new crops, and to develop a decentralization plan so Portugal doesn't develop unlivable "urban beehives" on its coasts and a "great desert" in the interior.

A 10-year transition from a highly protected national market to fully free agriculture trade with EC countries in 1996 was an important incentive to change.

Now Portugal also faces pressure from the EC's Common Agriculture Policy (CAP) reform approved last spring. Designed to cut European farm surpluses and allow the EC to reduce its multi-billion-dollar farm subsidy program, the CAP reform for the first time in the EC offers payments for leaving land fallow.

Fernandes and other agriculture specialists, however, say the CAP reform will not help Portuguese farmers become more productive because it calls for land set-asides in low-productivity areas like Portugal, and its incentives for crop diversification or early retirement muster little enthusiasm among farmers.

Jose Joaquin Franco is one Evora farmer whose diversified, larger-than-average farm leaves him relatively well off. But still he views the future with uncertainty.

"All we hear is lower prices for the consumer, but someone has to make sure the farmer has the means to live or there won't be food for anyone," he says. Portugal now receives about $1 billion a year from the EC in farm income support and other agriculture assistance. Mr. Franco says he and his neighbors worry that incomes will plunge or incentives to modernize and diversify will be insufficient under the new CAP.

"There's a lot of talk of directing farmers away from cereal production into forestry or cattle, but all that takes money and time," says ANPOC's Rosado. He notes, for example, that cork production is a profitable export business for Portugal, but that cork trees reach harvesting maturity after 30 years' growth.

"Will the EC pay the farmer while his trees are growing, or will they change their policies again in another few years?" he asks. "That's what our farmers worry about."