Latin America bank acts on food costs

Latin America bank acts on food costs

By Richard Lapper, Latin America Editor

Published: May 27 2008 18:19 | Last updated: May 27 2008 18:19

Latin America’s most important development institution on Tuesday launched a $500m programme to help deal with rising food prices in the region, amid growing international concern about the potential political impact of price rises on the small, poor and externally vulnerable economies of Central America and the Caribbean.

The Inter-American Development Bank credit is designed to extend the range and size of so-called conditional cash transfer programmes, in which poor families have to attend clinics and send their children to school in order to receive benefits.

Countries will also be able to use the money to build infrastructure, increase access to credit and pay for technical assistance, measures that would increase agricultural productivity and food output.

Food prices worldwide have doubled over the last two years, with staples such as corn, wheat and rice up by at least 100 per cent. In some countries the poor spent up to 84 per cent of their budget on food, said the bank.

“The risk for the region is very real,” said Luis Alberto Moreno, president of the IDB. Recent progress in reducing poverty rates as a result of greater financial stability could be “undermined” if “nothing is done”.

Rioting following rocketing food and fuel prices in Haiti in April led to the resignation of the country’s prime minister. It is feared that other Caribbean and Central American countries – most of which import oil, as well as much of their food requirements – could be affected by similar turbulence.

El Salvador, Costa Rica and Honduras are among smaller countries that have introduced cash transfer programmes along similar lines to those pioneered by Brazil and Mexico. Countries can use the IDB money to put similar plans in place where none exist.

“These programmes directly increase the purchasing power of the poor, instead of benefiting wealthier consumers, and they provide incentives for more production of food instead of penalising farmers,” said Mr Moreno.

Mexico last weekend increased the amount it is paying to the 5m plus beneficiaries of Oportunidades, its cash transfer policy, specifically in order to meet rises in food costs.

The government was also forced last week to removed import tariffs on food staples in an effort to lower domestic food prices. It also reduced tariffs on some food imports.