SAN SALVADOR — Are exploding oil prices about to burn Latin America?
With the largest petroleum reserves outside the Middle East, the region has been on a roll in recent years. Record exports of crude and grain fueled economic growth not seen since the 1970s. The region's stock markets roared. Easier credit spawned a consumer class that snapped up homes and cars. About 26 million Latin Americans climbed out of poverty between 2002 and 2006, United Nations figures show.
But the same forces behind that prosperity are now, paradoxically, creating misery in the midst of bounty. Surging fuel prices have ignited inflation throughout the region, driving up the cost of food, whose prices were already on the upswing thanks in part to ravenous global demand for Latin America's farm products.
A gallon of gas now costs more than a typical day's wages in some countries in the region. Food prices have escalated an average of 15% over the last year, according to the U.N. Economic Commission for Latin America and the Caribbean. Prices of many staples have increased much more than that.
The inflation is leaching workers' paychecks and eroding years of progress against hunger and indigence. At least 500,000 people in El Salvador and Guatemala toppled into poverty last year, the U.N.'s World Food Program estimates. Across Latin America, an additional 15 million people could join the region's 190 million poor if prices keep rising at their recent pace, the commission predicts.
They aren't alone. If gas and grocery prices continue their relentless climb, at least 100 million people worldwide may be sucked into the same downward spiral, the World Bank estimates. Food riots have erupted in countries such as Egypt, Cameroon and Burkina Faso. Poor consumers have staged demonstrations in India and Indonesia to protest cuts in fuel subsidies.
"There is a whole combination of factors that is putting a tremendous amount of pressure on the poor," said Carlo Scaramella, who heads the World Food Program in El Salvador. "We haven't had an economic shock of this magnitude in years."
Maria and Jose Lopez, squatters who live with their three children in a two-room cinder block house perched on a hillside in this gritty Central American capital, are among those feeling the strain. This year, they scraped together $148.50 for a down payment on their own place in this hard-luck area, which is aptly named Thin City. But their dream of homeownership has long since vanished. The new priority is simply to eat.
