Integrating Central American and International Food Markets : An Analysis of Food Price Transmission in Honduras and Nicaragua

Arias, Diego; De Franco, Mario A.

Integrating Central American and International Food Markets : An Analysis of Food Price Transmission in Honduras and Nicaragua

Autores

Arias, Diego

De Franco, Mario A.

Editor

World Bank, Washington, DC

Descripción

In 2004 the Central American countries of Nicaragua, Honduras, Guatemala, El Salvador, Costa Rica, and the Dominican Republic signed the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) with the United States and are currently negotiating another agreement with the European Union and others. This study examines the dynamics among international and domestic food markets by assessing the transmission of international prices to domestic prices of key agriculture commodities in Honduras and Nicaragua. It analyzes to what degree, if at all, a change in the international price of a given food product influences the domestic price of that same good, at the level of the consumer and producer and in different regions in each country. This analysis provides important evidence of the price dynamics that guide public policy recommendations for a complementary agenda of agriculture trade liberaliza-tion in the region. There are two methods for analyzing the relationship between international and domestic prices. The first is to conduct a price wedge analysis-to evaluate the difference between international and domestic prices. The second method is to conduct a price transmission analysis by analyzing the variation in the percent growth of international versus domestic prices. Evidence from Nicaragua suggests that for most of the agriculture supply chains studied (except for beans) there is little competition in the country's domestic market structure. A few Nicaraguan companies own the majority share of the market, both to purchase and export agricultural products and to import and sell food domestically. Obtaining information about the structure of domestic agriculture and food markets could shed light on country-specific impediments from domestic market structure to increasing agriculture growth, reducing poverty, and improving rural competitiveness. Information on domestic market structure was difficult to obtain for this study, particularly for Honduras. But, even in a context where the domestic market structure concentrates purchasing and selling power in a few agribusiness companies, price transmission could be high.

Palabras clave

ADDITIVES, AGRICULTURAL PRODUCTION, AGRICULTURE, BANANAS, BEEF, CENTRAL BANK, CLIMATE CHANGE, COCOA, COFFEE PRICES, COMMODITIES, COMMODITY, COMPETITIVE MARKET, COMPETITIVENESS, CONSUMER DEMAND, CONSUMER GOODS, CONSUMER PRICE, CONSUMER PRICES, CORN, COST INCREASE, COST STRUCTURES, DAIRY, DEMAND CURVE, DOMESTIC MARKET, DOMESTIC MARKETS, DOMESTIC PRICE, DOMESTIC PRICES, DRIVERS, EGGS, ELASTICITIES, ELASTICITY, ENVIRONMENTAL SUSTAINABILITY, EXCHANGE RATES, EXPENDITURES, EXPORT MARKET, FINANCIAL CRISIS, FINANCIAL MARKET, FOOD AVAILABILITY, FOOD CHAIN, FOOD MARKETS, FOOD POLICY, FOOD PRICE, FOOD PRICES, FOOD PRODUCT, FOOD PRODUCTION, FOOD PRODUCTS, FREE TRADE, FREE TRADE AGREEMENT, GRAINS, GROSS DOMESTIC PRODUCT, GROWTH RATES, INCOME, INPUT PRICES, INSURANCE, INTERNATIONAL MARKET, INTERNATIONAL MARKETS, INVENTORY, LIBERALIZATION, MAIZE, MARGINAL COST, MARKET DISTORTIONS, MARKET INTEGRATION, MARKET POWER, MARKET PRICE, MARKET RISKS, MARKET SHARE, MARKET STRUCTURE, MARKET STRUCTURES, MARKETING, MEAT, MONOPOLY, NOISE, PACKING, PADDY, PARTICULAR COUNTRIES, PORK, PRICE ADJUSTMENT, PRICE ADJUSTMENTS, PRICE BEHAVIOR, PRICE CHANGE, PRICE CHANGES, PRICE ELASTICITY, PRICE INCREASE, PRICE INCREASES, PRICE INDEX, PRICE INDICES, PRICE LEVELS, PRICE LISTS, PRICE SERIES, PRICE SUBSIDY, PRICE SUPPORT, PRICE VARIATIONS, PRICE VOLATILITY, PRODUCER PRICE, PRODUCER PRICE INDEX, PRODUCER PRICES, PRODUCT QUALITY, PUBLIC POLICIES, PUBLIC POLICY, PURCHASING, RAIL, RAIL TRANSPORT, REPUTATION, SALE, SILAGE, SOCIAL COSTS, SUBSTITUTE, SUBSTITUTION, SUGAR, SUGAR CANE, SUPPLIERS, SUPPLY CHAIN, SUPPLY CHAINS, SUSTAINABLE DEVELOPMENT, TECHNOLOGICAL CHANGES, TRANSACTION COSTS, TRANSPORT, TRANSPORT COSTS, TRANSPORT EFFICIENCY, TRANSPORT SECTOR, TRANSPORTATION, TRUCK TRANSPORT, TRUCKS, TRUE, VEHICLE, VEHICLES, VOLATILITY, WHEAT, WHEAT FLOUR, WHOLESALER, WHOLESALERS