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What’s getting in the way of Latin America becoming a food superpower?

John Nash's picture
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The United Nations estimates that with the population reaching 9 billion by 2050, global food demand will double, with much of that growth in developing countries. 
 
While the gloom-and-doom predictions of Malthus and a long line of neo-Malthusians have failed to materialize, still, one does have to wonder how all those hungry mouths are going to be fed.
 
What will it take to ensure that the recent food crises do not become permanent features of the world of the future?  While countries in Latin America and the Caribbean are quite heterogeneous in their production potential, overall they are well equipped to contribute to meeting this challenge.

The region has always maintained a strong comparative advantage in agricultural production, as indicated not only by its position as a net food exporter but also by its high ‘revealed comparative advantage’.
 
This comparative advantage owes largely to its natural endowments, especially land and water. Of the 445.6 million hectares of land potentially suitable for sustainable expansion of cultivated area, about 28 percent is in the region, more than in any region other than Sub-Saharan Africa. 
 
Accessibility considerations magnify this potential: the region has 36 percent of the 262.9 million hectares of such land situated within six hours of the closest market. The region is also well endowed in renewable water resources, with about a third of the 42,000 cubic kilometers worldwide.  
 
Although trade in agricultural products has declined as a percentage of overall trade worldwide, its value has grown substantially in absolute terms, and the region has increased its share of this growing market from around 8 percent in the 1990s to around 13 percent today.  And of course, agricultural growth is key to raising incomes in rural areas, where poverty is concentrated.
 
Feeding the hungry
So, Latin America and the Caribbean have until now done more than its share to help feed a hungry world, and has at the same time reaped substantial benefits.  But a recent diagnostic study of constraints to further expansion suggests that it could do even more in the future with better external and internal policies and appropriate investments. 
 
The study, -Agricultural Exports from Latin America and the Caribbean Region: Harnessing Trade to Feed the World and Promote Development  - found that on average, agricultural exports from the region currently face trade barriers higher than those from any other region except East Asia and the Pacific , with the most significant impacts coming from non-tariff measures.
 
Furthermore, manufactures from the region face lower barriers than do agricultural products, creating an anti-agricultural bias in the external trade regime.  And exports from some major food-producing Latin American countries have suffered from self-inflicted wounds, with governments partially backtracking on policy reforms of the 1990s, and even imposing taxes and controls on exports (particularly in Argentina).
 
Given agricultural trade’s importance to the region and the region’s importance as a world food supplier, it is in everyone’s best interest to lower global trade barriers as quickly as possible, with non-tariff measures at the top of the agenda. Global gains from implementing the proposals on the table in the Doha Round could produce gains in excess of $160 billion a year. This is underscored in the recent World Trade Organization (WTO) Global Review of Aid for Trade in Geneva.
 
Betting on Biofuels
Global trade reform in biofuels is especially important in ensuring that Latin America and the Caribbean can sustainably ramp up its contribution to the global food supply while minimizing global greenhouse gas emissions. Liberalizing trade in biofuels could increase sector competition, improve efficiency, lower costs, and enable the world’s most efficient producers to expand their share of the biofuels market. For example, producing a liter of ethanol from sugarcane in Brazil requires only about half the land area needed to produce the same liter from corn in the United States.
 
Transferring production from the United States to Brazil would thus reduce the amount of land diverted from growing food. But currently, biofuel promotion policies and trade barriers distort international trade patterns and impede this shift, while imposing large costs on the populations of the countries employing them. Of course, to fully realize these benefits, Brazil would need to expand its production without deforesting land. But as a recent low carbon development report shows the country has plenty of degraded pasturelands that could be used more productively for these crops.
 
But while working for a global agreement, Latin American countries can also take action themselves. They have substantially reduced the anti-export and anti-agricultural biases in their trade regimes, but this bias remains significant in some countries, and reducing it could encourage further export expansion. 
 
Taxing neighbors
At a minimum, countries should avoid ‘beggar thy neighbor’ policies such as imposing export taxes or controls or temporarily reducing import tariffs on an ad hoc basis during food price spikes.  These policies insulate the domestic market to some extent, but amplify the magnitude of the swings in the world market prices, shifting adjustment costs to others.  Countries could also take better advantage of their bilateral and plurilateral preferential trade agreements to address issues not covered well in WTO commitments, particularly to reduce the adverse effects of non-tariff measures.  Chile has used its bilateral trade agreements to good advantage in this regard.
 
The study also found that improving trade infrastructure and logistics is critically important for the future of agricultural exports.  The Logistics Performance Index (LPI) shows that the region’s logistics performance fares reasonably well with that of other developing regions, but is still far from the standards of high- and upper middle-income countries. Overall, econometric estimates suggest that improving the region’s hard infrastructure (ports, railways, etc.) to OECD standards could increase agricultural exports by almost half, and improving ‘’soft infrastructure’’ (logistics and trade facilitation) by even more.
 
Looking into our crystal ball, we worked with the International Food Policy Research Institute  to model various future scenarios of climate change and socio-economic development.  In what was considered the most likely ‘baseline scenario’, by 2050, Latin America and the Caribbean would be contributing a third of meat exports and fruit exports, half of oilseed exports, and 10 percent of grain exports.  In other scenarios, the shares were lower than these in some and higher in others.  But in virtually all of them, the region’s shares in some major food categories would be higher than today. 
 
Overall, the message is clear:  the Latin America and Caribbean region is poised to up its game to help feed the world.  But realizing this potential will require wise decisions in the future both at the global level and in the countries of the region
 
 

Comments

Submitted by Mac Callaway on

Normative trade models, driven by state-of-art crop models, often don't capture reality very well for developing countries... in the ground or in commodity markets. Same goes for CGEs. Something else is going on. Multi-nationals like to reduce ownership risks especially where there is political instability over land tenure.

Submitted by Rev.Ebenezer J.Malyi on

We have a lot of fruits in Africa.The problem is,know how!The International community doesn't want to know that,because Africa is dirty.African leaders don't see that.With their different Brain,they just think about becoming rich & corrupt.

Submitted by Jeffrey O'Hara on

I am an economist at the Union of Concerned Scientists. Our offices are close to the WB at 18 & K. Using GTAP, we just finished a study on the international crop acreage implications if Americans ate healthier diets. We provide estimates for the US, NAFTA, equatorial, and southern hemisphere countries. Please send me an email (johara@ucsusa.org) if you would like to discuss further. I can post a link to the report when it is completed.

Submitted by Danni on

Great post. Everywhere can produce food but it just takes the now how about how to do it successfully. We shouldn't punish those who do.

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