International prices and food security: An analysis of food and fertilizer price transmission in Central America

The report analyzes the transmission of food and fertilizer prices and volatility from international to domestic markets in Central America, as well as the impact on household welfare and government policy responses to food crises. The main objectives are: 1) To estimate the degree of transmission of international prices and volatility to local markets; 2) To assess the effects on household welfare; and 3) To examine the policies implemented by Central American countries in response to food price crises. The main results indicate that: The transmission of international prices to domestic markets is generally low, although there is greater transmission of volatility; Consistent with the low transmission, the estimated impacts on household welfare are moderate and do not fully explain the current food crisis in the region; Policy responses have focused mainly on short-term measures such as subsidies and price controls, with less emphasis on long-term investments in agricultural public goods. It is concluded that domestic factors such as natural disasters and high input costs probably play an important role in current food insecurity, and it is recommended that policies be reoriented towards long-term investments in agricultural productivity and infrastructure.