Editor’s note: In this analysis from First Citizens Financial Services (FCFS), the institution warns that the raging global COVID-19 pandemic will certainly worsen socio-economic conditions and create hunger crises in countries that are particularly vulnerable, placing the perennial issue of food security as one of the key issues to address in navigating a post-COVID environment. Further, FCFS notes that a ‘hunger pandemic’ may be looming when coupling the effects of the COVID-19 pandemic with those of climate change.
The global economy may be faced with the imminent threat of a food crisis as a result of factors such as conflict, climate-related shocks as well as economic instability, according to the 2020 Global Report on Food Crises published by the United Nations. While conflict and insecurity remained the leading driver of food crises in 2019, particularly in the Middle East, Asia and Africa, extreme weather and deeper economic shocks played a greater role in regions such as Latin America and the Caribbean. The raging global COVID-19 pandemic will certainly worsen socio-economic conditions and the hunger crises in countries that are particularly vulnerable, placing the perennial issue of food security as one of the key issues to address in navigating a post-COVID environment.
The UN report shows that not only will the 55 countries identified as being in a food crisis be highly vulnerable to the pandemic, but countries that are net food importers, oil exporters, and those dependent on tourism and remittances for income are also highly exposed. This will have implications for the Caribbean, as most of the countries possess one or more of these characteristics.
For the region, agriculture has historically been the foundation of economic activity, built on large sugar, banana, and cocoa plantations, specifically. However, the sector’s relative importance has diminished over the decades as structural transformation caused agriculture’s share of the economy to decline.
Based on a report by the Food and Agriculture Organization (FAO), the Caribbean is estimated to have spent US$4.75 billion on food imports in 2018 and this is forecasted to climb further to between USD8-10 billion by 2020. Moreover, the report stated that the only CARICOM countries to produce more than 50 per cent of their food consumed are Guyana, Haiti, and Belize. CARICOM countries on average spend more than 50 per cent of the value of their exports on food imports and the share is rising according to the FAO. The extremely high dependence on imported food leaves the region highly exposed to shocks in global agriculture commodity prices. Coupled with the fact that most countries are also net energy importers, the region suffers from weak foreign exchange-earning capacity, which impedes external liquidity and erodes external buffers. One of the greatest risks to the Caribbean in terms of boosting the agriculture sector is that of climate change, as more frequent and intense weather events have the potential to devastate the entire sector. In fact, it is estimated that the agriculture sector experienced damages of around US$212 million and half a million US dollars for Dominica and Antigua & Barbuda respectively, after the 2017 hurricane season.
Since March 1991, the agriculture sector, measured by the QAEI agriculture subindex has declined by close to 67 per cent as the structure of the economy evolved. In the nine months to September 2019, food and live animals accounted for 13.6 per cent of imports, up from an average of 11 per cent in the preceding three-year period — the third largest, only behind machinery and transport equipment and manufactured goods. As oil prices remain low and the global economy remains steeped in uncertainties, Trinidad and Tobago has to be cognisant of the depletion rate of its foreign exchange and external buffers. The country’s international reserves have declined by 32 per cent in the last five years and now represents about 8.5 months of import cover, compared to 12 months five years ago. In the Mid-Year Budget Review presented in June 2020, the Ministry of Finance allocated an agriculture stimulus package of TT$500 million to help increase productive capacity with the intention of reducing import dependence and to create strong linkages along the food value and distribution chain. Agriculture has been identified as one of the eight sectors which would be the foundation for a revitalised economy post-COVID. While food security may be a short- to medium-term goal, the development of the local agriculture sector is also imperative to boost export earnings capacity and to provide more sustainable jobs for many who may have become displaced or furloughed.
“The extremely high dependence on imported food leaves the region highly exposed to shocks in global agriculture commodity prices. Coupled with the fact that most countries are also net energy importers, the region suffers from weak foreign exchange-earning capacity, which impedes external liquidity and erodes external buffers.”
As the world grapples with the ongoing health crisis, vulnerable countries in the Caribbean should employ strategies to safeguard their food security to prevent what the FAO termed as a ‘hunger pandemic’ post-COVID. On a global scale, an additional 130 million people are likely to be pushed to the brink of starvation by the end of 2020 as a result of COVID-19- a total of 265 million people. The Caribbean region therefore must initiate bold steps to revitalise the flailing agriculture sector if only to ensure we do not succumb to a global food price shock.