San José, Costa Rica, since 1956

Food Prices Rattle Economy

Wearing their aprons and starched white caps, some 100 bakers left their ovens and marched through downtown Granada Oct. 25 to protest the latest sharp increase in the cost of basic food staples.

Pressured by catastrophic rains in the northwestern part of the country, and ongoing crop shortages in the storm-ravaged North Atlantic Autonomous Region (RAAN), food prices continue to climb and shake the Nicaraguan marketplace.

“Beans, rice, corn, vegetable oil, gasoline; all of the prices for the basics are increasing,” said Juan López, president of Granada’s bakers cooperative. “We have no choice, we have to raise prices. The price of a sack of flour has increased 100% in the past two months alone.”

That has translated into a 45% spike in the cost of a loaf of bread, López said. Bread now joins a growing list of other products that have already been subjected to hefty price increases, including beans, rice, eggs, chicken, meat, flour and oil.

“The poor are already struggling between poverty and extreme poverty,” said Ermis Morales, president of the National Bakers’ Cooperative of Nicaragua (COPANIC).

“Now, on top of this, come constant increases in the cost of basic materials, in grain, in everything the Nicaraguan people depend on. Life is getting more expensive.”

Economist Néstor Avendaño says that the soaring cost of food prices will be the number- one cause of double-digit inflation this year, which he says he calculates “optimistically” to finish around 11-12%.

Avendaño also blames the situation on the deregulation of the market, which favors free-trade over matters of food security. For a country that produces 40% of the Central America’s annual bean harvest, the fact that Nicaragua must now import beans at a higher price is an example of the “irrationality of the market,” the economist said.

“Beans and other crops should be exported after satisfying the internal demand, but free-trade has led to negligence in the internal market,” Avendaño told The Nica Times this week. “The state needs to play a greater role.”

José Augusto Navarro, former Minister of Agriculture and Forestry (MAGFOR) under President Enrique Bolaños (2002-2006), agrees that the state needs to play a more active role helping to “orient the market,” which it did in the times of the Somoza dynasty through the revolutionary days of the first Sandinista government.

In the past, the Nicaraguan Basic Food Business (ENABAS) was a major buyer and distributor of basic stables, acting as a price regulator for the market.

The company, however, was wrought with inefficiency and corruption, and was eventually gutted – at the behest of the World Bank and the International Monetary Fund –when President Violeta Chamorro’s transition government came to power in 1990.

The company still exists today in a skeletal form, yet without any capital, according to Navarro. The former minister says that the state does, however, still have the facilities to become a player in the basic food market –all it needs is funding and qualified people to run the operation.

“Although ENABAS has sold some of its facilities and others have fallen into disrepair, the government still has perfectly good silos that are sitting empty along the Carretera Norte and in Managua,” Navarro told The Nica Times in an interview this week.

Navarro says the government needs to reactive the state company or form a publicprivate mixed-company to again start purchasing some 10-20% of the basic food crops to help regulate market prices, both for farmers and consumers.

One of the most frustrating aspects of the unregulated price increases, the former minister said, is that the money is not getting back to the producers, rather staying in the pockets of middlemen.

Even in the marketplace, vendors who are normally resistant to any state interference are calling on the government to play a more active role.

“We’re exporting beans outside of the country, and now we’re going to import them,” said Rosa Guerrero, owner of a local bakery and a union organizer in Granada.

“It’s illogical.”

Guerrero said the government’s lack of a coherent role in the agricultural sector is affecting all related sectors.

“By December, they say that flour will cost $50 a sack,” she said. “In Nicaragua, we don’t earn in dollars, we earn in córdobas.We’re a small business – we have five, maybe six employees. Wend up paying for the mistakes of the government. For us, it’s expensive.”

Rain Damage Assessed

Shortages in food staples such as beans are still widespread, especially in the parts of the country hit hardest by this season’s relentless rains.

“In the RAAN, there are at least 25,000 families that are still lacking necessities,” said Laura de Clementi, the resident representative of the United Nations Food and Agricultural Organization.

There is fear that if those families are unable to obtain seed for the final growing season, it will lead to more food shortages and higher prices next year.

In the drenched north-Western region of the country, losses are still being assessed, Clementi said; “but the damage, to agriculture at least, appears to be much less than in the RAAN.”

“We’ve already purchased some seeds,” she added. “We’re working with MAGFOR to distribute them as early as possible, so they they can be sown by mid-November.”

The destruction of road infrastructure raises another series of obstacles.

“In the west there are other questions – there are problems with the highways, it will be difficult to transport coffee and get the harvest out,” Clementi said.

The mountainous regions of Matagalpa, where more than 1,400 kilometers of productive roadways were destroyed, will complicate getting the harvest to market in the coming weeks when the coffee picking begins.

An international consortium of countries has stepped in to alleviate some of the more immediate problems.

“We’re focusing first on the RAAN, where the damage has been the most extensive – almost 45% of the productive zones have been damaged,” said Tina Huvio, director of development for the Finnish Embassy.

“We’re sending seeds so that farmers can begin recovering their harvest,” she added. “Hopefully, we can avoid a famine next season.”

Meanwhile, on the streets of Granada, the bakers’ protest may just be the beginning of a movement to pressure the government.

As the demonstrators wound through Granada’s marketplace, Juan López stood on the back of a pickup truck and called on the citizens of Granada to mobilize.

“People of Granada,” he said; “we are here to say, enough is enough. Enough with the price increases, enough with the energy cuts, enough with the water outages.”

Bakers handed out fresh bread to bemused onlookers. For a moment, at least, food was plentiful and free.


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