Inter-American Development Bank President Luis Alberto Moreno, right, listens to Finance Minister Guillermo Zuniga of Costa Rica, as a US$500 million credit line to ease the impact of rising food prices is announced on Tuesday in Washington. -AP

The Inter-American Development Bank (IDB) announced a US$500 million package Tuesday to ease the impact of increasing food prices in Latin America and the Caribbean, where 71 million people who live in extreme poverty face hunger.

Each country will receive a share according to its needs, said Luis Alberto Moreno, the IDB president, after meeting finance ministers of seven Central American countries worried about a 68 per cent increase in worldwide food prices in the past two and a half years.

"Those living in extreme poverty will be among the most affected," he said. "They spent about 58 per cent of their income in food."

He said a sustained increase of 30 per cent in prices of wheat, corn, beef, soy, sugar and rice, basic staples in the region, not only would aggravate the situation of those already in extreme poverty but might send some 26 million more people into poverty.

"The risk for the region is very real," said Moreno. "If nothing is done, the hard-won gains in the fight against poverty could be undermined."

'Sign of concern'

Guillermo Zuniga, finance minister of Costa Rica, said the presence in Washington of ministers from Panama, Nicaragua, Guatemala, El Salvador, Dominican Republic and Belize was a "sign of concern of a region where the increases of food and oil prices strongly affect our economies."

"The sustained growth that Latin America and the Caribbean performed in the past six years, with inflation under control and good fiscal policies, may be reversed by this complex global phenomenon," Zuniga said, speaking beside Moreno and the other ministers at the development bank's Washington headquarters.

The persistent increase of food prices "has put us against a fatal contradiction: while we need investments to develop many areas and improve social safety nets, we also face budget constraints to attend the poor during the crisis," he said.

This is the second time Latin American countries have expressed their concern about food prices in less than two weeks.

During the Latin America-Caribbean and European Union summit in Lima, Peru, their leaders noted the urgent need for industrialised countries to help "the most vulnerable countries and populations affected by high costs of foods."

The US$500 million line of credit, which is still to be approved by the IDB's executive board, will fund agricultural productivity.

Between January of 2006 and March of this year, worldwide food prices jumped 68 percent on average.

The rise has been especially steep for some basic food items, for example rice whose prices have doubled, corn, which increased 128 per cent and wheat up 163 per cent.

"Fortunately, the full impact of external prices will take some time to filter into domestic markets," said Moreno.

Window of opportunity

"In the meantime, the region has a window of opportunity to implement measures that protect the most vulnerable and encourage greater domestic food production."

The IDB said the credit line would support projects that increase rural productivity and investments, and reduce distribution costs.

The development bank has also set aside, it said another US$20 million of grant funds to study ways in which early childhood nutrition and other government programmes can be made more efficient.