Colombia Faces Higher Food Prices as Rains Harm Crops, Transport

Torrential rains and flooding in Colombia will boost food prices as farmers struggle to harvest crops and transport their produce, Agriculture Minister Juan Camilo Restrepo said today.

“The prices of some products are strongly affected by the situation,” Restrepo said in a statement. “The roads are causing difficulty transporting goods to market.”

More than 400 people have been killed and thousands made homeless by rains, caused by the La Nina weather pattern, that have battered the Andean nation over the past year. More than 3 million people have been affected by landslides and flooding, the government said.

Higher vegetable and fruit prices in coming weeks may make it harder for central bank chief Jose Dario Uribe to fight inflation, which is being fueled by robust domestic demand, said Rupert Stebbings, head of brokerage Celfin Colombia SA.

“For as long as Colombian trucks laden with food are axle deep in avalanches, the government is going to struggle to keep inflation under control,” Stebbings, who is based in the city of Medellin, said in an e-mailed response to questions. “If the mountain passes are blocked, then agricultural products rot in the fields as prices in the cities climb.”

The agriculture ministry has earmarked 400 billion pesos ($224 million) to help cattle ranchers and farmers, Restrepo said in today’s statement.

Flooding in the fourth quarter of 2010 cost an estimated 10 trillion pesos in repairs and aid for victims.

Reconstruction Finance

The government last month sent a bill to congress seeking an additional 5.7 trillion pesos for this year’s budget to finance reconstruction. President Juan Manuel Santos has already raised taxes on high-income wage earners and accelerated plans to sell a stake in state-owned oil company Ecopetrol to help pay for rain damage.

“This is without doubt the worst tragedy in history, but the country is still functioning,” Santos said in a statement last night. “We can’t underestimate these kind of tragedies but neither can we overestimate them.”

The La Nina weather phenomenon is caused by cooling equatorial waters in the Pacific Ocean.

Finance Minister Juan Carlos Echeverry has said he expects 2011 economic growth of as much as 6 percent, buoyed in part by spending to repair washed-out roads and buildings.

Gross domestic product rose 4.6 percent in the fourth quarter from a year earlier and expanded 4.3 percent in the whole of 2010, the biggest gain since 2007.

Inflation Accelerating

As Colombia’s economic expansion gains momentum, inflation has been accelerating. Annual inflation was 3.19 percent in March, up from a five-decade low of 1.84 percent a year earlier.

The central bank forecasts inflation near the 3 percent midpoint of its target range at the end of 2011 and in 2012, Uribe said. Central bank policy makers raised the benchmark interest rate a quarter-point for a second straight month in March to 3.5 percent, noting increases in consumer confidence, bank lending and retail sales. The bank’s board will hold its next monetary policy meeting on April 29.

Economists cut their forecasts for year-end inflation to 3.31 percent in a central bank survey published this month, from 3.48 percent in the March survey.

To contact the reporter on this story: Helen Murphy in Bogota at hmurphy1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net;

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