IHMA to Hondurans: What Emergency

Beans are sky high. Today's price is $1.26 a pound, or 120 lempiras for 5 pounds. You will recall that in July, beans sold for $0.47 a pound.

When we last checked in on the bean crisis in Honduras, it was to report that the Finance Minister, William Chong Wong, had not, more than 30 days after the declaration of a crisis by President Lobo's Council of Ministers, released the money to the Instituto Hondureño de Mercadeo Agricola (IHMA) to purchase beans on the international market to improve supplies and drive the price back down. That was the goal of the emergency decree.

Yesterday, the head of IHMA, Carlos Girón Ayala, announced that Chong Wong had released 20 million lempiras to IHMA, more than authorized in the decree, to buy 60,000 quintals of beans and 100,000 quintals of corn to guarantee the national supply of both foodstuffs.

Girón Ayala announced that the corn purchases had already started last Friday, and that the bean purchases would begin in 15 to 20 days, when producers begin the new harvest in Honduras. Girón Ayala announced he already has 30,000 quintals of beans which he is distributing to BANASUPRO. That should be more than enough to keep BANASUPRO supplied until the new harvest comes in.

So, the money will go to national bean producers, not international grain merchants, which makes sense as part of a national economic plan. However, it is also misleading. IMHA would be buying those beans anyhow as part of its mission. IMHA buys beans every year during the postrera harvest, so there's nothing extraordinary about it. It's business as usual, not an emergency purchase.

This purchase will have no impact on the elevated prices people are paying for beans, which was one of the announced goals of the emergency decree.

It won't increase supplies; the postrera harvest will do that by itself. From an economic standpoint, this is actually the worst time for IHMA to make a purchase in the domestic market, at the high side of a predictable downward curve. Bean prices will be starting to come down as the harvest begins to appear on the market, but they'll still be much higher than they will be in a few weeks, once the harvest is finished. The purchase will serve, IHMA hopes, to guarantee supplies to BANASUPRO over the coming year.

So the message of Girón Ayala's announcement today is, if you're Honduran and you eat beans, you'll continue to suffer high prices until the harvest of the postrera crop improves the supply and brings the market price down. The government isn't going to do anything to solve the problem; instead it is waiting for the harvest to do that. There is no emergency to be solved that time alone won't deal with well enough.

Minimum Wage or Living Wage?

In all the discussion about setting a new minimum wage, with its focus on the proposals and counter-proposals of business and labor organizations, it can be easy to lose sight of what it costs urban workers to subsist in Honduras. The Honduran government has defined this as the cost of the canasta basica alimenticia, a monthly supply of 32 basic products that feeds a family of six.

In 2008, Honduras' labor minister said the cost of the canasta basica was 6,800 lempiras ($360 US). The minimum wage then was just half that amount.

Rampant speculation in 2008 was driving up the cost of beans. When the minimum wage was last set, Honduras had the most expensive canasta basica in all of Central America.

When he set a new minimum wage in December 2008, Manuel Zelaya explicitly placed it at 500 lempiras less than what it would cost a worker to buy the components of the canasta basica at that time.

Yet the claim being made today is that the canasta basica costs a fraction of its 2008 price, a claim that if true, would justify (in some measure) a lower minimum wage. How is this estimate being produced?

COHEP says the canasta basica cost is about 4,400 lempiras per month, basing their estimate on pricing the goods at the Tegucigalpa government-subsidized supermarket called Banasupro and the wholesale market in Tegucigalpa. This is well under the current minimum wage of 5,500 lempiras.

The workers unions, in contrast, suggest the canasta basica costs about 6,300 lempiras a month in the stores where their employees actually typically shop. The difference between the two sides comes to about $100 (US) a month.

The Instituto Nacional de Estadistica (INE) calculates the prices of the constituents of the canasta basica in a quite different manner from that used by COHEP. INE collects prices from six retail markets in a specific city, for a given week, as well as in seven supermarkets, 46 pulperias and two farmer's markets in the same city, and for each category calculates an average price. These four averages are then averaged to get a price for a given item in the canasta basica. You can find the weekly price reports for 2006 to 2008 for several cities on the INE's website here.

The Banco Central de Honduras then use these prices and applies them to a standard amount of each item sufficient to feed a family of six for a month, and calculates the cost of the canasta basica.

What COHEP did, in contrast, is go to a wholesale food market and to a government subsidized supermarket, a disingenuous selection of prices that systematically profoundly underestimates the real cost of the canasta basica.

Current INE estimates, and in fact, any of those for 2009-2010, are not available online. But one thing is clear: proposing a minimum wage based on low prices very few Hondurans will actually be able to obtain would make the minimum wage something far different from a living wage.

La Prensa noted in August that, in general, prices have continued to increase throughout all of 2009 and 2010. Bean prices increased $0.80 a pound just in the month of August, largely due to speculation. Vegetable prices have increased rapidly as the persistent heavy rains damage field crops. To the extent that these prices are not reflected in neighboring Central American countries for the same commodities, and they are not, this indicates significant market price manipulation in Honduras.

When Porfirio Lobo Sosa was sworn in in January, 72 percent of Hondurans lived in households that didn't have access to even the canasta basica according to a European Union study, creating a serious food security problem for Honduras. That's 5.7 million people. A further 1.5 million Hondurans lived in households that earned enough to pay for the canasta basica every month, but not enough to afford housing, health care, transportation, education, etc. That leaves just 800,000 people in Honduras, according to the study, in households with incomes that adequately support them.

And that is what is at stake in the current negotiation, if we step back and think about how wages affect people's ability to survive.