Latin America's poor not protected enough against rising food prices

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Latin America's poor not protected enough against rising food prices

As the threat of a new global crisis eats away the world’s expectations of a prompt economic recovery, our eyes are again focused on rising food prices and their potential impact on Latin America and the Caribbean’s own recovery.

Now, you may argue that the region is well equipped to weather another meltdown, and that the region’s poor are shielded from the impacts of such developments. After all, Latin America has been praised worldwide for its safety nets, right?

Think how Oportunidades, Bolsa Familia, Chile Solidario, Familias en Accion, are names known outside Latin America and the circle of social assistance wonks; think how they’ve inspired dozens of countries around the globe, such as Turkey and the Philippines to follow suit.

So, though food prices have risen back to near peak levels, if the situation gets really bad, Latin America and the Caribbean countries should easily be able to assist those who, might go hungry (or hungrier), right?

That wasn’t quite the conclusion from the study How Ready are Latin American &Caribbean Safety Nets for Food Price Increases? some colleagues and I recently conducted building on work done in 2008. Its findings are in some ways sobering, in some ways encouraging, and in some ways thought provoking.

The sobering part is that the results are not as good as expected, only on par for those from a similar small global assessment.

In fact, despite the region’s fame for its headline programs, there are still a sizeable number of countries where poverty targeted transfer programs are absent, small, or run with inadequate systems.

Moreover, the countries with weak safety net systems are mostly those most at risk of big problems when food prices rise because they import a high share of food and/or have high initial poverty or malnutrition.

Focusing on the at risk countries, which are mostly small countries in Central America and the Caribbean, we found:

Unprepared is the term for Haitian government programs though all the donor and NGO programs help mitigate this.
The encouraging part of the assessment is that most of the countries considered are more prepared in 2011 than they were in 2008 to help their populations cope with rising food prices should the situation warrant.

Several countries (Guatemala, Belize, Honduras, Nicaragua, Haiti, El Salvador) have launched new programs that increase the reach of social assistance. Others (Mexico, the Dominican Republic) have expanded coverage of existing programs.

Several countries have undertaken or plan to undertake systematic improvements in their administrative systems, with improvements in targeting systems or beneficiary registries being the most common – Belize, Dominica, the Dominican Republic, El Salvador, Grenada, Guatemala, and Honduras all have been working on ambitious improvements.

There is some experimentation going on with respect to programs for urban areas – Bolivia’s Mi Primer Empleo, Guatemala’s Comedores Solidarios, El Salvador’s PATI, the Dominican Republic’s food baskets – but much more is needed.

The other good news is that though world prices zoomed up in the spring, they’ve since stabilized or moderated. On the other hand, local prices haven’t seen the spike they did in 2008, so the improvements countries are working on may be effective before they need to take any dramatic food price-induced actions.

The thought provoking part is about how sensitive judgments about safety net quality or preparedness are to different specific challenges.

The recession underscored that mitigation of chronic poverty as provided by the region’s poverty targeted, mostly conditional, cash transfer programs is not the same as protection against sudden income losses for those who may not have been so poor initially.

But even for mitigating the consequences of food price increases, where the chronic poor are the group of concern, it turns out things aren’t so simple. For redressing historic inequalities in opportunities, the rural focus of many of the region’s Conditional Cash Transfers is appropriate, and the links to education and health through conditionalities. But for mitigating the consequences of food price increases, urban coverage is important too. And to protect against a short run shock, speed, coverage and generosity are important, whereas for long run use, incentive compatibility and financial sustainability get significant weight.

Countries face hard trade offs, not just between spending on safety nets and other good things, but on safety nets designed for different purposes. (For the whole treatise on safety nets see For Protection & Promotion).

A country’s particular circumstances determine the best long-term policy response to a food crisis. In the short-run, however, a loose ranking of approaches should be considered, including: targeted cash transfers of adequate coverage, generosity, and quality; and increasing the benefits across a large spectrum of social transfers, such as social pensions, survivorship pensions, disability pensions, unemployment benefits (where they cover the poor).   


Margaret Grosh

Senior Advisor of Social Protection and Jobs

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