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LATIN AMERICA / THE CARIBBEAN
Food prices strain budgets
5/20/2011
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Some of the region’s poorest urban sectors spend up to 70 percent of their monthly budget on food.

The rapid rise in world food prices is expected to strain families’ budgets across the region and cause more poverty, the Inter-American Development Bank, or IADB, said in a new study.

In February, the United Nations Food and Agriculture Organization’s food price index reached a historic high, surpassing the 2008 level, with cost increases of a basic family basket of between 5-6 percent. The IADB says the higher costs for basic foods like wheat and corn could drive up general inflation.

“The causes of these price surges are the subject of intense debate, but there is general agreement that they are a result of a combination of medium-term demand increases, slower agriculture productivity growth, and short term supply disruptions,” it said in its report “How Will the Food Price Shock Affect Inflation in Latin America and the Caribbean,” released on May 2.

The bank said inflation of more than 5 percentage points should be expected in 2011 in Bolivia, Dominican Republic, Guatemala and Honduras, and between 2 and 5 percentage points in the Bahamas, Panama and Peru.
To combat the issue, targeted aid for the poor is necessary to limit the impact of the food price surge, it recommended.

The Food and Agriculture Organization, or FAO. estimates that the high food prices aggravates the hunger and malnutrition problem that affected 52.5 million people in 2010 in Latin America and the Caribbean.

For Fernando Soto Baquero, the FAO’s regional director, food prices will likely remain high for the foreseeable future and inflation will rise as a result with food representing 40 percent of the general price index. —Latinamerica Press.

LATIN AMERICA/CARIBBEAN
Food prices’ impact on 2011 inflation

Country
Total Projected Effect*
Guatemala
7.4
Dominican Rep.
6.9
Honduras
6.1
Bahamas
5.6
Bolivia
5.2
Panama
4.2
El Salvador
3.7
Peru
3.7
Ecuador
1.9
Colombia
1.0
Uruguay
1.0
Brazil
0.7
Mexico
0.1

* Increase inflation rate expected for 2011 including impact of food price shocks.

Source: IADB

 


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