The first semester of 2008 saw the real price of the main food staples climb to a 30 year peak. The food riots in Haiti and the highly politicized “Sovereignty and Food Security: Food for Life” Presidential Summit held in Managua, Nicaragua on the May 7th have brought issues of trade, international aid and crisis mechanisms to the forefront of the regional political and economic agenda. Growing concern over food security and price vulnerability was clearly reflected by the Summit’s call for a regional production and distribution strategy for fairly priced food as well as for a review of the distortive and unfair international agricultural and trade system.  

In a recent Briefing Paper, Rising food prices: A global crisis, ODI Research Fellows Steve Wiggins and Stephanie Levy highlight the forces behind rocketing food prices and their impact on poverty and farming. Such forces span from global income growth, population growth, growth of the biofuel industry and financial market speculation to cereal stock decline, disruption in production due to climate impact and rising transport costs. Prices rises could mean an income fall of 25% and a reduction of food consumption by almost 20% for poor populations. Although medium-term prospects are brighter, research shows that in the short-term rising prices for consumers are likely to cancel out the potential trickle-down effects of rising prices on farmers’ incomes. 

This crisis provides great incentives for poor countries to boost underdeveloped agricultural and rural sectors, in terms of food as well as biofuel production for example, in order to channel the financial benefits yielded by rising prices. Taking advantage of biofuels’ competitiveness on the energy market could result in higher employment rates and have wider growth multiplier effects. In this sense bioenergy seems to bridge the gap between food and energy insecurity as well as climate change. Figures put together by the FAO show that Brazil’s biofuel sector accounted for 1 million jobs in 2001, Brazil’s Selo Combustivel Social programme is a great example of innovative policies which can help the downward diffusion of the advantages created by the biofuel sector. Indeed, it provides an incentive for large biofuel industries to employ small farming families. 

Unreservedly celebrating biofuel opportunities as the magical remedy for poverty, food security and climate change mitigation would be a mistake. They only makes sense if countries face high costs of oil imports, enjoy spare land and have the capacity to manage the threats of deforestation, land degradation and biodiversity loss as well as to ensure the diffusion of socio-economic benefits to the poor. As the Briefing Paper suggests, countries with spare land could offset high oil prices through biofuel production. This should entail careful planning as displacing food crops could result in higher food prices. The political element of land distribution among the rural poor can also be relevant. In Colombia for instance, controversy surrounds the palm oil industry’s alleged links with paramilitary forces as well as its practices, as cases of land seizures have been reported. Moreover, biofuels have become the focal point for disputes between countries like Brazil where Lula defends their expansion, and Venezuela or Bolivia where Chavez and Morales denounce their immorality, to the point that the debate becomes too politically charged to provide informed conclusions.

Although climatic and geographical conditions are generally met, the heterogeneity of Latin American countries in terms of institutional capacity raises doubts as to its ability to deal comprehensively with economic, social and environmental effects of biofuels.