Inflation: The Beans Did It

Blame the beans. The Honduran economy continues to get bad news. This time it's on the inflation front. November, 2010 inflation added a further 0.8 percent to the cumulative inflation for the year, bringing the total to 6.4% so far this year. This is more than double the inflation rate of 2009.

The Banco Central de Honduras (BCH) released the November Consumer Price Index, and it contained the bad news. The target established by the BCH for all of 2010 was 6% (except for El Heraldo, which claims it was 6-7%), so at the end of November we've already exceeded the target inflation for this year by 0.5% with all of December to go.

The main source of inflation? The BCH report identifies food, especially those pesky beans as the main cause of inflation in November. Oh and pork, eggs, and all the other 33 foodstuffs in the canasta basica. The BCH say that food costs account for about 75% of the inflation rate this month.

While El Heraldo claims the price controls passed by the government, which went into effect on November 19, have worked and kept inflation in check, other papers, such as Tiempo, have pointed out in recent days that the price controls are toothless, because there's no one to enforce them. The law contained funding to hire and train 300 inspectors to enforce it, but of course, that takes time, maybe months. In the meantime, caveat emptor.

Both Tiempo and El Heraldo pointed out there were no beans or pork to be found in Tegucigalpa farmers' markets as recently as December 5. Everyone who can find beans to buy that aren't at a Banasupro store is paying more than the government mandated 70 lempiras for 5 pounds of beans. Red beans were "frozen" at 14 lempiras a pound, but are, according to the Consumer Price Index, priced at a weighted average of 20.25 lempiras a pound in November.

Nor is the burden borne equally around the country. The BCH report shows that inflation is highest in Juticalpa and Danli, at 1.8% in November, followed by western Honduras (Santa Rosa de Copan) at 1.5% and central Honduras (Comayagua) at 1.5%. In fact, just about everybody outside of Tegucigalpa has an inflation rate higher than the "official" inflation rate for the country according to the BCH report. Only the San Pedro (0.5%) and La Ceiba (0.7%) regions have lower inflation.

What does this mean? It is bad news for the Lobo government, which continued to resist price controls until long after things got out of control. Missing your inflation target will have implications with the IMF perceptions of your management of the economy.

But ultimately its bad news for anyone who eats, and that's everyone in Honduras.