Panama Inflation; Gas, Bio Fuel, and the Cost of Sugar
As the price of gas goes down will the price of sugar stay up? Panama has been fighting inflation for the last couple of years. Recently gas prices have gone down but food and retail prices remain high. One of the culprits may be the development of biofuels. For example, Brazil is one of the world´s largest producers of sugar. Brazil has also become a large biofuel producer. Figures for 2007 show that Brazil produced 30 million tons of sugar of which it exported 19 million tons. According to press releases Brazil also produced 17.5 billion liters of ethanol for use as fuel.
Of Brazil’s 17.5 billion liters of ethanol produced from sugar cane in 2007 3.5 billion liters were exported for $500 million USD. When the USA started ramping up production of ethanol from corn to add to gas a spokesman for Cargill, the privately owned agriculture commodities giant, noted that diversion of large amounts of sugar and grain into ethanol production could lead to worldwide food shortages.
Oil sold for $150 a barrel in the summer of 2008 and gas went for $4.50 a gallon in Panama. Farmers in sugar and grain producing countries such as Brazil, Canada, and the United States plant more corn and sugar cane to get higher prices at harvest. The emerging bio fuel industry is taking food (sugar) off the table and putting it into gas tanks world wide.
Fossil fuels will eventually run out. They will run out faster now that China and India are developing at a rapid pace. The competition for petroleum drives up prices and makes the sale of corn and sugar cane for conversion into ethanol for your gas tank very attractive to hard pressed farmers.
With the current global credit crisis having driven down the price of oil it remains to be seen what will happen to ethanol production.
Food and Inflation in Panama
Assuming that the global recession will not last forever we can assume that the diversion of food stuffs (sugar) for fuel will continue. This is a problem in Panama. Panama has made great gains in reducing poverty by attracting foreign investment and increasing jobs. Wages have not increased much but more people are working more hours. The increased cost of gasoline, electricity, food such as sugar and corn, and retail items has hit Panama’s middle and working class very hard.
The recent decreases in gas and electric prices in Panama have been very welcome although people are waiting to see if the prices of milk, sugar, rice, and corn go down too.
Although foreign investment is very important to Panama and there are many expatriates and retirees in Panama only native born Panamanians vote in Panama. Issues such as inflation and the crime rate are the issues that will influence Panama voters. How inflation goes may well determine the next presidential election in Panama. Will there be a “sugar and gas factor” in future elections such as the fact that a Republican has never won the White House without winning Ohio?
Expect to see Panama continue to promote hydroelectric and wind farm projects to reduce dependence on fossil fuels. Also expect to see the price of the sugar you put in your morning coffee go up along with gas prices as the recession lessens.
For those interested in Panama real estate investment, inflation will mean more than the prices of sugar and gas. Follow this web site -for information on inflation, Panama’s political stability, and more.
