Contents Statement of the Problem : General Trends

1. Globalizing food markets: Food Security and Environmental Effects in Latin AmericaInsa NiemeyerCEIGRAM, FMB Water Observatory, May 12th 2011

2. Contents • Statement of theProblem: General Trends • TheGainsfromTrade: a TheoreticalPerspective • EffectsonFood Security • EnvironmentalImplications • Hypothesis • Methods: Data from 5 Latin American Countries • PreliminaryResults • NextSteps

3. Statement of the Problem Challenge Rapid demographic changes Impact on global food demand Diatary changes Urbanization Bio fuel demand How can we feed the world in a sustainble manner? • Climate change • effects on yields • higher year tor year volatility • Unevenly distributed natural resources • land • water Food supply

4. Statement of the Problem Current development on global food markets • Globalising world: • Trade liberalization by WTO • Bilateral FTA Supermarket buying power global commodity chains Increasing global farm trade Altered product quality standards Implications on water and land resources Impacts on food availability (quantity) and access (prices) Green water Blue water LUC virtual water trade = solution of sustainability prospects? Food trade = increasing or decreasing food security?

5. The Gains from Trade: A theoretical perspectivea) Effects of trade relevant to food security Theory of comparative advantages • The effects of international trade are shown as: • the difference between the domestic priceof a good without trade and the world priceof a good, • thedifferencebetween total supplyquantitieswithouttrade and worldtrade. Price Foodimporter Foodexporter supply Price supply Pa Pw welfaregain welfaregain Pw Pa demand demand Qdomesticsupply Qa Qdomesticdemand exportvolume importvolume Quantity Qdomesticdemand Qa Qdomesticsupply Quantity

6. The Gains from Trade: A theoretical perspective a) Effects of trade relevant to food security Winners and losers of international trade: EXPORTERS: domesticproducerswin, domesticconsumers lose IMPORTERS: domesticproducers lose, domesticconsumerswin Traderaisestheeconomicwell-being of importing and exportingnations Implications for food security IMPORTER: reducedfoodprices > iffoodcheaper in real termsdependsonincomechange Specializationon non-foodindustry > promoteseconomicdevelopment > povertyreduction EXPORTER: foodpriceshigher > iffood more expensive in real termsdependsonincomechange Tradewithfoodcommodities > promoteseconomicdevelopment > povertyreduction

7. The Gains from Trade: A theoretical perspective b) Environmental implications Basic trade theory does not consider environmental effects: C Foodimporter Foodexporter Se Se Price Price D C S Pw D B S Pa B A Pa Pw A D D Qdomesticsupply Qa Pdomesticdemand Qdomesticdemand Pa Pdomesticsupply • IMPORTER: s = marginal cost curve > if no environmentalexternalitiesincluded • se = marginal cost curve + environmentalexternatlities • Productionsubstitutedbyimports > reduces environmentalcostsbyareaABCD > additionalwelfaregainforimportingnations! • EXPORTER: WelfarelossthroughenvironmentaldamagereducedbyareaABCD • > stillgainfromtrade?

8. The Gains from Trade: A theoretical perspective b) Environmental implications Open trade may provoke negative and positive effects on the environment

9. Hypothesis Environment Globalisingfoodmarketsaddsenvironmentalpressureonexportingnations and releasespressureonimportingnations Food security Globalisation of foodmarketshelpsachievingfoodsecurityforbothimporting as well as exportingnations

10. MethodsCountries: Argentina, Brazil, Chile, Mexico and Peru • Dynamics of trade (1996-2008, source: own elaboration, data from FAO (2011): • Most relevant crops > 80% imports, exports, production, area harvested • Trade intensity (in thousand tons and value) • Tradable, import-competing and non-tradable crops • Environmental effects in importing and exporting nations • Green, blueand greywater footprint over time • Yield increase vs. agricultural land expansion, rate of technology (number of tractors) • Specialization (water intensive/water extensive products) • Shannon-Wiener Index: Hs = magnitude of specialization in the production of certain crops • s = magnitude of different crop categories • pi = relative abundance of crop i • Food security in importing and exporting nations • Domestic food supply over time: (production + imports – exports) • Consumer prices indices / income indices • GINI-index • International food price volatility, prices transmission analysis Availability of food Access tofood

11. Preliminary ResultsTrade dynamics Total Latin American exports (left) and imports (right) of all crops (in thousand tons) EXAMPLE: PERU Trade dynamis of Peruvian imports (left) and exports (right) (in thousand tons) EXAMPLE: BRAZIL Trade dynamics of Soybean and maize exports in Brazil (in thousand tons) Coffee: mainimportersconstant: Europe, USA and Japan Maize: bulk of exports:1996-2000 shiftfrom MENA to LAC, 2000-2008 shifttoEurope Soybeans:bulk of exports: 1996-2000 EU and Japanwith a minor role China, 2000-2008 EU and China mainimporters, Iran and Thailandentermarket Source: own elaboration, data from FAO (2011)

12. Preliminary Results Environmental Effects Argentine green, blue and grey virtual water imports (left) and exports (right) of all most relevant crops (in km3) EXAMPLE: ARGENTINA Argentine green virtual water imports (left) and blue virtual water imports (right) (in km3) Argentine green virtual water exports (left) and blue virtual water exports (right) (km3) Source: ownelaboration, data fromMekonnen, M.M. and Hoekstra, A.Y. (2010) The green, blue and grey water footprint of crops and derived crop products, Value of Water Research Report Series No.47, UNESCO-IHE, Delft, the Netherlands.  http://www.waterfootprint.org/Reports/Report47-WaterFootprintCrops-Vol1.pdf

13. Preliminary Results Environmental Effects Dynamics of areaharvested of mostimportantcrops in Argentina (left), total areaharvested (middle) (in thousand ha), and change of relative share of areaharvested (right) (in%) Argentine’s production quantity (left) (in thousand tons), change of relative share of production (middle) (in%) and LUC (right) (in thousand ha) Trendtospecialize in theproduction of Soybeans in Argentina Slightincrease of agriculturalarea and decrease in forestarea Source: own elaboration, data from FAO (2011)

14. Preliminary Results Food Security Dynamics of domesticsupplyquantity in Argentina (left), foodsupplyquantity (middle) (in thousandtons) and calorysupply (kcal/cap/day) Argentine’s per capita GDP over time (left) (in USD), change of producer price index (right) (in %, base 2008) Source: own elaboration, data from FAO (2011), InstitutoNacional de Estadística y Censoshttp://www.indec.gov.ar/principal.asp?id_tema=748 (2011)

15. Preliminary Results Food Security Development of worldcommodityprices (annualaverages in nominal USD) Argentine’s GINI-Index to measure income inequality Source:World own elaboration, data from Bank (pink sheet) http://blogs.worldbank.org/prospects/world-bank-publishes-latest-commodity-prices-october-2010 (2011), World Bank Development Indicators: http://search.worldbank.org/data?qterm=GINI%20index&language=EN&format=html

16. Next steps • Development of a more precise theoretical framework • Theory of environmental impacts of trade • Theory of impacts of trade on food security • Empirical analysis with data from 5 focal countries • select more indicators suitable to answer the questions • Statistical/econometric tests with the the data

17. Thank you for your attention!Email:insa.niemeyer@upm.es