Food prices were a huge problem across Latin America even before Russia’s invasion of Ukraine. Thanks to surging fertilizer prices, the problem is getting worse.
I would like to begin this piece with a brief recap of the recent political drama in Peru, where the fledgling Pedro Castillo government is already on the ropes less than a year after it was formed. A combination of rising economic pressures and growing discontent with both the government and the congress sparked major demonstrations in late March. What began as a strike by farmers and transporters against the rising prices of fuel, agricultural products, particularly fertilizers, and road tolls has plunged the country into yet another political crisis.
Two Protests in One
As in the case in so many places these days, there is certainly plenty of dissatisfaction to go round. According to the left-leaning Spanish daily Publico, the recent protests in Peru are being driven by two ideologically opposed forces:
Teacher unions are demanding that the current president fulfill the reform program he set out when he won the elections. The right, for its part, continues to do its thing, pursuing its own interests amid the escalating tension and fomenting what it used to crack down on most severely: social protests. A regular demand of the protests, which reached their apogee in the middle- and upper-class neighborhoods of the capital, is the immediate departure of the Castillo government.
These are two protests of diverse origins, composition and demands, but ultimately they represent two flanks that threaten a government bedeviled by an incapacity to respond effectively, weak leadership and internal fractures.
The latest problems began with a nationwide truckers’ strike in late March. In Huancayo, a mid-sized city some 120 kilometers east of Lima, a demonstration culminated in pitched battles with the police. Three protesters died. On April 1, the protests reached Lima. Roadblocks were erected that caused shortages in many of the capital’s markets. Stores were looted and private property vandalized. Following three days of chaos President Castillo announced a national state of emergency followed by curfews in Lima and Callao.
Rather than stabilizing matters, the repressive measures merely underscored the government’s weak position. Within hours of declaring the state of emergency, the Castillo administration repealed it following a cacophony of complaints that it was unconstitutional.
Since then the government has tried to cushion the impact of rising priced by eliminating taxes on fuel and food. It has also increased the minimum wage and offered additional subsidies to farmers. These containment measures have helped relieve the pressure but probably only momentarily.
Following a string of corruption scandals involving myriad governments, the Peruvian people have lost virtually all faith in the political process. Six of Peru’s last seven presidents, dating all the way back to Alberto Fujimori (1990-2000), have faced legal proceedings, investigations, convictions and even dismissal from Congress due to corruption cases. It is against this backdrop that Pedro Castillo, a virtual unknown, was able to take last year’s presidential elections by storm, narrowly winning the keys to Miraflores, Peru’s governmental palace.
But the Castillo government has had to contend with a largely hostile congress, which has blunted its ability to enact reforms. It has also been accused of its fair share of corruption scandals, with the result that patience is fast running out even among many of the government’s core supporters.
An even bigger problem for the Castillo government is that two of the main causes of the recent protests — surging energy prices and a severe fertilizer shortage — are almost totally beyond its control.
Spreading Economic Fallout from Ukraine
Russia, as is now common knowledge, is the world’s largest exporter of fertilizers. Those exports are being impacted by surging energy prices, Western sanctions and the Russian government’s decision, in mid-March, not to export a string of products, including fertilizers, to so-called “unfriendly” countries. While Peru is not on that list, its imports of fertilizers have nonetheless been severely impacted.
The National Convention of Peruvian Agriculture (Conveagro), which represents the interests of agricultural unions and agricultural producers’ associations, has warned the country’s acute fertilizer shortage could cause food production in Peru to fall by as much as 40% in approximately three to six months’ time. What little supply is coming in costs 410% more than the normal price, according to Conveagro’s president, Clínico Cárdenas.
Conveagro has been warning the Castillo government about tight fertilizer supplies for the past five months, says Cárdenas. Global fertilizer supplies were already under serious pressure long before the Ukraine conflict began. In a meeting with the Deputy Economy Minister and Minister of Agriculture in November Cárdenas was told a solution would be found within eight months, but he says that “so far nothing has happened.”
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