CRS Position on Monetization Cash would be more Effective & Efficient More Cash + Distribution Food Aid (of U.S. Origin + Local Purchases) would be the best combination Until that situation is achieved: CRS will not advocate for Monetization but CRS will use it as a resource, in the absence of other funding, to ensure continued food-assisted development programming
Chief MTZ Restrictions = Challenges: Timing – Dependent on US Govt Cycles – very inconsistent Target Country = Destination Transport: Limited Tonnages, U.S. Flag Sourcing: U.S. Origin Only Limited USG Support on Risks (Legal & $) Ensure Limited Effects on Local Production Ensure Limited Effects on Trading Patterns
CRS Reactions to Challenges: Streamlined our Monetization Systems (Policies and Procedures) Hired experienced staff to handle transport and monetizations Stressing optimized response Being Careful in Doing No Harm Pooling Resources within CRS and with other PVOs (Consortia) Cooperating with US Govt at all levels
Challenge No. 1: Timing Subject to US Govt Budget Cycle: Fiscal Years, Continuing Resolutions, Supplementals, etc. USDA Programs (esp. Food for Progress): 12-18 Months Lead Time from Proposal to Sale to Delivery Markets & World Prices Change in shorter time Remedy: Propose a Realistic Sales Price at Proposal Time, to be Fine-tuned at Signing Time with USDA or USAID. Long Term Remedy: Realistic USG Food Aid Budgets, Bridging Mechanism so that Title II programs dont grind to a halt waiting for budget approvals - will require political will and legislation.
Challenge No. 2: Target Country CSs Must Monetize in the same Country where Sales Proceeds will be used for Programs Markets in these Countries are often Thin. Sometimes with only One credible Buyer for a particular Commodity. Even in markets where there are Multiple Buyers, Buyers recognize that Supply is Captive to their Market. Remedies: Know the World Market Prices for your Commodities to be able to Negotiate effectively. Consider multiple Commodities if possible, even if each only has One Buyer, in order to leverage Buyer against Buyer. Consider down-streaming of Goods – Small Lot Sales- to widen Customer Base and develop more Competitive Markets – but recognize this is more costly and time & effort consuming.
Challenge No. 2 Continued: Target Country Other Remedies: Third Country Monetization - Sales into more Competitive Markets. Presently theoretically possible but practically difficult to obtain USG approval. Proposed WTO language would prohibit. Transfer Monetization Funding in whole or in part into Cash Funding - 202e and/or ITSH funds. Potential Alternative Remedy: Regional Monetizations – Grouping Several Countries with Common Monetization Commodities within a Region to pool resources for Sale into the Country where the Highest Bid is obtained. Would require a change in regulations = time and political will.
Challenge No. 3: Transport 75% of U.S. Food Aid, incl. Monetization, Must Be Transported on U.S. Flag Vessels. U.S. Flag Freight Rates are generally much Higher than Foreign Flag rates. Due to Size and Age of the U.S. Fleet Service Not Commensurate with Premium Paid. Monetization Tonnages are Low and into Exotic Ports, resulting in High Rates even by Foreign Flag Vessels. Remedy: Greater co-ordination internally and between PVOs within regions to Consolidate shipments particularly Bulk Commodities to gain Economies of Scale.
Challenge No. 3 Continued: Transport Potential Alternative Remedies: Deliver commodities, for Monetization, on U.S. Flag ships into Cluster Ports only (similar to Pre-positioning) like Durban, Djibouti, Mombassa or Dar es Salaam, Dakar, Accra, Lome, etc.). From there Lighter on Foreign Flag ships to final destination port; or allow Buyers to purchase in Cluster Ports (transferring title and risk) & handle transport to final destination. Roll back Cargo Preference to the 50% U.S. Flag required for most other USG Impelled Cargo. Both of these will require changes in law / regulations = political will and time.
Challenge No. 4: Sourcing Its U.S. Law that U.S. Origin commodities Must Be Used. In some markets U.S. Commodities are simply Not Competitive, even using Commercial Rates and Prices – i.e. No USG Preferences: small, woman owned, minority owned, handicapped employing businesses; U.S. Flag Vessels, etc. It is often Difficult to obtain a Reasonable Return for Monetization of U.S. Goods.
Challenge No. 4 Continued: Sourcing Remedies: Know the World Market Prices for your Commodities in order to determine Fair Market Value of the goods as mandated by U.S. Law. If the Return on the sale is Not Adequate, consider Alternative Commodities if possible. Other Remedies: Third Country Monetization. Conversion to Cash Funding, 202e and ITSH. Potential Alternative Remedy: Regional Monetization.
Challenges No. 5 & 6: Limited Effects US Govt Regulations and PVOs own Principles of Do No Harm require that both Distribution Food Aid and Monetization have Limited Effects on Local Production (incl. Substitution) and usual Trading Patterns Any Food Aid (Distribution or Monetization) will have some effect on Markets and Production. Ideally any displacement effects of Monetization should be Minor and compensated for by Programming Supported by the Monetization that spurs Development and Food Security – including increased local production, local demand, and commercial trade.
Challenges No. 5 & 6 Continued: Limited Effects Presently there is no accurate way of determining if this is the case. Remedies: Better and more appropriate Bellmons. Resources made available to gather Accurate and Timely Market and Production Data to facilitate the analysis of Monetization, Distribution, and Programming in a Comprehensible, Standardized Manner.
Conclusion: Make Monetizations more flexible by Congressional Action (Transport) or by Administrative Action (Regionalization, TCM, Cluster Ports, Consolidation). If Remedies as above cannot be implemented, shift resources into more Cash. In any case, more Cooperation and Coordination between USG and PVOs is necessary: A carefully weighted combination of Cash, Distribution Food Aid (of U.S. and Local/Regional Origin) and Rational Monetization may be required to optimize our common Response to Global Food Security and Development.