High Food Prices, LAC Responses to a New Normal Some countries in the region have already revolutionized food production. In the scope of 30 years,
Brazil turned its most unproductive region (Cerrados) into one of the world’s largest food reserves. Embrapa, the Brazilian agricultural research center has developed global cutting edge expertise.
Because Brazil has a lot in common with Africa (geographical similarities in climate and soils),
it launched in 2010 a south-south cooperation initiative with African nations to enhance their agricultural productivity, which the World Bank supports with a three year US$1.5 million grant. To take advantage of their full potential, Brazil’s neigh-
bors can also learn from its experience. Rates of return to public spending in agricultural research are clearly high, yet with the exception of Brazil and Uruguay, Latin American countries spend only a little over 1 percent of agricultural GDP on research. Though appropriate level of funding for R&D is related to the stage of development, a level of 2 percent of agricultural GDP is often considered as a desirable target for developing countries.
ŠWorld Bank Photo Collection/Curt Carnemark;
Constraints in distribution are still a challenge to overcome. Costs of handling, storing and trans-
porting food drive a wedge between the prices consumers pay and the prices farmers receive, penalizing both. The World Bank has estimated Latin American logistics costs as percentage of GDP to be between 16 and 26 percent compared to the OECD benchmark of 9 percent. Poor infrastructure not only affects export but import prices as well. In the case of U.S. corn
exports to Nicaragua, for instance, the combined cost of U.S. transport, ocean transport, and additional logistics for getting the grain to the country is lower than the cost of transporting it within Nicaragua. To both lower costs to consumers and maximize contribution to global food supply, Latin America
clearly needs to do much more to lower distribution costs. By taking appropriate policy actions and making critical investments to relieve bottlenecks in areas such as road and port infrastructure, customs, warehousing and storage, the region will be far better positioned to meet its full potential for doing well while doing good.