Ethanol Mandates Plague Developing Countries With Rising Food Prices

By:  Brian Koenig
10/16/2012
       
Ethanol Mandates Plague Developing Countries With Rising Food Prices

The expanding use of ethanol in U.S. oil production, prompted by government mandates that require the use of biofuel in gasoline, is escalating the price of corn while plaguing poor countries with rising food prices. Critics worldwide are now questioning the federal government’s ethanol mandates, as the use of American-produced corn for biofuel has added more than $6.5 billion to the food import bills of developing countries, particularly in North Africa and Central America.

A new report published by anti-poverty group ActionAid USA, entitled Fueling the Food Crisis: The Cost of Developing Countries of U.S. Corn Ethanol Expansion, indicates that federal requirements that mandate the inclusion of ethanol in gasoline have imposed a significant burden on corn-importing countries.

The quantity of U.S. maize that goes into producing ethanol equals a sizable 15 percent of global corn production, which in turn has inflated food prices throughout the world. ActionAid’s analysis expounds on a working paper from the Global Development and Environment Institute (GDAE) at Tufts University in Massachusetts. "Higher corn prices have had a direct impact on the food-import bills of developing countries, many of which have become heavily dependent on outside sources of basic food commodities in the last 25 years," the GDAE study reports. Among other findings the paper highlights:

• Net Food Importing Developing Countries, among the most vulnerable to food price increases, incurred ethanol-related costs of $2.1 billion.

• Thirteen developing countries incurred per-capita impacts greater than Mexico’s, and they include a wide spectrum of large and small countries from all regions of the developing world — Colombia, Malaysia, Botswana, Syria.

• North African countries saw large impacts, with $1.4 billion in ethanol-related import costs, led by Egypt ($679 million). Other countries experiencing social unrest — Tunisia, Libya, Syria, Iran, Yemen — also suffered high impacts, highlighting the link between rising food prices and political instability.

• Central American countries felt impacts nearly those of Mexico, scaled to population. The region has seen its dependence on food imports rise over the last 20 years, and corn imports cost an extra $368 million from 2006-11 due to U.S. ethanol expansion. Guatemala saw the largest impacts, with $91 million in related costs.

• Latin American partners to trade agreements with the United States saw high costs, as import-dependence grows. The six-year ethanol-related cost of corn imports was $2.4 billion for Latin American nations involved in NAFTA, CAFTA-DR, and the bilateral agreements with Panama, Colombia, Peru, and Chile.

The GDAE study overlaps ActionAid’s report in that U.S. government mandates on ethanol, which have contributed largely to rising food prices, are a severe and undue burden on impoverished nations.

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