Examining the food crisis in Latin America and the Caribbean
by Odeen Ishmael
Guyana Journal, July 2008
CARACAS, 26 June 2008: With the problem of food shortages and increasing prices becoming a global concern, Latin American and Caribbean (LAC) countries have been examining the situation and proposing remedial action for medium and long term solutions.
Without a doubt, what is now called a food crisis is having a dire effect on the poor in the region. Actually, a recent ECLAC study indicates that more than 10 million people could join the 80 million in the region who already cannot afford a minimum diet.
While the problem is already causing some economic and social setbacks in the region, it is more related to the escalating prices for food than a shortfall in local food production and supply. Even so, Ecuador has restricted its rice exports to meet increased local demands while Argentina government has placed export controls in addition to a 10 percent export tax on meat and cereals. The Argentine government says farmers are benefiting from rising world prices and the profits should be spread to help the poor. However, farmers are protesting against the tax saying they want to reinvest the profits but the higher taxes prevent them from doing so.
But even before the food crisis assumed global proportions, the Caricom sub-region had already begun to address its expected impact and agreed, as a priority, to increase agricultural production to meet the needs of the region as well as the international market.
This is especially important since there are eight Caricom nations which are dependent on agriculture with 10 to 40 percent of their GDP being attributed to this sector.
President Bharrat Jagdeo of Guyana, who has the lead role for agriculture within Caricom, set the stage in 2004 with the preparation of a strategy to reposition Caribbean agriculture in the economic development of the region.
This approach, known as the "Jagdeo Initiative", seeks to re-position the agricultural sector to ensure food security, rural development and further wealth in the Caribbean. Thus, it proposes the implementation of targeted, focused and practical interventions at both the regional and national levels to alleviate ten identified constraints affecting agriculture in the Caribbean region.
These constraints are: limited financing and inadequate new investments; outdated and inefficient agricultural health and food safety systems; inadequate research and development; a fragmented and disorganized private sector; inefficient land and water distribution management systems; deficient and uncoordinated risk management measures; inadequate transportation systems; weak and non-integrated information and intelligence systems; weak linkages and limited participation of producers in marketing; and the lack of skilled and quality human resources.
Caricom governments have since been working together to overcome these problems, but they still have to make greater efforts to alleviate them.
And in the endeavor to boost agricultural production, the Guyana government has offered the Caribbean island-states, which have limited areas of arable land, the opportunity to invest in agricultural production in Guyana in order to expand the region's food supply and agricultural exports.
Throughout the region, governments are introducing programs aimed at reducing in the short and medium term the effects of the rapid rise in food prices on their citizens. In Guyana, for instance, these include a 5 percent increase in pay for Government workers; an increase in the tax free allowance for low income workers; a reduction by 10 percent of the fuel tax; and the distribution of seeds, fertilizers and pesticides to farmers aimed at increasing food production. These actions have since been assessed by the Inter-American Institute for Cooperation on Agriculture (IICA) as the best in the Caricom sub-region.
The wider regional food situation was discussed in Caracas on May 30, 2008 when the Latin American and Caribbean Economic System (SELA) held a high-level regional meeting on food security, which drew participation from its 26 member-states, as well as international organizations including the World Food Program, the Food and Agriculture Organization, the Inter-American Institute for Agricultural Cooperation and IICA.
At this meeting, the SELA secretariat presented a significant analysis of the current global food situation, outlining the structural and circumstantial factors responsible for the food shortages and escalating prices.
These include the seven-fold increase of financial investment and speculation in agricultural products in the past four years. Added to this, the weakness of the US dollar and low international interest rates are driving financial operators to seek shelter for their funds in the acquisition of various commodities, thus pushing up prices.
Further compounding the problem, the rapid rise in the price of oil, a necessity for food production and transport, has pushed up production costs in almost all areas. (SELA notes that, as an example of the rapid rise in food prices, a tonne of powdered milk cost $1,500 eight years ago when a barrel of crude oil cost around $30; with oil now hovering near $140 dollars a barrel, a tonne of powdered milk has gone up to $4,500.)
Undoubtedly, a food crisis has gripped some regions. Food stocks, especially of cereals, have fallen at a rate of 3.4 percent annually since 1995. This is now leading to restrictions on rice exports, particularly by some Asian countries, and such action has resulted in the skyrocketing price of this commodity. However, over the past two weeks the price on the world market has slipped back since rice stocks are not as low as were initially estimated.
Much of this shortfall in especially cereal production can be attributed to climate change which has caused severe droughts (and devastating floods) in countries which are normally large food producers, such as Australia, Ukraine and the United States. In LAC, hurricanes and tropical storms have affected food production in Cuba, Haiti, Nicaragua and the Dominican Republic while floods also severely damaged agricultural areas in Bolivia and Ecuador.
At the same time, demand for food has increased in Asia with its growing population. For example, in 2003-04, maize consumption in south, east and south-east Asia totaled 200 million tonnes while in 2007-08, this increased to 227 million tonnes.
Some blame for the cereal shortage is also attributed to the increased demand for animal feed, especially in the United States where fodder accounted for 47 percent of the 332 million tonnes of maize produced last year.
Significantly, in 2007, domestic maize consumption in the United States increased by 48 million tonnes, but of this amount, nearly 30 million tonnes were used exclusively for ethanol production. Thus, the increased demand for biofuels, the production of which utilizes mainly maize for ethanol, as in the United States, is identified as a factor spurring the food crisis.
LAC governments are generally opposed to the production of biofuels from edible agricultural raw materials. Nevertheless, Brazil, the largest biofuel producer in the region, takes the position that the production of biofuels does not preclude an increase in food production. At the recent Food and Agriculture (FAO) meeting in Rome, President Lula da Silva expressed this view, adding that biofuels are an important instrument for generating income and creating jobs helping countries to combat food and energy insecurity. Showing the advantages of using sugar cane for ethanol, he said it gives off 8.3 times more energy than is needed to produce it, while for maize the ratio is 1.5 times.
He explained that Brazilian cultivation of sugar cane for ethanol accounts for just one per cent of Brazil's 340 million hectares of arable land, and the plantations have not encroached on land used for food cultivation or on the Amazon rainforest.
The SELA analysis, further, blames the protectionist policies in the industrialized countries of the North for distorting the global agricultural market. For instance, Haiti, almost self-sufficient in rice 30 years ago, was forced to cut import tariffs and local subsidies to qualify for credit from the multilateral financial institutions. The result was massive imports of subsidized rice from the United States which undercut local prices and Haitian farmers, unable to earn a living in rice farming, migrated to the overcrowded urban areas.
At the regional meeting, SELA members agreed that the region must respond to the food crisis with a regional food security program. During the debate, Guyana proposed the establishment of a special fund to assist poor countries with food security and to offer concessionary term credit for small agricultural producers to assist them in overcoming the high cost of restarting after losses due to pests, floods and other natural disasters.
In the end, the meeting called for the establishment of a special fund administered by any of the multilateral financial institutions to assist countries affected by the food crisis. This proposal was subsequently sent to the FAO meeting in Rome.
Looking to the future, LAC governments, keeping in mind the constraints and the factors affecting food supplies, must actively encourage sustained and scaled-up investment in agriculture at all levels, including the enhancement of the security of tenure for small land-holders and the preservation and expansion of agricultural livelihoods.
Certainly, the current food crisis must not be considered as just a phase in global development. And, definitely, its adverse consequences in the region, as well as globally, will not be confined only to small developing countries and poor people.
(The writer is Guyanas Ambassador to Venezuela. The views expressed are solely those of the writer.)