Panama Strikes Back at Inflation Subsidizing Food Prices

Flag of the Republic of Panama

Countries around the world were hit hard by soaring food prices at the same time that gasoline prices were reaching the stratosphere. These two economic factors caused violent social unrest in poor communities, like in Haiti where the Prime Minister was toppled. Panama was no exception. The components of the basic food basket were all affected by this international price hike. My wife couldn’t believe her eyes when the price of rice went up to 70 cents a pound at the supermarket.

If something was not done soon to dampen this dangerous trend, a social explosion would hit Panama streets. The Panama government decided to subsidize food prices to calm the storm. They had already begun by selling Compita Rice at 30 cents a pound plus other basic food items such as cooking oil, flour, coffee, sugar, spaghetti and sardines. The lines to buy these products at open food fairs in popular neighborhoods were enormous. People were hungry and their pockets were almost empty.

There was a strong rumor on the streets that the next product in line for a price increase would be bread. That would have been the last straw on the camel’s back. The Panama government again took measures to subsidize this basic food item, since most Panamanian wages had been outstripped by inflation. Their goal is to import cheap winter U.S. wheat so that bread bakers would be able to save between $9.00 and $13.00 on the purchase of 100 lbs. units known as “quintales” to bake “michita” and “flauta” breads.

The government had to put the brakes on the price increase of michita bread, a traditional Panama egg bread and flauta bread, a flute-shaped bread similar to a baguette. Recently, the Agriculture Marketing Institute (IMA) began distributing flour at $35.00 per quintal (100 lbs. bags) to the 169 member establishments of the Panama Bakeries Association.

A quintal of flour will now cost between $9.00 and $13.00 less than on the local open market. Member establishments benefiting from the subsidized price will be identified by a poster advertising the subsidized cost of bread—10 cents for michita bread and 65 cents for flauta bread.

According to Gonzalo Cambefort, General Director of IMA, this measure to subsidize the price of flour would be permanent. The flour would be imported every 15 to 20 days to maintain the steady production of bread at a reasonable price well within the reach of low income Panamanians.

Yesterday Panama President, Martin Torrijos announced additional measures to support the agriculture sector and keep the prices of basic foods low:

• Soft bank loans to farmers at a subsidized interest rate of 2 percent.
• Zero import taxes to agriculture equipment and accessories.
• Subsidized prices for agriculture supplies like fertilizers, pesticides, seeds, etc.
• Guarantees that all agriculture production would be purchased by Panama government agencies.
• Introduction of state-of-the-art technologies to boost agriculture yields.

After yesterday’s announcement there was a sign of relief in the country. You can stretch your salary so far, after that hunger will show its despicable face.

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Tags: Inflation, Food Prices, Panama, Agriculture, Bread