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Help Develop Local Responses to Food and Energy Crises

November 30, 2008

The Americas face multiple and simultaneous challenges in the coming years, ranging from climate change and the competition from the growing economies of China and India to rising crime and narcotics trafficking. These issues have been magnified recently by the severe problems associated with rising oil and food prices. But the challenges in those two areas also contain some unique and innovative possibilities.

By acting in concert, we can help alleviate the pressures on the economies and societies of the world's poorest nations.

That will not only help to minimize a growing global crisis, but also reduce the risks that food scarcity, poverty and energy shortages pose to the elected governments of the hemisphere.

As a participant in several international summits this year, I became keenly aware that global concerns must be translated into viable public policy options at the regional, national and local levels. We must develop local responses to global issues, and global concerns must respect local and national priorities.

My recommendation to the next U.S. president, therefore, is based on the need to develop such a local response to the twin problems of energy and food. The sharp fluctuations in the price of oil in the past 12 months has severely affected developing economies such as ours, with annual per capita incomes of less than $6,000. Collectively, these economies — whether located in the Americas, Africa or Asia — import around two million barrels of oil per day. At the same time, the oil-exporting countries sell more than 50 million barrels each day, earning them windfall profits of approximately $1.3 trillion in the last twelve months alone. For countries such as ours, this has meant approximately $42 billion in additional costs.

Finding a way to pay this extra money is only part of the problem. With our already high energy costs, we have found it difficult to adjust our economies to cope with our other pressing needs. The price increases have affected our entire production apparatus. The sectors which have been most affected are electricity generation, transportation and food production.

As our petroleum bills drain our cash reserves — making it more difficult for us to address the challenges facing our countries — our problems are aggravated by the fact that the cost of foodstuffs is rising. This has had profound effects on the quality of life and the livelihoods of all our citizens, especially the poor.

The solution: Invest a portion of the profits earned from today's high oil prices to benefit the countries that have been worse hit by the increases.

Our proposal is to first establish an alliance of these oil importing nations and then to search for global allies. Former President Bill Clinton and former United Nations Secretary General Kofi Annan have already expressed support. Our hope is that other leaders, including yourself, will join such an initiative.

The principal aim of such an alliance would be to recover the cost of petroleum price increases from oil-exporting nations by asking them to provide unconditional grants and soft loans with low interest rates and long-term payoffs that can be used to undo the damage already felt by our economies.

Direct investment could also be another means of recovering the $42 billion shortfall in our energy bills. While that may sound high, it still represents only 3 percent of the profits reported from recent oil price increases.

The mechanism for recovering these profits would be a "Global Petroleum Solidarity Fund." This fund could be established in the World Bank or within regional development banks, or based in other international institutions that are already working on programs aimed at helping developing economies meet the challenges of the global energy and food crisis. The International Fund for Agricultural Development (IFAD), for instance, was established within the UN following the first oil crisis of the 1970s precisely to face the food crisis that arose as a result. Whatever institution became the repository of these windfall funds, poorer nations would be allowed to withdraw a "refund" proportional to their expenditures in crude oil imports. I believe that such a mechanism would enable the countries hardest hit by the energy crisis to invest in projects aimed at stimulating food production.

In doing so, we would be close to resolving in a single step, and relatively quickly, the worst set of crises we have faced as a region.

By simultaneously mitigating the impact of increasing oil prices and investing in food production, our region could produce food at record levels and at lower prices. By taking the initiative, we might have a chance of meeting the ambitious goals of all of our nations to reduce extreme poverty and hunger. But there is little time to lose. Each day the crisis continues, the situation faced by the poorest countries worsens.

Fernández is serving his second term as president of the Dominican Republic. This article is reprinted with permission from the Fall 2008 issue of Americas Quarterly ( The Chronicle plans to publish three more Americas Quarterly articles over the next three weeks with messages from other Latin American leaders for President-elect Barack Obama.