Pricey oil erodes years of Latin gains

Wiping fresh dough from her fingers behind the plastic and tin shack she shares with 10 family members in San Salvador, tortilla vendor Consuelo Esperanza Acensio said the price of the imported cooking oil she uses had jumped 50% in the last few months. Corn and firewood prices have surged too. She said she can't recall a bout of inflation this swift and steep in all of her 44 years, even during civil war in the 1980s.

"We had it easier during the war," she said. "At least the colon would buy something."

In an attempt to fight inflation, central banks in Chile, Brazil and Mexico have raised interest rates. But that's threatening to slow the solid growth that has produced jobs and wealth.

Public frustration is growing. In Brazil, police in the city of Porto Alegre recently fired rubber bullets and tear gas into a crowd that was trying to storm a supermarket to protest high food prices.

Transport workers paralyzed Nicaragua in May, demanding affordable diesel. Most of Nicaragua's electricity comes from plants that burn imported oil. Regulators have raised rates five times since November.

Fearful of social unrest, Latin American leaders are now scrambling to blunt the impact of the price shocks. Mexico, for example, has eliminated duties on imported grain and is increasing cash payments to families enrolled in the nation's largest anti-poverty program.

It's also keeping a lid on the price of gas, which is about $2.68 a gallon in most of the country. That subsidy is projected to cost the treasury more than $20 billion this year, a figure officials say is unsustainable if crude prices continue to rise.

Central American leaders have huddled in summits, vowing to decrease their dependence on imported grain and livestock. It won't be quick or easy. To revitalize their farm sectors, these governments will need to invest billions in roads and other infrastructure. Farmers need loans for equipment, fuel and supplies such as fertilizer, which are much costlier than they were a few years ago.

Fallout from the crisis could last generations. Even short periods of malnutrition can permanently stunt the brain development of children. Kids pulled out of school to help with the family finances often remain permanently behind their peers. Neither Maria nor Jose Lopez finished high school. They can't say when they'll send their daughters back.