Central America hands out cash to stall food crisis

SANTA LUCIA LA REFORMA, Guatemala (Reuters) - Central American governments are handing out cash and fertilizers and buying up grains from farmers to prevent rising food prices from pushing millions into deeper hunger and poverty.

Guatemala, where one of every two children is already malnourished, is giving emergency money to thousands of women in the poorest areas to buy food for their families.

El Salvador is passing out hybrid corn seeds to increase production and Nicaragua is buying crops and selling them cheaply to consumers whose small incomes are stretched by rising prices.

Central America, torn by civil wars in the 1980s and still the poorest region of Latin America, hopes to avoid the type of violent protests over spiraling prices now plaguing nations from Cameroon to Bangladesh.

A combination of factors from high oil prices, to rising food demand in Asia, to the use of crops for biofuels and speculation on commodities futures markets have all pushed up the price of food staples around the world.

Rice prices have nearly tripled since the beginning of the year hitting net importers in Central America hard.

The region's governments -- members of a free trade deal with the United States -- have so far shied away from price caps imposed by other countries and instead are throwing money at the problem.

Guatemalan Vice President Rafael Espada handed cash to some of 2,200 women who lined up in the dusty town of Santa Lucia La Reforma last week as part of a $50 million government plan.

Over the next year, 190,000 households in Guatemala's 45 poorest areas will receive between $40 and $80 a month.

In one town where money was distributed, the local market quickly ran out of goods as women rushed to hoard all the staples they could get their hands on.

Maria Mejia, 42, lined up in the local school for the small stipend, which almost matches her husband's monthly salary as a day laborer at surrounding coffee farms.

"Food prices have gone up so much in the last three months and we don't make enough to cover the costs," said Mejia who used the money to by a dozen eggs, rice and beans for her four children.

FERTILIZERS FOR FOOD

OPEC member Venezuela, led by left-wing President Hugo Chavez, called on fellow Latin American energy producing countries on Wednesday to set up a fund for food aid using windfall oil profits in an effort to give poor nations some relief from the soaring prices.

Aid agencies fear Central America's emergency measures may not be enough to save millions more from going hungry.

A skewed distribution of wealth means Guatemala has the highest rate of chronic child malnutrition in the Western Hemisphere, and the sixth highest in the world, just after Afghanistan and Burundi.

If food prices continue to rise by double-digit percentages and wages remain stagnant, over 30 million more people will be thrown into poverty in Latin America, half of those into extreme poverty, a recent U.N. study said. The countries of Central America -- Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama -- could be among the worst hit.

"There is a whole new group of people entering into a situation of food insecurity," said Carlo Scaramella, the head of the United Nations World Food Program in El Salvador.

For growers who have a surplus to sell on local markets, rising fertilizer and transportation costs and money paid to intermediaries is whittling away at their small profits.

Justino Jimenez, who grows carrots, potatoes, leeks, broccoli, lettuce and onion on a tiny mountain plot in western Panama says production costs have increased 50 percent in the past year.

"My family has been farming here for a long time, but I am thinking about doing something else, you cannot make a living from this now," said Jimenez.

Farmers like Jimenez in the Tierras Altas region, which provides Panama with most of its potatoes and dairy products, have threatened to stop planting unless the government agrees to buy from them directly, cutting out the middlemen.

Guatemala and Nicaragua have already agreed to such crop-buying schemes.

Many oil-based fertilizers and pesticides are prohibitively expensive for small growers now with oil around $120 a barrel.

(Additional reporting by Andrew Beatty in Panama, Ivan Castro in Nicaragua, Raul Gutierrez in El Salvador; Writing by Mica Rosenberg; Editing by Kieran Murray)