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Local Food Industry Expecting $221 Million Injection

New Pan Rules To Affect Non-Food Retailers


August 2, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

As of Sept. 1 this year, the federal Nutritional Assistance Program (PAN) funds beneficiaries in Puerto Rico will be required to use no less than 75% of what they receive to purchase food items only at certified retailers. It is estimated that the change will result in a $221 million boost in food sales out of the $1.3 billion-a-year block grant.

Unlike food stamps in the mainland U.S., which can be accepted by retailers for the purchase of food items only, in Puerto Rico, federal nutritional assistance funds are received in a block grant by the local government and is then distributed to beneficiaries by check

It is estimated that right now only 58%--or $754 million–of the PAN funds received locally are used to buy food staple items, according to a study sponsored by Food, Marketing, Industry and Distribution Association (MIDA) last year. With the 75% mandate, $975 million will have to be used on the purchase of food items at certified retailers.

"We expect a 20% to 25% increase in food sales that will be divided among all participants," said Johnny Luna, past president of MIDA and owner of Ponce Cash & Carry supermarket. Luna says he expects 15% to 20% increase in sales in his own stores.

"We expect about a 10% sales increase," said Atilano Cordero Badillo, owner of Grande Supermarkets. Another more positive independent supermarket owner said that he expects up to 20% to 25% increase in sales.

Fernando Bonilla, vice president of Pueblo Supermarkets, said the company has not made the analysis to estimate the increase in sales. "The increase will depend proportionally on the number of PAN beneficiaries that visit each chain," he said.

The extra $221 million will give supermarkets especially a needed boost in sales. In recent years, the food business has faced intense competition from discount stores, superstores, clubs, and even pharmacies. It is still uncertain to what extent some of these other retailers may be affected by the new rules.

The local Family Socioeconomic Development Administration (Adsef by its Spanish acronym) certifies retailers for participation in the 75% part of the program. To qualify, half of a retail store’s total sales must be on staple food items. Those retail stores with less than 50% sales in staple food items can qualify if half of their food sales are in staple items.

Under the Department of the Family Umbrella, Adsef implements the PAN and Electronic Benefits Transfer (EBT) programs. EBT is an electronic system that allows recipients to authorize transfer of their government benefits from a federal account to an individual debit card account to pay for products purchased.

PAN funds are distributed among 429,000 families via EBT debit cards. PAN cardholders will have two accounts in the debit card (think checking and savings account): the 75% PAN funds and another account that will include the 25% portion of the PAN funds and any other federal program benefits that applies.

This Caribbean Business article appears courtesy of Casiano Communications.
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