Tariffs and Tortillas

BUENOS AIRES – Ever since Mexico’s so-called “Tortilla crisis” this past January, street protests against food shortages and high prices, or against increasing taxes on agricultural production, have spread from Haiti to Central American countries, and across Latin America. Governments have sometimes reacted with protective measures or macroeconomic initiatives, but in some cases with repression.

The paradox of Latin America’s food crisis is that, although the region is a major food producer, it sometimes needs to rely on imports to prevent sporadic shortages. According to the World Bank, Latin America and the Caribbean exported $55 billion of foodstuffs in 2006; yet the continent’s poorest families spend 50% of their budgets on food, and this at a time when Latin America has been experiencing its best economic performance since the 1970’s.

Food prices, which have shot up 83%, are not likely to start falling until after 2009. For Latin America, this is more than a challenge; it is an opportunity. The central challenge is political: correcting state policies formulated when resources, including oil, natural gas and food commodities, were not considered a driving force in the global economy. The key here is to avoid the trap of protectionism and international isolation.

Even before the current crisis, Latin America’s recent “left turn” in politics was tied to the food problem. During his first term, Brazil’s President Luiz Inácio Lula da Silva implemented a “Zero Hunger” plan targeting the most vulnerable people in Brazilian society. Around this time, Argentina’s then President Nestor Kirchner was using price controls to keep food prices low. In Venezuela, Hugo Chávez took a further radical turn and launched a widespread plan of land reform.