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Belts tightening in Nicaragua

The situation is growing desperate as Central America is hit by soaring prices for grains and fuel.

May 06, 2008|Marla Dickerson | Times Staff Writer

MANAGUA, NICARAGUA — There is no shortage of good things to eat in the open-air Wholesale Market here in Nicaragua's capital. Canvas sacks groan with rice and lentils. White eggs are stacked neatly, 30 to a box, fresh from the hens that laid them.

But talk to merchants and shoppers and they'll tell you stories of want, not bounty. The fallout from exploding global prices for grains and fuel has landed hard on this impoverished Central American nation of 5.7 million people.

Bean seller Blanca Castro said most of her customers were buying less than they were just a few months ago. Some are stooping to humiliating lengths for bargains.

"They root through the garbage," Castro said. "I see more of this every day."

Much of Latin America has benefited from soaring global prices for agricultural commodities and petroleum. Venezuela and Mexico are flush with oil profits. Good times are rolling for soybean farmers in Argentina and Brazil.

But in Central America, a major importer of grain and oil, the price hikes are wreaking havoc on already fragile economies. The region's presidents are slated to gather here Wednesday for an emergency summit on food security. Aid agencies are warning of rising social tensions in countries where a typical day's wages won't buy a gallon of gas and food inflation is breaking family budgets.

In Honduras, thousands took to the streets last month to protest their eroding purchasing power. Bakers in El Salvador did the same in March to vent their anger over expensive wheat flour. In Guatemala, prices for corn tortillas have jumped 30% in recent months. That's worrying officials as the country heads into its annual "hunger season" when tens of thousands of farm laborers are idle during the rainy summer months.

No Central American country, though, is more vulnerable than Nicaragua. The nation doesn't produce a single barrel of crude, yet about 80% of its electricity is generated by plants that burn imported oil. The financial stress of rising oil prices contributed to a series of lengthy blackouts in 2006. Federal regulators have approved five electricity rate hikes since November.

And at about $4.70 a gallon, gasoline in Managua makes a Los Angeles fill-up look cheap.

"Pure robbery," cab driver Manuel Rodriguez Sanchez said.

A deal with Venezuela to purchase oil on favorable financing terms has helped stabilize supplies. Still, rising energy prices are rippling through the economy, pushing up the cost of nearly everything.

According to the government, inflation hit nearly 17% in 2007, the highest in the region. The prices of many basic foodstuffs increased more than that last year. The country imports about 40% of its rice, a staple that has soared to record highs on world markets.

Poor families are spending three-quarters of their incomes on food, according to official estimates. More than a quarter of the population is undernourished, many of them children. More are going hungry every day.

"It's a time bomb," said sociologist Cirilo Otero, a food security expert and president of the Center for Research on Environmental Policy in Managua. "It's an explosive situation."

Leftist President Daniel Ortega has blamed "the tyranny of global capitalism" for the world's food woes. His ire is directed particularly at the United States. He said America's thirst for ethanol has driven up international prices for corn and other grains, while U.S. trade policy has discouraged food production in developing countries by flooding them with subsidized farm commodities.

Nicaragua last month hosted farm ministers from Central America, Cuba, Haiti, the Dominican Republic and Venezuela to talk about boosting production of grains and animal feed. Ortega is pushing those discussions to the highest level with this week's meeting of the region's presidents.

Whether those talks amount to more than political grandstanding remains to be seen. Battered by years of civil war, natural disasters and emigration, Nicaragua has hundreds of thousands of acres of arable land available for cultivation. Ortega has vowed to use the current crisis as a springboard to turn his nation into Central America's breadbasket. His administration last year launched a program known as Zero Hunger that is giving low-income rural families cows, pigs, chickens and seed.

Otero said that effort, while laudable, was progressing slowly and had been criticized for aiding only sympathizers of Ortega's Sandinista National Liberation Front.

He said reviving agriculture would require the investment of billions of dollars in roads, farm credits and technical assistance that the country doesn't have. Then there's the need for transparency and a long-term commitment that's at odds with Nicaragua's bitter partisan politics.

Otero said that external shocks undoubtedly worsened Nicaragua's food and fuel troubles. Still, he said, the current crisis had been years in the making and was grounded in unwise energy and agricultural policies.

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