Nations turn to barter deals to secure food

Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars.

In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil.

Related article: Credit Crisis Hits Poorer Nations Harder As They Barter for Food (Washington Independent)

The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.

The countries have not disclosed the value of any deals, and some have refused even to confirm their existence. Officials estimated that they ranged from $5m for smaller contracts to more than $500m for the biggest.

Josette Sheeran, head of the United Nations’ World Food Programme, said senior government officials, including heads of state, had told the WFP they were facing “difficulties” obtaining credit to purchase food. “This could be a big problem,” she told the Financial Times.

Last week, Malaysia’s commodities minister, Datuk Peter Chin Fah Kui, said Kuala Lumpur had already signed a barter deal swapping palm oil for fertilizer and machinery with North Korea, Cuba and Russia. He said Malaysia was talking to Morocco, Jordan, Syria and Iran about other barter deals.

“[Bartering] could be used for contracts with other countries that do not have the cash,” Mr Chin told the local press. “We can set the conditions for them to supply us with the raw materials that we need.”

Thailand, the world’s largest exporter of rice, is discussing barter deals with Middle Eastern countries, including Iran. The Philippines, the world’s largest importer of rice, has secured rice needs for this year through a diplomatic agreement with Hanoi.

The countries’ struggle to obtain credit to import food is boosting the price of domestic crops. Ms Sheeran said that prices of crops in some African countries were rising sharply even as international food commodities prices had fallen from last summer.

The move to barter shows the global food crisis that started last year is far from over.

26 Jan 2009 11:32pm
By Javier Blas in London

Source: Financial Times

Leave a Comment