1. Supermarkets, Small Farmers, and International Migration: How Complex Structural Changes Affect Food Security in Latin America Amy Damon Assistant Professor of Economics Macalester College Minnesota Economics Association, October 2013

2. Hunger Trends in Latin America Persistent malnutrition – stunting, wasting, micronutrient deficiencies Especially acute in indigenous populations At the same time, we observe rising obesity rates.

3. Root Causes of Hunger – Prices, production distribution, policy, environment, incentives. – natural disasters, poor policy, infrastructure, and institutions (short terms vs. long term) – Why is economics a relevant tool to think about hunger? it’s about distribution of resources

4. Dynamics of the “Small Farmer” Producers are consumers. How do small farmers respond to price changes? What does this mean for household food security? What are some major constraints that small farmers face? – Credit – Land insecurity – Access to inputs – Market information – Inadequate Infrastructure – High risk and market volatility.

5. What about Urban Hunger? Slightly different because these folks are purely consumers. Depends on the urban labor market (formal vs. informal) Face a different set of constraints: – Unemployment – Changing food distribution markets – Migration and remittances

6. Women are key players in food security Women are responsible for more than half the world's food production. Men's roles in agriculture are declining in most poor countries In poor countries, most economically-active women work in agriculture. Women produce 60% to 80% of the world's rice, maize, and wheat; and they provide nearly 90% of the grains consumed by the rural poor in their own countries. However, there is still mal-distribution of food within many household

7. Marketing in the Food System Why do we care about marketing?

8. The Food System Prices Policies

9. Three Changing Trends in Latin American Food Systems 1.Changes in food marketing 2.Rise in obesity in the face of persistent malnutrition 3.International migration

10. Major Changes in Food Markets Food retail groups in Latin America: Small full service stores (independent on the street) Traditional markets (plaza markets) Small self service stores (convenience stores) Large self-service stores, super markets hypermarkets There has been a major rise in supermarkets in the region at the expense of small shops and plaza markets. Now 50-60% of national retail sectors in LAC are supermarkets. This is even the case in poor countries.

11. Plaza Market Cuzco, Peru Artist: Robert Harding ImagesRobert Harding Images

12. Supermarkets

13. Why are supermarkets growing so fast? Demand side: Urbanization Women into the workforce Increase in real income Increased demand for non-staples (income elasticities) Increased availability of refrigeration Increased access to cars

14. Why are supermarkets growing so fast? Supply side: Trade liberalization Reductions in the regulations of FDI – US and European chains invested heavily. National supermarket chains change their format/size to compete with large international chains

15. Percent of Food Sales in Each Channel Channel200520062007200820092010 Supermarkets or hypermarkets50.0350.3650.650.8551.1351.08 Specialist Retailers17.5417.2617.0616.8416.6119.57 Independent Retailers24.6224.524.3924.2824.1722.77 Convenience Stores4.734.784.854.914.966.1

16. Big names in Latin America’s food retail sector Mexico is Walmart’s third largest world market after the U.S. and the U.K., and accounted for around 6% of its global sales in 2010. Walmart is seeing double digit growth in LA. Other big players: Carrefour (France), Casino (France), Cencosud (Chile)

17. Outcomes of changing retail sector Who benefits: - Middle/high-income urban consumers. - middle/large wholesalers - international retail corporations Who loses: - small and medium size farmers

18. Outcomes of changing retail sector Supermarkets must provide cost cutting and consistency, and increased product quality and diversity. This means procurement must change and must reduce transactions costs with better coordination among the actors in the supply chain. These incentives mean these supermarkets procure from large areas, handle larger volumes, work with suppliers whose scale, capital, and managerial capacity can meet these needs. (Smaller producers must invest). The supermarkets have bargaining power.

19. Outcomes of changing retail sector Supermarkets are procuring less through traditional wholesale markets and more with direct farmers and their own distribution centers. This is mostly because of the grades and standards issue – big producers can provide consistency. Supermarkets often pay producers 45-60 days after delivery.

20. Food security dichotomy: malnutrition and obesity

21. Malnutrition in Central America-DR

22. 2009 Crisis’ effect on malnutrition

23. Remittances likely played a role

24. At the same time…..

25. Global Obesity

26. The New Food Problem in Latin America: Overweight and obesity prevalence in Latin America, 2005 Source: Age-standardized prevalence of overweight (kg/m2) and obesity (kg/m2) by country (2005). WHO Global Infobase, United Nations Overweight Obesity

27. Mexico changes in obesity

28. Nutrition Transition

29. Cardiovascular Epidemiology and Transition in LA

30. Reasons for rise in obesity Neoclassical economic explanation (Lakdawalla et al): welfare-improving technology facilitates economic growth causes a drop in relative food prices - increasing caloric consumption, while at the same time these changes lead to a reduction in caloric expenditure from work activities.

31. Large Structural Changes Nutrition transition Migration – increases boys risk of obesity, but not girls. Urbanization Changes in technology

32. International Migration

33. International Migration and Food Security What are the connections? – Changes in agricultural production Increases liquidity but decreases labor – Changes in household income – increases – Changes in family composition – Changes in food preferences – Decreases insurance and liquidity constraints.

34. Food Policy in Latin America Conditional Cash Transfers – Reduces some measures of malnutrition up to 25% (Paes-Sousa et al, 2011 in Brazil). Many other programs to fight malnutrition. Obesity policy is harder.

35. Thank you! Questions? Comments?