Supermarkets, Small Farmers, and International
Migration: How Complex Structural Changes Affect
Food Security in Latin America
Amy Damon
Assistant Professor of Economics
Macalester College
Minnesota Economics Association,
October 2013
Three Changing Trends in Latin
American Food Systems
1. Changes in food marketing
2. Rise in obesity in the face of persistent
malnutrition
3. International migration
Major Changes in Food Markets
Food retail groups in Latin America:
•Small full service stores (independent on the street)
•Traditional markets (plaza markets)
•Small self service stores (convenience stores)
•Large self-service stores, super markets hypermarkets
•There has been a major rise in supermarkets in the region at the
expense of small shops and plaza markets.
•Now 50-60% of national retail sectors in LAC are supermarkets.
•This is even the case in poor countries.
Plaza Market
Cuzco, Peru
Artist: Robert Harding Images
Supermarkets
Why are supermarkets growing so
fast?
Demand side:
• Urbanization
• Women into the workforce
• Increase in real income
• Increased demand for non-staples (income
elasticities)
• Increased availability of refrigeration
• Increased access to cars
Why are supermarkets growing so
fast?
Supply side:
• Trade liberalization
• Reductions in the regulations of FDI – US and
European chains invested heavily.
• National supermarket chains change their
format/size to compete with large
international chains
Percent of Food Sales in Each Channel
Channel
Supermarkets or
hypermarkets
2005
2006
2007
2008
2009
2010
50.03
50.36
50.6
50.85
51.13
51.08
Specialist Retailers
17.54
17.26
17.06
16.84
16.61
19.57
Independent Retailers
24.62
24.5
24.39
24.28
24.17
22.77
4.73
4.78
4.85
4.91
4.96
6.1
Convenience Stores
Big names in Latin America’s food
retail sector
• Mexico is Walmart’s third largest world
market after the U.S. and the U.K., and
accounted for around 6% of its global sales in
2010.
• Walmart is seeing double digit growth in LA.
• Other big players: Carrefour (France), Casino
(France), Cencosud (Chile)
Outcomes of changing retail sector
Who benefits:
- Middle/high-income urban consumers.
- middle/large wholesalers
- international retail corporations
Who loses:
- small and medium size farmers
Outcomes of changing retail sector
• Supermarkets must provide cost cutting and consistency,
and increased product quality and diversity.
• This means procurement must change and must reduce
transactions costs with better coordination among the
actors in the supply chain.
• These incentives mean these supermarkets procure from
large areas, handle larger volumes, work with suppliers
whose scale, capital, and managerial capacity can meet
these needs. (Smaller producers must invest).
• The supermarkets have bargaining power.
Outcomes of changing retail sector
• Supermarkets are procuring less through
traditional wholesale markets and more with
direct farmers and their own distribution
centers.
• This is mostly because of the grades and
standards issue – big producers can provide
consistency.
• Supermarkets often pay producers 45-60 days
after delivery.
Food security dichotomy:
malnutrition and obesity
Malnutrition in Central America-DR
At the same time…..
Global Obesity
The New Food Problem in Latin America:
Overweight and obesity prevalence in Latin America, 2005
80
Overweight
70
Obesity
60
50
40
30
20
10
Source: Age-standardized prevalence of overweight (kg/m2) and obesity (kg/m2) by country (2005). WHO
Global Infobase, United Nations
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Mexico changes in obesity
Nutrition Transition
Reasons for rise in obesity
Neoclassical economic explanation (Lakdawalla
et al):
• welfare-improving technology facilitates
economic growth causes a drop in relative
food prices - increasing caloric consumption,
• while at the same time these changes lead to
a reduction in caloric expenditure from work
activities.
Large Structural Changes
• Nutrition transition
• Migration – increases boys risk of obesity, but
not girls.
• Urbanization
• Changes in technology
International Migration
International Migration and Food
Security
• What are the connections?
– Changes in agricultural production
• Increases liquidity but decreases labor
– Changes in household income – increases
– Changes in family composition
– Changes in food preferences
– Decreases insurance and liquidity constraints.
Food Policy in Latin America
• Conditional Cash Transfers
– Reduces some measures of malnutrition up to
25% (Paes-Sousa et al, 2011 in Brazil).
• Many other programs to fight malnutrition.
• Obesity policy is harder.
Thank you!
Questions?
Comments?