Small production and monopoly; causes of food disharmony

The government is convinced that food prices in the country will not fall. They did not, as happened elsewhere, after the brutal impact of the pandemic and the war in Ukraine, which domestic economists attribute to a lack of agricultural policy and monopolies dominating distribution and imports.

“Prices (of food) will not fall, and those who say they will fall are lying,” said the head of the Ministry of Agricultural Development, Augusto Valderrama, who attributed the situation to the law of “supply and demand.”

According to official statistics, the price index of food and non-alcoholic beverages increased by 3.4 percent. last June compared to the same month in 2022.

Panama, with a population of 4.2 million and an informal rate of close to 50%, has dozens of minimum wages, but for most they are around $380 a month, according to analysts, adjusted every two years without indexing to inflation. , which is one of the smallest in the subregion.

The grocery basket closed last June with an average price of $290.17, up $4.25 from the same month in 2022, according to data from the Consumer Protection Agency (Acodeco).

“Econometric analyses” carried out in the last 24 months “show that we must see an improvement in the prices of what we consume. So, unfortunately, we do not share the minister’s perspective,” Valderrama, financial analyst and businessman Carlos Araúz told EFE.

The deep distortions caused by the crisis resulted from the pandemic in the global supply chain, which in Panama resulted, among other things, in a “five-fold increase in the import burden” or the rise in crude oil prices due to the war in Ukraine. are issues that have affected world inflation, but they have been corrected, he asserted.

Therefore, as happened in other latitudes, better prices “must be seen” in the Panamanian market, “unless in Panama market disruptions are caused by oligopolies controlling the distribution chain or abusive monopolies,” he added.

“The distribution chain in Panama is completely contaminated and it is a toxic element that prevents competition, technological investments in agriculture, which are so necessary, and that, ultimately, the price (of food) falls,” he added.

Economist and university professor Felipe Argote warned that in Panama there is a “closed market, where only deficits in local production are imported.” so “there can be no free supply and demand”.

“So, of course, food prices can fall, but if the markets open up,” Argote told EFE.

The big problem, the expert added, is that the system applied “for the last 40 years” in which the state subsidizes “inefficient” production, without technology, which only promotes the profit of a few, does not work.

The dean of the Faculty of Economics of the State University of Panama, Rolando Gordón, stated that “the lack of agricultural policy prevents the fall in prices” of food.

“There is no short-term solution, unless prices fall sharply on the international market, which I see as difficult,” explained Gordon, among other things, due to Russia’s withdrawal from the Black Sea Agreement, which enabled the export of Ukrainian grain during the war.

In fact, the FAO food price index recorded 123.9% last July, 11.8% below the same month in 2022, but 1.3% above last June, an increase attributed to Russia’s decision.

And in Panama, “the problem with imports is that there is a monopoly of three or four companies. There is really no competition, neither in fertilizers nor in anything,” added the dean.

Experts consulted by EFE recommended that the Government focus on promoting the technicalization of agriculture, cooperatives and the application of specific and temporary interventions to guarantee affordable nutrition.