Food insecurity

Food prices rocket across Latin America but governments have limited room for manoeuvre.

Latin America, like the rest of the world, is experiencing a dramatic rise in food prices derived from the economic crisis resulting from the COVID-19 pandemic, extreme weather events and record inflation levels in a number of countries.

In Brazil, food inflation rose by 14% in 2020 and the country has seen basic products such as rice and oil increase by 76% and beef by 43%. An agricultural economist in Brazil commented, “The situation in Brazil is critical to the point where the government recently announced the creation of ‘Auxilio Brasil’ a new social spending programme to coincide with the end of COVID-19 financial assistance programmes. It is needed, but it puts the country’s economy in peril as the economic deficit widens.”

“The situation in Brazil is critical, to the point where the government recently announced the creation of ‘Auxilio Brasil’ a new social spending programme to coincide with the end of COVID-19 financial assistance programmes.”

Agricultural economist, Brazil

The devaluation of the Brazilian Real is not helping either and casts doubt over any potential return to food price normality. This means that Brazilian food products will become more attractive to international buyers but, at the same time, there is a real risk of undersupply to the domestic market.

Governments across the region are struggling to cope with the region’s economic rebound which is putting pressure on prices. Both food and energy prices are disproportionately impacting the region which have resulted in Brazil, Mexico, Peru, Chile, Uruguay and Paraguay increasing interest rates during the second half of 2021.

“It is a similar picture in much of Latin America,” explained a former adviser to the Peruvian Ministry of Economy, “but in Peru specifically, the food prices that have increased the most are those in the basic food basket: chicken and milk, due to the increase in the price of corn and soybeans. The rising price of petrol is also a problem and some strikes are starting. The Central Bank has increased the interbank interest rate to try and combat inflation but the situation is complicated because the exchange rate has increased and you have a deterioration in the fiscal accounts. It looks like direct subsidies to families can’t continue for much longer.”

“The Central Bank has increased the interbank interest rate to try and combat inflation but the situation is complicated […]. It looks like direct subsidies to families can’t continue for much longer.”

Former adviser to the Ministry of Economy, Peru

In addition, regional governments face pressures to provide social spending to combat the humanitarian crisis caused by the pandemic. Consequently, larger deficits compound investor fears and increase inflation expectations. With weak monetary policies, a high level of informal jobs, filling the basic basket needs has become a challenge for the poorest in the region. Thus, many communities in Brazil, Argentina, Venezuela, Colombia and Bolivia are facing food insecurity.

The UN Food Agriculture Agency deemed that only structural measures to tackle food poverty by assisting small-scale food producers, national policies to eradicate food distribution inequality and innovative agroforestry measures will be able to solve the food insecurity challenges.

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