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COVID-19: an ultimatum for food security

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Economic Impacts of COVID-19 in Panama

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Elpidio González

Graduated in economics at the University of Panama. He has conducted research in the area of agricultural economics and labour markets. He is currently studying for a Master's degree in Agricultural Economics at the University of Buenos Aires.

Danilo Rivera

Economist, graduated at the University of Panama with almost 4 years of professional experience. He is involved in studies, research and has even participated in the elaboration of the book "Resilient Fiscal Rules in Latin America" and the Journal of Scientific Initiation of the UTP "The importance and prices in the rice production chain during the period 2001 - 2014".


In most countries of the world, the isolation and social distancing measures put in place to curb the spread of the coronavirus have had an impact on food trade by disrupting supply chains and delaying their timelines. So far, however, no significant shocks to global food production levels are expected; in fact, almost all estimates made by FAO have been revised upwards (FAO, 2020a). As for the prices of major food commodities, a general decline has been observed since the onset of the health crisis, mainly driven by falling prices of sugars and vegetable oils. This decline can be attributed to reduced demand for meals away from home. The only item that has seen an increase is rice, due to Vietnam's suspension of exports in order to redefine its foreign trade policies to adapt to this situation (FAO, 2020b).

What is Panama's current food security situation? Amid the general uncertainty, local food prices have remained fairly stable in recent months. According to ACODECO (2020) estimates, only fruits and vegetables (two of the ten items that make up the Basic Food Basket) have registered increases from January to February 2020. Similarly, cereal imports are forecast to remain stable or increase, and the 2019-2020 rice harvest is expected to be 5% higher than the average harvest of the last five years (GIEWS, 2020). This is good news, given the international context of rising rice prices. Despite this relatively stable outlook, concerns about supply and the local price level continue to have a solid basis, given our country's status as a net importer. This is because Panamanian foreign trade policy has not necessarily resulted in a lower cost of living. In fact, in specific cases such as rice, imports have served to consolidate the market power of intermediaries in the production chain (González, Rivera and Jované, 2018). Panama's foreign trade strategy, instead of pursuing the benefit of the consumer and the development of domestic productive forces, has been influenced by asymmetrical markets, deep inequalities and historical dependencies.

To demonstrate this, it suffices to analyse the case of some cereals. In the case of wheat, our import matrix is totally dependent on the United States, with a very modest participation of Canada. For an import of wheat with a CIF value of approximately 33 million dollars[1], both countries were exempt from paying customs tariffs in 2019, as a result of the trade agreements that Panama has signed with both nations. Currently, the most competitive prices per tonne of wheat on the international market are those of Russia and France (7% and 6% lower than the US price, respectively)[2], countries with which we do not have far-reaching agreements.

In the case of rice, the import matrix for 2019 is configured as follows, based on total CIF value: the United States (47%), Guyana (43%), Brazil (3.2%), Paraguay (1.3%), and Uruguay, Thailand, Argentina, Costa Rica, Italy, Spain, India and Colombia, together with the remaining 1.8%. While prices in India, Uruguay and Thailand have remained relatively stable during March, US prices recorded an average increase of 3% over February 2020, and 9% over March 2019[3].  

The burden of our relations with the United States has prevented us from pursuing a strategic and fully autonomous foreign trade policy. Similarly, the commercial bias of our transitional economy, expressed in an eagerness to import, has not allowed the agricultural sector to become more dynamic.  Panama's economic development policy has been shaped by these interests, to the detriment of consumer welfare and the development of domestic production. This feature of our economic and social formation has deep historical roots, the effects of which are still with us today. Independence in 1903 marked the beginning of an accumulation scheme based on the dependence of the commercial bourgeoisie on the United States (Hughes, 1998). The first decades of the 20th century were marked by economic decisions that favoured, through imports, the underdevelopment of strategic products, such as rice (Heckadon, 1983). This dynamic has continued unhindered during all periods of our republican era. In 1970, tertiary GDP represented 45.1% of production. With the promotion of the transnational services platform, this indicator had risen to 70.4% by 1980. In this context, the first structural adjustment loan (Structural Adjustment Loan) was signed in the mid-1970s, marking the "beginning of a process of liberalisation of the economy to the world market, (...) the reorientation of economic activities towards exports" (Achong and Jované, 1990). The mantra of an outward-oriented economy, and above all, of an agricultural sector that must develop in order to export, has been reproduced in each and every government plan since the US invasion of Panama in 1989.

The pursuit of food sovereignty and security is an objective that does not interest Panamanian economic elites, as it runs counter to their short-term accumulation schemes. Tertiary activities accounted for 65% of total market production in 2019, a sign that our development model follows the same dynamics that have prevented progress in the agricultural sector. But this is not about the quest for autarky, as that stage of human history is already behind us. Food sovereignty should rather be seen as a mechanism for control and protection against international risks. What is currently happening with rice is an example of the benefits of domestic production, as international uncertainty will be tempered by a good crop year. On the other hand, in the example of wheat, diversifying the origins of our imports would allow us to be more responsive to the presence of conjunctural risks.

Food sovereignty is also about inequality. In 1980, the lowest income quintile received only 1.8% of total income, while the highest income quintile received 61.2% (Achong and Jované, 1990). In 2018, the lowest income quintile received 4.9% of total income, while the highest income quintile received 46.2% (CEPALSTAT). Reducing inequality and poverty so that more of the population has access to food is also a struggle for food sovereignty.


Konrad-Adenauer-Stiftung e.V.

Regional Programme ''Alliances for Democracy and Development with Latin America (ADELA)''.

Albrook 16, Cl. Las Magnolias, Ancón

Panama City / PANAMA


References

Achong, Andrés and Jované, Juan. 1990. The effects of macroeconomic policy on food security: the case of Panama. CADESCA

Authority for Consumer Protection and Defence of Competition (ACODECO). 9 March 2020. Lower costs of the basic family food basket in the districts of Panama and San Miguelito: February 2020. Available at http://www.acodeco.gob.pa/acodeco/view.php?arbol=4&sec=1&pagi=0

FAO (2 April 2020a). Cereal Supply and Demand Brief. Available at http://www.fao.org/worldfoodsituation/csdb/en/

FAO (2 April 2020b). Food Price Index. Retrieved from http://www.fao.org/worldfoodsituation/foodpricesindex/en/

 

Global Information and Early Warning System (GIEWS). 30 January 2020. Country Briefs: Panama. FAO. Retrieved from http://www.fao.org/giews/countrybrief/country.jsp?code=PAN

González, E., Rivera, D., and Jované, J. (2018). Imports and prices in the rice production chain during the period 2001-2014. Revista De Iniciación Científica, 4, 62-65. https://doi.org/10.33412/rev-ric.v4.0.1822  

Heckadon, Stanley. 1983. Cuando se acaban los montes: los campesinos santeños y la colonización de Tonosí. Editorial Universitaria Panama, Smithsonian Tropical Research Institute.

Hughes, William. 1998. Canal and development: an interpretation of the genesis of the Panamanian bourgeoisie.


[1] Integrated Foreign Trade System (SICE). Chapter 10: Cereals. Web consultation at http://190.34.178.196/aduana/SIGA_SICE/index.php?pag=formprin

[2] and 3 Food price monitoring and analysis (FPMA) tool. Global Information and Early Warning System (GIEWS). FAO. Web consultation at https://fpma.apps.fao.org/giews/food-prices/tool/public/#/dataset/international

 

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