Integrating Central American and International Food Markets : An Analysis of Food Price Transmission in Honduras and Nicaragua
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 neg...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2011/03/17394091/integrating-central-american-international-food-markets-analysis-food-price-transmission-honduras-nicaragua http://hdl.handle.net/10986/18018 |
| Summary: | 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. |
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