Food prices hitting the poor

The numbers of poor and indigent people in the Caribbean are increasing because of a 40% escalation in world food prices.

And the fact that the region is importing a large portion of its basic food basket isn't helping either.

"Inflation affects poverty and indigence rates through the erosion of real incomes of the population," states a report of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) on the escalation in world food prices and its implications for the Caribbean.

"Inflation is deemed to be the most regressive tax of all because the poor do not have any way of protecting themselves from it," states the report, released last Friday in Port of Spain.

Setback

But beyond the immediate effects of rising food prices, the fear is that the "negative impact of higher food prices could eventually translate into a severe step back in regional achievements of poverty reduction and social development goals."

The reality, states the report, is that Caribbean people have “increased their dependency on imported food as a result of the substitution of the traditional diet based on domestic produce for a diet more intensive in cereals like wheat and other staples.”

The problem of food inflation (above 25%) is more acute in the larger, so-called more developed countries (MDC's) of Caricom compared to the Eastern Caribbean.

And the food inflation increase is also impacting on headline inflation, the broader package of price increases.

The headline inflation rate in Jamaica, Suriname and Trinidad and Tobago are the most affected by food price increases.

Trading accounts

Because regional countries are net importers of food, the climb in world food prices is also having a negative effect on the trading accounts of member states of Caricom as the cost of their imports climb over their exports.

“This would widen the already massive trade (and current account) deficit in most countries,” states the report.

The Bahamas, states the UNECLAC report, appears to be the most vulnerable country in the Caribbean as a result of relatively high food imports compared to its overall import bill.

To compound this problem, the report notes that the Bahamas has a low level of international reserves, merely equivalent of the cost of imports for 1.8 months of imports.

“As net importers of food, Caribbean countries need to get the financial resources and foreign exchange to finance the import bill.

Although food imports dependency is not a recent but a chronic problem, its economic and social relevance has increased under the current context of high international food prices,” states UNECLAC.

High food challenge

There is in this environment of high food prices, claims the report, a challenge for countries which have considerable dependence on imported food, insufficient levels of economic development and diversification, and low levels of international reserves.

In this context, the already high level of external vulnerability is on the rise.

Only in Trinidad and Tobago, the strongest and most sophisticated economy in the region, is data on the cost of living available for UNECLAC to make an assessment of the actual impact of the rise in food prices on levels of poverty and indigence.

Through a statistical calculation, the report concludes that the rate of indigence in T&T increased to 5% of the population in 2008 from 3.5% a year before.

More poor people

With regard to poverty levels, in 2008 the figure would be 19.5% up from 16.7% in 2007.

In numbers, the percentage increase means that an additional 20,500 people became poor during 2008 and 23,500, who were already poor before this year, have now become indigent, unable to afford the basic food basket for consumption.

In the circumstances, the expectation must be that in less affluent economies the poor and indigent would have increased by larger percentages.

The increase in food prices is having a severe impact on persons in the lower income bracket as they have to spend a larger proportion of their earnings on food than those at the top of the income scale.

For instance, points out the report, the food inflation rate for the poorest 20% of the populations of Trinidad and Tobago and St. Lucia would be 70–75% higher than that of the richest 20%.

The inflation rate in Jamaica is 43.7% higher for the poor.

For those in Anguilla the rate is three times higher, twice as high in Antigua and Barbuda and Dominica.

So what are the solutions being put forward by UNECLAC?

They include:

The introduction of competition in the supermarket industry that sells imported food, the reduction of food dependence by promoting domestic production of some agricultural products and at the regional level, and an increase in social programmes.