Food price inflation in El Salvador Worst in Central America

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By LatAm Reports Editor

Food had an average increase of 3.98% between November and December 2023 alone. Food dependence on other nations is identified as the main factor. That food is increased affects, above all, the poorest population.

Before starting with reading this note, the reader must do an exercise of reflection and ask the following questions: am I spending more and more money on food?, have I stopped buying some kind of food because my salary no longer covers it?, or is the same happening everywhere in the world?

We place this emphasis because the price of food in El Salvador increases faster than in the rest of Central American countries. That is what can be seen when comparing the official monthly inflation figures in this area at the end of 2023 in each of the countries of the region.

In December, food and non-alcoholic beverage prices in El Salvador increased by 3.98% compared to November, according to the Central Reserve Bank’s Consumer Price Index (CPI). That is, out of every $100 spent on food, Salvadorans had to spend almost $4 extra from one month to the next.

Nicaragua is the second country in the region where food became more expensive with the highest speed in December 2023 compared to November. But this increase is 2.69%, more than one percentage point less than in our nation. The other countries maintain levels equal to or below 2 per cent.

For economist Tatiana Marroquín, a first explanation for the phenomenon is that El Salvador does not have a currency of its own, which means that it cannot apply some kind of monetary policy to counteract inflation. However, this falls short when it is verified that El Salvador’s general inflation, of 1.23 per cent, is lower than that of other countries, such as Nicaragua.

That’s because food inflation in El Salvador has been higher than the average of the other items in each month of 2023. This ratio has even tripled: in June last year, the overall monthly variation over the previous period was 1 per cent, but that of food reached 3%.

For Marroquín, this is a symptom that most of the products we feed with come from the outside, that is, that El Salvador does not have the capacity to produce the food it consumes. Thus, when prices increase in an exporting country, such increases move to the price with which it is bought from our nation.

“As much as the Consumer Ombudsman is striven to verify prices, they will not be able to go down because they are coming like this from the outside,” says Marroquín.

That food in El Salvador is more expensive by leaps and bounds is a fact: it is only enough to compare the price of the basic basket of the beginning of 2021 ($199.24) with the latest data available, that of November 2023 ($255.60) to verify that an ordinary citizen must allocate more than $55 extra today than two years ago for elementary food, 15% of a minimum wage in the service sector.

For economist Alfonso Goitia, there is a displicity on the part of the central government with the issue, especially considering that there is also no intention to establish a comprehensive agricultural policy, which guarantees, at least, that the country can produce all the basic grains it consumes.

In El Salvador, the fall in production has been drastic for a few years to here. It is enough to see the data collected by the Salvadoran Chamber Association of Mediums and Small Agricultural Producers (CAMPO), which indicate that the production of basic grains in El Salvador fell by more than 10 million quintals from 2021 to 2023.

That is the result of the impact on local producers of higher input costs, the increase in the value of renting the land and the onslaught of climate change. However, for Goitia, these factors are already known from the Government, but little or nothing is done to counter them.

I don’t think you can hide that displicity when you had, in the last four years, four Agriculture ministers and five deputy ministers. How are you going to build an agrarian policy if you don’t have the capacity to run the institution in charge?, Goitia says.

Impact on poverty

A person can stop visiting restaurants; or buy clothes, footwear and household items; or even pay for services such as electricity and telephone. But he can’t stop eating.

That is why the increase in food prices is so delicate in an impoverished population. And that is precisely what is happening in El Salvador.

If we talk about food, they are between 35% and 40% more expensive, that no longer goes down, as the average food goes up on average is no longer going down. If your income does not rise 40%, it means you lost purchasing power… If for a person who was close to the poverty line their incomes did not rise, it means that it has become poor,” said Carlos Acevedo, former president of the Central Reserve Bank, as part of a television interview in December 2023.

That is the reality of at least 2.5 million people in El Salvador who (equivalent to 40 per cent of the population): according to World Bank data, they are in a vulnerable situation.

These people earn income ranging from $6.85 to $14 a day, which does not officially classify them as poor, but puts them at high risk of falling into that category. An unexpected economic shock, such as job losses, an accident, illness or a natural event, could trigger its fall in poverty, says the entity. An economic shock is the rise in food prices.

In El Salvador, by the end of 2022, there were 1.8 million people who were qualified as poor, that is, they fail to meet all their needs, according to data from the Economic Commission for Latin America and the Caribbean (ECLAC). For this group, there is an additional risk: falling into the category of extreme poverty, when a family can no longer access a basic basket.

This number is on the rise in El Salvador: also by the end of 2022, ECLAC reported that the population in extreme poverty in El Salvador was 580,000, 8.7 per cent of the population. The figure could have grown by 2023.

This article has been translated from the original which first appeared in El Salvador